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Wednesday, 6 November 2002 "Business value has become a more pressing issue for IS organizations during the past year," according to Betsy Burton, Gartner Vice President and Research Area Director. "This," she said "has caused vendors to place less emphasis on delivering complete solutions and to focus more either on delivering raw, embedded technology or on services. Enterprises must determine which of these is the core strategy for each vendor in order to best leverage their products and technologies." Speaking at Gartner Symposium/ITxpo 2002 in Cannes, France on Tuesday, Burton predicted that through 2005, many technology and service vendors will look to the outsourcing model as a means of increasing profits, but will then withdraw from this market because of "client relation" challenges. By 2007, powerhouse software vendors will move away from services and outsourcing and refocus on technology and solutions (0.8 probability). Many vendors will not have the experience and dedication to support long-term outsourcing relationships. The main battle will be for control of the enterprise's infrastructure, with IBM, Microsoft, Oracle, Sun and SAP offering their own application platform suites designed to lock enterprise's into their products and architectural direction. Enterprises, though, should deploy functionality according to application constraints, not vendors' perceptions of where functionality should be placed. Burton outlined the strategic directions for each of the ten major powerhouse vendors and the challenges they face: AOL Time Warner AOL Time Warner needs more cable assets and other high-speed services to enable it to compete in the consumer market. By year-end 2002, AOL Time Warner will have merged with or acquired at least one of the other top-five U.S. cable companies (0.7 probability). Cisco Systems Cisco's main challenge will be to generate growth in very difficult market conditions. It dominates its markets and price pressure will limit is scope for growth in switching. Service remains an opportunity for Cisco, and it is slowly increasing maintenance prices for older products. Hewlett-Packard To successfully compete with Dell Computer in the long term and to gain market share from IBM and Sun, HP must reduce operating costs to the promised range of 15 percent to 17 percent (from its current 21 percent). This will require an additional US$2.5 billion in savings or an additional US$15 billion revenue. IBM With the acquisition of the consulting group, PricewaterhouseCoopers (PwC), professional services will account for approximately 41 percent of IBM's revenue. Through 2004, IBM's growth will come from services, software, and Unix and Intel-based servers. By 2006, hardware products will account for less than 27 percent of revenue, down from 39 percent in 2001. Intel Even though Intel's channel partners are responsible for the bulk of its revenue, enterprises should seek a direct relationship with Intel - not for product purchasing, but to obtain insight into Intel's future products and directions. Microsoft Microsoft's next operating system release (code-named "Longhorn") will lead, ultimately, to a new product ("Blackcomb"), the major feature of which is unified storage, delivered via "Yukon" (the next version of SQL Server). Enterprises can view these releases as possible steps toward realizing Bill Gates' early 1990ˇ¦s "Cairo" vision, dubbed "Information at Your Finger Tips.ˇ¨ Microsoft's vision is now peppered with mentions of .NET, which should also be viewed as an evolving set of concepts. Oracle Oracle has worked to try to reposition itself as an "enterprise software vendor,ˇ¨ including database management systems, applications and infrastructure. This has caused some market turmoil and revenue downturn for Oracle because SAP, PeopleSoft and Siebel Systems, which were heavily focused on supporting Oracle, increasingly view Oracle as a competitor. Siebel Systems Through 2006, Siebel will increasingly shift from selling point solutions to selling an architecture, using its Universal Application Network as the key component for enterprises to build around (0.8 probability). Enterprises, though, must first develop an enterprise architecture plan, then evaluate if vendor-specific solutions such as Siebel's fit the plan. SAP mySAP.com is designed to form the foundation of an enterprise architecture. However, building an enterprise architecture that includes mySAP.com requires a top-down approach, starting with the business strategy as the basis for executing future SAP applications and technologies. Sun Microsystems Sun's traditional strength is technological excellence and it faces a significant challenge if it is to catch up with its competitors in delivering industry-specific solutions. It will need to shift its focus away from hardware and more to software. Burton concluded by providing advice on how enterprises could turn the tables on powerhouse vendors. Yes, enterprises are dependent on these vendors, but they can benefit from becoming vocal participants in vendor-related activities and from acting as software beta-test sites. When negotiating with powerhouse vendors, she recommended that enterprises:
David Seabrook Gartner Staff |
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