Services to keep channel margins growing

Services to keep channel margins growing

The increasing importance of IT services to the channel's future revenues was again underlined by speakers at the IDC Forum held here last week.

Fred Amoroso, general manager of IBM Global Services Asia Pacific, told delegates that the advancing complexity of systems environments is rapidly driving end-user demand for value-added services.

"There is a growing frustration among customers with the complexity of information technology," Amoroso said, "and they do not want to spend their limited time, money, or human resources sorting out that complexity.

"So despite the general downward trend in expenditure on hardware and software, services expenditure continues to grow."

$400 billion

Amoroso quoted IDC figures that suggest that of the $US1 trillion of external IT spending worldwide predicted for 1998, 40 per cent will be on services.

That figure is expected to multiply in the future, with Australia a key driver of growth.

Amoroso claims IDC figures show that by 2002, Australia will comprise 46.4 per cent of the estimated $US17.7 billion the Asia-Pacific IT services market (excluding Japan) will generate.

According to Amoroso, the key factors that will propel the market's growth are the accelerated pace of and speed of technology change, the shortage of available IT skills and a growing propensity by users to outsource.

"Initially, IT Services were utilised mainly for maintenance, to protect investments in hardware and software," Amoroso said.

"But now, increasingly, business strategy is dependent on the provision of IT. Customers are looking for service providers who can deliver a complete business solution across the value chain rather than piece-part services."

Amoroso identified four main hotspots in the IT services arena: electronic-business, outsourcing, business intelligence (BI) and Y2K support.

The most pressing of these, according to Amoroso, is Y2K support, yet he claims the Asia-Pacific region has been slow to address the problem.

"The Asian financial crisis has diverted attention away from Y2K and, as a result, this region will possibly be the least prepared to tackle the millen-nium bug and the associated computer chaos," he said.

However, he added the caveat that recent IDC research shows Asian companies have become more aware about the problem over the past 12 months and are now starting remedial programs.

IT service providers should also look to derive revenue from a growth in the e-commerce market, Amoroso said.

The rise of the Internet coupled with market deregulation is increasing competition, Amoroso argues, so companies are being forced to formulate IT strategies that utilise e-commerce. "The marketplace is becoming increasingly global and the Internet does not differ between a customer in America or one in Australia," Amoroso claims. "So customers need to stay ahead with e-business technology or their ability to compete will be affected."

IT outsourcing presents another opportunity for the channel, according to Amoroso.

IDC predictions indicate outsourcing will grow by over 18 per cent in the Asia-Pacific region, excluding Japan, and Amoroso claims this is being fuelled by companies merging, expanding into new markets, looking to reduce costs and seeking to more effectively serve their customers.

"Five years ago, outsourcing was used as a way to control costs and get IT infrastructure under control," Amoroso said. "But today, it is seen as a way to leverage technology for competitive advantage, and provide ever-increasing value to the business."

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