Smaller firms are coming into fashion

Having had the opportunity to speak with many suppliers and users of IT during the past several months, it has become clear that IT markets will probably never be the same again.

We have become so used to IT being dominated by the big five -­ IBM, Microsoft, Oracle, Sun Microsystems and HP ­- that we tend to think IT will always be this way. No one would have disputed this a year ago ­ but economic conditions are changing IT markets and the big boys are no longer guaranteed a place at the table.

In the past, corporations have been willing to pay a premium for “designer” brands, but this is no longer true. Many mid-tier suppliers are experiencing something of a renaissance as IT buyers look for value. Most of us know that large suppliers do not have a monopoly on quality and stability, despite the fear, uncertainty and doubt they use as part of their sales and marketing tactics.

The willingness of users to look outside the designer brands is well illustrated by a conversation I had with the chief financial officer of a charity. He believed the days of the large, arrogant, over-priced IT vendors and consultancies were over, and that the recession legitimised a search for technology and services that included suppliers which might not have been considered a year ago.

This new search for value has created an opportunity for many new entrants into IT markets. Indian suppliers of technology are the keenest to take advantage of economic conditions.

A supplier of business intelligence applications called ElegantJ BI is a good example. The company does not possess the slick sales and marketing skills we expect in the West, but it offers surprisingly good technology, at quite a modest price. The firm is keen to get into European markets and a strapline on its web site seems particularly relevant: “The future does not belong to anyone”.

Speaking to large IT suppliers can be fairly dismal at the moment. They are in lock-down mode, with exclusive focus on next quarter’s figures. As they concentrate on their sales forecast spreadsheets and try to squeeze every ounce of revenue from existing customers, the new kids on the block have been given the freedom to do as they wish ­ and they are.

The current economic conditions are not simply allowing new entrants to come into IT markets. Many managers are asking if the crippling complexity that characterises many IT endeavours is really necessary. Unnecessary complexity always means higher cost and poor-quality systems. Cloud computing, and particularly cloud applications, provides an ideal mechanism to realise the 80-20 rule ­ 80 per cent of needs can be met by 20 per cent of the functionality. For “commodity”
applications such as HR, finance, purchasing and the like, cloud computing will offer a low-cost alternative to in-house applications. While large corporations will be reluctant to go down this route, the economics will become so compelling that it will be irresistible.

As if things did not look sticky enough for the status quo, we should add one more factor. While we like to imagine interesting IT is the domain of the large corporation, this is not so. Hundreds of thousands of small and medium-sized firms also need business intelligence, enterprise search, customer relationship management and other applications. This is a huge global market where designer brands carry very little weight. Low-cost solutions from emerging economies such as India will be very attractive to these organisations.

At the risk of making myself very unpopular, I have to admit that the changes this recession will bring about are desperately needed. What was “designer” last year will look very uncool next year.

Martin Butler is founder of IT analyst Martin Butler Research