Tuesday, May 23, 2006

Is IT a non-growth industry?

Apparently

I love the idea of "IT spend items with the most empty calories".

Totally agree about the horrors of shelfware. I have to confess to being rather confused as to why it seems to be such a prevalent occurrence in the wider industry. One would think that incentives should be aligned: purchasers of software presumably have a reason for buying it and sellers have an incentive to get it deployed as customers aren't going to come back for more (licenses, CPUs, etc) if they haven't used the stuff they already have.

For example, my job exists - in part - to ensure WebSphere customers successfully deploy our software. We want our customers to deploy this stuff and get value from it and to come back for more after they've seen for themselves what it can do for them. Perhaps the problem is that when a market is growing very fast, it's easier to sell to new customers than worry about ensuring you'll be able to sell to the last lot again any time soon. If so, and if IT really is a non-growth industry, I expect to see other vendors paying closer attention to this area in the future.

Not so sure I agree with his swipe at "Telecom fringe services" though. I couldn't do my job anywhere nearly as effectively without international mobile and Wi-Fi hot spots. So this raises an interesting question: the price of such services is clearly massively above the cost but, even at the price they charge, they still provide value. So everyone wins, right? Well... I'd get even more value from these services if they cost less :-) Competition is usually the way to squeeze prices nearer to marginal cost but I guess there's no harm in indignant purchasers hammering away at their vendors in the meantime...

5 comments:

Vinnie Mirchandani said...

not saying you cannot have mobility - but the nitpick charges ar airport hot spots, the roaming charges on mobile phones etc are huge...they offset every other reasonable rate in other areas. Look at it this way - Most families spend more in connectivity and content than they do all other utilities - gas, electric etc. Businesses spend as much in telecomm as they do s/w, services, h/w combined...with SaaS hosting growing, more global travel, telemetry - RFIp etc, more mobile apps we have to watch telecomm lot closer than we have in past....

Richard Brown said...

I wonder if the phenomenon of escalating telecom costs varies by geography?

For consumers, the costs are falling to the ground at present in the UK (one provider even offers 8mb DSL for free if you take their very cheap landline package).

The EU has also just "encouraged" mobile operators to slash their roaming charges.

On the other side, however, I guess a point in favour of your argument is that whilst I use WiFi HotSpots on business, I wouldn't use them for purely personal use. That is because I don't consider them good value for that purpose... which is probably a good indicator that businesses are over-paying.

Vinnie Mirchandani said...

here are the most over priced telecom services around the world, for the most part

- international roaming on mobile calls
- conference calls - usually a premium charge even if the call number is not toll free
- hot spots for the charge per minute (like at an airport you usually need for 45-60 minues, but get charged by the day)
- cost of phone and web access for remote employees - often not on corporate discount terms
- calling card calls from public phones (less and less as mobile calls icnrease)
- satellite calls

Agree general rates are dropping, but volume is growing dramatically because of SaaS hosting, mobility, global trravel etc - quicker than rate of price drops...and if telcos get their way with "net neutrality" content providers will pass along increased comm charges.

Finally, as consumers we also pay quite a bit in government programs and subsidies to a number of telcos around the world...

Richard Brown said...

Conference calling is an interesting one. These things are so utterly trivial that it amazes me that there's so much money to be made.

I guess it's an example of how incumbency and ease-of-use counts for so much. For example, our internal phone system can set up dynamic four-way conference calls at the touch of a button but almost noone knows how to do it.... copying and pasting their (external) "conference line" into an email is a lot easier...

You have, however, raised a good point: it's the long-term growth of data volume that is making telco services look expensive...

Vinnie Mirchandani said...

you may enjoy this article I just wrote for the UK magazine Real Finance on telecom ...you can download it here

http://dealarchitect.typepad.com/deal_architect/2006/06/us_patent_17446.html