RealTime IT News

Interest Returns to Infrastructure Software Space

After a three-year slump, certain areas of innovation in the infrastructure software sector will help lead a 'modest' recovery as technology becomes increasingly tied to an enterprise's business processes, according to a new report from Deutsche Bank.

"Companies must understand the linkages between its business requirements and goals and the underlying technology infrastructure," the DB report said.

The sentiments of the report, entitled "Growth...but it's gonna cost you", echoed the remarks of IT business leaders from IBM, Unisys, Microsoft and elsewhere, who earlier this week emphasized the importance of business process-related or process-centric technologies -- which is likely to be a consistent theme at next week's CeBIT America show in New York.

For years, IT infrastructure (and the software that support it) was the realm of back-office operational experts -- often hobbyists that enjoyed tinkering with upstart projects like Linux -- that had very little contact or ties with senior management. And when business leaders got burned in the late 1990s by the combination of over concern about the Y2K bug and over investing in what eventually become the "dot-com" bubble, the door on those back-offices were more or less slammed as well as any hopes of contributions from those operational employees.

"We had a confluence of events that have made people very skeptical about technology," Larry Weinbach, Chairman, President and CEO of Unisys, said earlier this week in New York. In fact, Forrester Research has quantified that amount of overspending as high as roughly $60 billion, Forrester Chairman and CEO George Colony said during a recent panel discussion hosted by Unisys.

But while the Internet revolution didn't pan out as some so-called "visionaries" envisioned, businesses and governments have become increasingly more dependent on technology for what Deutsche Bank called "near real-time" business processes in dealing or communicating with suppliers, customers, partners, competitors and investors. And that, in turn, has forced technology executives and senior management to learn each other's language in an attempt of linking business and technology.

"Historically, [senior management teams] have been almost a slave to the technology," Deutsche Bank Analyst Brian Skiba told internetnews during a brief telephone interview. "The CIO today is more of a hybrid that is three-quarters businessman and one-quarter technology expert. The CIO has been elevated in his visbility. He's more of a businessman."

"The need to understand the linkage between the two is clear. The path to achieve this is known under various names - business process management, business process re-engineering, business service management - all of which roughly describe the same concept. We believe that companies will slow document and understand the linkages over the next five years," Skiba wrote in his report.

Earlier this week, studies indicated that the worldwide business process outsourcing (BPO) market is expected to grow 10.5 percent to $122 billion from $110 billion in 2002 and grow 13 percent annually until 2005 when the market will reach $248 billion.

To be sure, the DB analyst said that exuberance hasn't returned. "Today, we believe there is a lack of a major catalyst to spur another massive wave of IT spending. However, pockets of technology innovation (such as Java, Linux, 64-bit processing) are fueling certain market sectors," Skiba said.

Standards like Java and open-source technologies like Linux are certain to get a significant portion of the limelight at next week's CeBIT America show, the first attempt by German events giant, Deutsche Messe AG of Hannover, to bring its tradeshow to the U.S. The event runs from June 18-20 at the Javits Center in New York.

While Skiba does acknowledge that bigger vendors will capture an increasing portion of market share, he does favor smaller niche players. On Thursday, he initiated coverage of Mercury Interactive , Alteris , NetIQ and Red Hat with "buy" recommendations.

Skiba initiated Computer Associates , BMC Software and BEA Systems with "hold" ratings. The analyst already had a "buy" rating on market leader Microsoft and a "hold" rating on Oracle due to the sluggish growth prospects of the database market outside of the mid-market.

In the interest of fair disclosure, though, it should be noted that Deutsche Bank admit to either sales-and-trading or investment banking relationships with the companies mentioned within the report.