Dimension Data: Tech Consumers Apt to Delay Big IT ProjectsBy Jessica Davis | Posted 2008-12-23 Email Print
Cisco's biggest reseller, Dimension Data, says that although systems integration sales may be off in 2009, video conferencing, storage and in-process projects remain areas of strength.
Nobody is saying 2009 will be a boom year for technology spending, but there are areas that experts forecast will be recession-proof, such as storage and virtualization. And then there are areas that are expected to suffer. One of those is expected to be systems integration.
While services have often been vaunted as a defensive move for solution providers, in the year ahead some service sales and consulting work will be at risk, experts say.
Dimension Data, Cisco's largest global reseller, performs a great deal of systems integration work and infrastructure sales, and the company's chief technology officer says there is a clear difference in how customers are approaching their IT needs in recent months and looking ahead to 2009.
Cutbacks are apparent, and customers are reluctant to begin new projects, according to Dimension Data CTO Mark Slaga. Rather than listening to Dimension Data's IT recommendations, customers are coming back with slimmed down budgets and a clear list of priorities.
"Customers were more open to listening to our recommendations before," says Slaga. "Now they say, 'We will tell you where we can spend, and that's where we want you guys to focus.'"
It's a major shift for Dimension Data which has enjoyed a 22 percent compound annual growth rate over the last three years, and 19.5 percent in the most recent fiscal year. But in a recent note to public investors, Dimension Data's CEO said the world is suffering "crisis of confidence" and that has put current macroeconomic conditions in a "fragile" state for several quarters to come.
Given the uncertain environment and the outlook for systems integrators, Dimension Data declined to provide an outlook for the year ahead in its note to public investors.
But in spite of the great uncertainty for systems integrators, Dimension Data sees some bright spots, too.
While clients are extremely reluctant to begin new projects, Slaga notes that existing clients are unlikely to stop ongoing projects, even if stopping the projects will save money in the short term.
"If they are partway through, they are continuing with it," he says. "There's a business case behind that – they recognize it takes more resources to stop and restart a project than to continue with it. It also indicates that they do still plan to spend the money."
Slaga believes it’s also an indication that "systems integrators have done a good job of articulating the value of these projects."
The challenges are steep for anyone who wants to get a new project started. Forget about big new applications deployments in 2009, for example, which are typically big job wins for systems integrators. To avoid embarking on such major projects, clients are likely to buy other technology, such as storage.
And while it's not immune to the recession, Slaga believes certain networking infrastructure purchasing will suffer less than, say, server purchasing will. That's because clients are more likely to run into capacity issues with network hardware than server hardware, he says.
And that may be particularly the case if companies are looking to cut travel expenses by using more video conferencing.
"I do think video is going to play a bigger role in 2009," says Slaga. He notes that Dimension Data itself has cut its travel expenses by 40 percent over the last three months by integrating more video conferencing into its business.
Slaga says that a cultural change is required to make a video conferencing directive a success, but it that at Dimension Data that directive and subsequent action has been an effective way for the company to cut costs in anticipation of a challenging year ahead. And many customers are taking a more serious look as well.
"I'm seeing a lot of requests from clients who want to be able to mix and match their video conferencing room systems with desktop video," Slaga says. "It's not a big investment to do that – just some integration."
And that kind of integration was part of Dimension Data's own in house project. The company integrated its Microsoft instant message system with its video conferencing network. When Dimension Data bought new laptops for users, it made sure to buy the ones with webcams.
"Many customers already have room systems, and there's a good chance they already have Microsoft systems," Slaga says. "So the investment is not significant" and the less significant the investment, the more likely it will be approved in 2009.