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The year in review

The year in review

With this being the last issue of 1998, ARN editors take a look at the year that was. Philip Sim, Naomi Jackson, Tom Allen, Gerard Norsa and Tamara Plakalo review 1998.

The word on everyone's lips in the channel in 1998 was services. With margins continuing to shrink, everyone, from retailers to integrators to distributors, was put under pressure to define the value-add that made their company worth doing business with. In the distribution ranks, everyone sat and waited for the big global integrators to make their move. Ingram came in and made a lot of noise through its partnership with Electronic Resources Australia (ERA), but then went very quiet again when ERA was sacked by Intel. However, rumours of Tech Data and CHS' entry continue to be just that - rumoursNetwork1998 was the year when networking went downtown. 3Com announced it wanted to own that space and during the latter part of the year it aggressively launched a program aimed at pushing low-end networking gear into small-to-medium business through the channel. However, it is following in the footsteps of Bay's very successful NetGear spin-off, which had an amazingly successful year, and, according to this year's Inform Channel survey, was the big mover in the networking market in terms of channel recognition and satisfaction.

Not to be outdone, the PC boys, including Compaq and Intel, continued their push into this arena, while Cisco has recently shown its intention to grab a foothold at the low-end as well. All indications, therefore, point to the fact that while the low end networking market was hot this year, watch out for bigger things in 1999.

Uptown, Cisco became even more dominant this year. It must be said that it was aided by instability from its primary competitors. Bay Networks, just coming out of recovery mode, was acquired by monolithic telco provider Nortel Networks. While the settling-in period will rock the combined force for a while, Cisco, if it can pull off the merger, just might have its hands full with a company that is twice its size. 3Com meanwhile was getting back on its feet after its merger with US Robotics. With the decision by new MD Gerhard Rumpff to aggressively go after the low end, it will be interesting to see how 3Com fares.

Meanwhile, Cabletron ended the year on a disappointing note reporting disastrous results, adding further fuel to the speculation that the company was soon to be acquired.

The two smaller companies that took marketshare were Fore Systems, which successfully teamed with Cabletron to land some large ATM wins and Xylan, which has had great success teaming with distributor LAN Systems and integrators like Anite, Digital and Lanlink.

On the whole, though, it was a tough year for the network integration community who were consistently squeezed by ridiculous discounting. Com Tech and Anite were standout performers.

PC

1998 saw the emergence, if not the definition of, PC hardware fulfillment as a component of a successful IT business rather than a business in itself. Direct PC seller Gateway grabbed a spot in the channel with its partner's program.

The search for the sub-$1000 PC progressed with Internet vendors like US-based iDot.com launching PCs exclusively for sale via the Net. Worldwide shipments of PCs continued to increase at varying rates, while some vendors felt the pinch of market share pressures push them towards more direct models (to their peril).

1998 saw the arrival of traditional office automation resellers promoting digital copiers and network-ready mopiers, and the distinguishing line between selling stand-alone and PC or network-attached devices became permanently blurred.

Intel released, slashed and adjusted its CPU offerings, while the non-Intel world scrambled for footholds in value PC segments, extending the lives of architectures Intel had left behind.

Meanwhile the big chip vendor had a little Australian house-keeping of its own to deal with, and the year saw Todaytech replace ERA as one of its three distri-butors. Not all bad news for the Ingram Micro affiliate, though. Picking up IBM PC distribution was not exactly a backward step.

The review of the PC year would not be complete without mentioning the re-emergence of Apple with its entry-level iMac released in September. It earned bonus points for its incorporation of the USB, giving it at least a chance of mixing it with the Windows herd.

The year saw Acer burst through the pack of suppliers to governments, jumping from supplier 31 to a top five slot.

Compaq, meanwhile, drew fire from the channel for its direct sales strategy and problems with its implementation of R/3, which saw it struggle to cope with supply from both resellers and customers.

Enterprise

The favoured buzzwords and product hotspots for enterprise resellers and service providers in 1998 have been many and varied. But which ones have had the biggest impact?

Obviously, Compaq's acquisition of Digital has been the most significant event of the past year. Despite Compaq's commitment to Alpha and OpenVMS, the loss of the Digital brand was keenly felt in the enterprise space. Consolidation of Compaq's channel also remains an issue for enterprise resellers, integrators and outsourcers.

Another talking point was about Microsoft's flagship Windows NT 5.0 product and when it would finally ship. But although NT 5.0 has continued to get later and later, and the likelihood it will be bug-free from the outset has become more and more remote, Microsoft has not suffered. Enterprises have instead been adopting version 4.0 of the operating system at a dramatic rate.

But Unix vendors have started to bite back. A number of key version releases designed to accentuate the scalability and reliability advantages of Unix over NT have given enterprise resellers new options for their customers.

Sun Microsystems released Solaris 7 in October, a 64-bit version of its Unix operating system.

Unix also received a spur from IBM, who launched several RS/6000 models running the operating system, and from Santa Cruz Operation (SCO) who released Unixware 7.

IBM and SCO also jointly announced they will team with Intel to develop a 64-bit version of Unix for Intel processors, encompassing elements of both IBM's AIX operating system and SCO's Unixware platform.

That partnership sets the scene for the third key issue of 1998 - the migration to 64-bit processors. Merced's ship date has slipped, but talk about it and other 64-bit technologies continues unabated.

All the major vendors have announced strategies for the platform and most have engaged in alliances to strengthen their cause.

It has also been a watershed year for the database market. While Sybase and Informix continue to battle poor results, Oracle and Microsoft announced major version releases.

Oracle's 8i database signals the company's move away from a client/server-based strategy, while Microsoft's SQL Server 7.0 is its first real shot at credibility in the market.

The third key player in the market, IBM, also announced a number of enhancements to its DB2 product.

Other key technology sectors to claim a profile in 1998 have included: enterprise resource planning (ERP); knowledge management; and customer relationship management.

But services is where the real margins are, and enterprise resellers, integrators and outsourcers are taking advantage.

Demand for integration and outsourcing expertise continues to grow, although the focus is being narrowed to specific infrastructure domains and processes, rather than the whole-of-enterprise projects that have been popular in recent years.

Developer

1998 was always going to be an eventful year for the developer community, increasingly engaged in a debate over software component models.

One could even say that the timing of last month's court injunction against Microsoft was impeccable in terms of concluding 1998 with the appropriate battle-of-components culmination that could see Microsoft, with its JVM based around "MS-enhanced" version of Java, finally pulled back into line with the Sun-standards respecting developer folks.

But, while those using JVMs based on Sun's core 1.2 platform in conjunction with CORBA and Enterprise JavaBeans (EJB) rejoice, one can expect the euphoria to be short-lived as the battle-of-components intensifies.

Acucobol - in its own attempt to turn the tables on Sun and Java, this year rewarded its faithful COBOL programming followers with the late release of Acucobol GT 4.0 development suite. Expected to take the heritage of 1960s COBOL into the new millennium and allow applications to be developed entirely within the COBOL syntax, Acucorp GT 4.0's main remedial property, however, is the ability to ease the pain of being called passŽ in an environment where more and more programmers are turning to Java and Corba.

Save for Bill Gates' Java faux pas, the world number one software company has to be credited with some oracular caution, at least when it comes to their September release of its platform-independent Visual Studio 6.0 suite. But, that is about the only thing that likened the software market enfant terrible to open systems proponents, such as Compuware, who last year entered a number of partnerships in order to support Corba and Java PLs in their Rapid Application Development Environment.

Heralded when Sun Microsystems let its Jini out of the distributed systems research bottle, the shift is expected to become a commercial reality when projects such as Jini or Microsoft's Millennium are unveiled in the next few years.

And while the software big guns are conceiving the "third era of computing" and preparing for the impending XML battle and Y2K plague, the more immediate future is being shaped by small software developers who are quietly positioning themselves for the post-2000 IT market.

Proving wrong all those who last year claimed the Australian developer community was taking a prolonged technological nap by not doing enough R&D in Java or by being overcautious in accepting XML, were local innovators such as our own smart-card innovator Indigo Corp from Sydney or the GIS-market rising star Infomaster, based in Adelaide. Both of these companies spent 1998 flying the Australian flag around the world.

Retail

It has been a year of rapid change and turmoil in computer retailing due to significant price and margin erosion for computer store operators. Both small and large retailers have been through a transition period as technology becomes more affordable and consumer and SOHO buying habits become more mainstream.

All legitimate operators rejoiced in the more even playing field eventuating from new tax laws effective from September 1, 1998.

Windows 98's launch in June was a timely boost for retail with USB support supposed to help stores sell more peripherals with PCs. USB may well be a retail bonanza in future years as Win 98 penetrates further, but it has not been a huge success in 1998.

Harvey Norman's delivery of a $90.17 million operating profit to shareholders for the 1997-98 financial year represented a healthy 53.8 per cent increase for the year. Its turnover was up 21.7 per cent (to $1.48 billion) and all in management agree it is the computer and communications group bringing increasing numbers of people to its stores.

The 20-plus new stores Harvey Norman opened during 1998 should ensure sales growth continues. Existing retail chains in New South Wales, Western Australia and Tasmania were acquired while new stores were opened in New South Wales, South Australia and Queensland.

Another national retailer, Dick Smith Electronics, hatched its own plans for new stores based on its highly successful Sydney "Powerhouse" model. Additional powerhouse sites in both Sydney and Melbourne opened during the second half of the year while it has also launched the most comprehensive attempt yet by a major retailer at Web-enabled sales. A mammoth e-commerce project went live in October.

Additionally, mainstream retail juggernaut the Coles-Myer Group has been progressively increasing its product range. It was reported in October that its consumables sales alone were growing at 120 per cent per year. The emergence of K-Mart, Officeworks, Big-W and Coles as computer retail players is further evidence of the commoditisation of computers.

However, the biggest single retail success story of 1998 would have to be the dynamism of Ron Harris and his North Sydney-based store, Harris Technology. Its Web site now accumulates $350,000 to $360,000 in sales every month from 35,000 products. The call centre for its mail order business receives 1100 calls per day.


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