For each and every IT vendor in Australia the question of how to best position themselves is a challenging task. The dynamics continue to shift as purchaser priorities change, new technologies proliferate, and the supply of competent technical and industry expertise becomes more and more constrained.
And the deals are now getting a lot more extensive. Womb to tomb outsourcing deals once thought to be nearing extinction, seem to wax and wane. And the systems integrator's influence is extending from the old data centres and server closets into the heart of the workplace.
Given this panoramic picture, distinguishing vendors that are good at satisfying customers' demands from those that aren't is paramount. Many vendors have not only seen their customer loyalty fade but also at the same time their margins have diminished severely.
Several are now trying to turn up the volume on hopefully more profitable service opportunities. And if some of the players don't service the heck out of their current base, which has now become increasingly multi-vendor, they may have little business left on which to build their futures.
Survival of the fittest
The popular television "survivor shows" may have ended, but the game of survival of the fittest is ongoing in the Australian IT marketplace. Weekly we hear of multinationals either closing or cutting back their Australian operations.
Globally IT is still forecast to grow rapidly over the next five years, a recent study by SPS/Spectrum estimated the market would grow from $US1400 billion to over $US2600 billion in 2005 for IT products and services. This is a steady 13 per cent compound annual growth rate. (CAGR). These are outstanding spending numbers, but what market planners don't seem to recognise is that Australia is only two per cent of the world market and we are overwhelmed with competitors from all over the globe, not just from the United States.
Who's who?
Hardly a day goes by without someone asking us at The Rust Report, who has substance? Who's making a profit? Who's the current market mover? Who's going to survive?
At The Rust Report Institute of Marketing Cybernetics we have been pondering the changing nature of the marketplace in the light of all the latest trends, over a few glasses of VB and the occasional claret.
Every day we review the headlines, hear the rumours and probably expect more to come. We're talking about earnings down, announcements of staff cuts and restructures, layoffs and business closings.
Then there are the ongoing stories about vendors searching for strategic partners and possible mergers; anything to help them remain as a going concern to continue their local operations.
The headlines read: "There's lots to fix and the deal with current owners won't help, some investors are starting to lose patience". The disruption caused by the so-called buy deals currently underway, with lots of significant issues still to be resolved, hit the headlines quickly and certainly get Wall Street jumping, but they also start to create rumblings amongst the Australian staff and the local customers.
I agree that these announcements don't always end up with a bang and/or a fanfare; sometimes they just close with a whimper and leave a string of newspaper clippings. They also leave some concerns in the Australian marketplace.
The end is nigh!
These past few months have seen such a parade of dumbfounding events and also some assorted cruelties often heralded by two bit pronouncements from the industry messiahs - that have created an unsettling feeling that maybe the IT revolution is close to being spent.
Despite all the technical brilliance that is flowing and the market obtuseness, many companies are still creating the products of the future yet trying to sell them using strategies of the past.
Several companies are littered with the walking wounded waiting for the next barrage of pink slips to rain down from corporate headquarters. The tragedy is that many of these employees are highly experienced people who have shown an uncanny knack for producing world-class products and services under what are often the most unsettling conditions.
It's these people, the products they built and the customers they supported that have kept the local operation alive. The irony with this is that it's the local customers and employees that bear the brunt of the company's lacklustre worldwide performance. This situation will only change when certain captains jump ship.
Top management generally claims, like politicians, that they inherited most of the problems from the previous regime. These claims are beginning to wear thin. Current management has to take the blame for the company's continued performances.
Change of tack
Just a few years ago certain executives couldn't get publicity out fast enough. Today, elusiveness for several seems to be the game, with some practically denying their own existence. But, I suppose a related advantage to an initial silence is as that if there are no expectations about any unhyped vendors' products, they can't disappoint.
Healthy financials are always the best marketing tools a high tech company can have. Financial success assures investors, customers, strategic partners, employers and the press that the vendor could be around for a while. Yet most executives elect to keep mum about local financials.
It's also an entertainment for some. No other industry has so many "prime-time" personalities as information technology. Conferences, forums, newspapers, radio and television opportunities abound so that the novices as well as the seasoned executives can get themselves and their customers into the spotlight.
Bigger takes hold
In many segments of the IT industry the competitive dynamics have also become such that the massive players are again starting to dominate the business. The share for second-tier players is now more vulnerable than ever. So competing against players with similar scale, technology and investment capability is now the norm. Which means the only way to win is to out-execute. And you can't out-execute if you don't have any idea what the heck it is you're executing.
The common ailment for most companies that have been hit on the head by a piece of "four-by-two" or are about to be, is distance from their customers. Many have ended up building products and/or services that customers' didn't want.
Today's reality is that things are changing so incredibly fast that what was an idea yesterday, is an emerging technology today, is mainstream news tomorrow and if one's not careful will be old hat by next week.
We're not alone in our complacency. It's shared by our politicians, unions, successful companies, management, staff and by anyone and everyone who has become comfortable with their achievements.
We all have to keep asking the question "What's my role in the uncertain tomorrow that I'm helping create?" Otherwise we have to be prepared to be surprised. And remember, you can't tell em if they're not listening.