Looking back Eh

Although I have over 35 years` experience in the information technology industry, 1998 has probably been one of the most eventful years in that time. I have tried to summarise, from both a local and international perspective, the business events that to me have had the most impact, and are likely to be the most significant.

So what does 1999 have in store for us? I`m not yet convinced that stability has returned to the markets.

The single most important happening that affected both the local and international markets was without question the various stock market "crashes" that occurred. Locally, we were experiencing a ludicrous run of IT listings, often associated with much "hype", in a highly inflated market, from companies that 12 months ago had not been considered "worth buying" and where many of the directors were looking to make a "quick buck".

The stock market corrections "sanitised" much of this activity and although there have since been numerous listings, the situation and the associated share prices and P/E ratios are now at much more realistic levels. With over 50 new listings in 1998, the scene is now set for the consolidation and acquisition of some of these new entities by the larger players in 1999. It`s already started with Dimension Data and TCO.

Internationally, similar corrections have occurred, but those markets were not experiencing the proliferation of IT listings that South Africa experienced. Of the major shares in the IT sector worldwide, those of Lexmark seem to have been least impacted. The current share price is very close to the all-time high experienced only a few days ago. We also saw the majority of the Japanese companies having continued financial woes, which they are struggling to handle.

Additionally, we have witnessed two very pertinent legal wrangles; that concerning the "Java" issue, where Sun seems to have won for now, a major victory over Microsoft; and of course, the DOJ vs Microsoft trial which is still in progress and likely to be so for some time to come.

In the local market, the key acquisitions were those of Plessey by Dimension Data, Atio by Unihold, Software Futures by Computer Configurations, and the proliferation of purchases by USKO in particular. However, as might be expected with the huge number of listings, the number of smaller acquisitions was enormous. I suspect that there are only a few local and privately owned IT companies left in South Africa which have a turnover in excess of R100 million! 1998 also witnessed the acrimonious de-listing of IBM SA.

In terms of individuals, we saw the departure of Rob Katz from Microsoft SA and his subsequent moves to USKO and then Ixchange. KC van Straaten also moved from Digital to the Ventron group to head up its proposed new IT listing, which will include some new acquisitions and many of its current IT interests including Altech Smart Card Technologies and ISIS, but not the NCR and Xerox entities. I wonder if there are "independence" plans afoot for the latter two?

As well as too many local listings, we saw a proliferation in the number of IT publications into a market already awash with them. There was also the announcement of more exhibitions for 1999, in addition to the extra Computer Faire in Durban and the usual ones in Johannesburg and Cape Town.

1998 was very significant for the European IT industry or what`s left of it. We saw the break-up of Siemens Nixdorf and Olivetti, the (mediocre) listing of SAP in the US, the highs experienced early in the year by Baan, followed in the later months by some significant lows, and the continuing emergence and strengthening of Nokia and Ericsson into IT areas, as well as the traditional cellular telecommunications operations.

Internationally, 1998 has seen an enormous number of acquisitions, particularly within the communications and telecommunications sectors of the market, including some of the largest ever recorded in any industry. The most significant have been the take-over of Teleport by AT&T worth some $11 billion, which most recently added IBM`s Global Network Services to its portfolio. There was also the acquisition of Digital by Compaq, worth some $9 billion; the purchase by SBC of Ameritech and SNET, valued at some $40 billion and $4 billion respectively; and the swallowing of MCI by WorldCom.

Others of particular note include the purchase of Stratus by Ascend Communications, the acquisition of Dr Solomon`s by Network Associates, the purchase of Netscape by America Online, and the buy-out of Amdahl and the remaining bits of ICL by Fujitsu. The one that didn`t quite happen was the acquisition by Computer Associates of Computer Sciences.

In terms of individuals, the key move in 1998 was that of Andy Grove from the CEO`s position at Intel and the "disappearance" of Bob Palmer once the Compaq/ Digital acquisition was complete. However, the three most dominant individuals continue to be Bill Gates, Larry Ellison and Scott McNealy of Sun Microsystems.

So what does 1999 have in store for us? I`m not yet convinced that stability has returned to the markets. The current uncertainty may well continue for some time, particularly as the year 2000 (which is NOT the start of the new millenium) approaches and organisations battle with these issues and the Cobol ones associated with 9 September 1999 (9999). Additionally, we will see the continued convergence of the IT and telecommunications industries, with consolidations and acquisitions continuing apace.

In South Africa, we will also have the added concerns of the increasing departure of IT skills from our shores. We will need to be exceptionally creative to stem this tide.