2011: Revenue upturn, skill shortages and cloud control

Computerworld surveys end users and industry players to see how their predictions match those of IDC New Zealand

This could well be the year in which IT managers police the use of their IT, rather than promote it. With the desire among users for mobile, video and applications, the IT department will be expected to accommodate the latest must-have devices that staff bring into the workplace environment.

IDC New Zealand’s number-one prediction for this year is that CIO priorities will be tied to ‘managing disruption’ and reforming IT governance. (See full list of IDC predictions below.)

“As ICT becomes intrinsic, decisions are being made as part of a blended process with line of business managers directly involved. The CIO’s department therefore adopts more of an advisory role. In some cases, line of business managers have made decisions to adopt applications that are not part of the CIOs preferred, more holistic approach. This creates a new need for the CIO to have a set of tools that will deliver consistent, on-demand, whole-of-business reporting and enquiry,” IDC analysts advise.

An example of this is the locally-based projectmanager.com business, profiled in Computerworld last November. Founder and owner Jason Westland claims many of his customers are circumventing the IT department and downloading the online project management system without the CIO’s knowledge. This is made possible because projectmanager.com is a SaaS application and is paid for by a monthly subscription. The cost is an operational expense, so it doesn’t attract the same kind of scrutiny as a one-off traditional software purchase.

As Nokia Siemens country director Andrew Button puts it: “Software in a box will be the rare exception. Get it in an App store or as a cloud service.”

Did someone mention the cloud? IDC’s ranks its prediction that cloud computing will gain traction at number four, though industry and major end users are clear it is a top priority on their roadmaps.

As Graeme Osborne, National Health IT Board director, put it: “Cloud computing suppliers will find a cost-effective method to address the need for a New Zealand-based solution for the government sector.”

NZICT CEO Brett O’Riley says consolidation of the government spending in ICT – which is about a $2 billion industry – is well underway. “This will drive productivity and also change the way citizens interact with the public sector. The strategic areas of geospatial, open data and cyber security will be other priority areas. There will be new procurement initiatives to stimulate local innovation including a government applications store, and a strong focus on making the procurement process less onerous for suppliers and agencies alike.”

IDC predicts a number of government departments will converge in an effort to reduce duplication of IT services. (An example sited by IDC is the merger of Treasury, Statistics and the Department of Prime Minister and Cabinet). “Although government expenditure is shrinking, ICT spend will grow slightly as technology is used to improve productivity on the front lines of government to citizen delivery. At the same time, the unit price of ICT products and services provided to government will continue to decline.”

Among those lining up to deliver cloud computing to the newly formed Government ICT Council (see page 12) are Gen-i and Datacraft — the chief executives of both those two companies believe cloud computing will be top priority for their clients in 2011.

Gen-i CEO Chris Quin: “The reality is that organisations will transform their ICT pragmatically to the cloud, one piece at a time. Hybrid ICT infrastructure and operations will be the model for the next 10 years, with private cloud solutions happening now. Clients want assurance their infrastructure and vital data is kept secure and robust by local service providers, who can take straight up accountability for the outcomes right here in New Zealand.”

Datacraft CEO Robin Hartendorp: “Our industry has a lot to answer for when we consider the hype created around the cloud. Whilst all organisations now accept that they can get value from virtualisation and consolidation, very few have a clear roadmap to take full advantage of cloud services. This year, the industry must start delivering on the promise. This will be in the form of private cloud solutions, as businesses continue to consolidate their internal IT assets. Then businesses and government will start to recognise the obvious candidates for migration to the cloud – CRM. FMIS, HR, Messaging.”

Meanwhile, Jade managing director Craig Richardson says his company is “seeing a rapid shift in IT spend from traditional systems of record into complementary systems of engagement like interaction applications, adoption services and real-time analytics. This is largely being driven by customer’s shift to cloud-based services, demand for deep customer insights and recognition that speed-to-market is their only remaining competitive advantage.”

Richardson also says that sales cycles continue to be extended – in other words there is unlikely to be a big spend-up in 2011. “We expect no or minimal growth in 2011.”

It appears that for many businesses the effects of the GFC (Great Financial Crisis) are still being felt.

“Coming out of the GFC there will be a range of projects getting underway that have been put off for the last year or so, in some part being driven by the maturing of cloud services, advances in mobile technologies and the need to re-invest in infrastructure,” says Bruce Tinsley, CIO at Opus International Consultants.

“There will be continued emphasis on IT governance as a result of these investments. Social networking will continue to drive changes in the business work environment. The roll out of Ultra Fast Broadband (UFB) in New Zealand will drive new innovations as entrepreneurial businesses take advantaged of the opportunities it provides.”

But as Martin Cocker, Netsafe CEO, points out, getting a return on investment from ICT isn’t only about the technology; it is about the people who use it. “The problem is that ‘investing in ICT’ means more than just purchasing equipment,” Cocker says.

“Businesses need to invest in training. They need to establish processes to protect against the possible negative consequences of introducing technology. In many cases, they will need to change existing business practices to maximise the benefits the technology will bring. There is plenty of advice for businesses on what they should buy – but not enough support for these other aspects of ICT use.”

“The same argument plays out on a national scale. The country is investing big in UFB, but we are not investing equally in the other components of a successful digital society. Within a few years we will have an ultra-fast network that we’re not making the most of.”

Building of the UFB and its country cousin the Rural Broadband Initiative will get underway in 2011, though IDC analysts remain cautious about their impact.

“The opportunity in a 2011 election year is that we move beyond the myopic focus on who builds the network and begin to at least debate, if not address, the inherent risks of structurally breaking up the industry [Telecom to separate into two separate companies if it is awarded the bulk of the UFB] – a debate noticeably absent to date. No matter who builds the network, it will over time become a national, highly-regulated monopoly, operating under separate ownership and incentives from the rest of the industry.”

The building of the UFB and RBI are also expected to put further stress on the retention of skilled labour throughout the ICT community.

Gen-i’s Chris Quin: “The demand for talent, especially into Australia, will tax the ICT industry.”

Jade’s Craig Richardson: “From an IT skills and capability perspective, we expect the market for top talent to be tight as usual in New Zealand and Australia, but are seeing more developer resources available in our northern hemisphere markets.”

The ICT industry, according to IDC, was estimated to be worth $11.8 billion locally in 2010, while telecommunications was the largest earner here with $5.6 billion.

“In 2011 IDC is forecasting further steady but unspectacular ICT growth, with local revenues rising 3.2 percent to $12.19 billion. The hardware sector is the strongest performer with revenues rising 10 percent to $2.57 billion, followed by software (up 9 percent to $1.05 billion) and IT services (up 3.6 percent to $2.95 billion). Telecommunications will, however shrink by 0.8 percent to $5.6 billion as new mobile and broadband services fail to offset the decline in core voice revenues,” the IDC report predicts.

Yet, despite a forecast drop in revenue, the telco industry remains strong. Network builders such as Alcatel-Lucent and Nokia Siemens are jostling to get the lion’s share of projects such as the UFB and the RBI, as well as upgrade mobile networks to facilitate the booming interest in portable devices.

Alcatel-Lucent New Zealand CEO Jyoti Mahurkar-Thombre says, “Web 2.0 is fuelling an insatiable demand for a greater volume of data, delivered faster anywhere, anytime and ubiquitously on any device.

“The challenge that this trend delivers the industry however is how do network operators cope with the increasing demand on bandwidth and the blurring of the line between their fixed and mobile networks? As the proliferation of fibre increases right across New Zealand, it really does become a question of how close are you to the fibre? Whether this is at home, at work or to a fibre-fed mobile cell site,” he says.

Nokia Siemen’s Andrew Button says, “everyone will either have or want a smartphone and it really will become “the remote control” of your life. And, what is more, businesses of every kind will deliver their services over the network.

He is predicting something of a watershed year.

“This will be a year in which things change more than ever before, as we shift to broadband as the standard model – and we are doing that even before the fibre and LTE networks are built. It is hard to guess how many homes will be connected next year, but it is easy to predict that communications and ICT will never be the same again.”

And he challenges New Zealanders to make the most of the new way.

“We need to be aware that broadband is a two-edged sword for nations as well as operators. For New Zealand, we risk becoming a nation of consumers rather than a nation of shop keepers who offer content, software, services and exciting goods at low prices via the mail.We need to ensure the encouragement of demand and development of appropriate frameworks and institutions matches and preferably precedes the rollout of networks.”

Finally, 2011 is also the year of the Rugby World Cup (RWC). Both IDC and NZICT say it is an opportunity to showcase local IT innovation. Though, if you haven’t already got a RWC strategy in place, it may be too late, according to IDC.

“Companies that have not managed to benefit from the investments made during the lead up the event, should not expect miracles once the World Cup arrives. Wheeling and dealing on all levels of corporate hospitality for future projects and investments, will therefore be the game plan for most companies.”

Which is to say – you can’t leave it all up to Richie and the boys.

• Predictions for 2011 from many of those quoted in this article have been published in full on the Computerworld website.

IDC NZ top ten predictions for 2011

1. Chief Information Officer (CIO) get strategic: driving the business value of technology, managing disruption and reforming IT governance.

2. Everything goes mobile: the mobile computing explosion will redefine devices, consumer behavior, workplace practices and create a new applications battlefront.

3. Behind enemy lines: consumer passion for disruptive devices and applications in the workplace will force IT departments to adapt and optimise.

4. The cloud fog dissipates: cloud computing gains traction.

5. Strange bedfellows: disruption will force ICT players into new partnerships and roles for growth.

6. The Ultra-Fast Broadband debate: the myopic debate over who builds the national fibre network will shift to risks of industry restructuring, regulation and how to make it work.

7. The Social Enterprise: social networking will mature — and innovative companies will use it to create a new social business model.

8. Government trims down to gear up: the new Government public procurement programme drives shared services, providing better frontline services with less duplication.

9. Connected health services come of age: broadband initiatives, successful telemedicine trials, rapid mobile technology adoption and consumer acceptance means e-health adoption reach a tipping point.

10. Rugby World Cup 2011: pre-match preparation and execution will be critical.

Govt ICT Council named

Shortly before Christmas the establishment of a Government ICT council was announced. According to the media statement, “The Government ICT Council represents a cross-agency approach to transform government ICT solutions and implement the Directions and Priorities for Government ICT policy framework, designed to deliver value for money and higher quality services to the public.”

Government ICT council members are:

•Independent Chair: Sam Knowles

Craig Soutar, Chief Information Officer, New Zealand Transport Agency

David Habershon, Chief Information Officer, Ministry of Social Development

Gerard Aberdeen, General Manager ICT Services, Ministry of Justice

Graeme Osborne, Director, National Health IT Board

Greg Patchell, Deputy Secretary, Ministry of Economic Development

Leanne Gibson, Chief Information Officer, Ministry of Education

Myles Ward, Group Manager IT Operations and Services, Inland Revenue

Nigel Prince, Deputy Director-General Business Services, Ministry of Agriculture and Forestry.

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