IT accounts for a huge percentage of all business investment, which means IT isn`t simply affected by the economy, it is the economy and the economy is IT, BMI-TechKnowledge research manager Roy Blume said at the recent BMC Software Forum05.
IT spending is driven by general business conditions, which are affected by macroeconomic and geopolitical conditions, he stated. Blume added that rising oil prices and the war in Iraq are slowing a global economic recovery, leading to IT spending taking a $10 billion hit.
"Of course it`s not all macroeconomics. The market management skills of vendors affect spending levels, as does new technology - wireless, Web services, blades, batteries, instant messaging, and so on. But macroeconomics matter, in ways they didn`t before. That`s part of the new IT context."
Hardware growth
The South African hardware market is expected to grow from R17.9 billion in 2004 to R22.7 billion in 2009, driven by corporate refresh cycles and consumer renewals, as well as portable adoption in the consumer and small and medium enterprise segments, stimulated by attractive price points, Blume said.
He noted the rand-dollar exchange rate is an important variable in market behaviour - and in vendors` profitability levels - while hardware price/performance improvements across all form factors are also driving local market growth.
According to International Data Corporation research, year-on-year growth within the hardware market was 14.7% between 2003 to 2004, with PCs contributing 46% of total revenue, and peripherals bringing in 24%, Blume stated.
The compound annual growth rate in this market is expected to reach 4.9% from 2004 to 2009, he said.
The local software market, Blume noted, is worth R8.7 billion, and is made up of three main clusters: applications (contributing 54.3%), system infrastructure software (24.4%) and application development and deployment (21.3%).
The year-on-year growth within this sector between 2003 and 2004 was 3.5% - from R8.3 billion to R8.7 billion - and the estimated compound annual growth rate for the software market between now and 2009 is 7.8% (R12.7 billion).
Trend-spotting
He said trends within this market include a shift in focus towards the mid-market, which will not only affect product strategy but also channel acquisition. Other trends seen within this market are moves towards commoditisation, virtualisation, integration and optimisation of software.
In addition, Blume believes vendors will steal a greater slice of the services pie, which is reported to be worth R18.4 billion a year.
"Partnering and alliances will become the number one issue for software companies in 2005. Organisations will start to spend serious money on security and the mid-market will begin to explore CRM and ERM solutions," Blume said. He added that Linux is beginning to make real inroads into Microsoft`s market share.
Commenting on some of the most important IT and business issues in 2005/6, Blume stated that the CIO must become a change agent, as pressure to demonstrate the value of past IT investments not only continues, but intensifies.
The alignment with business strategy remains the critical, albeit illusive, element of IT governance, he added.
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