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Outsourcing > Articles > IDC: Economy rebound to be driven by integrated networked busine >

IDC: Economy rebound to be driven by integrated networked business

by Madanmohan Rao (madan@techsparks.com)

Given signs on the ground and on stock markets around the world, business confidence seems to be making a slow rebound, and companies are once again increasing their investment in IT services for operational and strategic gain.

"Integration and collaboration will be the keys to success as a new phase of expansion begins," according to Dane Anderson, vice president of Internet and computing products at IDC Asia-Pacific in Singapore, speaking at one of the market research group's "Directions 2003" international industry briefing roadshows in Asia.

"E-business will be at the heart of the market's rebound. We have entered the Networked Knowledge Economy, and businesses need to respond," Anderson said.

According to IDC surveys, over 50 per cent of US companies in 2001 reported that having an integrated Web presence is critically important for their business; more than 60 per cent already have enterprise applications like ERP and CRM in place, though only about 10 per cent have fully integrated these applications across the board.

IT solutions will play an important role in helping businesses deal with improved efficiency, faster innovation, quicker time to market, profitable growth, and customer delight. IT solutions providers are forming increasingly involved relationships with clients for technology services as well as business process management. They are migrating up the value chain from financial to strategic objectives, from rule-based processes and knowledge-based processes to judgement-based processes.

According to IDC research, companies worldwide will spend over US$6 billion on enterprise integration software and US$150 billion on enterprise application services this year - approaching US$20 billion and US$300 billion, respectively, in 2005.

"While we were reeling from the economic aftershocks, steady progress has been made on fronts like employee usage of handheld devices, end-user familiarity with the Internet, and attributes like security, fulfillment and bandwidth," said Anderson.

The Web services component of the business integration market worldwide will cross US$25 billion by 2007. The growth of wireless computing solutions will spawn a US$10 billion market worldwide in mobile e-business services this year, approaching US$40 billion in 2005.

Value chain integration can vary along the focus spectrum from internal optimization (eg via EDI) to competitive differentiation (eg. workflow), and along the scope spectrum from internal integration (eg. back-office automation) to external integration (eg. Web services).

The security software market worldwide will cross US$5 billion this year and approach US$15 billion in 2006; security services currently account for US$10 billion and will cross US$20 billion in 2005.

Numerous success stories of enterprise application integration have already emerged. For instance, application integration has helped Nordstrom seamless operate its Web site and call center with inventory data stored on mainframes, as well as gift certificate information at Nordstrom Federal Savings Bank

The new value chain will be integrated, collaborative, and dynamic, in order to be able to deal with the IT chaos of emerging technologies and the business chaos of globalisation.

Though Web services standards are still evolving, they can unleash a "glue effect" via better utilization of existing infrastructure internally and externally, said Anderson. This year, Web services are likely to make an impact on simplified application integration within the enterprise firewall, followed by simplified business partner connectivity, richer application functionality, and eventually new business models.

Spending is increasing on solutions like the Enterprise Information Portal (EIP), used to integrate access to information and applications and present it to the user in a useful format.  EIPs' key contributions at the enterprise level include role-based or rule-based administration, collaboration functionality, content management and search, and access to structured data/

"Despite deep wounds inflicted by the Internet crash, the Web will be the driving force behind a regional market rebound in 2002 and beyond," said Anderson.

Although countless dotcoms have come and gone, Internet fundamentals have plodded forward throughout the meltdown. In the process, the Internet has become a fabric that weaves through every facet of the IT market, from software and services to hardware and communications.

"Nevertheless, our visions of the Internet and its place in the IT market must change radically from the utopia envisioned before the Internet crash," said Anderson.

Companies should not turn to IT as a panacea, but also keep an eye on core business performance, environmental issues like M&A activity, and tough leadership in these hard times.

With growing complexity and IT becoming a base for critical business processes, organizations are now moving towards sourcing end-to-end IT solutions for business problems. New types of partnerships and alliances are forming in the software and services front.

Countries like India are emerging as attractive destinations for outsourcing functions ranging from high-tech R&D and core applications development to back-office support and non-critical business processes.

Numerous alliances and partnerships are thus being formed along a complexity axis ranging from endorsement and influence to integration and solution. In sum, outsourcing will continue to be an important component of business strategy to proactively expand the addressable market and enhance local skillsets.

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The writer can be reached a madan@techsparks.com

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