First looks

The next few months will see a number of issues significantly impact the Australian IT industry's growth and performanceThe Asian currency crisis of late 1997 had a number of unanticipated consequences for the IT industry, slowing the rate of technology adoption throughout the region and destabilising the costs of computer components and complete systems.

More importantly, however, it proved the truism which has emerged over the past few years. Even in fast-growing, underdeveloped IT markets such as Asia, the IT business is less about technology and more about business. Global, regional and country economies now have a powerful effect on the growth and success of any number of IT markets.

As we look forward over the next several months, we can see that so many of the issues which will impact the Australian IT industry's growth and performance will be tied to economics - whether that is direct economic activity; product and service pricing; or value of ownership.

The effects of the currency meltdown will continue to have an impact on the market, affecting the pricing of components as hedging contracts expire, and changing the way that US, European and Asian vendors compete in both their domestic and offshore markets. Particularly for commodity products such as PCs and peripherals, global reach and economies of scale in volume manufacturing are increasingly important differentiators.

Of course, the purchase price of computer equipment is but one factor to be taken into account. Organisations of all sizes and in all industries are quite rightly growing concerned at the total cost of ownership of desktop hardware over the three to five years in which it serves a usual function in the enterprise. So even if purchase prices drop 10 per cent, this has little impact on the training, real estate and end-user support costs associated with the equipment.

Over the past year or so, IDC has conducted research into the value of ownership of a number of IT products, and we expect this to be an increasing focus for user organisations through 1998 and beyond. IDC's value of ownership concept focuses on the value that IT can provide to an organisation through improved efficiency and automation, rather than just the actual costs to install and support.

This research indicates that the value of IT emanates from well-managed systems, typically using software tools designed for this purpose. As the IT function within an enterprise becomes an even more important component of the overall business function, users need to look for competitive advantage through adding IT value to business processes.

Not all organisations agree that IT is a core element of their business, but qualitative research conducted by IDC in Australia indicates that a well-managed IT function is far easier to outsource than a poorly-run department. Only through understanding the complexities of the environment and the service levels required can a user hope to measure an outsourcing vendor on their service delivery.

There is much debate over the real value of outsourcing, and that can only be expected to intensify over coming months. Certainly outsourcing will continue to be a major element of IT market growth and direction, but focus on performance will also be significant.

The reality is that IT has become a bottom-line business, and those users and vendors which ignore this will bear the consequences of the market forces.

David Noble is general manager, vendor services, for IDC Australia

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