Opportunities in 2010

While 2009 was all about CIOs cutting down IT budgets, this year promises
greater avenues for solution providers to expand and upscale. This is the time
when SPs can continue to look at their core competencies and at the same time
may also venture into some unexplored areas

Recession and economic slowdown were the two buzzwords you heard throughout
2009. Clearly last year did not bring cheer to businesses across the globe and
IT industry was no exception, however 2010 promises to be a better year as
compared to 2009. According to a study conducted by IDC, global IT spending is
projected to increase at a compound annual growth rate of 6.3 percent to reach
$1.48 trillion in 2010.

The worldwide software spending is expected to reach $327 billion in three
years, reflecting a compound annual growth rate of 7.7 percent. The report
further states that the hardware market is projected to reach $562 billion by
2010. This will be driven mainly by 'robust' spending from the home business and
consumer, communications, and govern-ment sectors. Specifically, IDC predicts
that more money will be spent on volume servers, peripherals, storage, and
network-ing equipment worldwide.

In light of the above developments, there are several technologies and hence
business opportunities that the SP community can look at in 2010. While cloud
computing, virtualization and consolidation, unified communications are some of
the key technologies that will rule. Solution providers can also look at ERP
implementation and management, data storage, and managed services as some of the
other potential areas to give their businesses the perfect momentum to thrive in
2010.

DQ Channels spoke with solution providers and experts across the IT industry
to understand the nature of opportunities that this year stands to offer.

Cloud Computing

According to an IDC report conducted in 2010, cloud computing will spur
significant M&A activities that will lead to bigger companies buying the smaller
hosting firms to round out public/private offerings. The current US economic
woes will drive more enterprises to consider cloud offerings. This will upscale
the spending on IT cloud services, which is expected to hit $42 billion by 2012.

Why Cloud Computing?

The biggest strength of cloud computing lies in the fact that it can
effectively help companies in reducing their Capex and further focus on their
core competencies. Hence, services related to software, platform, and
infrastructure can be delivered through the cloud computing technology at
minimal costs. In addition, it gives businesses the option to keep abreast with
the latest technology without making huge investments, thereby automating their
business processes. In a nutshell, cloud computing gives direct access to
software and hardware with minimal or no upfront investments.

Providing reliable, flexible, and cost-effective access to all the data
stored in an organization is the biggest challenge being faced by these very
enterprises today. Hence, as an SP one can look at driving efficiencies and
innovation across the business for customers. Concentrating on areas such as
superior service management, providing visibility, control and automation across
IT and business services are few of the areas where SPs can lay stress. Cloud
computing gives business the option to pay only for what you use, so they can
effectively use the technology to ensure greater revenues for themselves.

Saket Kapur, CEO of Delhi-based Green Vision shared, "The most important
thing that an SP today needs is to look at identifying his core competency and
then ride on that technology in order to expand their businesses. Some 10-15
years back, SPs were doing almost everything, but increasingly they have
realized that they need to look at limited services and hence their portfolios
have narrowed down. SPs have now started specializing and hence these partners
are now looking at a particular technology/product." Kapur further added that
the cloud computing technology will see a major boost, as more and more
customers, including SMBs, are looking at hassle-free computing environment.

What an SP requires?

In order to further services related to cloud computing, an SP needs to have
a good amount of capital in the first place. However, this would depend on
several variables which could be number of customers, area of implementation (ie
ERP, word processor, etc). 80 percent of customers today use basic applications
such as e-mail, word, excel sheet, power point among others, hence SPs can look
at application service providing (ASP) and make licensed software, applications,
anti-virus available at low cost.

Elucidating further, Kapur of Green Vision stated, "If one were to go by
licensing cost alone, the cost of MS Office application for one machine is
around Rs 12,000 per machine. Further, the cost of anti-virus is Rs 1,200 for
yearly subscription. Hence, if the customer agrees to have all of this as part
of cloud services, he will no longer have to worry about the licensing cost and
managing applications. The customers can place some of their not-so- crucial
applications on the servers that are owned and managed by the SPs. They, on the
other hand, will ensure availability of applications all the time.

Shital Nahar of Mumbai-based Nahar Integrated Systems opined that cloud
computing ensures that customers can outsource some of their key applications at
relatively

lower costs. "As far as cloud computing is concerned, we have recently
identified it as one of the potential areas of investment, since traditionally
we have been furthering end-to-end networking and security solutions. Investing
into cloud computing solutions does not require huge investments and one can
begin with training manpower (pre-sales, post-sales and technical knowledge).

Lot of software companies, manufacturing units, and financial companies are
looking at adopting cloud computing technologies and solutions."

Virtualization and Consolidation

Opting for virtualization and consolidation solutions can help organizations
do more with fewer physical assets. Virtualization helps drastically reduce the
number of software and hardware resources being deployed by an organization;
power and physical space reduction, accelerated server provisions/consolidation
ensure quick RoI. Additionally, simplified backup and recovery, business
continuity built-into model, dynamic provisioning and transformation of physical
IT infrastructure are other benefits that a customer stands to enjoy.

In a distributed environment, almost 85 percent of server capacity sits idle.
70 percent of the IT budget is spent on maintaining the current IT
infrastructure. This clearly emphasizes the increasing need for consolidation
and virtualiza-tion of an IT environment.

Challenges for an SP

While the biggest challenge for an SP who is looking at virtualization as a
potential area for business revolves around deep technical know hows, the other
limitations may be in the form of adding workforce to ensure greater and
smoother deployment and manageability.

The SPs will have to make their customers understand the fact that adopting
virtualization and consolidation does not mean large overheads and multiple
servers. While the technology has been around for quite some time, asset
management and problem management are the other challenges that emerge from its
application that demands effective training of the technical workforce at the
partner level.

According to Biren Selarka, CEO, ACMA Computers, a Mumbai-based SP offering
networking and managed services, "Virtualization and consolidation are
technologies that require regular technical updation and a proper understanding.
However, this is a green area for investment since the returns are good.

It depends on the SP, the way he does the business and how he places the
product and solution before his customers."

Unified Communications

Unified Communications (UC) basically makes use of software to bring voice,
e-mail, instant messaging and video conferencing together. This enables
companies to replace traditional phone and voice mail systems with solutions
that integrate telephony with corporate messaging, calendaring and directories.
This leads to huge savings in terms of travel cost and greater TCO.

Potentials UC can offer

According to a recent IDC report in 2008, the total UC revenue in the
Asia/Pacific (excluding Japan) region was $1.8 billion, including IP telephony (IPT)
and UC applications. In this, the APEJ UC applications revenue totaled to $798.6
million. Hence, combining phone and e-mail communications into a single solution
leads to increasing employee productivity and decreasing administrative workload
for IT professionals. Unified communication certainly offers scope for expansion
and assured revenues.

What an SP requires?

Giving further insight into the growth potential that UC can offer, Nahar
shared, "Unified communications and telepresence ensures that customers save a
lot of travel costs, by using UC tools such as that of phone, Web, e-mail, and
video conferencing. However, investing into UC solutions requires huge
investments. Additionally, costly IP phones, security issues, low awareness
levels, regulatory restrictions, low broadband penetration in India, and quality
of services are few of the challenges that can come in an SP's way. Hence the SP
will have to do a lot in terms of generating awareness.

ERP Applications

Opportunities in of ERP implementation are huge. A number of SMBs (typically
having 50 or more users and a turnover of Rs 100 crore) are now looking at ERP
solutions to ensure that they meet

their demands of integrated SMSes and e-mails along with structuring their
marketing campaigns. Hence, ERP solutions can help customers in managing their
HR and marketing departments.

Why ERP?

According to Pradeep Jhawar, CEO of Kolkata-based Bard Roy Infotech, "SPs
can look at ERP implementation as one of the potential areas of investments.
They can also look at areas that offer maximum opportunities for revenue
generation. Any SP who has the capability to develop and implement ERP solutions
has the maximum scope of expanding his business in 2010. To get into this area
of business, the SP's can either tie-up with an independent software developer
as an implementation or service provider partner or create a small team within
their own organization that does the same job. A lot of companies in Kolkata are
now looking for solution provider partners to meet their needs around
implementation and installation of software."

ERP software now is available in the range of Rs 7-8 lakh, and is easily
affordable by both big and small customers. Saket Kapur of Green Vision stated,
"The cost of an ERP software has gone down and more SMBs are looking at ERP
applications to meet their business challenges. The SPs can look at
implementation of ERP as yet another potential area for expansion and upscaling
their business. In order to sustain, one needs to constantly look at newer areas
of businesses. All the growth that had to happen in the conventional hardware
business has taken place, and hence in order to make money one has to get into
services and solution such as that around ERP."

Data Storage and  Management

Customers today are also looking at services from SPs that can consolidate
their data and backup solutions. Previously this data was stored on DVDs and now
customers look at Storage Attached Network (SAN) and Network Attached Storage
(NAS) to ensure that they are able to access their data from anywhere. Hence,
the requirement for data to be mobile has gained prominence. SPs can also look
at tying up with vendors such as Emerson Networks and APC who are now ensuring
that they offer solutions around storage and data management at lower costs.

What an SP requires?

Jhawar shared, "Customers hailing from verticals including government,
education, corporate and especially SMBs are looking at mail messaging solutions
and opting for two to three bandwidth service providers to meet their needs.
Hence SPs can look at having a service-related agreement (SLA), wherein they can
have clauses such as mail will not be down, along with maintaining the
infrastructure by providing facilities management services. Even in the
education segment, a host of schools and colleges that buy laptops/desktops in
large numbers are making investments into storage management solutions.
Government again has realized the importance of data and the business benefits
they can enjoy post the implementation of the storage solutions."

Managed Services

Managed service is all about monitoring and maintaining a client's
infrastructure, including the hardware, software and network. The entire process
is usually carried out by a third party. Hence, the actual equipment may be
deployed at the client's site or in a datacenter, or the partner might host it
at his own network operated center. Big and small enterprises spend a huge
portion of their IT budgets on managing, maintaining and supporting the systems.
By outsourcing some of these activities, these companies can use resources for
investments in strategic projects and concentrate on building their core
competencies. Hence, the role of a managed service provider (MSP) is crucial in
this regard. An SP can look at transforming their business by getting into the
managed services space but they will have to ensure smooth working of day-to-day
applications on a recurring basis in a more cost-effective manner.

Why Managed Services?

There is a huge scope for SPs in datacenter management and they can look at
managed hosted services to expand their businesses in the years to come. Earlier
the SPs had an annual maintenance contract (AMC) with customers and followed the
break-fix model, in which they offered services on call or monthly basis and
that too manually. However, with the advancement in technology, customers are
opting for SPs who can ensure smooth functioning of applications at all times.
The customers are increasingly signing SLAs that ensure improved uptime.

A look at the managed service model suggests that the portfolio has undergone
a drastic change and from a reactive model it has now evolved into a proactive
one. It has also transformed from a time-based model to a performance-based one
and from a break-fix model, to one which is service-oriented. Hence any
customer, who has large, heterogeneous and mission-critical infrastructure,
requires managed services. At present, banking and telecom verticals are
contributing the most to the growth of managed services.

However, if an SP is looking to get into managed services then he has to
realize that the initial cost of investment is high and the breakeven will come
either six months or one year down the line. According to Biren Selarka of ACMA
Computers, "Infrastructure cost for furthering managed services is too high and
it may take some time before an SP can actually enjoy RoI. The SPs can hence
look at handholding some of the exiting players or piggy banking on someone who
is already in this space. Later when he (SP) is comfortable he can invest on his
own. Hence, it is all about the way one delivers the services."

Green IT

Across the globe, people are demanding more environment-friendly
products/solutions that can enable high-performance computing while satisfying
ecological concerns. Hence, Green IT will cut across all product categories and
offer the requisite opportunity for growing business. The impending global
climate crisis is real and opportunity for Indian corporates includes
monetization through carbon credits. IT solution providers can also leverage and
benefit from this.

Jayesh Kotak, VP-Product management, D-Link said, "D-Link spends a
significant amount of resources and time pursuing green computing initiatives
and designing green products. We are also working to take lead in developing
innovative, power-saving technology that doesn't sacrifice operational
performance or functionality."

Kotak further stated that despite the economic slowdown, he would still term
2009 as 'the best year' that could have happened to the world's economy as it
has put everybody back to the basics, ie moving away from valuation to value
creation. Away from complex business models and futuristic projections based on
highly leveraged finance models to a simple profit and loss approach.

"One key learning for the channel community is that they need to continue to
be close to their customer, be more adaptive and be adequately prepared to go
through the transformation journey on the technology front," Kotak opined.

The lessons

The solution provider community will have to look at ways to get rid of the
dark year (2009) and identify newer opportunities within the space of IT. The SP
community needs to redefine the way they do business and along with identifying
newer verticals they should also know how to go about their business.

If as an SP your core competence lies in basic networking, then it is
recommended that you do not jump into virtualization. Also instead of looking at
newer sets of customers, one should look at existing customers and identify the
gaps in their (customer's) existing infrastructure. Acquiring newer clients
implies incurring more expenses related to marketing and services.

While establishing newer relationships cannot be ruled out in 2010, an SP can
look at strengthening relationships with existing clients and go slow on
acquiring newer customers when times are tough. He can also look at getting into
asset-based services as well. This implies that they can get into leasing of IT
equipment, solutions and services.

Puja Sharma

poojas@cybermedia.co.in