Top Ten Predictions for Asia Pacific in 2004

1
Top Ten Predictions for Asia Pacific in 2004
Dion Wiggins and Bob Hayward
Audio Teleconference
10th February, 2004
2
State of the IT Industry
The Condition of the IT Industry Is Not Due to
Lack of Demand
IT IS SELF-INFLICTED
3
IT Industry Has Six Fundamental Issues

• IT costs too much.
• Infrastructure is too fragile, complex and
  expensive.
• Risks of IT Investment have been overlooked or
  under-estimated.
• Cost and time needed to reliably connect to third
  parties is prohibitive.
• Financial returns are elusive.
• Too many vendors are selling the same thing.

4
E-Business Hype Cycle Rapidly Becoming Just
Business
Visibility
Year
Peak of Inflated Expectations
Trough of Disillusionment
Slope of Enlightenment
Plateau of Productivity
Trigger
5
On the Cusp of the Most Fundamental Change to
Business Since The Internet
1

• IT Architecture, concepts and business philosophy
  have reached a critical tipping point
• Service Oriented Architectures (SOA), Event
  Driven Architectures (EDA), Service Oriented
  Business Applications (SOBA), Service Oriented
  Development of Applications (SODA), Web Services,
  Real Time Enterprise (RTE), Business Process
  Management (BPM) and Modeling and Business
  Process Fusion gaining major traction and move
  towards critical mass and mainstream adoption

Maturity in these areas will drive dramatic
changes in the way we do business, to a degree
not seen since the advent of the Internet
6
The Business Process Renaissance
Business Process Transformation
Business Process Re-engineering
Business Process Fusion
By 2007 Business Process Fusion will become a key
driver for IT investment in a majority of Global
2000 (0.7 probability)
Business Process Outsourcing
Business Activity Monitoring
7
How Fusion Compares To Traditional Application
Development Methodologies
Traditional Tactical
Traditional Strategic
Composite Fused
Code Reuse
low to medium
low to medium
high
Approach
tool-driven
model-driven
parameter-driven
Business Driver
opportunistic
systematic
either
Requirements
simple
complex
simple
Scope
departmental
enterprise
either
Skills
junior developer
senior developer
business analyst
Team size
1 to 6
6 to 60
1 to 3
Code Longevity
6 months to 3 years
2 years to 10 years
indefinite
Budget
small to medium
large
small
Methodology
informal
formal, systematic
informal
Risk tolerance
high
low
medium
Project duration
1 to 6 months
6 months to 6 years
1 to 6 weeks
Connectedness
low to medium
medium
high
Code refactoring
low
low
medium
Integration use
low
medium
high
8

• By 2008, 75 percent of new enterprise-scope
  applications will use elements of SOA (0.7
  probability), a dramatic increase from 20 percent
  in 2003
• In 2006, over 80 percent of all business
  application products sold worldwide will be
  service-oriented (0.7 probability).
• Through 2005, 80 percent of enterprises
  attempting to build Real-time Enterprise
  capabilities will seriously underestimate
  networking requirements, and will have to make
  last-minute additions, upgrades or modifications
  to roll out Real-time Enterprise applications and
  capabilities (0.8 probability).

Strategic Planning Assumptions
9
Massive Vendor Consolidation Will Enable or Cause
Burn and Churn Through 2005
2
2,300 publicly traded software companies about
50 to 60too many
2000
2000
Innovators of Internet Boom Burn Themselves and
VC Cash
Big brand stacks slow down their innovation
products mature
2004
2004
The notion that when business spending picks up,
our business will, too is incorrect for most
vendors
Oligopoly of Few Vendors
Most surviving small firms just complement the
big brand stacks
Signals end of price war in select sectors
Marginal players finally are forced out
Vendor-induced upgrades take hold
2007
2007
Return of Innovation,New Entrants, and Big VC
Cash
2010
2010
10
Long-Term Outlook for IT Is Brighter,but Also
Will Result in Pain for Many
True Power of IT Finally Unleashed
Cut Costs
Massive Consolidation
Internet This, Now
Keep the Lights On
Massive Wave of Innovation
Power Shifts to Vendors
Price Is No Object
Fix What You Have
Global IT Spending
Huge Productivity Gains
Get Really Rich, Quickly
Fundamental Technology Changes
Power Shifts to the User
Enormous Societal Impact
Pure Greed and Fear
Vendors Hemorrhage
Installed Base Refresh
Consumer Is King
Y2K
2003
2000
1997
2006
2009
11
ICT Market Makes Slow but Steady Recovery
3

• Spending still very pragmatic and cautious
• No backdrop of uncertainty with Iraq or SARS
• No 'me too', 'blue sky' or 'hot technology'
  driven spending
• Driven by proven, demonstrable ROI, reasonably
  quickbeneficial outcomes supported by solid
  business cases
• CIOs and IT chiefs will take advantage looser
  purse strings in 2004 to invest in technology to
  make their business stronger and more innovative.
• We are moving into a major platform shift with
  compelling new technologies that will require
  significant investment to do well (OSS,
  .NET/J2EE, Web Services, EDA, SOA, RTE, Business
  Process Fusion)
• Time to refresh IT assets acquired in 97-99 -
  when combined with the pent up demand of almost 3
  years of very little IT capital spending this in
  itself will be a major factor to growth
• Global economic growth and improved outlook over
  last few years, especially in USA, Japan, parts
  of Europe, most of Asia

12
Asia/Pacific Economies Projected GDP Growth in
2004
8
China
Vietnam
7
S. Korea
6
India
Thailand
Malaysia
5
Philippines
Singapore
Indonesia
USA
4
Hong Kong
Taiwan
Australia
3
New Zealand
2
Japan
1
0
US100bn
US1tr
US10tr
Size of Economy US GDP 2002 PPP (Log Scale)
Sources CIA Global Insight
13
Asia/Pacific Enterprise ICT Markets 2003 Size and
2004 Projected Growth
17
India
Indonesia
16
15
14
13
Rest Of Asia Pacific
12
11
10
Growth 2004
S. Korea
9
8
Malaysia
China
Hong Kong
Thailand
7
Taiwan
6
Singapore
5
Australia
4
3
2
New Zealand
1
0
US10bn
US30bn
US40bn
US20bn
US50bn
US60bn
Size of Enterprise ICT Market 2003
14
Despite Economic Improvement, Outsourcing Remains
Strong
4

• The total IT services segment will grow with
  outsourcing growing faster than other segments.
• Traditional outsourcing will be augmented by an
  increase in Global Delivery Outsourcing in both
  IT Services and BPO, as Asia Pacific enterprises
  follow trends that are becoming mainstream in
  North America and Europe.
• Enterprises will be courted by larger numbers of
  service providers that claim outsourcing
  qualifications, requiring deliberate analysis of
  sourcing drivers and careful evaluation of market
  choices
• Asia/Pacific is unique in that the region will be
  a strong force in both the Supply and Demand side
  of Global Delivery

15
Trends in Offshore BPO
BPO Adoption In the United States
Total BPO 173 billion, Offshore BPO 27.7
billion by 2007
19 Planning to Outsource in Next 24 Months
in Millions
1 Currently Outsourcing
250,000
200,000
150,000
100,000
50,000
0
80 No Plans
Offshore BPO Revenue
Total BPO Market
Gartner defines business process outsourcing as
the delegation of an IT-enabled business process
to a third party that owns, administers and
manages the business process according to a
defined set of metrics.
Gartner Survey 150 Respondents, April 2003
16

• By 2005, the number of enterprises that enter
  into new outsourcing relationships will increase
  30 (0.6 probability)
• By 2005 the number of IT providers that claim
  outsourcing expertise will increase by 40 (0.7
  probability)
• Through 2006, 80 percent of all BPO deployments
  for mission-critical processes will be driven by
  cost-cutting measures, although the stated
  business objective will be speed (0.7 probability)

Strategic Planning Assumptions
17
Linux makes headway mainly at the cost of Unix
not Microsoft
5

• Linux/Intel or Win2003/Intel over almost
  anything else in servers space, with Unix/RISC
  Yielding to Intel/Linux from 2006 and being
  driven into a niche like mainframe.
• Enterprises are already migrating from Unix to
  Linux, but current turnover will carry Unix
  through this decade
• A transfer of applications (and, along with them,
  a transfer of skills, or "brain drain") from Unix
  to Linux will ensure that the availability of
  applications will be sufficient to sustain
  Linux's market momentum.
• Unix vendors themselves will disinvest from Unix
  as Linux meets more enterprise capabilities.

18
Its Not About

• ... the Operating System
• its about platform flexibility and OS choice.
• ... only Total Cost of Ownership
• its about leveraging commodity technology
• ... Windows
• its about Microsoft business and licensing
  practices.
• ... Red Hat vs. UnitedLinux
• its about vendor support and standards.
• Free software
• its about freedom to choose

19
Linux Trends by Market and Sector
Planning to Install 1 or More Linux Machines
of Linux Installed on Servers
Asia Pacific Taiwan South Korea Singapore India Ch
ina Australia
Asia Pacific Taiwan South Korea Singapore India Ch
ina Australia
Manufacturing Government Finance Education Communi
cation
Manufacturing Government Finance Education Communi
cation
0
20
40
60
80
100
0
20
40
60
80
100
Already Installed
Planning in next 12 months
No plans
20

• Through 2005, Linux will be considered "a work in
  progress" or evolutionary in scope, not
  revolutionary, providing tactical, rather than
  strategic, competitive advantages (0.7
  probability).
• By 2006, Linux will possess 70 percent of the
  performance and functionality available from Unix
  (0.8 probability).
• By 2008, 60 percent of large enterprises (greater
  than 500 employees) will have migrated 80 percent
  of their Unix-based applications to Linux (0.7
  probability).
• By 2007, Microsoft will focus on manageability,
  and the value of the Microsoft architecture as
  the biggest differentiator for Windows, as Linux
  becomes the most important competitor in the
  enterprise (0.7 probability)

Strategic Planning Assumptions
21
Telecommunications and Mobility
6

• The average enterprise will have 80 more mobile
  applications in the field by year end 2004.
• Devices Will Become Less Expensive and More
  Integrated
• Weak Standards Will Hamper Wireless Technology
  for Consumers
• Wireless WAN Pricing and Interoperability Will
  Stabilize as the Technology Matures
• Corporate Mobile Applications Will Flounder, but
  Picture Messaging Will Spread Widely
• Wireless LANs Will Be Integrated Into the Wired
  Network Infrastructure
• Wireless LAN technology and use continues to
  evolve at a rapid pace and will achieve greater
  integration with the wired infrastructure in
  2004, leading to greater VoIP integration in 2005.

22

• 3G (W-CDMA) will fail to achieve mainstream
  adoption in Asia Pacific markets through 2004
  (0.8 probability)
• By year-end 2004, 80 percent of new enterprise
  WLAN installations will include 802.11a/g
  technology (0.7 probability).
• By 2005, 60 percent of interpersonal data
  messaging done by consumers and enterprise users
  via mobile and fixed devices will be instant
  (real time) by exploiting location and other
  presence indicators (0.7 probability).

Strategic Planning Assumptions
23
Advances in Technology Wireless Broadband
Networks Enable Diversification of Access Devices
It will be virtually impossible to buy
non-wireless-enabled devices within three years
24
The Connected Economy Opens the Door to New
Dependencies and Threats
7
Political social instability
Electronic fraud
Geographical cultural remoteness
Lack of trust in Internet security
Uncontrolled distribution of information
Supplier dependency
In recent years, we have witnessed terrorist
attacks, political unrest, war and most recently
SARS which has forced us to urgently address the
business issues of globalization in a way never
before required
25
Globalization Affected by Local Events, Standards
and Regulations

• Standards, regulations and events in one country
  are now starting to have knock on effects on a
  global basis. Examples include
• Sarbanne-Oxley in USA with potential global
  ramifications
• The move towards adoption of globally recognized
  accounting standards (for example IFRS in
  Australia)
• The drive towards increased corporate governance
  (transparency, independence, accountability and
  ethics)
• Basel II monitoring and reporting requirements in
  the global Financial Services Industry.
• WTO membership is also continuing to be a major
  factor in MNCs drive into China, but China is
  also becoming a major global player and not just
  focusing on manufacturing for others.
• Companies such as Legend and other Chinese brand
  names like Chinadotcom are beginning to make
  their mark on the global stage with expansion,
  partnerships and even significant acquisitions of
  international companies. Expect to see similar
  trends emerging from India as well.

26
Regulation is Tightening on Corporate Governance
Management, Privacy and Security
Turnbull (All industries, UK)
Database Security Breach Notification Act
(California)
Data Protection Directives (EU)
Sarbanes-Oxley (All industries,USA)
IFRS (accounting, Australia)
Basel II (Financial Services, world-wide)
pending
27
Reverse Brain Drain Helps Asia Growth and
Competency
8

• H1B and other US visa cutbacks result in many
  highly skilled IT professionals, business
  executives and entrepreneurs returning to their
  home countries, this will especially boost both
  India and China
• Returnees often will be financially well off and
  when returning to their homeland will bring
  capital, some of which will be invested in local
  businesses
• Returnees will also become a pipeline for pouring
  knowledge capital into dozens of colleagues,
  accelerating the development of a professional
  class that uses technology more intensively.
• Foreign direct investment will follow, growing
  new competitors for foreign IT services
  companies, while seeding a domestic market for IT
  services.

28
Security Focus Will Move to Intrusion Prevention
and Vulnerability Management
9

• Intrusion prevention, rather than detection, will
  be key.
• IT security organizations will focus on
  vulnerability shielding, mitigation and
  practices that improve the overall resiliency of
  IT resources and business processes.
• IT security projects and spending will be driven
  by the need to
• Improve resiliency in the face of rapidly
  spreading external threats
• Support emerging Web-services-based applications
• Provide more-efficient, functional identity and
  access management capabilities
• Enterprises that rely only on proxy or stateful
  packet inspection will experience successful
  application-layer attacks at twice the rate of
  enterprises that use leading deep-packet-inspectio
  n approaches.
• Traditional signature-based antivirus software
  will become a tactical, legacy solution for virus
  management as personal firewall and other
  blocking technologies emerge as the primary
  methods of mobile protection.

29
Innovation Continues with Three Megatrends
10
Connected Society
Smart Networked Objects
wearables
wireless
digital ink
location-based services
RFID
Wi-Fi
smart dust
smart phones
MEMS
ultra-wide band
embedded computing
Semantic Connectivity
automatic tagging
Semantic Web
affinity profiles
information extraction
XBRL
30
Analysis Mind the Gap
Analysis Gap
Action Gap
More information
Improved understanding
Improved decisions

• Digital footprints(Sensors, RFID)
• Self-service
• Information extraction
• Unstructured data sources
• Embedded connectivity
• Metadata and tags

• Improved algorithms
• Targeted algorithms
• Integrated analysis

• Business rules
• Business process fusion

31
This Next Wave of Technology Will Cause Massive
Disruption in the IT Workforce and Societies
IT professionals that are now employed to perform
administration and maintenance functions must
upgrade their skills
Infrastructure becomes more reliable and robust
Application development shifts to a service model
Programmers also must upgrade their skill sets.
Broadband, wireless, Linux, content management,
real-time analytics, data mining, security,
middleware and certification skills will be
highly valued
Secure robust, wireless networks will reach
critical mass
Workforce reductions
Productivity gains Replacement or reduction of
entire industries