Posted on 06/22/2002 4:50:43 PM PDT by maui_hawaii
INTERVIEW: JOHN GANTZ
As the world looks to Asia's information-technology market for growth, Asians are best positioned to prosper
JUST UNDER HALF OF the $450 billion American companies are expected to spend on information technology this year will pay for services, says John Gantz, chief research officer and senior vice-president at computer-research firm IDC. The United States' services segment--from computer training to customer-relationship management--grew about 8% last year even as hardware sales shrank about 10%. Gantz spoke with Tokyo correspondent David Kruger about what Asian economies, until now mostly hardware producers, need to do to make it in services:
WHAT IS THE OUTLOOK FOR THE IT MARKET IN THE U.S.?
The economic outlook for 2002 is actually very positive in every indicator except the stockmarket . . . We think that will translate into the IT economy with about a one-to-two-quarter lag. Once U.S. companies believe that they can be profitable they will do some of the spending they've been shoving off for a year. There are some data centres getting pretty tapped out, a lot of client systems are getting old and you have a lot of stuff coming off lease and depreciation that was bought for Y2K. So that should help spur spending.
AS DEMAND MOVES TOWARD SERVICES FROM HARDWARE, WHAT DO COMPANIES NEED TO DO TO CAPITALIZE ON THE SHIFT?
If they are IT vendors and they don't want to just be stuck making personal computers--a dying market--and they want to get more into services, they have to spend some attention on people. Services is a people business. Software is a geniuses business. And hardware is a widget-manufacturing business. They're pretty different businesses. When we look at the successful service firms, they spend an inordinate amount of money and time recruiting, maintaining people, building databases of skills and a lot of things that hardware companies never even think of. If a company says it wants to be in services, there is a lot of people infrastructure that has to be built in order to be successful--including the methodologies of running projects.
WHAT WILL ASIAN IT COMPANIES BE FOCUSING ON IN 2007?
I think they'll be most active in the simpler things--they'll be making servers, not just PCs, but they'll be making low-end servers, they'll be making appliance servers, they'll be making all the chips . . . I think they'll still be doing that, but at the same time building up indigenous software and services organizations along the way Israel has done. I don't think they'll be exporting intellectual property, exporting a lot of software packages or multinational services firms unless they acquire their way in. But every other geography is looking to Asia to grow . . . it's like the last great frontier for IT vendors and it's the indigenous vendors who have the best shot at taking advantage of that. So I think Asians should be looking at Asia first and Europe or the U.S. second. There's a whole regional second tier that we think is going to build up . . . Globalization has gone pretty far. Now it's time for regionalization to happen.
WHAT ROLE WILL CHINA PLAY AS AN IT PRODUCER AND AS A MARKET IN FUTURE?
They tend to be the manufacturing centre of the world, not just in computers but anything. If they can upgrade their infrastructure fast enough--roads, highways, telephones--they have a good chance of being a low-cost manufacturer . . . they'll be like Japan 40 years ago. A lot of companies are setting up plants in China and the government has made it possible for them to do that. Also it's a huge market. Asia-Pacific outside Japan will be a bigger market than Japan in about four years and China will be half of that. China's already a bigger market than Canada. It's soon to be a bigger market than Italy and within six years bigger than the U.K. or Germany. So it's becoming a huge consumer of IT . . . If it's going to be the manufacturing centre of the world they are going to have to buy a lot more IT because they don't have much IT content in manufacturing now.
The IT expendetures in China are more than likely originating from overseas by big instutional corporations looking to lower costs in a global supply chain.
China is being developed from the outside in...
Keep in mind he is only talking only about IT, not everything. Economically, IT isn't everything.
The whole thing still has its roots in China's cheap manufacturing...
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