This is an interview carried out by former NUJ member, David Cunliffe, for inclusion in his website blog. David currently runs an IT marketing consultancy in the UK.
DC: We have seen some major drops in IT spending in most of 2011 especially in the last quarter. These reductions varied across the different Territories of the world – however the overall trend was down. Do you see this changing in 2012?
G. Rudolphi: In the past, companies would refresh or upgrade their IT infrastructure every 3 – 4 years. This is not the case anymore. Today, they need to have very good reasons to invest in their IT infrastructure. Otherwise they will simply hold back or even let the projects die. The marketing battles of the IT vendors will most probably not drive massive IT investments because these are ongoing. Customers might (and can) wait for equipment and solutions to get even cheaper.
DC: What do you think might constitute ‘very good reasons’ for IT spending in 2012?
G. Rudolphi: One of these is definitely the further increasing costs for energy. If new servers, switches, routers, Desk-Tops, Notebooks etc. are low power and low heat compared to the existing IT equipment, the exchange of this equipment is going to positively affect the total cost of ownership. However, this needs to be properly calculated in order to make the right decisions. Having said this, it is really surprising that the vast majority of companies simply don’t know how much power their IT compensates. This is even stranger as vendors have been promoting low power equipment for some years now. Just think about the Green IT initiatives almost every manufacturer has put in place. Companies would be surprised how much money they could save with the latest hardware. So it’s definitely worth to investing some time and money in analyzing the energy use in e.g. data centers. The pay back, when doing this properly, will by far exceed the investment.
The other reason is staying competitive. This reason isn’t new but is particularly true in today’s economy. Due to the economic world-wide crisis, companies across the world have laid off people as never before. In order to stay productive, technology need to fill these gaps. The smarter the technology, the better the chances of companies staying competitive and even gain advantages over their competition. Although companies have started to hire people again in some countries in such as Germany this focus will remain. Keeping the ‘old equipment’ simply won’t work.
DC: Does this mean that companies should upgrade all of their installed IT equipment in order to get the savings they are looking for?
G. Rudolphi: There needs to be a balance between investment for new equipment and the associated cost benefits for energy savings. Obviously all major vendors will argue that just new, low power equipment will lead to the necessary savings. This is true for the vast majority of old dated solutions. The often heard argument of CFO’s and Finance, that older equipment has been written off the balance sheet and therefore now ‘earns money’, is simply wrong in most of the cases.
However, as budgets are usually limited, companies sometimes cannot afford to keep their IT equipment up-to-date all the time. As I mentioned above, a power analysis of the IT infrastructure will certainly show where companies can save money without necessarily needing to buy the latest technology. There are smart solutions out there which can save 20%, 40% or even 50% in energy costs by optimising the IT infrastrcuture e.g. the cooling techniques in data centers. These don’t require touching a single IT device companies have installed.
DC: Do not all main IT vendors offer energy analysis?
G. Rudolphi: They do. But usually these are very expensive and typically lead to results which are even more costly. For example, exchanging or modifying the entire cooling or power distribution system. There’s nothing wrong with this but these a large scale projects and not every company that needs this can afford to pay for it. That’s why even large IT vendors are looking at less expensive solutions to get a foothold in those accounts and go from there. As they usually don’t have these solutions in their portfolio, they are teaming up with companies which do have them and either ‘re-selling’ or working together as partners. This is mutual beneficial business. The same applies for data centre monitoring and data centre management solutions.
Q: Let’s look more closely at your 2nd reason for companies to invest into IT, staying competitive. You mentioned that companies cannot be up-to-date all the time as far as the latest available technology is concerned. If this is the case, how can they stay competitive?
G. Rudolphi: Companies need to set priorities and look what is working and what isn’t. If it’s too expensive to buy all necessary software and keep it up to date why not considering Cloud Computing? Moreover, they need to look at what new technologies are available and cross check whether or not this helps them to keep or increase their productivity. Proper evaluation of products and solutions will become more and more important in the future.
DC: How does your company SMF-Global fit into this picture?
G. Rudolphi: Companies usually don’t have the time and/or the resources for a comprehensive view of the market and the available products and solutions. So they buy what they are offered by their IT partners they are used to and know. There’s nothing wrong with this as these are usually long term and well working business relationships. But even if they did focus more on the market, there are many vendors which are just addressing specific countries or Territories with their products and solutions. These are usually smaller or midsized companies which cannot effort to spend the associated upfront money for going world-wide or even expand their reach. SMF-Global is bringing these loose ends together. We are constantly looking into this market and evaluating products and solutions. If we think that it is worthwhile to bring a solution or a specific product into a market, we start by helping to setting up the necessary infrastructure for sales, marketing, logistic and services. This works in all directions – from Asia to EMEA, from the US to EMEA and vice versa. We have the network in place which enables us to do this.
DC: There are many companies out there that claim to do the same. What makes the SMF-Global proposition different?
G. Rudolphi: There are major differences. First of all we have a clear focus on the IT infrastructure and data center environment. Secondly, our remuneration is based upon success to a very large extend. This means that the product owner is not faced with high upfront cost for our services – unless, of course, he requires consultancy, only. Other than that I can say that if we are successful the product owner will be successful. If not, his costs are minimal. But, as we do a detailed product and market analysis, we will not consider taking on a project unless we believe it will be a success. So, if we take equipment or solutions on board – they are as good as sold.
DC: Last question. How do you foresee the next few years in the areas within which you are active?
G. Rudolphi: A serious judgment is very difficult at this point in time as this depends on the overall situation of the economy and the related effects. It looks like that the overall crisis isn’t over yet. The Euro zone is still struggling and the US is far away from recovery. There are still major differences depending on the countries you are looking at but overall I think business won’t pick up short or mid-term. But who knows for sure. Maybe we are looking at a double dip? It all depends to whom you listen. However, I believe that there will be two main trends in the IT industry.
Due to the increasing cost pressure companies will have to do a much better job at analysing their IT infrastructure and the cost for maintaining it. Whatever helps to reduce these costs will become more and more important. Also, I honestly believe that the features and cost relation will be a driving factor for future investment decisions rather than paying an upside just for a brand.
Software solutions which can partially or completely replace hardware with will be the customer’s number one choice. The reasons are obvious. Less hardware means less capital expenditure, less hardware maintenance, less hardware logistics, less power consumption and less heating. Software is Green IT at its best. That’s not really new but I am seeing software solutions being developed right now which simply don’t exist in the market today – not even in fragments. Not all of those will make it to market but enough of them will. Enough to make a big difference. A few of these have the potential to revolutionise and reset entire market segments.
DC: Thank you for this interview.