IT companies of all sizes are struggling to find their
position in an increasingly mature and consolidated European
market, and they must “differentiate or die”, according to
professional services company Ernst & Young.
Ernst & Young’s fourth annual Technology Insights study said
Government spending on IT has kept the UK technology market
buoyant, while the markets in Germany and France have been hit by
competition from Eastern Europe and India.
The report said that as customers demand greater reliability
rather than technological edge, IT companies have had to reshape
the way they serve clients by developing partnerships within the
sector.
This in turn could lead to further consolidation in the IT
industry, said Ernst & Young.
Nick Powell, Ernst & Young UK head of technology, said "IT
is settling into a mature market with different characteristics for
hardware, software and services. Companies need to find their
position or niche and agree alliances. But above all they must
differentiate or die."
The report says smaller companies are particularly vulnerable.
Where they once tried to sell direct to larger corporate customers,
they must now partner with global contractors to gain access to
large customers and tap into their skilled management teams.
Powell said, "No single IT company is in a position to provide
every one of the components a customer needs. The market is
becoming increasingly inter-dependent and companies of all sizes
are jostling to find their role in the technology market.
Innovators still have their role but the bar for what defines
innovation is much higher."
Powell said global IT businesses are capitalising on their
partnerships with smaller players by identifying and testing
opportunities for targeted consolidation.
"Companies are testing innovative solutions through partnering
prior to acquiring the company or withdrawing support," said
Powell.
The report says the IT market “hotspots” are IT security, the
public sector and compliance, such as Sarbanes Oxley.
But the biggest hotspot is the consumer market. The report says
innovation for IT products and services in business is coming from
what the consumer wants, such as wireless or pay per use.
Powell said, “The industry has finally cottoned on: the consumer
leads, enterprise follows.”