The first section of the Computerworld Awards features hardware which includes servers, PCs, mobile devices as well as peripherals like printers and corporate multifunction copiers.
The server sector was buoyant last year with worldwide server revenue in 2005 growing 4.5 percent to US$51.7 billion, while server shipments grew 12.7 percent to 7.6 million units from the previous year, according to Gartner. IDC estimates revenue grew 4.4 percent to $51.3 billion, while shipments grew 11.6 percent to 7 million servers. Although vendors remain enthusiastic about the possibilities in the server sector, Annie Chung, Gartner's principal analyst for enterprise systems, Asia/Pacific, sounded a note of caution. "Based on the forecast update last quarter, the server revenue in Hong Kong is expected to have flat-to-negative growth," she said.
What's hot in servers right now is virtualization with many enterprises having consolidated their server farms they see further gains in virtualizing server resources. Virtualization enables the sharing and pooling of server resources and lowers costs and increase flexibility. Market research company IDC estimates spending around server virtualization will increase to nearly US$15 billion worldwide by 2009,
Power and heat issues are also affecting servers at the processor level. Instead of simply ramping up clock speed, chipmakers are putting more cores on a single piece of silicon to enable more work to be done by fewer power-hungry processors. All the key chip vendors are rolling out multicore processors for servers at all levels.
Blade servers are given their own category in this year's awards. While uptake has been high in the last year or so, Gartner expects more modest gains in the future due to concerns over heating, power and immaturity of the technology. "By 2009, only approximately 16 percent of servers installed worldwide will be in the blade format," says Gartner analyst Jane Wright.
PCs and the rest
Shipments of PCs worldwide will grow at a slower pace in 2006 than in 2005, partly because the replacement cycle for desktop PCs has hit a peak, market researcher Gartner said recently
PC shipments in 2006 are expected to reach 234.5 million units, up 10.7 percent compared with 2005. However, PC shipments grew 15.5 percent in 2005, compared with 2004.
Although shipments of mobile PCs are expected to grow strongly in 2006, the deceleration in desktop PC replacements will drag down the overall growth rate, according to Gartner.
Desktop PC shipments are projected to grow just 1.9 percent this year overall, declining 8.6 percent in mature markets while increasing 19.5 percent in emerging markets, according to Gartner. However, mobile PC shipments are expected to grow 31.4 percent worldwide this year.
On corporate wireless devices, the battle is intensifying with smartphones and wireless-enabled PDAs all vying to get into the corporate communications environment. Push-email and more powerful and rich operating systems are now allowing mobile professionals to remain in touch with their corporate network.
STORAGE AND NETWORKING OVERVIEW
Storage and networking are the next categories in the awards this year and both markets have seen positive growth and development.
In storage software is the big growth area today. Enterprises are buying more replication, backup and archiving storage software, market analyst IDC found in its most recent quarterly storage software report released in March.
In the fourth quarter of 2005, the storage replication software market grew 21.7 percent, representing the largest storage software segment growth, IDC said.
Businesses increasingly need to protect and secure the information they collect and that demand is driving the growth in the replication, backup and archiving segments of the storage software market, IDC said. The growing volume of software sales in those segments is also being driven by demand from businesses to protect their data throughout the business cycle, it said.
Sales in those segments helped drive the overall worldwide storage software market to grow by 12.6 percent in 2005, with revenue reaching US$8.9 billion for the year, IDC found.
An earlier IDC report in February noted that an explosion of data and the availability of storage systems that help tackle data protection and business continuity issues drove a record year of growth for the disk storage systems market in 2005.
External disk storage system sales worldwide jumped nearly 18 percent to US$4.7 billion in the fourth quarter of 2005 from the prior year-ago quarter, and for the year grew 12 percent to $16 billion from the prior year, IDC said.
Sales of midrange systems, which IDC defines as priced between $50,000 and $149,999, were especially strong, noted IDC.
"The sweet spot continues to be midrange products," said Brad Nisbet, program manager, IDC Storage Systems. "A lot of the features and functionality once only in the high end has migrated its way down to lower segments of market. That combined with the fact that many midrange products offer multiple tiers of storage is driving the growth."
Multiple-tiered storage is helping users to address such challenges as data protection and business continuity, Nisbet said.
Networking
Networking has been dominated by IP telephony and convergence as well as growing areas such as network optimization which we haven't included in this year's awards as its still an emerging market.
The overall enterprise telephony equipment market in Asia Pacific has grown 8 percent in Q3 2005 compared to 2Q 2005 in terms of revenues, according to IDC. This increase was mainly attributed to the 16 percent quarter-over-quarter growth in the IP telephony equipment segment. The migration to IP continued with 3Q 2005 sales of IP telephony equipment again overtaking sales of traditional telephony in mature markets in Asia at 58 percent IP versus 42 percent Time Division Multiplexing (TDM). In the overall Asia/Pacific region, one out of every four telephony lines shipped were IP.
Many companies have an interest to move to an IP network but have yet to build a significant business case for the move as some companies are still comparing IP with traditional PBX systems on a simple cost basis rather than looking at what new applications and benefits that an IP network can deliver.
Wireless is becoming an accepted and mature technology within the enterprise. Growing standards in security and access to WLAN networks have given large and small enterprises the confidence to deploy and manage wireless within the corporate network.
The Asia-Pacific Wi-Fi services market is expected to reach $1.3 billion in 2010, more than five times its size of $213.2 million in 2004. In-Stat says the business Wi-Fi equipment market in the Asia-Pacific region is expected to rise to $865 million in 2010 from $498.7 million in 2004.
The region's consumer Wi-Fi equipment market is also projected to grow from $112.3 million in 2004 to $243.6 million in 2010.
SECURITY OVERVIEW
In the security section, competition is fierce in each market with security remaining at the top of the list of concerns for the region's IT managers and CIOs, according to a recent survey by IDC. When asked which security and continuity measures companies currently have in place, storage and archive came at the top of the list, with 81.4 percent of respondents responding positively. This is a good indication that organizations recognize that storage and archive forms the fundamental basis from which any disaster recovery efforts can be made. Coming in a close second was security software (81 percent), which covers anti-virus applications and intrusion detection tools.
While the level of understanding appears high, many organizations have yet to put in place the fundamental plans and tools required to ensure they can withstand attacks and recover from disasters when, and if, they occur. Of the 9 critical security measures surveyed, seven measures individually registered less than 60 percent take-up by respondents. This suggests that organizations may not have thoroughly planned their security measures and most likely deploy them only when security issues arise.
"Security risks are becoming progressively more sophisticated, and further efforts by organizations are required to keep pace with the dangers faced," comments Willie Low, market analyst, Infrastructure Software, IDC Asia/Pacific. "Many organizations have yet to adopt the additional security measures which they can use to arm themselves against these new threats. However, the awareness of the need for these measures is growing, and we expect to see higher adoption rates for enhanced security measures over the next year."
Assault on all sides
A 2005 study by the FBI shows that organizations are all facing a barrage of electronic assaults, ranging from nuisances such as spyware and viruses through sophisticated hacking attempts.
Of the 2,066 organizations with more than US$1 million in annual revenue surveyed, 87 percent reported some type of computer security breach within a year, ranging from internal theft to viruses to Web site defacement, the FBI reported.
IT managers and system administrators reported spyware and viruses were the most common problem, followed by port scans, sabotage of data or networks, and then adult pornography. While not necessarily illegal, adult pornography is against the policy of most organizations, the study noted.
More than 50 percent of hacking attempts came from within the US and from China, as many organizations were able to trace where intrusion attempts originated. But hackers are using computers that are under their control but located in other countries, combined with the use of proxies to make detection more difficult.
The FBI said a Romanian hacker could use a proxy computer in China to gain access to a compromised computer in the US, leading to a false conclusion that the attack originated in the US.
"Difficulty tracking IP (Internet Protocol) addresses and prosecution in China combined with other economic, military and political concerns make this an unusually troubling statistic, especially when considering the potential impact of industrial espionage and state-sponsored cyberwarfare efforts," the survey said.
Antivirus software is widely used, and most organizations also have firewalls in place, the survey said. But 44 percent reported that intrusions came from within their own organizations, and "this is a strong indicator that internal controls are extremely important and should not be underemphasized while concentrating efforts on deterring outside hackers," the FBI said.
SOFTWARE OVERVIEW
In the software section of this year's awards, we see continuing consolidation across all software categories. Increasingly companies are aiming to reduce the number of vendors and point products they use and simplify their application environments. According to IDC's latest research publication on packaged software market, the Asia/Pacific (excluding Japan) region is expected to grow by 11.1 percent for year 2006 amidst sustained price pressure, increasingly integrated selling strategies, and continuing market consolidation.
"IDC views the market consolidation activities as great opportunities for vendors to upsell their integrated technologies," says Wilvin Chee, Director, Asia/Pacific Software Research. "We also expect vendors to make greater efforts to improve their penetration rates by reaching the corporate boardroom in order to better persuade the criticality of IT investment within business operations."
IDC offers an overview of the latest market trends and the emerging dynamics that will shape the software industry and its competitive landscape in 2006.
IDC's Major Predictions for the Software Market in APEJ for 2006 include:
' Product Supply Chain Applications to Lead the Industry Applications Market
The vast industry applications market (more than US$1 billion by 2006 in the region alone) will draw a lot of attention from global vendors who will pursue the acquisition of successful local vendors in order to establish firmer footprints in the region. Product supply chain applications are expected to lead the strong growth in this market segment with an annual growth of 13.6 percent.
' Content Management Applications Market to be a Hot Button
IDC expects the content management applications market to be a hot button due to the expansion of information management and forecast this market to grow at 14.4 percent. Organizations are increasingly adopting greater integration of their resources, both internally and externally. Hence, it is critical to have proper deployment of content management applications in order to facilitate effective dissemination of information.
' A Higher Degree of 'Batteries Included' Philosophy Towards Security
Moving into the year, IDC predicts a higher degree of 'batteries included' approach amongst the larger vendors towards security. Whether one purchases an email management solution, an enterprise infrastructure management solution or a service subscription with a service provider, security (or "batteries") will built-in. The security may be in the form of hardware, software or services, and the fulfillment may either be carried out by the same vendor or its partners.
' End-users to Increase ITIL Adoption Paving Way for Greater Benefits
End-Users in the region are increasingly well placed for ITIL (Information Technology Infrastructure Library) adoption. 2006 will prove to be a significant seeding year for reaping ITIL benefits amidst a sustained cautious approach on IT investments and continued market education. This market is expected to close at US$544 million in the Asia/Pacific (excluding Japan) region this year.
' Enterprise Applications as Entry Point in Adopting 'Software-as-a-Service' Mode of Subscription
Software usage will be significantly addressed with the introduction of 'software-as-a-service' mode of subscription. The enterprise applications will be among the first entry points for companies to consider such mode of subscription, especially those within the SMB segment. IDC believes SMBs will contribute 28.4 percent of the US$13.4 billion packaged software market in the region this year.
SERVICES OVERVIEW
The emerging managed services market involves a growing plethora of different functions and operations. Voice, basic Internet access, network services such as leased lines and ATM lines were the staple offering from telecoms providers.
Today the portfolio covers network support and maintenance, fault monitoring and management, administration management, IT and communications assessments, network design, build and systems performance analysis, or even business continuity and risk assessments. Add IP telephony, security and the usual IT outsourcing services then the list of choices for enterprises is mammoth, both from the perspective of service options but also the list of providers to select from.
Converged market
Experts note that the service offerings are converging with traditional telecoms carriers pitching into markets dominated by IT service providers and outsourcing firms. The points of differentiation between the two camps reducing and this translates into greater choice for enterprises as services become more mature and pricing will come down.
This is not a bad thing for enterprises as competition in the managed service space will keep cost performance high, he added.
Some argue that only one consideration applies when trying to decide between a managed service provider with telco roots, and one with IT house roots.
If it is external connectivity with partners and suppliers and regional/global coverage, then the expertise of a regional or global telco will likely offer better value. While companies looking for internal integration and platform rationalization may find providers with stronger systems integration expertise will usually provide more comprehensive responses to enterprise needs.
According to IDC's inaugural Asia/Pacific Managed Services Study, the Managed Services market in 2004 topped $13.26 billion and US$208 million for the enterprise and telecom carrier markets respectively. In Q1 2005, this was US$3.4 billion and US$63 million respectively. IDC forecasts that the combined market will exhibit growth of 8.8 percent to reach US$14.6 billion in 2005. However, Value Added Managed Services (VAMS)( are expected to grow almost 15 percent in 2005 and it is this segment that has caught the attention of Managed Services providers, opening up new opportunities for them.
Lines drawn
According to Adrian Ho, Senior Market Analyst, Networking Research, IDC Asia/Pacific, "telcos across the region rolled out Managed Services offerings and made acquisitions to mitigate stagnant data revenue." He added that network equipment vendors pursue strategic tie ups with telcos, while IT service providers refreshed their managed services portfolio to mark their territory against new competitors."
While leading IT services vendors will continue to be seen as scion in this industry, IDC expects a flurry of activity to take place in the small and medium-sized business (SMB) sector, which will provide a unique selling opportunity for the telcos who are aggressively finding opportunities to expand their addressable markets. Mr. Ho adds, "There is a strong tendency for SMBs to opt for a single party for all their managed communications services need. Telcos who are the sole providers for managed connectivity will be the de-facto choice of many SMBs." This is also the canvas on which networking vendors have decided to actively develop strategic relationships with telcos across the region. Resale of networking equipment to Telcos for their managed service bundling amounted to US$94 million in 2004 and almost US$24 million in Q1 2005.
"Telcos must and have started to realize that they cannot be a one trick pony to thrive," said Mr. Ho. "A supermarket of managed services products is essential." IDC advises telecom operators to quickly form partnerships beyond the networking vendor community, and reach out to software vendors in order to successfully exploit the growth in VAMS like managed applications.
In Q1 2005, Managed Connectivity, Managed Networks and Internet Data Centres/Hosting were the largest three categories of Managed Services.
- IDG staff contributed to this report