Big IT investments on cards: IDC

Over 1000 large New Zealand businesses will have installed an IT solution costing more than $100,000 by next April. And increasingly the aim of such installations is to cut costs and improve efficiency rather than increase sales and revenue, says research firm IDC.

Over 1000 large New Zealand businesses will have installed an IT solution costing more than $100,000 by next April. And increasingly the aim of such installations is to cut costs and improve efficiency rather than increase sales and revenue, says research firm IDC.

In April IDC surveyed more than 1000 firms employing 50 or more staff, and found around 500 had already implemented IT solutions costing more than $100,000 or planned such an installation over the coming year. From this research and other statistical data, IDC says New Zealand has 1150 firms which will have such installations operational a year from now.

It says most existing installations are process-oriented solutions, like supply chain management (SCM), enterprise resource management (ERP) and customer relationship management (CRM). But in the coming year firms will upgrade systems to include storage and e-commerce.

Over the next 12 months a fair percentage of firms are planning to upgrade existing systems at a cost of over $100,000. Some 25% of firms are planning to upgrade storage systems; e-commerce systems, 23%; security, 21%; portals, 16%; ERP, 14%; CRM, 14%; BI, 13%; and SCM, 12%.

IDC says the hardware market flattened in 2000 at around $2 billion and this is likely to continue. Instead, growth in the New Zealand IT market will be driven by security (up from $700 million in 2002 to $1 billion in 2006) and services (up from $2.1 billion in 2001 to $2.6 billion in 2006). Previous growth (from $1.5 billion in 1997) has already led hardware vendors such as Unisys, Fujitsu, HP, IBM and others to shift more into services, IDC says.

IDC senior analyst Mark Cribbens says the main sectors in services are IS outsourcing (29%), systems integration (21%) and processing services (17%). During 2001-2005 the biggest growth sectors will be application outsourcing, with compound average annual growth of 28%, and IS outsourcing sitting at 12%.

Cribbens says the Kiwi ERP market in 2002 will be worth $360 million, the CRM market $220 million, internet and supply chain management about $150 million each, e-commerce $120 million, business intelligence $100 million and “other” about $50 million.

CRM projects at present mainly concern bringing data together, says Cribbens, rather than improving market share. They are not about doing more but doing the same more efficiently. However, once the infrastructure is “sorted out” over the next two years firms will use CRM more to create new customer relationships.

Cribbens says technology purchase decisions were previously made by the IT manager, who tended to focus more on the functionality of solutions. But now other board members, including finance chiefs and chief executives, are being brought in to see if the business case of a project will stack up.

In addition, other Asia-Pacific companies increasingly receive their IT services through joint ventures with the vendor. But in New Zealand the lack of large corporations means customers try to receive such extended service arrangements by outsourcing arrangements like the one between Terabyte and esolutions, where the cost of the service depends on the performance of Terabyte, Cribbens says.

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