Oisín Byrne, managing director of Dublin-based industry research firm iReach is better equipped than most for a spot of crystal ball gazing about future trends in Ireland’s ICT landscape. His firm gives a uniquely local take on local issues. But before we step into the future he reflects on the current state of play. “This year we’ve seen a clear shift from traditional spends on consulting, system integration and application development into managed services. That’s not a surprise but it may be a concern for vendors,” he comments.
Driving the change is an emergence of a new force in IT infrastructure. “Telecoms is top of everybody’s spend agenda,” he says, “because it is now a fundamental part of infrastructure building blocks. For a long time we were in a world where IT companies sold IT and telecoms companies sold telecoms. With BT’s acquisition of Cara, we’re seeing the shape of the market changing and a shift into a true ICT environment. It’s the same with Eircom and its ICT solutions. They are both scaling up into being more like traditional ICT infrastructure companies.”
This has huge ramifications for existing players: “Less companies are getting value out of consulting and systems integration. Things such as application development are moving to places such as India because it can do it quicker, faster and cheaper. That leaves a lot of IT organisations squeezing as much as they can out of the business value from the infrastructure.”
The problem is that IT decision makers no longer look at telecoms as being a separate solution, but rather as one of a number of building blocks. It’s a market reality that remodelled telcos are keen to exploit. The challenge for traditional IT vendors, according to Byrne, is how well they will cope with the momentum as it gathers pace in 2006. How will they compete with a communications company that can throw broadband, voice and data into their product offerings?
Another ongoing challenge, particularly pertinent in a country made up of so many smaller businesses, is how vendors serve this market. Big IT companies scaling down their wares to pitch to SME customers has been a trend for some time but it’s been a learning curve. “Vendors have tried to sell the same way to a 50-man SME as a corporate and it’s taken them a while to treat them differently, says Byrne. “It’s a big market and it’s harder for them to get a consistent message across, which is why you still see strong regional technology companies. They are successful because they are closer to the smaller firms rather than the larger vendors that have to have a country-wide strategy. To succeed the bigger companies have to have multiple SME strategies and the trade off is whether the sales make it worth the effort.”
Some of it comes down to the sales process. It’s less of a numbers game and much more scientific than it used to be, according to Byrne. “The old days of hiring a sales guy, giving him a Golf GTi and giving him a list of 100 companies are long gone. Companies need to invest more in segmentation and really understanding how their customers do business. The sales model has to evolve into something a bit smarter.”
He also anticipates changes in the mobile market as far as business as a whole are concerned. “There’s going to be more of a squeeze on what people are prepared to spend on mobile bills than ever before. It’s happened in everything, hardware, software, and in the last year it happened in services. There’s no reason to suggest that mobile communications will be any different. As people look at ICT as a single package there will be some items, such as mobility, that jump out as being very expensive.”
Another hot topic is the public sector. Post Personal Payroll and Related Systems it will be interesting to see how technology implementation is treated though Byrne argues that the long-term impact will be negligible. “Many companies have had disastrous IT projects that are over time and over budget. It’s nothing new or unique to Irish government. It was just a project that was badly managed but in a room full of CIOs there would be very few that hadn’t had that experience.”
Byrne puts a completely different spin on it and says that, surprisingly perhaps, it’s the public sector rather than private that will break new ground particular in the outsourcing and managed services arena. “Two years ago you couldn’t say words such as ‘outsourcing’ around the Government, now it’s surprising that the fastest uptake of managed services is coming out of the Government. Every week you see tenders for call centres or helpdesks and in 2006 we’ll see some very significant government managed service contracts.”
Byrne describes outsourcing as a strategy that includes people; not so with managed services. This is a distinction that public sector has grasped quicker than the private world. “In one of our surveys we found that as many as half of our 80 government respondents are using or close to using managed services. They don’t see managed services as a people issue, they see the benefits of redeploying public servants in new, customer-facing roles. A lot of commercial organisations haven’t taken on the movement on people.”
He says, however, that one lesson the public is learning from the private sector is the need for common processes regardless of the size of an organisation. “It’s very difficult to be efficient if everyone is doing something different to everyone else. Subsidiaries in big corporates are unlikely to be doing distinct IT projects because it’s all co-ordinated through central decision-making processes. The sense I get is that government is learning some lessons from the corporates.
An optimist on a sector that has taken its fair share of criticism, he points out that the Irish government is responsible for a large number of good projects. “Time and time again they win European awards,” he says. “We shouldn’t forget that the Irish government has achieved more than most European countries.”
By Ian Campbell
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