Global IT spend 2011

Global Outlook:

IT investments bounced back in 2010 from 2009 recession. All the three firms expect the Global IT spend to grow by 6%-7% in 2011. Recovery slow, Macroeconomic risks still exist. IT investment by Organizations and Countries are set to increase. Software & Services spend set to increase. Gartner & Forrester predict PC segment will be affected by increasing smartphones and tablets.

Gartner:

Global IT spending to reach $3.6 trillion in 2011, a 5.1 percent increase from 2010. Enterprise software sales growth for 2011 at 7.5 percent, rising to $253.7 billion dollars. Hardware sales will reach $391.3 billion in 2011, or a 7.5 percent growth.

IDC:

IT market will grow by 7% this year to $1.65 trillion. Hardware spending will increase by10%, while software and services markets will increase by 5% and 4% respectively. US will expand by 5% in 2011, Asia/Pacific region, excluding Japan by 10% in 2011. Central & Eastern Europe, Latin America, and the Middle East & Africa also expected to see double digit growth.

 

Forrester:

Global IT spending will grow 7.1 percent to $1.7 trillion in 2011. Software and services are expected to account for 44 percent of the global IT market. Forrester analysts believe that over the past 60 years, the tech market has gone through eight-year cycles. 

Nasscom:

IT client budgets' to rise 2% to 4% in 2011.

TCS:

IT outsourcing across verticals would be robust in the new fiscal owing to discretionary spending and higher budgets.

Repeat business of 95-97 percent and pricing looking up and Multi year deals and new projects are on.

Demand for outsourcing in US increasing.

Infosys:

Not commissioning long-term projects—most of the IT spend is on short-term projects.

Clients’ IT budgets for 2011 are either flat or marginally up.

Wipro:

Due to the organizational shake up in January Wipro is still not finalized its view on budgets. But it is in agreement with TCS predictions.

Cognizant Technology

Lower demand expectations. Client IT budgets for 2011 to see a “modest single-digit increase.”

Dual CEO Structure – A Review in Technology Industry- Focus on Wipro

Dual CEO Structure has always been perceived to be a weak structure. Many firms have adopted this with mixed results. Empirical research points out the fact that firms with Single CEO Structure have generated more ROI compared to dual CEO structure firms. Despite this well known fact why do the boards and management adopt the co-CEO model? Situations like the M&A where the acquired or merger company CEO has to be included in the management for various reasons, sudden CEO exit to avoid further exits from the company boards try to give two people the opportunity to lead jointly and in times of crisis large organizations with massive geographical presence also adopt dual CEO model. Historically Dual CEO Model has been a success for technology companies like Research in Motion which adopted this model since 1993 and Motorola adopted it in August 2009, and SAP adopted in February 2010. Wipro adopted this model in April 2008 and moved away from this model in January 2011.

Research in Motion is one company that has grown tremendously under the joint leadership of Jim Balsillie and Mike Lazardis since 1993 and it is still doing well despite facing some heat from Apple in the recent years. Mike Lazardis strengths lie in the engineering and product development side and he recruited Jim Balsillie to look after the corporate finance and business development part of the business. There was clear understanding about their strengths and each focused on their part which helped the tremendous growth of the company.

SAP is another that used the Co-CEO structure many times in its existence. SAP had Dietmer Hopp, Henning Kagermann and Hasso Plattner in 1998, Leo Apotheker and Kagermann in 2008. Henning Kagermann was sole CEO from 2003 till 2008. Leo Apotheker became sole CEO in May 2009 till Febrauary 2010 and Bill McDermott and Jim Hagemann Snabe were again appointed joint CEOs. SAP has been very successful with its joint CEO structure as the company has done well during the joint CEOs tenures. The success can be attributed to SAP German Corporate Structure that reward consensus management and management boards also play a crucial role in controlling the CEOs and their performance. But we have to see how the two new non German CEOs perform together and deliver.

Motorola was a different case. The company adopted this model in 2008 as the company was planning to spin off the wireless handset division into a separate entity. Motorola lost $4.3 billion from 2007 to 2009. Sanjay Jha was set to become the CEO of the separated unit. Greg Brown will take over rest of the businesses. At last in January 2011 the company’s assets have been divided between two separate and independent companies to create Motorola Solutions and Motorola Mobility. Motorola Solutions will be led by its President and CEO, Greg Brown, while Motorola Mobility will be headed up by its CEO and Chairman, Sanjay Jha. The joint CEO model ended for Motorola as planned earlier in 2008 in 2011.

Wipro Chairman Azim Premji announced a dual CEO management structure in April, 2008. Girish Paranjpe and Suresh Vaswani were appointed as joint CEOs. Premji announced this as the best way forward to leverage the depth of leadership and tide over the recession due to financial crisis. But in January 2011 Wipro dismantled the dual management structure and appointed a single CEO T K Kurien. Wipro's performance over the last four to five quarters prompted rejig at the top. One of the comments made by Premji was “It will be foolish to ignore the financial services, healthcare and energy (and utility) business”. This speaks a lot about how dual structure didn’t work as vertical break up show that Financial services, communication, media, telecom and technology were Girish responsibility where as Vaswani was also responsible for healthcare, energy, utilities, manufacturing, retail, BPO, Enterprise applications etc. so both missed out on those verticals financial services, healthcare and utilities that drove revenues at the rival firms TCS and Cognizant technology.

Cognizant is very close to Wipro and is expected to displace Wipro as India’s number three IT services company. The gap reduced significantly in terms of quarterly revenue and Analysts feel that Cognizant will surpass Wipro in coming quarters. Another reason was Wipro failed to adopt aggressive approach during the downturn and company was looking to survive by looking internally in terms of freezing nrw hiring and also attrition that led to shortage of resources. Rishad Premji son of the founder who is actively involved in the business is also expected to take over as future CEO and the new CEO will lead him to the future succession. Both Wipro CEOs have lost the sight of market evolving post recession and let the competitors overtake.

Dual CEO Structure is best suited at an entrepreneurial level, where a team of people are working together. But it is difficult to work when a company is in a stable to growth stage and it can only be considered as stop gap arrangement. It also involves a lengthy decision-making process with contradictory viewpoints as two people often work in different ways. Wipro case highlights that both CEOs missed opportunities in critical verticals where competitors are doing exceptionally well and also failed to evolve the best strategy during downturn and allowed the competitors to come near. Both the CEOs also failed to adopt new Client engagement approach and sales and marketing teams failed to acquire new clients. We have to see how this shakeup will work for Wipro and how it regains its number three position if at all it loses it to Cognizant.

Discussion points:

1.      When should Dual CEO Structure be adopted and for how long?

2.      How to make it work? How to overcome the coordination related issues?

3.      How to tackle the delay in decision making process?

4.      How should employees be involved in dual CEO structure?

Symbian on Life Support - What lead to this?

Symbian is an open source OS and the biggest smartphone operating system by market share, the oldest smartphone platform still in use. According to Gartner, in 2010 Symbian is the best-selling smartphone system with 37.6% share overall as almost all the leading manufacturers also use it on their devices. But in Q4 2010 handsets with Google’s Android software overtook sales of Symbian smartphones. The Symbian platform designed for smartphones is the successor to Symbian OS and was created by merging and integrating software assets contributed by Nokia, NTT DoCoMo, Sony Ericsson and Symbian Ltd., including Symbian OS assets at its core, the S60 platform, and parts of the UIQ and MOAP(S) user interfaces. In December 2008, Nokia bought Symbian Ltd., the company behind Symbian OS and announced a community led by the Symbian Foundation will develop it, which officially launched in April 2009. Recently Nokia announced that it would migrate away from Symbian to Windows Phone 7.

Symbian was more designed to work on phones and PDAs and finds its origins in Psion’s EPOC PDA Operating System but not on smartphones. Another critical issue was Symbian needed an additional user interface system. Developers complained about the difficulty in programming, the code was closely guarded and only Symbian internal developers can develop and 80% of revenues were earned through consulting for licensees. Licensees like Nokia, NTT DoCoMo, and Sony Ericsson also encouraged delivering half engineered product so that they can add their own flavors and differentiating from one another. This led to three incompatible and diverging OSs: NTT DoCoMo's Symbian MOAP for Asia, Nokia’s Symbian S60, and Sony Ericsson’s Symbian UIQ. Other technical issues include design issues like C++ development, no support for proper string handling, not a great support for multi threading, bad development environment and lack of proper documentation and resources.

Nokia played a critical role not only in the rise of Symbian but also in its fall. Nokia was vey actively involved as it sold the most number of devices using Symbian OS. Nokia influenced Symbian decisions and always blocked Symbian from developing the OS and also forced Symbian to adopt Nokia controlled components. Even after acquiring Symbian Nokia did not support the foundation in terms of human resources and technology support. More over Nokia maintained its own internal line of Symbian developers working on its own version of code, developed its own version of OS NOS/S40 and it tied up with Intel to offer a new OS MeeGo. As a matter of fact Nokia and its business strategy played a crucial role in ruining the Symbian OS. Now it made a very questionable decision to go with Microsoft Windows Phone and develop apps.

Does this mean it’s an end for Symbian? The fact is all the mobile phones in the world are not going to be smartphones with big computing powers. High end smartphones are more like mobile computing devices with a phone app for calls. There will be always mid and low range segments in mobile devices where Symbian does work well but User Interface has to be improved. Nokia and other Industry peers along with developers community has to make sure that people understand the true capability of Symbian is not to work on High end smartphones but focus on its core capabilities of good battery life and lower hardware requirements.

Nokia and other OEMs are still developing handsets that need Symbian OS and there is huge cumulative base of more than 300 million handsets already there in the market and Symbian Foundation is itself focusing on improving the technical capabilities of the code convenient to work on the modern day touch devices. All these factors highlight  Symbian will be surviving for some more time but soon will be dethroned by Google’s Android as the largest smartphone OS. Android is seeing a huge rise in its share as OEMs like Samsung, Motorola, HTC etc are releasing significant number of handsets into the market.

Discussion points:

1. What should be the Symbian future course of action?
2. Should Symbian try to compete with iOS, Android and Windows Phone immediately or delay and focus on the mid segment phones?
3. What should Symbian Foundation do to attract developers?
4. How to attract the OEMs back to Symbian OS?