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VISUAL MARKETSNew and Insightful Results Using a
Network Analysis Approachto Market Research
Detailed Case StudyAustralasian Information Technology and
Telecommunications Industry2006–2009
LAURENCE LOCK LEE, PH.D.OPTIMICE PTY. LTD.
VISUAL MARKETSNew and Insightful Results Using a
Network Analysis Approachto Market Research
Detailed Case StudyAustralasian Information Technology and
Telecommunications Industry2006–2009
LAURENCE LOCK LEE, PH.D.OPTIMICE PTY. LTD.
VIS
UAL MARKET
S
Published by
Optimice Pty. Ltd.
23 Loquat Valley Road
Bayview NSW 2104
Sydney, Australia
Copyright © 2009 Optimice Pty. Ltd.
All rights reserved. No part of the contents of this publication may be reproduced or transmitted
in any form or by any means without the written permission of the publisher.
All organization, product, service, or other names herein are owned by their respective trademark
or service mark owners. Optimice, the Optimice corporate logo, Visual Markets, and the Visual
Markets logo are registered trademarks, trademarks, or service marks of Optimice Pty. Ltd.
iii
Foreword v
1 Introduction 1
How does Visual Markets research differ from traditional market research? 2
2 What are Visual Markets? 5
Social network analysis: A short tutorial 6
Sourcing data for Visual Markets research 9
So what can Visual Markets do that traditional market research can’t? 11
3 A decade of Australian IT&T outsourcing in review 13
4 The IT&T market in more detail 19
Telecommunications 23
Mining and Manufacturing 26
Business Services 28
Health Care 30
Regional Government 32
Education 34
Energy and Utilities 36
Travel and Transport 38
Banking and Finance 40
Retail 44
Federal Government 46
Defence 52
Intersector analysis 54
5 Competitive assessment from the marketplace 55
Market intensity by sector 55
Competitiveness by firm 56
The value of partnering and channels 60
6 Market analysis scenarios 63
Vodafone–Hutchison 3G merger 63
HP takeover of EDS 64
Oracle takeover of Sun 64
Vendor partnerships 67
Contents
iv
CONTENTS
7 Key players: Firms and individuals 69
Key players: Firms 69
Individual key-player analysis 71
Key players: Individuals 73
8 Scenarios of use 77
Customer hubs 77
Industry specialisation: Entering a new sector 78
Client problem solving 79
Multisourcing 80
Industry intelligence 81
Promoting Australian exporters 81
Finding the real experts: Recruitment? 82
Visual Markets and developing IT&T clusters 83
Summary and final assessment 89
Keeping current 91
Service providers 91
Users and clients 91
Contact us 92
About the key contributors 93
v
Today’s sophisticated clients want service providers to present them with a comprehensive range of offerings that allow them to engage at whichever level they are comfortable. Business priorities are changing; organisations are faced with ever-growing expectations and competitive pressures.
Service providers have to move beyond the traditional role of technology providers to deliver innovation to their clients. The multisourcing approach as highlighted in this new and insightful study strongly supports this trend.
As companies continue to flatten their organisational structures, business partnerships are gaining prominence. Knowing the market’s needs and how it is currently serviced provides you with key information that is essential in developing your product or service and marketing plans.
If past patterns and current conditions hold, the 2010s are likely to be char-acterised by a significant consolidation of existing participants and the emer-gence of powerful competitors who base their advantages on new concepts and different models of success.
Whether you are starting a new business or launching a new product or ser-vice, conducting a market analysis is the first step in determining if there is a need or audience for your idea. Knowing the market and how it is currently serviced provides you with key information that is essential in developing product and service marketing plans.
Optimice Pty. Ltd. provides specialised services to help organisations map and improve relationships at multiple levels by identifying relationship pat-terns between people, organisations, and vertical markets. This innovative firm’s Visual Markets research provides new insights into the Australian information technology and telecommunications (IT&T) marketplace that are currently not available through other research companies.
Len RustExecutive DirectorDialog Marketing Services
Foreword
In 2005 Thomas L. Friedman published his international best seller TheWorld Is Flat. Friedman was able to skillfully articulate what we have all been experi-encing with globalisation and the impact it has had not only on our market-places but also our personal lives. Through engaging narrative, Friedman helped us understand just what has happened to our markets as trade barri-ers have fallen and the Internet has provided the vehicle for conducting com-merce at electronic speeds. What we now appreciate is how complex the international marketplace now is. There is no greater testimony to the power of networks than the current global financial crisis (GFC). The breadth and depth of the financial impacts were largely invisible to conventional analyt-ical practices. We can no longer draw comfort that our competitors are all local and known to us. With unprecedented levels of joint venturing, merg-ers, and acquisitions, we cannot even be sure what the nature of the compe-tition will be going forward. What we do know is that the IT&T market in five years’ time will be vastly different from what we see today. Megamergers such as HP–EDS and Oracle–Sun Microsystems, and acquisition attempts like Microsoft’s play for Yahoo and IBM’s play for Sun Microsystems, all con-tribute to making strategic IT planning a perilous task.
Visual Markets aims to do with pictures what Friedman has done with words. In keeping with the old adage “a picture tells a thousand words”, Visual Markets looks to make visible the complexity of our current marketplaces in a way that traditional market research approaches cannot. Traditional approaches have been limited to analysing individual market actors and their products and services, revenues, clients, and market shares. However, to effectively understand the competitive environment, one needs to be able to see the full complexity of the relationships that exist between buyers and sellers, sellers and other sellers, and even buyers and other buyers. Visual Markets applies the science of networks to analysing marketplaces. It draws from social network analysis (SNA) techniques that have traditionally been applied to individuals in sociological fields. It takes advantage of the tool sets used to understand complex social situations to complex marketplaces. Using these techniques we are able to identify the key influencers in the market-place, which market areas are most competitive or dense, and where market gaps or opportunities might exist. We are also able to see the future impact of significant market changes like major mergers or acquisitions. For example,
1 Introduction
1—INTRODUCTION
in the global information technology sector, the Oracle–Sun Microsystems deal or a major regional initiative like the National Broadband in Australia may have a great effect on that marketplace. By viewing market network changes over time we can start to identify trends and likely scenarios. For government trade agencies, one can see the full complexity of the small-to-medium enterprise (SME) market and the impact of multinational compet-itors in the local marketplace. Most importantly, however, Visual Markets works down to the individual firm and senior leader level. With this high level of granularity, procurement or competitive strategies can be articulated and finely targeted to this level.
This report is designed to introduce the Visual Markets approach to market research through the use of a detailed case study of the Australasian informa-tion technology and telecommunications (IT&T) industry. The report will be of interest to those looking for new approaches to market research in com-plex marketplaces. The case study results will be of particular interest to both IT vendors and their clients as well as government agencies interested in the development of the IT&T marketplace. The case study results may also be useful to those operating in IT&T markets outside of Australia who could be considering market entry or looking for joint-venture partners. Those inter-ested in Visual Markets in general will be able to understand its basis and see a detailed example of its application to a significant and complex market.
How does Visual Markets research differ from traditional market research?
Visual Markets does not aim to compete directly with traditional IT&T mar-ket research. What Visual Markets does aim to do is provide new insights into the marketplace that are currently not available through existing market research techniques. The following table has been developed to help compare Visual Markets research with traditional IT&T market research.
HOW DOES VISUAL MARKETS RESEARCH DIFFER FROM TRADITIONAL MARKET RESEARCH?
Visual Markets research Traditional market research
Point of focus Marketplace relationships: focussed on business connections between firms, partnerships, supply contracts, and so on.
Marketplace firms: focussed on attributes of firms like revenue, market share, staff levels, key staff, and so on.
Critical value Provides a dynamic view of the full complexity of the market ecol-ogy. Concerned with value “flows” rather than “stocks”.
Provides a comprehensive profile of individual market players.Concerned more with value
“stocks” than “flows”.
Presentation of results
Makes use of visual network maps as a core means of communicat-ing data on market connections between market players.
Makes use of traditional “league tables” and pie charts to commu-nicate comparisons between mar-ket players.
Datasources and requirements
Largely drawn from public sources, but can be supplemented by survey data. Major market patterns can be validly identified with less than 50% sampling of the market.
Drawn from both public and pri-vate sources. The value is typically associated with the comprehensive-ness of the sampling.
Vendor value proposition
Identifying strategic pathways to connecting with prospective cli-ents. Identifying strategic product or channel partners to prospective clients.
Comparison with competing ven-dors on attributes like market share, revenues, profitability, and current clients.
Cliques and subgroups
Groups that can be distinguished by the density of connections between the members compared to the rest of the network. These are often seen as the “unofficial” niches that exist in most markets. SNA can make these niches more visible for the analyst.
Comparison with competing ven-dors on attributes like market share, revenues, profitability, and current clients.
Client value proposition
Smart multisourcing. Provides the facility for selecting vendors who have a history of preexisting rela-tionships and cooperation and, therefore, of avoiding costly post-procurement governance issues.
Can provide profiles of vendor’s products and services and com-pare these products and services between vendors to support client procurement decisions.
The report is structured as follows:
Chapter 2 provides a more detailed description of how Visual Markets oper-ates along with the underlying theoretical and research underpinnings. It will provide a short tutorial of SNA and how to read the market maps.
Chapter 3 provides a 10-year perspective of the Australasian IT&T outsourc-ing market as it has evolved over the past decade. The chapter will provide commentary on the macro trends that the market has experienced, from the initiation of outsourcing to single vendors to today’s multisourcing
environment. The Australasian market is considered a microcosm of the larger markets in North America and Europe.
Chapter 4 takes a detailed look at the Australasian IT&T marketplace, incor-porating major contracts, both outsourcing and otherwise, as it exists today. It is important to note that Visual Markets is as much a “method” as a “data source”. Marketplaces are dynamic and will change over time. Not all market transactions will appear on these maps. However, the method can be applied to fill these gaps as required by the particular needs of a Visual Markets user. To build up the market picture, data is drawn from published contracts and partnership data since 2006. Commentary is concentrated on market struc-ture, key players and influencers, and rising stars across 12 industry sectors.
Chapter 5 will take a closer look at the competitive landscape across the indus-try. The competitive landscape concentrates on the number and uniqueness of both contractual and noncontractual relationships. Commentary will be provided on competitive issues around the key players identified.
Chapter 6 provides a unique analysis of a selection of major mergers either undertaken recently or in progress. The analysis looks at the potential effec-tiveness of the merger from a relationships perspective as well as the potential impact on the market as a whole.
Chapter 7 is dedicated to individual firms and their leaders. The impact on the market of individual clients and providers is analysed. Key executives associated with the identified market influencers will be assessed for their own personal social networks as inferred from the market data and publicly available information. As key decision makers, their professional networks are likely to have a strong influence on the clients or suppliers they are most likely to work with.
Chapter 8 provides a series of “scenarios of use” for the Visual Markets prod-uct and related services. These case scenarios emphasise the unique benefits that can accrue to Visual Markets users.
Chapter 9 sums up the report. It reinforces the attributes that are uniquely valued in the Visual Markets approach.
Chapter 10 provides information on how readers can keep up to date with Visual Markets analysis over time. A number of options are provided for read-ers who require information or advice tailored to their own specific needs.
1—INTRODUCTION
Visual Markets as a market research concept is being pioneered by Optimice Pty. Ltd. through its Web site www.visualmarkets.net. The concept was developed by Optimice cofounder Dr. Laurence Lock Lee during his Ph.D. research studies at the University of Sydney. His dissertation was entitled
“Corporate Social Capital and Firm Performance in the Global Information Technology Services Sector”. The research was aimed at building a link between a firm’s social capital and its performance in the market in terms of return on investment and shareholder value. In conducting this research Dr. Lock Lee was able to draw from a long history of prior research studies of markets from a networking perspective. Some of the earliest work can be attributed to Harvard Professor Harrison White, who published the paper
“Where do markets come from?” (American Journal of Sociology, 1981) and the book Markets from Networks: Socioeconomic Models of Production (2004). Yale Professor Joel Podolny, a former student of White’s, followed up this theme of investigating the sociology of markets. From what was considered a niche area for research by mainstream economists, the global financial cri-sis (GFC) is providing impetus to look at alternative ways of viewing mar-kets, with the sociology of marketplaces now gaining increased attention. The speed at which the GFC propagated through the virtually invisible net-works that make up the world’s economic systems was breathtaking. Visual Markets is about making visible these networks of commerce so that we can better predict and more successfully manage within them.
Building on decades of research on the science of networks, Visual Markets makes use of a method, invented by sociologists, called social network anal-ysis (SNA), which makes visible the complex web of relationships that exist in today’s marketplaces. Sociologists have been using SNA to study friend-ship networks, neighbourhoods and communities, the spread of diseases, and even terrorist networks, in order to come up with ways of improving the way humans collaborate. Visual Markets is also concerned with how firms can better collaborate for mutual benefit. In the same way that individuals can play different roles in a community, firms will also play roles like vendor, cli-ent, distributor, product developer, and so on in the marketplace. SNA not only provides a means for visualising complex networks, but provides a host of analytical measures for the study of networks that can be readily applied to markets. It is important to note that Visual Markets is an analytical method and the maps it produces are visual aids to interpretation. The maps are
2 What are Visual Markets?
2— WHAT ARE VISUAL MARKETS?
not always complete, but will provide sufficient patterns for developing new strategies and identifying where the methods may need to be applied in more detail to gain insights at a more granular level than presented in this report.
SNA measures like centrality, betweenness, and closeness do not currently appear in the traditional market analyses. Yet as markets become more highly interconnected and global in nature, it is these sorts of measures that will pro-vide insight into who may or may not prosper. In the IT&T market in par-ticular, we have observed firsthand how rapidly the market can change, with major market players emerging and disappearing virtually overnight.
The following section provides a brief tutorial on SNA to help the reader bet-ter understand the nature of the market maps published in this report.
Social network analysis: A short tutorial
SNA is a technique used primarily for the analysis of public welfare applica-tions in the field of sociology. SNA has been used here for analysing the rela-tionship networks of markets. SNA provides a visual representation of who is connected to whom. Measures can be calculated to identify those prefer-entially placed in the network. According to social network theory, the most prominent roles are those of the “centrally connected”, who command atten-tion through being highly connected, and those of the “broker” or “bridge”, who bridge different clusters or cliques. Central connectors exert influence through their central role in their cluster of alliance partners. Brokers or bridges are often the source of innovation, facilitated by their ability to view across often disparate clusters. Both of these roles—central connector and broker/bridge—have negatives as well as positives. Central connectors can be locked into their own clique, making it hard for them to innovate. Brokers and bridges could lack the power to take advantage of their unique position-ing in the network. The following graph provides a simple illustration of these roles in a network map:
Figure 1. Social network analysis basics
Bridge or brokers
Central connector
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SOCIAL NETWORK ANALYSIS: A SHORT TUTORIAL
The science of networks
Visual Markets analysis is founded on the “science of networks”. Discoveries of how networks underpin many of the complex systems we experience on a day-to-day basis are only relatively recent. Studies of complex systems like disease propagation, the Internet and World Wide Web, terrorist networks, cellular metabolism, collaboration by scientists, and even Hollywood actor networks have resulted in new understandings of how networks grow, adapt, and even decline. Markets are another example of a complex network and therefore their characteristics and evolution can potentially also be predicted through the application of network science.
One of the best-known examples of the science of networks is social psychologist Stanley Milgram’s now-famous “six degrees of separation” experiment in the 1960s. Milgram’s experiment resulted in the claim that any two people in the world are sepa-rated by on average only six connections and has been labelled the “small world” effect. For the IT marketplace one could easily speculate that any IT vendor on the planet is within six degrees of any client on the planet. With the Internet available to facilitate such connections, one could imagine the impact this can have on world markets.
A second discovery by network scientists is what we call “scale-free networks”. This dis-covery found that in most complex systems some nodes in the network will have a very large number of connections. The remainder will have only a handful each. Depending on the context, the popular nodes, called “hubs”, can have thousands or even millions of connections (think of the Google home page on the Web) and the network appears to have no scale (i.e., it is completely emergent). An important characteristic of scale-free networks is their robustness against accidental failures. For example, broken links on the Internet will rarely impact its overall operation. From a market research sense, the analysis of a market network does not require a complete data set. Network scien-tists have shown that up to 50% of available data could be missing yet the dominant patterns will still be interpretable as the major hubs will still be visible. This point is rel-evant to this report. We make no claim for having captured all transactions or partner-ships that have been conducted in the Australasian IT&T market, but do claim that with the sample we have, our interpretation of the network patterns is still valid.
A third discovery of note by network scientists is the occurrence of two dominant network roles. The first has been identified above as those that are centrally located (i.e., the hubs), which will largely not surprise anyone. For example, in the IT&T mar-ket we would expect vendors like IBM, Microsoft, Google, and SAP to be hubs as well as major clients like IT-intensive government agencies and banks. A less obvious role is that of the broker or bridge. Brokers occupy privileged positions in the network, as bridges between network clusters. They are often seen as channels by which innova-tion can best occur in organisations. The above graphic shows the preferential bridging role played by Computer Sciences Corporation (CSC) between the defence and com-mercial market clusters in an analysis of the global IT&T market. By being positioned as a bridge, firms have the opportunity to leverage from both clusters for improved profitability.
In summary, by viewing markets as a complex network, one can start to apply the sci-ence of networks to make new discoveries and develop new insights that are largely not apparent using traditional market research techniques. As markets become increas-ingly networked and interdependent, it could be argued that the science of networks will circumvent the more traditional market research approaches that are concentrated more on the individual firms than on the relationships that exist between them.
2— WHAT ARE VISUAL MARKETS?
The software used to spatially lay out the network maps attempts to minimise link lengths, with the result that nodes with common connections tend to cluster together. While not foolproof, visual inspection of the maps can pro-vide some early insight into areas targeted for closer inspection and analysis.
The visual representation of a network is a graph of nodes or actors connected by one or more links. The links may optionally be directional, that is, have a specific direction of influence. In mathematical terms, the graph can be analysed via a number of measurement constructs that make use of proper-ties of network graphs. Some examples of key constructs developed by SNA researchers are listed in the following table.
Measurement construct Description
Network size and density
Measures the size of the network by the number of actors in the community under study. Density is determined by the number of interconnections as a proportion of the maximum possible number of interconnections. The measure can be used to iden-tify how dense and therefore competitive a given market sector might be.
Degree centrality Measures the centrality of an actor in the community, based on the number of other actors connected to it. Generally, the degree is defined as either “inward” or “outward”, reflecting the relationship direction. Highly central firms in markets have either many contractual or partnership relationships and are therefore more likely to be highly influential.
Reciprocity Measures the two-way connections between actors. This is often seen as a proxy for trust. Successful joint ventures are predicated on two-way value exchange.
Betweenness centrality Measures the degree to which an individual actor is on the path of connections between other actors. Firms with high between-ness are best positioned to introduce new innovations into the marketplace.
Closeness centrality Measures the degree to which an actor is connected to every other actor in the network. This means, in other words, the dis-tance required (number of indirect connections) to reach other actors. A firm with high closeness is better able to diffuse infor-mation throughout the market.
Cliques and subgroups Groups that can be distinguished by the density of connections between the members compared to the rest of the network. These are often seen as the “unofficial” market niches that exist in most markets. SNA can make these niches more visible for the analyst.
SOURCING DATA FOR VISUAL MARKETS RESEARCH
SNA data is traditionally sourced through surveys. Such data collection meth-ods can be expensive and time consuming. Much of the study of markets as networks has been limited by the need to survey firms to build social net-work representations for analysis. One of the innovations of Visual Markets is that the majority of data is sourced from preexisting industry informa-tion. Information on contracts, partnerships, mergers, and acquisitions has been used to create a “relationships” database from which SNA techniques can be applied to study whole market sectors. Of course this data can be sup-plemented by custom-developed surveys, as required. The approach was ini-tially developed and applied to the global IT market to study the effects of corporate social capital on firm performance. The technique has since been applied to study markets in health, finance, and media. This report uses the Australasian IT&T market as a detailed case study for demonstrating the power of the approach.
Sourcing data for Visual Markets research
Visual Markets draws its data from preexisting sources, with an option for surveying for primary data that might not exist through other sources. Much of the data that Visual Markets draws from is compiled for traditional mar-ket analyses, or simply IT news reporting. In this report Visual Markets makes use of data from several sources, most of which are available for pub-lic domain access. To gain a reasonable level of market coverage, multiple sources were required. Visual Markets is able to integrate its analyses across these disparate sources to provide a cohesive view of the market ecology over-all. The primary sources used were:
Datamonitor’s IT Services Contracts database1. 1 —a global database thatcontains details about IT deals larger than US$1 million.
The Rust Report2. 2 — An IT industry newsletter that in particular capturesIT deals involving SME firms as well as larger IT deals.
Australian government Austender3. 3 site—Provides details of contracts signed primarily by federal government agencies.
Australian corporate data4. 4 —Provides company data for IT vendors and resellers. Used to source company executive data in this report.
1. http://info.datamonitor.com/kc/itsca/
2. http://www.rustreport.com.au/
3. https://www.tenders.gov.au/
4. http://www.austcorpdata.com.au
2— WHAT ARE VISUAL MARKETS?
Various IT and business news sources were also used to complement the above.
Even with the breadth of data sources described above, it is not possible to capture every significant transaction or partnership that might occur in the market. We have, however, endeavoured to sample a representative cross sec-tion of the market. The quality of the data can vary depending on the source. The proprietary sources do tend to provide more comprehensive and complete data. However, for the purposes of Visual Markets, the key data is the iden-tity of the parties to a transaction, be it a commercial sale or an alliance activ-ity, and some indication of the scale of the transaction. The Datamonitor and Austender sources provided dollar values of the contracts. Therefore, where applicable, this data has been used in the following analyses.
A key feature of the SNA approach mentioned earlier is its ability to derive important patterns from incomplete data. Even with sample sizes as small as 20% of the total population, SNA is able to identify key patterns. The rea-son is that key players and their relationships will invariably be identified in even small samples. Adding more data will add to the detail of the analy-sis, especially of the less prominent players. But for the major players, more data simply reinforces patterns shown in smaller sample analyses. In contrast, traditional market research techniques can be severely hampered by missing data (e.g., calculating market shares or market demand in different sectors).
For areas of the market where data is not available, for example with IT chan-nels containing a large number of SME providers, electronic survey methods5
can be employed to source new network data for the areas of interest. The following analyses show that the IT market is at least two-tiered. The major clients and vendors are engaged in a central core market and major multiyear contracts and are well supported by published data. The second tier contains a multitude of smaller clients and vendors, for which only a fraction of data is available in published sources.
5. See www.onasurveys.com for an example of an electronic survey tool used for collect-ing network data.
SO WHAT CAN VISUAL MARKETS DO THAT TRADITIONAL MARKET RESEARCH CAN’T?
So what can Visual Markets do that traditional market research can’t?
Visual Markets does not compete with traditional market research. Rather, it adds a new dimension to the understanding of the competitive environment beyond what traditional methods are capable of. Visual Markets does not attempt to provide detailed profiles of individual players. It does not attempt to provide market share information or predict market size. However, when considering a competitive environment, relationships —be they contractual or more informal—form the essence of the marketplace. Traditional mar-ket research may identify who is selling to whom, or who is buying from whom, as one-off transactions. However, to understand the full dynamics of these transactions one needs to be able to “see” the potential network effects. Failing to see those effects is largely why the strength and breadth of the global financial crisis surprised everyone.
Traditional market research works with market segments and brand posi-tioning. These studies are typically at the macro level, providing little spe-cific guidance on tactics and market actions. Visual Markets allows you to see those segments, who are in them, where they are placed in the mar-ket segment network, and how your branding activities are best placed to exploit a given niche or market segment. The IT&T sector is currently awash with major merger and acquisition activity. Traditional market research can provide market share information and the changes that a particular prospec-tive action like Oracle–Sun Microsystems, Microsoft–Yahoo, or Vodafone–Hutchison 3G might have at a macro level. Visual Markets can show precisely which clients and vendors will be impacted and more importantly the poten-tial change to the competitive dynamics in the industry should they go ahead. Want to see what the impact might be of a major vendor or client disap-pearing from the marketplace? For example, what impact will the Westpac acquisition of St. George have? Just take St. George out of the network map and look at what impact that has on the network. Concerned that your SAP implementation may suffer from overloading the current SAP implement-ers? Have a look at the SAP network of clients and implementation part-ners. Perhaps you can identify a partnership combination that suits both your timetable and your specific industry needs.
Among the potentially biggest beneficiaries of a Visual Markets analysis are large firms undertaking a multisourcing IT strategy. The next chapter looks at the IT&T outsourcing industry in review as it has evolved over the past decade or more.
A major trend in the IT&T marketplace in the last decade or more has been information and communication technology (ICT) outsourcing. In Australia the industry was virtually launched by the announcement of a 10-year whole-of-state-government IT outsourcing contract for EDS Corporation by the South Australian government. IT outsourcing deals continued to grow in number and total value until around 2005, after which the IT outsourcing growth stabilised and perhaps even retreated a little over the past three years in terms of total contract values and terms.
Figure 2. A decade of IT outsourcing (Source data: Datamonitor)
The past decade of IT outsourcing in Australia has seen the industry evolve from a substantially sole-sourcing market to one where the mature outsourc-ing clients are adopting multisourcing strategies and therefore increasing con-nectedness in the marketplace. The following graphic traces the evolution of the IT outsourcing market from a contract relationship view.
The blue circles represent clients and the red circles indicate vendors. Linkages represent a contractual agreement between vendor and client or vendor and subcontractor. As can be seen from figure 3, as the volume of outsourcing contracts increased over the decade, so did the interdependencies between vendors and clients. This has led to the situation today where a majority of vendors and clients are connected either directly or indirectly.
3 A decade of Australian IT&T outsourcing in review
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Figure 3. A decade of IT outsourcing in Australia
The map in figure 4 shows the state of the IT&T outsourcing market as it is today. The map shows those multiyear contracts still current at the begin-ning of 2009. The existence of a two-tiered market, where the major vendors and multisourcing clients are now interconnected in the centre of the map, is evident. However, on the periphery of the map is a disconnected cluster of smaller second-tier outsourcing contracts (there is a minimum cut-off of US$1 million for all contracts on these maps).
The size of a node is related to the number of contracts the node is involved in. Therefore the larger blue nodes are the vendors with the most contracts. The size of the red nodes reflects the relative use of multisourcing by the cli-ent firm. The thickness of the connecting lines reflects the relative sizes of the contracts involved. In terms of contract value, the top five vendors are still responsible for 60% of the current total contracted value, though the trend has been toward the outsourcing dollar being distributed amongst a much larger set of vendors than was the case earlier in the decade.
3— A DECADE OF AUSTRALIAN IT&T OUTSOURCING IN REVIEW
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Figure 5. Market shares by value and number of contracts
At the beginning of the decade, outsourcing to a single vendor was the most common theme. Over the latter part of the decade, sole sourcing has been vir-tually abandoned in favour of multisourcing strategies. As shown in figure 7,around 20% of all firms participating in IT outsourcing now multisource. The major IT outsourcers like banks and large government departments are all now multisourcing. Figure 6 shows those firms that have signed multi-vendor deals in the past three years.6
Figure 6. Multisourcing firms, 2006–2009
6. This graph contains only significant contracts.
3— A DECADE OF AUSTRALIAN IT&T OUTSOURCING IN REVIEW
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Figure 7. Multisourcing trends
The increasing trend for IT&T outsourcing buyers to multisource has been matched by a growth in partnering between vendors. Partnering contracts have become common for major software implementations like SAP and Oracle. Marketing or joint development partnerships have also now become more commonplace, especially in the Telecommunications and Media sectors.
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In summary, the last decade has seen a clear trend toward a more networked marketplace. IT&T buyers are increasingly sharing their spend amongst a growing number of IT&T vendors. For their part the IT&T vendors are increasingly looking to partner to provide more comprehensive solutions, enabling them to focus on developing their own core capabilities in-house. Collectively the result is a more connected, more interdependent IT&T marketplace. The increased complexity in the marketplace offers both risk and opportunity for both buyers and sellers. The next chapter will make use of the Visual Markets analytical methods to provide a unique view of the IT&T marketplace as it has evolved over the past three years.
3— A DECADE OF AUSTRALIAN IT&T OUTSOURCING IN REVIEW
The map in figure 9 (next page) provides a visual representation of the Australasian IT&T market during the period 2006–2009. The nodes are companies coloured by the industry sector in which they operate. The links are either contractual or partnering arrangements.
This market map provides a visualisation of the complexity that the IT&T market now represents. The map identifies 518 buyers, 429 sellers, 711 con-tracts, and 432 partnering arrangements across 11 industry sectors.
Each connection identifies a relationship, either a contractual or partnering arrangement. The colours of the nodes reflect the industry sector of the cli-ent firm with vendors largely identified as being from the IT&T sector. The size of the nodes is scaled to the number of relationships that organisations participate in. The vendors with multiple contracts and partnering arrange-ments appear larger. Client organisations that have multiple contracts with multiple vendors will also appear larger.
While the full market map provides an appreciation of just how complex and interconnected the marketplace is, the real insights become apparent when we drill down into the detail of the maps. However, what we can see from the full market map is that there are a few key players that dominate the market, including Telstra, IBM, federal government agencies, and banks, who make heavy use of multisourcing strategies. We can also see that the Telecommunications sector is one of the most active and promises to stay that way with the announcement of the National Broadband Network (NBN) initiative. There is a sizeable second-tier market shown on the periphery of the map. The second-tier market provides the opportunity for the smaller buyers and sellers to be matched without the overhead typically associated with the major players.
The following sections provide subsets of the overall market map for more detailed analysis and commentary. We start with a look at IT&T vendors and how they are currently allianced. From this base we then overlay clients from 11 industry sectors to provide a view of what the competitive environ-ment looks like for each sector.
Figure 10 provides a view of how interconnected the Australasian IT&T industry is amongst the vendor community. The larger nodes represent those
4 The IT&T market in more detail
Figu
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4— THE IT&T MARKET IN MORE DETAIL
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identified with the most alliance connections. As expected, the main industry players like IBM, Telstra, Microsoft, Oracle, Optus, and Google are prom-inent. We can also see the emergence of Indian providers like Wipro, Tata Consulting, Satyam, and Tech Mahindra. A characteristic “star” pattern around the major players indicates that they tend not to share too many alli-ance partners, with the majority of partners being unique to them. It is likely that the majority of these unique connections are SME companies sought by the major players for their innovative offerings. Alternatively, the SME may be looking to the major player for market access and some reflected reputa-tion benefits from an association with a large and reputable provider.
4— THE IT&T MARKET IN MORE DETAIL
TELECOMMUNICATIONS
Telecommunications
The Telecommunications sector includes media companies who are becom-ing increasingly allied with traditional telecommunications companies.
Telecommunications is one of the largest industry sectors analysed both in terms of value and the number of participating players. As one would expect, the main telecommunication providers Telstra, Optus, and Vodafone operate as both clients and providers in the market. IBM, Microsoft, Oracle, Verizon, and Cisco are major providers to the industry. Interestingly, the key clients other than the telecommunications companies themselves are media compa-nies like AAPT, Fairfax, Seven Network, and Southern Cross Broadcasting. Of all the industry sectors studied it is the Telecommunications sector that is most connected and polarised around the major providers. The “second-tier” market in this sector is the least significant, suggesting that clients of all sizes still have few options when engaging with a telecommunications provider.
The A$43 billion National Broadband Network investment will drive mar-ket behaviour in this sector over the coming years. The decision by the govern-ment to not award the contract for building NBN to a major provider will ensure that NBN will become the largest multisourcing IT&T contract undertaken in Australasia to date. The lead-up to the NBN decision has vir-tually assured that the NBN project will not be devoid of political influences from the major players. It is also likely to require that the investment be used to also enhance the development of the Australian SME industry, rather than to simply “fill the coffers” of the major multinationals. Without doubt the NBN project implementation will be complex. The financing and procure-ment process will virtually assure a dynamic alliance and partnering environ-ment both in its construction and eventual use. The media players have been included in this sector in recognition of the closer relationships that have been built between media firms and telecommunications providers over the past decade or more. However, once the NBN is implemented, virtually all other sectors will be active users of this infrastructure.
So how can Visual Markets be used to help market players take advantage of the NBN initiatives? At the time of writing, the NBN board of directors has been formed and lead advisors appointed to complete the initial NBN imple-mentation study by early 2010. No doubt this will be the first of many follow-up studies that will shape the way the project is implemented. Each study will generate a need for market players to adjust or perhaps even rewrite their mar-ket strategies to enable them to be best placed to take advantage of the oppor-tunities as they develop. Rapid alliance formation and bidding consortia will become the norm. Being able to rapidly assess the competitive landscape prior
4— THE IT&T MARKET IN MORE DETAIL
to embarking on a partnering activity will become critical. Figure 11 provides a map of the competitive environment at the time of writing. However, the market landscape identified by Visual Markets will be updated as alliances and joint ventures are announced, providing an up-to-date visual map of how the competitive environment is changing over time. Potential conflicts of inter-ests can be quickly identified and addressed as new partnerships are sought. The size of the NBN will ensure that significant market players will not be restricted to the traditional Telecommunications sector. The Financing and Investment sector as well as the Business Services sector containing the major construction firms will also come into play. Visual Markets will provide a facil-ity for market players to explore their strategic options through testing poten-tial partnerships and their impact on the marketplace. An example of this use is provided with the Vodafone–Hutchison 3G merger in chapter 6, “Market analysis scenarios”.
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BlueScope Steel, BHP Billiton, and Rio Tinto are the prominent clients in this space. Key providers are IBM, Microsoft, SAP, CSC, ASG Group, Oracle, Optus, Google, and Sun Microsystems. The Mining sector includes Australia’s largest exporter earners, but compared to other industry sectors they are relatively unsophisticated in terms of IT. Global operators like BHP Billiton and Rio Tinto require a level of robustness in their IT infrastructure and therefore connections with major IT infrastructure providers like CSC and IBM. In terms of core business software, the SAP–Microsoft combina-tion is dominant. Sadly, manufacturing in Australia is disappearing or being marginalised as smaller-scale operations. Manufacturing typically requires a higher level of IT sophistication and investment. It appears that the future of this sector will lie in providing infrastructure and core business applications to the major mining players along with opportunities for niche application providers for specialist mining or manufacturing software firms.
Manufacturing firms these days are under continual cost-reduction pressure as they attempt to compete with the lower-cost manufacturing economies of China, India, Eastern Europe, and South America. One area of opportu-nity could exist in the use of IT to facilitate offshore manufacturing. For the larger manufacturers like BlueScope Steel, who have offshore manufactur-ing facilities, the scope exists for using IT to support more extensive supply chain applications. Mid-size manufacturers like Pacific Brands and Aristocrat have largely moved their manufacturing off shore, which means that at all levels IT needs for this sector will be related more to supply chain manage-ment than to manufacturing itself. Visual Markets provides opportunities for Australian companies to explore and analyse potential product channel options for manufactured goods that have been sourced offshore.
4— THE IT&T MARKET IN MORE DETAIL
MINING AND MANUFACTURING
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4— THE IT&T MARKET IN MORE DETAIL
Business Services
This sector is the most general and diverse of those analysed. It includes par-ticipants from areas like real estate, building and construction, accounting, consulting, and information services. There is little evidence of clustering amongst the client base (blue nodes), who are mostly seen on the periph-ery of the map. The inference is that this sector is open to exploitation, with none of the major vendors having any clear advantage.
With Google being the most connected vendor it would appear that this sector is centred on information provision. The opportunity for leveraging business services will escalate as the NBN becomes a reality. The building, construc-tion, and real estate players will become directly involved in the NBN proj-ect. Business services layered on top of the NBN will provide ample room for innovation in this space. Again, the use of Visual Markets to explore prod-uct channel opportunities will exist. From the client perspective, the NBN will make feasible a whole host of potential new business services facilitated by higher bandwidth telecommunications. Video on demand, enhanced dis-tance education, and distributed design and manufacturing are just a few of the possibilities for enhanced business services made feasible by an effective NBN implementation.
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r
4— THE IT&T MARKET IN MORE DETAIL
Health Care
This health-sector map combines both public- and private-sector health-care providers. In terms of core business support software, Microsoft and SAP are dominant. IBM, Telstra, and the ASG group dominate the IT service provid-ers. Indian provider Satyam has entered the market through contracts with Medibank and partnerships with Telstra and SAP. The existence of many niche health-care providers ensures that there is a health-care second-tiermarket for niche players.
Health care has the potential for huge IT investment. The UK national health scheme has set the benchmark for large-scale health-care IT invest-ments. Unless the federal government takes a stronger controlling interest in the state-controlled health systems, it is unlikely that Australia will see the levels of investment seen in the UK. The highly privatised US health-care market is also a source for huge IT investment. Unlike the UK system, investment is driven largely by competitive pressures between health-care providers. Australia appears to be caught somewhere between these two investment models. The general feeling is that without a nationally coordi-nated approach to health care there will tend to be inadequate investment in the sector, and that it is starting to show in its performance. Where large investments have been made, the outcome has often been poor (e.g., the A$700 million spent on the Medicare easy-claim systems in which adoption rates are still poor). Health record keeping has also been a contentious issue. After many years of planning and false starts, NSW Health is only now start-ing to build a statewide patient records management facility. Similar situa-tions are happening across the other states. The need for greater investment in health care in Australia is definitely there. How quickly these investments will materialise is the big question.
For the larger health-care facilities such as hospitals, the larger IT provid-ers like IBM and Telstra will be relied on to ensure minimal-risk services. However, the breadth of applications ensures plenty of opportunity for smaller providers to succeed in the marketplace. Visual Markets allows niche IT product providers to identify the smaller private health-care providers needed to introduce their products into the market. To access the larger public agencies it is likely that smaller providers will need to work through channels that may include the larger systems integration providers. Through Visual Markets, niche providers can plan their market strategies and test their potential partnering strategies. Clients can make use of Visual Markets to look for potential opportunities to share services between private providers in the health-care value chain (e.g., between private hospitals, health insurers, and larger medical practices).
HEALTH CARE
Figu
re 1
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r
4— THE IT&T MARKET IN MORE DETAIL
Regional Government
The Regional Government sector covers the state governments and selected larger local government councils. The state governments appear to be spread amongst a larger suite of providers beyond IBM, Telstra, and Microsoft. ASG Group, Fujitsu, SAP, HP, Oracle, CSC, Cisco, Dimension Data, and Sun Microsystems appear quite active at the state government level. There appears to be plenty of opportunity with the smaller agencies appearing on the periphery, suggesting ample opportunity for SME involvement. In comparison to the Federal Government sector, Regional Government is less polarised around a few large vendors. While the tendering processes can still be onerous, the sheer variety of needs between state and local agencies sug-gests there is plenty of opportunity for a full range of services. With Regional Government, local parochialisms may protect regional service providers to some extent from more global competition.
Visual Markets can provide vendors with the opportunity to explore poten-tial alliance or channel opportunities at a regional level. For example, chan-nels to a state government may best be addressed through working with an incumbent local provider. For the agencies themselves, the potential exists to explore sourcing strategies that can combine the best of world-class tech-nology and practices with trusted local delivery services. Through Visual Markets, local governments can determine those global vendors who have been able to work effectively through regional delivery services.
REGIONAL GOVERNMENT
Figu
re 1
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r
4— THE IT&T MARKET IN MORE DETAIL
Education
The major IT&T users in this sector are substantially the universities and state government education agencies. The client base is fairly distributed with the only providers for multiple universities being telecommunications providers like Telstra, Nortel, and Cisco. Microsoft and IBM are the major software providers. The lack of a common enterprise software provider is evi-dent, so opportunities exist here. Compared to other sectors, the penetration of SAP and Oracle is relatively modest. With the lack of a unified “buying culture” that can exist in other sectors, the Education sector provides a more level playing field for vendors. Outside of commodity telecommunications services and office software from Microsoft, there are opportunities for ven-dors to work directly with individual institutions from the major universities down to some of the larger private secondary schools.
The Indian providers Satyam, Tata, Wipro, and Infosys are all present in this sector, indicating that alignment with educational institutions is looking like a common strategy to build market presence through this sector. A large proportion of the postgraduate community in Australian universities comes from India and China. Having a ready-made workforce that is at least cultur-ally aligned with their style of management can be a great advantage.
Visual Markets can provide the educational institutions with a picture of how innovative technologies are diffusing throughout the sector. Universities are able to scout for research partners who may be interested in collaborat-ing in the commercialisation of university-developed technologies (i.e., pre-product channel exploration). In addition to offering vendors the potential for sourcing new product opportunities and attracting skilled staff, Visual Markets also provides them the opportunity to broker partnerships between institutions using the same software systems. Without a central or dominant buying agency across the sector, multiple sales have to be achieved through brokering partnerships between the institutions. This has been historically difficult as educational institutions tend to highly value independence when it comes to procurement decisions. With Visual Markets, however, the most likely collaborations can be tested—not just between the vendors, but also between the institutions themselves.
EDUCATION
Figu
re 1
6. E
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r
4— THE IT&T MARKET IN MORE DETAIL
Energy and Utilities
This sector is a mix of private and semiprivate industry clients. It is a fairly distributed market with little evidence of clustering of clients around any particular set of vendors. Telstra with its dominant position is perhaps an exception. CSC is servicing four utilities, in partnership with SAP for some. Interestingly, a number of clients (e.g., AGL Energy, Origin Energy, Wannon Water, and Western Power) are multisourcing, suggesting that they are look-ing for best-of-breed providers. This provides opportunities for “best-in-class” niche providers.
The deregulation of the electricity market in the 1990s and the privatisation of power assets, especially in Victoria, have created this more distributed market-place. Again, beyond the staples of telecommunications, office software from Microsoft, and core enterprise applications from SAP, IBM, and Oracle, the field is quite open to niche providers, as indicated by the peripheral “satel-lites”. The separation of power-generation assets and customer-facing retail assets may fragment the market even further. Generation assets share an IT needs profile not dissimilar to a manufacturer, requiring high availability of heavy engineering machinery. The retail area is now more akin to a business services sector, potentially offering information-intensive and information-centred services beyond billing systems. Another potential opportunity, on the agenda for some time now, is the use of power-line infrastructure to carry NBN services. Should the service availability issues be resolved, we could see this sector play an increasing part in the IT&T market as a provider.
Visual Markets provides a means for players in this market sector to explore some of the potential scenarios identified above. Vendors in the Business Services and the Mining and Manufacturing sectors could find new chan-nels into the retail parts of this sector. For the more entrepreneurial play-ers in this sector, potential alliance networks can be studied to investigate whether what has been a typical industrial-age market may begin to leverage itself into the more dynamic and faster-growing business services or telecom-munication sectors.
ENERGY AND UTILITIES
Figu
re 1
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4— THE IT&T MARKET IN MORE DETAIL
Travel and Transport
With the exception of Qantas, which has several providers, other clients tend to be attached to single providers. Telstra, Satyam, IBM, Unisys, UXC, and Accenture have multiple clients in this sector. There are a number of smaller clients with one-off providers, suggesting there are still niche opportunities in this sector. As one would expect, the logistics of Travel and Transport relies heavily on telecommunications, and Telstra is dominant in this area. The diversity in the sector, which covers tourist travel, supply chain logistics, and public transport, has meant that there are no real unified buying pat-terns, other than as previously mentioned, the core reliance being on robust telecommunications.
Growth in the sector could come from many avenues. As manufacturing continues to move off shore, many manufacturers will become channel play-ers in a global supply chain. The IT needs for this style of business are best understood in this sector. The tourist travel segment is under continuous competitive cost pressure. The advent of code sharing on international flights is a good example of how supply chain practices are being adopted for tour-ist travel, marking a convergence between people- and freight-transport busi-nesses. Like the Energy and Utilities sector, there could also be a growing division between the wholesale and retail aspects of this sector. As carriers become more innovative in “selling” capacity, the business becomes more information-intensive and starts to look more like the business services sector. The tourist travel industry is under particular pressure from Internet busi-nesses working directly with airlines. To compete effectively, these businesses will have to be exceptionally agile in the way they partner with complemen-tary service providers.
TRAVEL AND TRANSPORT
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4— THE IT&T MARKET IN MORE DETAIL
Banking and Finance
Banking and Finance is an IT&T-intensive industry sector. The four major banks—NAB, CBA, Westpac, and ANZ—are all major multisourcers, with the core providers being IBM, Telstra, Microsoft, EDS, Satyam, Oracle, CSC, Infosys, and Accenture along with specialist firm Bravura. The banking and finance industry has been very much the “engine room” for IT&T ever since the first computer systems were employed to undertake standard accounting tasks. As the industry has evolved in sophistication and complexity, so have the IT&T services developed to support it. The centre of the map shows this tight cluster, suggesting that breaking into the core of this market could be difficult for a new entrant. Opportunity for new entrants is more likely to exist with the smaller peripheral nonbank clients.
Australia’s “four pillars” banking policy, which prevents its four major banks from merging, has seen these banks act as poles for the IT&T industry, in particular IT outsourcing. Westpac and CBA led the way with major IT outsourcing contracts with IBM and EDS respectively. ANZ had an in-house Indian development facility courtesy of its banking acquisitions in India in the 1980s. NAB has been more circumspect with its early outsourc-ing endeavours, but is now joining the other major banks as a multisourc-ing procurer of IT&T services. The closed nature of the industry, restricted as it is to a selected group of major providers, can be partially attributed to the four-pillars policy. Basic banking networks demand high-availability, low-risk operators. A price premium is deserved for ensuring that banking systems stay online, and the major IT infrastructure providers are therefore best placed to provide these services. Switching is also difficult and costly once an incumbent infrastructure provider is in place. However, the trend toward multisourcing has seen some of the major single-source contracts now being shared to a limited degree. This has especially been the case as the lower-cost Indian providers have come into the market. Westpac’s acqui-sition of St. George Bank may signal similar takeovers of regionally based retail banks and credit unions as the economies of scale for the large-scale IT infrastructure required to support branch networks comes into play. This can only enhance the prospects of the larger IT infrastructure providers like IBM and EDS.
The applications side provides the opportunity for some innovation and novel use of technologies. The financial planning industry has boomed, especially since the advent of compulsory superannuation. Companies like Bravura,
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which provide specialised services to the superannuation industry, can thrive in this environment. The convergence between the retail and business bank-ing and the insurance, superannuation, and financial advice industries is in full swing, with all the major banks now offering these services. Mobile and Internet banking have also provided another dimension to how banks can differentiate themselves through technology. The major banks do not have it all their own way, however. Smaller-scale operators can succeed in virtu-ally all areas with perhaps the exception of retail banking, which still requires a branch network. It is likely that these smaller-scale operators will provide the opportunity for innovative IT&T providers to gain a foothold in the market. Technology sourced internationally could also prove beneficial for the smaller operators. For example, many of the fraud-detection technolo-gies, which are becoming increasingly critical in the Internet banking age, are sourced internationally.
Growth in the sector has been suppressed by the global financial crisis, though the Australian operators are arguably some of the least-affected glob-ally. Australian banks do not have a good record on international expan-sions, though at least for the four majors there are few other options for substantial growth. In terms of cross-sector influences, this sector, like the Telecommunications sector, pretty much underpins most business activity. The convergence of health insurance with other forms of insurance from the sector is predicted. Mobile services will strengthen the bridge with the Telecommunications sector. The larger retailers are already in effect offering banking services by allowing their customers to withdraw cash with their purchases. The growth in banking “middle men” like mortgage and insur-ance brokers could be seen as growth in general “business services” to both consumers and business clients.
While growth may be somewhat subdued in the coming years, market restructuring activities of the sort identified above will continue. Visual Markets can provide a facility for exploring novel convergences. For exam-ple, how could a health insurer move into general insurance, or vice versa? How could a financial services company leverage its business through, for instance, the Retail or the Travel and Transport sectors? The burgeoning financial advice industry is ripe for consolidation. Which smaller players would make attractive acquisition targets? How will their client and part-nership network complement your own network? For the major banks whose base services are commoditised, the search for differentiation through
4— THE IT&T MARKET IN MORE DETAIL
BANKING AND FINANCE
value-added services can be explored through the use of Visual Markets. Are there business services firms that could provide a differentiating value-added service to the bank? Exploring possibilities visually is a strength of Visual Markets.
Retail
The Australian retail market tends to be polarised around a few major players. The map shows that food providers like Coles, Woolworths, National Foods, and Foodstuffs are clustered around providers like SAP, Fujitsu, Satyam, and HP. Clearly SAP has been successful in dominating the retail supply-chain market. Other retail subsectors provide niche opportunities, for example Lawson, which counts Rip Curl and Kumfs among its enterprise resource planning (ERP) customers. The clients identified in this sector range from the major retailers to specialised chains, real estate agents, food outlets, and convenience stores.
The Retail-sector use of IT&T has been led by “poster children” like Wal-Mart in the USA, which have demonstrated the value of IT in running a retail business. Warehousing of consumer buying data along with the prod-ucts has allowed retailers to streamline their supply chains and adapt quickly to changes in customer buying patterns. This extends to merchandising, with the now-famous “put the nappies near the beer” strategy demonstrating how fine-grained merchandising can become with the help of IT. Like Banking and Finance, Retail is an established sector in which many traditional IT vendors have had many years to lock in the major players. Innovation will happen at the periphery through some of the smaller retail outlets, with peripheral second-tier players being quite active.
As the most customer-facing sector, retailers can be viewed as the “front door” to a plethora of business services. Retailers already provide some banking ser-vices, including offering discounts at fuel stations and acting as outlets for mobile telephony vendors. This sector is likely to benefit most from other sectors looking to deliver services through them. Partnerships with firms from the Banking and Finance, Business Services, Travel and Transport, and Telecommunications sectors are highly attractive for Retail-sector partner-ships. Visual Markets can provide an effective vehicle for exploring these partnering opportunities. Can some of the major vendors leverage their cross-sector positioning to facilitate such partnerships? For example, can IBM or SAP facilitate joint ventures between their clients in Retail and Banking? Can a niche business services firm facilitate joint promotion of travel advertising on mobile devices with a retailer? What about value-added services for real estate agents? The convergence of mapping technologies like Google Maps and location-centred services like real estate creates some exciting partnering opportunities that can be facilitated by Visual Markets.
4— THE IT&T MARKET IN MORE DETAIL
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The Federal sector is one of the most active IT&T market sectors, with many of the major agencies topping the IT&T investment lists. The analysis of this sector benefits from data made publicly available on the Austender Web site. This site reports on contracts signed by government agencies. The data on the site is representative and comprehensive, although unlikely to have captured all of the federal government’s IT spend. For this analysis, data was extracted for contracts over A$500,000 only.
Figure 21. Top Federal IT contract spenders
Data on the top-spending agencies shows that the Department of Defence together with the Defence Materiel organisation represent close to 50% of the total Federal IT spend. It therefore makes sense to separate out the Defence sector for specific attention. Australian Customs, Finance, Centrelink, and Health and Ageing were the leading agencies in terms of large contract signings.
4— THE IT&T MARKET IN MORE DETAIL
Federal IT Contract Spend Excluding Defence 2006–2009
Federal IT Contract Spend 2006–2009
FEDERAL GOVERNMENT
The vendors that benefited most from large-scale IT contracts are shown in figure 22. The leading vendor is Telstra, closely followed by IBM.
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Using the contract as a relationship link, a network map can be derived to show how vendors are linked to the government agencies. Unlike the previ-ous maps, the nodes are sized according to the size, rather than number, of contracts greater than A$500,000 that the agency or vendor is involved in. Blue nodes denote agencies and red nodes represent vendors.
One can see from figure 23 the dominant part that Defence organisationsplay in the Federal IT market ecology. The high number of individual vendors focussed solely on defence indicates the specialised nature of the Defence market. Figure 24 shows the federal government market excluding the Defence organisations. Again, the nodes are sized by the value of the con-tracts over A$500,000 that the organisation is involved in. One can see how the majority of big-spending agencies are clustered together with a selected few major vendors, though it is worth noting that Customs does have a num-ber of vendors that solely service its needs.
On the periphery are the smaller agencies with some niche providers. The second-tier periphery for the Federal sector is not that extensive. While the sheer size of the operations of the larger agencies will dictate a need for
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4— THE IT&T MARKET IN MORE DETAIL
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mature yet higher-cost services from the major vendors, the map does show whether the smaller providers are gaining reasonable access to clients in this sector. Government contracts are notoriously complex and expensive to ten-der for. SMEs can often be engaged on projects that fall below the “must go to tender” limits and are not shown on this map. However, once the cost of an IT initiative rises above those thresholds, the smaller providers are often constrained to subcontracting to the larger vendors.
Figure 25 plots for each agency the number of vendors it engages with against the percentage of these vendors who only service this agency amongst the 73 agencies analysed. The plot is a representation of the degree of specialisa-tion that the agency has (i.e., those agencies toward the upper right have a high number of unique providers, and therefore could be seen to have highly specialised needs). From the top graph one can see just how specialised the Defence agencies are with respect to the remaining 71 agencies. Excluding the Defence agencies, we see that Customs and Police are the next most special-ised agencies, with the Broadband, Communications, and Digital Economy agency, which sponsors the National Broadband Network initiative, likely to become more prominent over time. The degree of specialisation offers smaller vendors in particular the opportunity to tailor their offerings to the require-ments of the larger-spending specialised agencies. For the federal govern-ment agencies overall, the opportunity exists to review the above graphs and ask these questions: “Is the degree of specialisation shown justified? Are spe-cialist vendor capabilities being effectively leveraged across all agencies?” For the major agencies, Visual Markets offers the opportunity to fine-tune their multisourcing strategies. By understanding those vendors that have worked in alliance clusters to deliver services to a single client, they can procure clus-tered services and effectively avoid difficult governance situations where con-tracted providers are also marketplace competitors. The visual representation also makes it clear which vendors other agencies are using may have needs similar to their own (e.g., Customs and Immigration, Police, and Defence), providing the opportunity to reduce the time for procurement.
For smaller vendors, Visual Markets provides the opportunity to map out a partnering strategy whereby the major systems integrators will be look-ing to include them as subcontractors in major bidding situations. Vendors can choose to align themselves with partners who they see would benefit uniquely from their offerings. For example, a vendor with a niche telecom-munications security offering to the major agencies like Centrelink, ATO, or Immigration may choose to direct its attention to an IBM, CSC, or EDS, which do not have competing partnering relationships or an internal capa-bility, instead of an Optus or Telstra.
4— THE IT&T MARKET IN MORE DETAIL
Degree of Specialisation of Federal Agencies Excluding Defence
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Figure 25. Degree of specialisation amongst agencies
FEDERAL GOVERNMENT
Defence
The Defence sector is responsible for around 50% of the federal government’s IT spend, which mimics the situation in the US or UK markets.
Figure 26 clearly identifies the large number of specialised vendors with which the Defence agencies engage. The majority of these vendors are focussed solely on the Defence sector. The size of the spend justifies such vendor strat-egies. For the major commercial vendors, they will typically have a dedi-cated defence unit, often staffed by ex-defence personnel. Likewise, niche providers are also typically led by ex-defence staff. IT requirements are typ-ically overlaid with “specialist defence-level security” or the like. All in all this creates a very closed community of vendors, making it hard to enter for new vendors or vendors looking to expand from other sectors. That said, the most effective channel for a new entrant is through an existing vendor. Visual Markets can provide means for exploring such channels. It may mean traversing the internal walls that often separate the defence and commercial sections, but the size of the prize may be worth the effort for some vendors looking to enter the Defence market. The traffic, however, is not always one-way. Several innovative defence applications have made their way success-fully into the commercial market, Velcro and the Internet being two “modest” examples from the US space programme. Visual Markets provides a facility for defence contractors looking to commercialise technologies into the non-defence market. Through Visual Markets, defence contractors can explore potential partnership networks to assist with the diffusion of the technol-ogy. A common area of potential is security. Security is a foundation of the Defence sector and a growing need of other sectors, especially Banking and Finance, Federal Government, and Telecommunications.
4— THE IT&T MARKET IN MORE DETAIL
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Intersector analysis
It is instructive to look at how the different industry sectors analysed above might be interconnected. The interconnectedness is invariably facilitated by vendors working across sectors and therefore providing opportunities for inno-vations to flow between sectors. Figure 27 shows how sectors interconnect.
Figure 27. Intersector relationships
The thickness of the lines identifies the strength of the interrelationship between the sectors. The IT&T sector is excluded from this map, as the firms in this sector are more likely to be the common denominator in cross-sector affinities. A strong connection (thick line) between two sectors indi-cates a common or shared set of connections, usually to an IT&T vendor. For example, the thick line between the Telecommunications sector and the Federal Government, Banking and Finance, and other sectors depicts the common use of vendors such as Telstra, Optus, and IBM.
The map shows that the Telecommunications and Business Services sec-tors are the most central to the marketplace. The strong link between the Telecommunications and Business Services sectors indicates how closely tied telecommunications and information provision through business services has become. The linkage between the Federal Government and the Energy and Utilities sectors may relate to the strong influence government still sus-tains in these sectors. The lack of a connection between the Health Care, Retail, and Defence sectors to the Business Services sector could be seen as an opportunity.
4— THE IT&T MARKET IN MORE DETAIL
G-Defence
G-Retail
G-Healthcare
G-Travel & Transport
G-Energy & Utilities
G-Telecommunications
G-Federal GovernmentG-Mining & Manufacturing
G-Business ServicesG-Education
G-Regional Government
G-Banking & Finance
A key benefit from a Visual Markets approach to competitive analysis is the ability to look at competitiveness from a “flow” rather than “stock” approach. The traditional “stock” approach to analysing competitiveness relies on assess-ing the products and services of a particular vendor and then addressing how attractive these may be to prospective clients. The “flow” approach has the advantage of seeing how value actually flows through the marketplace between vendors and out to clients.
By looking at relationship patterns, network analysis techniques can identify areas of the market that might be overcrowded and therefore less attractive to newcomers. They can also identify areas of opportunity for new business development where the network patterns are less dense. For the individual vendor, network analysis can identify, based on relationships, how uniquely placed a particular vendor is. Ideally as a vendor we would be looking to have a high number of unique relationships with both partners and clients, to maximise our competitiveness. In many cases vendors are not aware that oth-ers share their marketplace connections and they therefore may be oblivious to potential competition. Network analysis can expose these situations.
The following analyses provide a unique insight into the competitiveness of the IT&T marketplace using network analysis research methods.
Market intensity by sector
Market intensity is often measured by the number of active participants in the sector. Using network analysis, market intensity can be measured by the number of connections between these participants, which provides a richer interpretation of market intensity. As an overall index, a density measure can provide a scaling for relative intensity. Density measures the proportion of connections or ties that exist as a proportion of all possible connections. A high density suggests not only high, but concentrated, activity. A low density suggests that there is more room for exploitation by new entrants.
The chart in figure 28 identifies the Telecommunications sector as by far the most active. However, the concentration of competition is not high, pro-viding scope for new entrants. Similarly, Business Services is also an area open to new entrants. The Defence, Banking and Finance, Mining and
5 Competitive assessment from the marketplace
Manufacturing, and Energy and Utilities sectors are seen as having the most concentrated competition. This might suggest that these sectors are perhaps more specialised in their requirements.
Figure 28. Market intensity by industry sector
Market intensity is a “whole-of-network” measure that can provide some high-level indication of competitiveness. However, gaining more specific insight into competitiveness requires that one look down at the individual company level.
Competitiveness by firm
Firm competitiveness can be assessed by how unique and exclusive its clients and business partnerships are. An ideal maximum competitiveness could be achieved by having a large number of exclusive clients and partners. The fol-lowing chart looks at each vendor firm from a uniqueness of relationships perspective. A high proportion of exclusive relationships would indicate high competitiveness.
The chart in figure 29 plots the percentage of unique or exclusive connec-tions against the total number of connections that the firm has. The chart shows that the relationships of firms like Lawson and Objective, while few
5—COMPETITIVE ASSESSMENT FROM THE MARKETPLACE
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in number, are nevertheless exclusive, suggesting that such companies are strong niche players. Firms like Telstra and IBM have a high number of cli-ents and partners, less than 50% of which are exclusive. This would still place them and Microsoft high on the competitiveness list when compared with a majority of firms in the lower left of the chart, which have a low number of relationships and few that are exclusive, suggesting low competitiveness. Firms like Google and Unisys have a reasonably high level of exclusive rela-tionships and could improve their competitiveness by building a larger cli-ent or partnership base.
Figure 29. Competitiveness by firm
This same competitiveness analysis can be applied to the current IT outsourc-ing market. The graphic shows IBM, CSC, ASG, and Dimension Data at the front of the “competitive frontier” leading toward the ideal situation of max-imising the number and uniqueness of contracts. The addition of contract values for each vendor shows the relative positions of the established play-ers like IBM, EDS, and CSC in relation to the emerging competition from smaller firms like ASG, Fujitsu, and Dimension Data. Of the established IT outsourcers, IBM is clearly dominant in terms of revenue, contracts, and
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partnerships, though it trails CSC and ASG in terms of uniqueness of con-nections. EDS looks the most vulnerable, having a lower number of connec-tions, though this will have been boosted by the HP connections (see merger analysis). Dimension Data has developed a strong group of unique clients from which to continue to build revenue.
The presence of telecommunications players such as Telstra, Ericsson, Optus, and Alcatel–Lucent indicates that the size of outsourcing contracts are com-parable to IT contracts but that the market is not as expansive as yet. In terms of present competitiveness, Telstra and Optus appear better placed than, for instance, Ericsson and Alcatel-Lucent.
The Federal Government sector is large enough to explore competitiveness justin that sector.
The competitiveness chart shown in figure 31 shows how difficult it is for vendors to achieve unique positions with agencies. Probity management and multisourcing strategies have clearly “flattened” the market compared with the overall marketplace as shown in figures 29 and 30. Very few vendors can claim that more than 20% of their contracts with agencies are unique. However, while multisourcing has resulted in agencies not being locked into a single provider, it is still the case that of the 260 vendors having single con-tracts exceeding A$500,000 with a federal agency, the top 10 vendors com-mand more than 60% of that spend. As the major consumer of IT services, the Federal Government sector can clearly have an impact on the competi-tive environment. It would appear that the key beneficiaries have been the major established vendors. The complexity and expense of participating in government procurement processes goes a fair way to explaining the reliance on a selected few. Of course this can present the same risks across the sector as sole-sourcing did with single agencies. The federal government’s next step beyond multisourcing could be to assess its portfolio of vendors to ensure that the overall risks to IT investments across the sector are appropriately spread among both large and small vendors.
5—COMPETITIVE ASSESSMENT FROM THE MARKETPLACE
COMPETITIVENESS BY FIRM
IBMCSC
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Dimension Data
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Figure 30. Competitiveness: IT outsourcing 2006–2009
Figure 31. Federal Government sector competitiveness
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The value of partnering and channels
Connections with clients earn revenue, whereas connections with partners are often made to win new clients and earn future revenues. The following section takes a look at partnering in more detail.
What is the value of partnering? How many partners should I have? Will partnering help us gain more customers? The evidence supports an argument for increased partnering and use of channels.
Figure 32 plots each firm’s partner and client relationships. The chart shows that there are a significant number of firms that have no direct client relation-ships. These are likely to be SME firms or subcontractors who are working though other client-facing firms. However, the remaining firms show a trend that indicates that a high level of partnering is related to a higher number of client connections. The data vindicates the increased level of partnering that is now occurring in the IT&T and other sectors.
The IT&T sector is also characterised by the level of channel selling that occurs. Software vendors and also the smaller service providers will often pro-vide their services through integration or implementation partners who hold the client relationship.
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Figure 32. Partnering versus clients
5—COMPETITIVE ASSESSMENT FROM THE MARKETPLACE
THE VALUE OF PARTNERING AND CHANNELS
Figure 33 plots each firm’s connections against the percentage of those connec-tions that are end clients. The chart shows up to four regions. In the lower left corner are those firms that have no direct client connections and therefore are most likely subcontracting firms or SMEs looking to move into the market-place. At the top of the chart are a group of firms that have only client con-nections. These are the niche providers. In between are two areas where firms are providing some level of channel facilitation. The firms with a high percent-age of client connections and a large number of connections overall are the large systems integration firms or software providers who work directly with end clients but use partners to implement. The firms with the highest number of connections are IBM and Telstra. Both of these play multiple roles as sys-tems integrators as well as direct software or infrastructure suppliers. A more detailed analysis of some specific channels is presented later in this report.
Figure 33. Channel connections
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7. This case study has been drawn from information on http://openvaluenetworks.com and V. Allee (2003), The Future of Knowledge: Increasing Prosperity through Value Networks,Butterworth-Heinemann.
5—COMPETITIVE ASSESSMENT FROM THE MARKETPLACE
Cisco case study7
Having identified potential channel partners, the next step is to engage those partners in profitable value exchanges in order to create and sustain the partnership. The Cisco business model is based on channel partnerships. Credited with providing the “plumb-ing for the Internet”, Cisco has grown to become one of the most highly valued com-panies on US stock exchanges.
Figure 34 illustrates Cisco’s value network with all of its stakeholders. Unlike the net-work maps shown previously, which connect firms by the existence of a contractual or partnering relationship, the connections in this map reflect value flows between the generic roles that could be played by multiple firms. A key feature of these value net-work maps is that value flows are not only defined by contractual deliverables, but also by the softer intangible value flows that are rarely contractual yet often make the dif-ference between a good or bad relationship. Another feature of the value map above is that it includes stakeholders that would not be normally included in a traditional supply-chain analysis. Strategic partners, standards groups, and even competitors are identified in Cisco’s value network as entities that can impact Cisco’s performance and therefore quite rightly deserve a place in Cisco’s partnering model.
Figure 34. Cisco’s value network
The mapping process used by Cisco is called value network analysis (VNA) (http://openvaluenetworks.com) and is best employed either before or during a partneringengagement to ensure that channel partners are both viable and sustainable. Once estab-lished, partnerships need to be continuously monitored and managed. One vehicle for monitoring performance over time is to use a partnership scorecard designed to manage peer-to-peer relationships (http://www.partnershipscorecard.com/).
The global IT&T industry is going through a rationalisation stage with some megamergers and takeovers either in progress or under serious consideration. Of keen interest to both market players and government regulatory bodies is the effect that these major transactions may have on the competitiveness of the marketplace as a whole. To date there have been few analytical meth-ods that could support this type of analysis. Network analysis has the capa-bility of playing these scenarios out both visually and analytically. Firms can be artificially “merged” in the market maps to show the potential impact on the market ecology. Analytically, it is possible to use network analysis to then assess the impact on the competitiveness of the merged entity as well as the market overall using methods similar to those illustrated in figure 29.
The following examples make use of some recent and prospective megadeals to demonstrate how network analysis can be used to analyse the competitive impact of such deals.
Vodafone–Hutchison 3G merger
This prospective marketplace merger in Australia has recently received approval from the Australian regulatory authorities, which did not believe that partnership would negatively affect the market as a whole. They stated that both Vodafone and Hutchison 3G needed increased scale to effectively invest in their infrastructure and compete with Telstra and Optus.
The following analysis looks at the prospective impact of the deal. The eco-system map in figure 35 shows that Vodafone and Hutchison 3G are indeed quite complementary businesses with few common clients or partners. One can see that Ericsson is the only direct common partner. On the surface it looks like a good deal in terms of the increased market coverage being sought.
6 Market analysis scenarios
Allphones
Apple
BBC Worldwide
Bizo
CompassCommunications
Crazy Johns
Dell Computer
e-pay
Ericsson
Hutchison 3G
IBM
Lebara Mobile
Lenovo
LG
Lime Pictures
M2 Telecommunications
Microsoft
Ministry for Social Development
Myer
MySpace
News Digital Media
Nokia
NZ Communications
NZ Police
NZ Telecom
Orcon
Palm
PeopleTelecom
RIM
Sky Television
Slingshot
Teamtalk
Tech Mahindra
Telstra
Unisys
Verizon
Vodafone
YellowPages
Figure 35. Vodafone–Hutchison 3G market ecosystem
HP takeover of EDS
The acquisition of EDS by HP was a major event in the IT market, adding a substantial services component to HP’s largely product-centred business.
The depiction in figure 36 of the HP–EDS market ecosystem shows a num-ber of points of connections as well as a good number of unique connections now being brought together under the HP banner.
Oracle takeover of Sun
Another megamerger currently in progress is that of Oracle and Sun Micro-systems. The Oracle–Sun market ecosystem identifies a more substantial suite of complementary connections, indicating that there are some good com-plementary relationships that could ease the integration issues if and when the acquisition does materialise. Major systems integrators like IBM, EDS, Telstra, ASG, and CSC will provide the bridge for an effective integration.
6—MARKET ANALYSIS SCENARIOS
HP TAKEOVER OF EDS
AAPT
ANZ
Aust CentreLink
Aust Customs
Aust Defence Force
Aust DOI
Aust Govt
Aust Tax Office
Bank of Queensland
BMC Software
Bravura
BT
CBA
Cellnet
ComputerCorp
CSG
Data #3 Ltd
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FiServ
FonterraHP
National Foods
NSW Govt
NZ Govt
Peregrine
Qld Government
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SAP
Shell
Sonnet Corp
Sportsbet
Sun
Tabcorp
Telstra
Verizon
Vic Dept Infrastructure
Vic Govt
Weta Digital
Figure 36. HP–EDS market ecosystem
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AT&T
Auckland Airport
Aurora Energy
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Bravura
Bureau of Meteorology
CBA
Crazy Johns
CSC
Fonterra
Fujitsu
IBM
Intel
MacquarieTelecom
Microsoft
NAB
National Libraryof NZ
Navitas
NSW Govt
Oracle
Otago University
Prolificx
SA Govt
Satyam
Sun
TelstraThe Warehouse
TomorrowNow
Trustpower
UXC
WA Attorney General
WA GovtWipro
EDS
Figure 37. Oracle–Sun Microsystems ecosystem
Megamergers and acquisitions like those profiled above can have a major impact on the overall marketplace ecology. Visual Markets analysis can pro-vide insight into the potential of prospective mergers or acquisitions to better inform market players as to how such actions can affect the competitiveness of not just the merged entity but also its future competitors.
Figure 38. Merger and acquisition effect on competitiveness
One can see that each of the profiled mergers improves competitiveness in the “Number of Connections” dimension. However, the uniqueness of con-nections will invariably be a compromise between the merged entities and therefore detract from the competitiveness of at least one of the parties. For the Vodafone–Hutchison 3G merger, Hutchison 3G is the major beneficiary in improved competitiveness. Hutchison 3G has no unique market connec-tions at present and therefore will benefit from Vodafone’s relatively high number of unique connections. The Oracle–Sun and HP–EDS merged enti-ties look to have improved the competitiveness of each of the individual firms (marginally at first). The challenge facing the merged entities is to win new and unique clients or partners as a consequence of their new and expanded profile and thereby further enhance their competitiveness over time.
6—MARKET ANALYSIS SCENARIOS
Mergers and Acquisitions
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Among those competing with the new entities, there are now three major players at the upper end of the marketplace. Improving competitiveness in the marketplace requires that growth in both the number and uniqueness of connections to partners or clients be considered. Invariably, mergers will usu-ally grow the number of connections; the value of future growth and com-petitiveness may lie in the potential for attracting more unique connections to the merged entity. Without increasing the proportion of unique connec-tions, the merger is simply “drinking more from the same pool”, which will ultimately limit growth prospects.
Vendor partnerships
Alliance partnerships are typically formed to provide more leverage for gain-ing new business. Starting initially as marketing and selling vehicles, an alli-ance may be formed to enable alliance participants to bid for larger pieces of work. Some of these alliances flow into actual contract work. The map in fig-ure 39 shows just the alliances, both marketing and subcontractor, that exist between IT&T vendors.
What is apparent from this map is the large number of one-off partnership relationships. In this type of relationship, firms partner with just one other company, usually a hub (e.g., Telstra, IBM, or Microsoft). What appears to be happening is that the larger hubs are increasingly looking for innovations outside their own walls. Usually these partnerships are with smaller niche firms that do not have partnership arrangements with any other companies. For a small firm, connection to a well-known hub provides the benefit of a reflected reputation. Because large firms do not partner lightly, a small niche firm that succeeds in negotiating such a partnership is accorded a stronger reputation by the market. Being connected to more than one hub is a sign of a niche player maturing. A good sign that a vendor is maturing in the mar-ket is when it brokers between multiple hubs, progressing until it becomes a hub in its own right.
A key benefit of being a hub is that other firms tend to come to you with partnering opportunities. A down side is that as a hub becomes more prom-inent (e.g., Telstra), the resources required to manage partnerships become significant. Balancing the needs of multiple partners can handcuff a hub, limiting its freedom and agility. A broker firm, with just a few connections to hubs, can profit from being in a better bargaining position by playing one hub against another. A company in such a position should connect to as many hubs as possible in order to build its brand and reputation.
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6—MARKET ANALYSIS SCENARIOS
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In this chapter we take a closer look at the identified key-player firms and the executives who run them. Our analysis of these key players will be from the perspective of relationships and relationship networks.
Key players: Firms
The market network maps shown in figures 9 and 10 exhibit a typical “core–periphery” structure, meaning that the network tends to consist of a well-connected core set of players and a more distributed and loosely connected periphery. In a marketplace, the core typically consists of the more estab-lished vendors and clients, with the periphery comprised of smaller vendors or clients or those with niche products and services or specialised client needs. The size of the core relative to that of the periphery reveals much about the nature of the market. A larger core and smaller periphery would suggest a mature and established market. A smaller core and a larger periphery might indicate a market in which significant growth potential still exists.
Figure 40 plots the relationship between the market players and the number of partnering or contractual connections they established during 2006–2009. The circle highlights the fact that 50% of the connections were established by just 7% of the market players. In other words, there is a dramatic concentra-tion of connections by a small number of buyers and sellers. The small core is therefore surrounded by a highly distributed periphery in which the remain-ing 50% of the connections are shared by 93% of the market players. With such a strong concentration of connections between a few major players, one could speculate that, as multisourcing increases and larger clients start to buy from more varied sources, the core would become more distributed over time. This will place pressure on the established core vendors to look for new ways to sustain their current dominant positions.
7 Key players: Firms and individuals
Australian IT Software and Services Market (2006–2009)
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Figure 40. Key players
Figure 41 identifies the top sourcing organisations in terms of number of contracts (including subcontracts). The data shows that the top 20 buyers from a selection of some 265 buyers are responsible for 33% of the contracts, reinforcing the view that the marketplace has a small, highly connected core and a much larger distributed periphery. That 50% of the top buyers are government organisations suggests that their buying behaviour differs little from the larger corporate organisations, with major procurement contracts being concentrated among a select number of mature providers. Access by SMEs to major clients appears to be mostly through partnerships with the established providers, also indicated in channel analysis shown in figure 33.
7— KEY PLAYERS: FIRMS AND INDIVIDUALS
INDIVIDUAL KEY-PLAYER ANALYSIS
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Figure 41. Top 20 buyers
Individual key-player analysis
The above key players have been identified as those with the most partner-ship or contractual connections (i.e., the hubs). As indicated in the intro-ductory section on the “science of networks”, other important brokering or bridging roles can potentially be as profitable as being a hub but are less obvi-ous to the casual observer. A key-player algorithm8 has been used to calcu-late the group of firms that collectively can reach the maximum number of other firms in the market through either contractual or partnership connec-tions. The identified firms are either hubs or bridges and together can reach 83% of the firms in the market in two steps or fewer.
Of the identified key players, IBM and Telstra are clearly hubs, based on the large number of contractual and partnership relationships they sustain. Of the other identified key players, the Defence Department and CBA are clients that are active multisourcers, with several vendor linkages to firms like IBM and Telstra. Sun Microsystems and Hutchison 3G appear to be brokers: they do not sustain a high number of connections but are positioned such that, in combination with the other key players, they can reach most of the market network in two steps or fewer. The firms that this group cannot reach are likely to be those on the periphery that are isolated from the core central network. Interestingly, both Sun and Hutchison 3G have been singled out for acquisi-tion, suggesting that Oracle and Vodafone have chosen their targets well.
8. Designed by Professor Steve Borgatti at the University of Kentucky.
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7— KEY PLAYERS: FIRMS AND INDIVIDUALS
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KEY PLAYERS: INDIVIDUALS
Key players: Individuals
While markets are comprised of buying and selling firms, the market is not devoid of the personalities who occupy them. In particular, the CEOs and CIOs of client firms and the CEOs of vendor firms will have a significant influ-ence on marketplace activities. SNA was originally designed to analyse relation-ships between people and therefore it is appropriate to include in our analysis potential social network effects of the key personalities in the marketplace.
Social networks can be developed from knowledge of actual connections between individuals, whether professional or friendship based. These net-works are called “ego networks”. As identifying either professional or friend-ship connections is beyond the scope of this report, a second style of social network called an “affinity network” is used. Affinity networks infer a rela-tionship between individuals based on a common attribute. This attribute could be something like belonging to the same board of directors, working for the same company, living in the same town or suburb, and the like.
There is virtually an infinite number of ways that individual players in a marketplace could be connected. Work histories could be analysed to iden-tify whether key individuals had worked at the same companies at the same time, belonged to the same professional society, studied together, and the like. The challenge for individuals of course is access to reliable data from which to infer relationships. To illustrate our approach, we have chosen to identify connections based on shared working experiences, either as part of a major contract between a vendor and a client or as a partnering arrangement between vendors. To simplify the analysis we have chosen just the CEOs of selected vendor companies and the CIOs of their clients. A link between a vendor CEO and a client CIO or between vendor CEOs is inferred when a transaction between the two companies has occurred during the tenure of the identified executives.9
Figure 43 identifies a selection of CEO–CIO connections through contract or partnership transactions. The size of the nodes indicates the relative num-ber of connections that the individual has. The colour of the link identi-fies whether the inferred relationship is based on a supplier–client contract or a vendor-to-vendor partnership. Key individuals in the marketplace are reflected by their relative size in the map. Client CIOs TL, DR, FB, BMc, and CH appear to be key client stakeholders, whereas vendor CEOs GL, RV, and GB appear quite influential. Additionally, one can navigate the map to
9. Data on CEO and CIO tenures was provided by Australia Corporate Data, http://www.austcorpdata.com.au.
identify how best to connect with or influence key individuals in the market-place. This map has only a selected few individuals used for illustrative pur-poses, but one can foresee the power of these people-to-people maps when looking to build closer relationships with both clients and potential joint-venture partners.
We also explored the affinity between CIOs in the different industry sectors, anticipating that those CIOs who move between sectors could play a broker-age role between the different industry sectors in the same way that major vendor firms do. Interestingly, we found virtually no movement of CIOs between industry sectors. This may suggest that CIOs are very loyal to the sectors that they work in or that firms are reluctant to hire CIOs without specific industry experience. The data also provided us with an indication of CIO turnover within the different industry sectors. Figure 44 shows that between 2006 and 2009 CIO turnover in the Finance sector was nearly one per firm during the period. Transport and Manufacturing appear to be the most stable in terms of CIO longevity.
7— KEY PLAYERS: FIRMS AND INDIVIDUALS
Figure 43. CEO–CIO connections
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KEY PLAYERS: INDIVIDUALS
Figure 44. CIO turnover per firm by sector (top 20 firms per sector only)
Traditional market research on firms and individuals will normally concen-trate on attributes only, such as size, market share, revenue, or organisational position. Network analysis adds the dimension of the relationships that indi-vidual firms or people maintain. Relationships are the key dimension miss-ing from traditional market research. As has been shown in previous chapters, new insights can be gained from understanding the complex ecosystems that characterise our markets today. In this chapter we have been able to identify key players in the marketplace, their individual characteristics, and how they relate to other players. Through the use of network analysis techniques one can find out not only who the key players are, but how best to access them.
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8 Scenarios of use
In this section we include examples of “scenarios of use” for the Visual Markets product and services. The scenarios are provided to illustrate the dif-fering perspectives of potential users of Visual Markets, including mature and start-up IT&T providers, IT&T consumers, and third parties like pro-fessional groups and government agencies.
Customer hubs
ABC Mobile Tech is introducing a new mobile messaging solution to the Australian market. Their marketing budget and current market presence is modest. They have a good idea of who their end-user target industries will be but still require partners with the domain expertise to effectively apply their enabling technology to existing systems. For all these reasons they recognise that they will have to work through channels to be successful.
Using Visual Markets maps they are able to identify key customer-facing ven-dors that might provide an effective channel for them. They are in fact able to identify those vendors that serve multiple clients in their target market as well as those that already have a successful history of partnering. Further, Visual Markets is able to identify the key contacts from those vendors to help begin the process of partner research and negotiation.
Key outcomes
Save time, shorten sales cycles, and predetermine a “best fit” channel model by:
Identifying partners with strong links to the end-user target market
Researching only those potential partners that have a successful part-ner program
Avoiding those vendors with a poor track record in partnering
Avoiding potential channel conflicts
Reference checks with selected vendors’ other “peer” partners
Who can benefit?
Organisations looking to expand geographically
Smaller organisations seeking access to much larger prospect companies
“Beachhead” operations of international companies
Organisations with “best-of-breed” or niche products that typically form part of larger projects or solutions
Industry specialisation: Entering a new sector
ABC Inc. is well established in the finance and banking industry with their financial trading software. Recently the firm has been looking to grow beyond this sector and has identified the Telecommunications sector as a potential target for clients looking to manage their portfolio of telecommunications services. Using Visual Markets they are able to identify a list of potential partners from the Telecommunications sector that are well connected to their target clients. They review this list to see if there are any potential conflicts of interest and settle on a short list to begin negotiations with.
Key outcomes
Save time, shorten sales cycles, and predetermine a “best-fit” channel model by:
Identifying partners with strong links to the end-user target market
Researching only those potential partners that have a successful partnerprogram
Avoiding those vendors with a poor track record in partnering
Avoiding potential channel conflicts
Reference checks with selected vendors’ other “peer” partners
Who can benefit?
Organisations looking to expand beyond their market sector
Small firms looking for a broader application base for their products or services
Organisations with “best-of-breed” or niche products that typically form part of larger projects or solutions
8— SCENARIOS OF USE
CLIENT PROBLEM SOLVING
Client problem solving
ABC Logistics is faced with the challenge of removing 50% of the cost from their current supply chains. They anticipate that technology will have to play a part but do not see any off-the-shelf solutions that come close to their needs. They are looking for “trusted advisors” who can lead them to the tech-nology providers who can provide the best solutions for them. ABC Logistics turns to Visual Markets to identify the ecosystem of technology providers that work in the broad technology space they are exploring. ABC Logistics uses Visual Markets to identify appropriate channels that could provide the broadest coverage of available technology options. They then look at more detailed reviews of the channel players, knowing that they will be using estab-lished channels and thereby maximising speed to market.
Key outcomes
Identification of key information channels for supply-chain innovation
Identification of partners with strong links to the end-user target market
Finger on the pulse of latest developments
Identification of potential implementation partners
Who can benefit?
Organisations faced with significant business problems requiring a new strategic approach
Firms looking to form information-sharing partnerships for strategic advantage
Firms seeking qualification advice for selecting the “right” technology
Organisations looking for a new technology and a new combination of vendors to help implement it
Multisourcing
ABC Finance is a large and mature organisation that has recently made the decision to reduce its reliance on a single IT outsourcing partner by adopt-ing an aggressive multisourcing strategy. One critical concern they have is how best to integrate the services of the multisourced vendors. They know that many of these vendors will be competitors and therefore are concerned about the cost of the multiple vendor-to-vendor relationships they will have to govern. ABC Finance has a preliminary list of best-of-breed vendors they are interested in. They turn to Visual Markets to look at those vendors’ his-tories of collaboration. They can also see other firms who have used some of the same combinations of vendors. They approach these firms to gain some insight into how these vendors have cooperated to provide seamless service. Based on these insights, ABC Finance adjusts their portfolio of providers to include those with a track record of cooperation amongst each other (i.e., those that have already established working relationships with one another).
Key outcomes
Identification of sourcing candidates with a history of working together
Potential for significantly lowering the cost of governance
Faster transitions as a result of preexisting trust relationships
Opportunity to focus on business outcomes instead of vendor contrac-tual issues
Who can benefit?
Organisations looking to adopt or expand multisourcing relationships
Firms looking to reduce the cost of IT governance
Firms looking for a fast transition to new sourcing relationships
Vendors looking to position themselves for multisourcing
8— SCENARIOS OF USE
INDUSTRY INTELLIGENCE
Industry intelligence
ABC Corp. is an IT-intensive business with a history of early adoption of IT innovations. While they subscribe to the major IT industry publications, they find that to stay ahead of the competition it is often the “unpublished” insights gained from direct contact with industry players that prove to be the most valuable. ABC Corp. has discovered Visual Markets. An analysis of the network identifies the key vendors who are best placed to absorb industry intelligence through their unique positioning in the industry network. From this list of intelligence hubs, ABC Corp. has short-listed a number of vendors and some customers to solicit as intelligence-gathering partners.
Key outcomes
Identification of IT&T industry intelligence hubs
Finger on the pulse of the latest developments
Support key decisions with intelligence from the front line
Who can benefit?
Organisations wanting to look beyond the public sources for technol-ogy “in-use”
Firms looking to form information-sharing partnerships for strategic advantage
Firms looking to lead through early adoption of the right technology
Industry organisations and government agencies focussed on the diffu-sion of technology trends
Promoting Australian exporters
The ABC Export department of business enhancement is charged with the task of helping build stronger, internationally competitive marketplaces in Australia. Of particular importance to their charter is the support they can provide to the emerging SME market. The department understands that to be attractive to international buyers, Australia must demonstrate a depth of expertise in the chosen area. The department decides to review Visual Markets maps by sector, looking for unique centres of excellence, where SMEs have been able to effectively deliver services with multinationals. The department then designs a program to effectively market these clusters internationally.
Key outcomes
Identification of key clusters of excellence for promotion
Identification of multinationals who could act as channel partners for exports
Identification of clients within these clusters to engage in assisting with export promotion, especially if the client is a multinational
Who can benefit?
SME organisations looking to expand internationally
Government organisations with a charter to build exports
Multinational vendors who could potentially gain government supportfor international business
Client organisations who can build reputations around being identifiedwithin a centre of excellence
Finding the real experts: Recruitment?
ABC People is a recruitment firm for the IT industry. In the current climate, its clients are asking less for general IT hires and are focussing more on very specific technical, industry-sector, or executive experience. ABC People turns to Visual Markets to find out how some of the key players in the industry are connected. It finds that referrals are the most powerful way of locating prime personnel. From Visual Markets, ABC People can identify those executives who are best placed to know where such specific resources may exist. Visual Markets works on “degrees of separation” and therefore can find those con-tacts that are closest to the target area in which ABC People is interested.
Key outcomes
Provides leads for particular IT domains
Identifies where there may be depth of expertise through tighter clusters
Identifies where the depth of expertise may be poor, offering opportu-nities for new recruits
Who can benefit?
Agencies looking to place people or fill positions
Firms looking to hire new staff from areas they are not familiar with
8— SCENARIOS OF USE
VISUAL MARKETS AND DEVELOPING IT&T CLUSTERS
Visual Markets and developing IT&T clusters
Case of western Sydney ICT cluster
The IT&T market is characterised by high levels of innovation, new prod-uct introductions, specialist or niche services, and a high proportion of start-up and small-to-medium enterprises (SMEs). In Australasia this mar-ket sector is seen as a highly prospective means for wealth generation and therefore is supported by all levels of government together with self-funded professional societies like the Australian Information Industries Association (AIIA) and the Australian Computer Society (ACS). Other ICT clusters have developed around proprietary development products (e.g., the .Net clusters facilitated by Microsoft). Regional ICT clusters like the Ballarat ICT clus-ter, HunterTech, Sutherland Shire ICT, North Sydney Collab-IT, and the Western Sydney ICT cluster are also operating as cooperatives partially sup-ported by regional government resources to help SMEs expand into larger, and even international, markets.
The common factor for nurturing successful SMEs in the ICT sector is part-nering. Partnering could involve SMEs offering complementary products or services. It could involve SMEs and larger multinational ICT providers. It could also involve end-use clients looking to on-sell value-added products or services (e.g., a financial or telecommunications services product).
Visual Markets facilitates partnering through analysing partnership networks. The Western Sydney IT Cluster (WSITC) is a successful regional cooperative with more than 300 registered member companies. WSITC, like many sim-ilar clusters, maintains a directory of services that its members participate in. The directory allows members to identify their areas of expertise from a pre-defined list. Figure 45 contrasts the traditional directory listing provided by WSITC with a Visual Markets approach using a network map showing how the firms cluster around identified areas of expertise. Interest areas are iden-tified by blue squares and firms by red circles.
Clusters by definition are firms that share common attributes. Visual Markets is able to take typical directory information and translate this into affinity maps that show how the individual firms in the ICT cluster are connected via common products or service profiles. Figure 46 provides an illustration of how firms in the WSITC cluster within the Software Development area. The firms are spatially clustered according to how similar their software develop-ment specialisations are. The thickness of the lines between the firms indicates the strength of similarity in their profiles. The specialisations are identified as Application Development, Bespoke Solutions, Multimedia Facilities, Multi-media Production, Prototype Building, Specialist Technical Software, and
8— SCENARIOS OF USE
Web Development. The firms in the centre of the map have typically nomi-nated specialisations across most of the areas nominated. Those on the periph-ery tend to be more specialised. Subclusters within the network of firms are identified and labelled according to the profile that best identifies them.
In addition to identifying affinities between member firms, Visual Markets can also identify the commonality between the identified specialisations.
Figure 47 shows areas of strength for the WSITC. Line thickness indicates the number of firms that share these specialisations. As can be seen, Web Devel-opment and Application Software Development have the strongest affin-ity. The core competency of the WSITC apparently lies in these two areas along with Specialist Technical Software, Prototype Building, and Bespoke Solutions.
Figure 45. Cluster directories
Adfreewebhosting.com
Application Software Development
Attunga Business Solutions Pty Ltd
Australia Japan Business Association
Base Information Systems Pty Ltd
Binarix Web & eCommerce Solutions
BIZTEL
Blue Chip Consulting P/L
BOSS Pacific
CADDIT.NET
Campus Consulting Pty Ltd
Command Digital Signage
Concentric Asia Pacific P/L
Conicom Pty Ltd
Damue P/L
Elantra Pty Ltd
Emerging Systems
Excellone Technologies
Galexo Consulting P/L
Gebesse Computer Consultants
GroupTech
HQ Help Desk
IBS Automotive Pty Ltd
IDS Internet Design Services
IJM & Associates Pty LtdIman Systems and Resources Pty Ltd
Interdependent
Internet Computer TechnologyPty Ltd
Jigsaw Technology Pty Ltd
Marketing Minds
Mercurage Pty Ltd
Multimedia–Facilities
Multimedia–Production
Naxtor Technologies
New Hope MediaProductions
Omni Meta Pty Limited
Open SystemsIntegration P/L Orbit Australia
Outside Edge Austalia
Perisoft Global Services Pty Ltd
PretaWeb
Pretty Clever Consulting Pty Ltd
Prototype Building
Right SoftwarePty Ltd
Showorks Australia
Sixth SenseSolutions
Smartpath Pty Ltd
Specialist Technical Software
Syspro
Tenton IT Business Solutions
Thinking Administration Systems
Thompson MarketingConsultants Pty Ltd
Wayahead Systems
Waytec Australia Pty Ltd
Web DevelopmentWebWise Network Consultants
Wild Purple
Yuranga Research
WSI Internet Consulting
Zone Products Marketing Pty Ltd
Miracle Software Systems Australia Pty Ltd
CN Global Pty Limited
Bespoke Solutions
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VISUAL MARKETS AND DEVELOPING IT&T CLUSTERS
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Figure 47. WSITC areas of strength
The maps above have shown how Visual Markets can provide more insight into the nature of the network. However, knowing how the members have engaged with partners and clients outside the cluster would require a more extensive network mapping of the cluster. As SME activities in terms of con-tracts and partnerships are unlikely to figure prominently in the publicly pub-lished literature, it would be necessary to collect primary data using network analysis surveying techniques. Basically, the survey methods are designed to elicit relationships between firms, be they clients or fellow vendors. By sur-veying the members for direct connections, it would be possible to charac-terise how the cluster members are interacting with the broader market. The ensuing network analyses could identify how the cluster could cooperate to engage more effectively with both local and global markets.
Industry mapping as shown in figure 48 provides a view of how the IT clus-ter of interest is networked into the broader industry. These maps look at points of leverage into the broader market and so can be used to develop strategies for enhancing the prosperity of the cluster as a whole. Areas of potential strength for the cluster can be leveraged into particular clients or multinational vendors. Through the use of customised Visual Markets sur-veys and resulting network analysis, it is possible to accelerate the diffusion of cluster expertise into the broader IT marketplace.
8— SCENARIOS OF USE
Application SoftwareDevelopment
Bespoke Solutions
Multimedia–Facilities
Multimedia–Production
Prototype Building
Specialist TechnicalSoftware
Web Development
VISUAL MARKETS AND DEVELOPING IT&T CLUSTERS
Figure 48. Customised surveying for building industry maps
Customised Survey forMapping Connections
Visual Markets presents an exciting and potentially ground-breaking means for conducting market research. As markets worldwide become increasingly interconnected and “flat”, understanding the full complexity of a market requires shifting focus from the individual firm to the relationships between firms. At this early stage of development, Visual Markets will not replace conventional market research. There is still a strong need to understand future demand, revenues, and market shares for the individual market play-ers. Where Visual Markets comes into its own is in its support of the tactics and strategies that these individual players undertake to enhance their market positions. Responding to a drop in market share, a desire to build revenues through expanding markets, or a need to improve profitability will increas-ingly require collaborative activity. Few firms have the advertising budgets to launch new products without the need for channel partners. Market restruc-turing through mergers and acquisitions is escalating and has the potential to disrupt even the most carefully crafted business strategies. Being able to “play out” potential merger and acquisition activity will be an essential require-ment for business strategy development going forward.
This report has aimed to launch the concept of Visual Markets as a valuable market research method and provide market insights through analysis of the Australasian IT&T marketplace as it currently exists. It identified the “sci-ence of networks” as the platform on which this method has been designed. The application of a social science to a market situation is novel but increas-ingly relevant as our marketplaces become more interconnected and global. The market sectors analysed were classified according to a combination of conventions but also by network cluster or density. While there is an increas-ing connectedness between sectors, sector-based analysis provides some par-ticular insights into the marketplace in terms of who the major players are and how open or closed a sector is to new players.
A number of new and novel analytical methods were introduced. Firm com-petitiveness is uppermost in mind for most analysts, and competitiveness is traditionally measured in terms of market share and revenues. The IT&T market can be very fickle; with these measures essentially being retrospective rather than predictive, there is a need for alternative or complementary mea-sures of competitiveness. Figures 29 and 30 provided an example of viewing
Summary and final assessment
SUMMARY AND FINAL ASSESSMENT
competitiveness from a relationship perspective. With a target of growing unique customers or alliance partners, the example showed how firms are placed in an overall market landscape of IT&T vendors. Alliances between IT&T firms are invariably created to generate future value and increase the competitiveness of all participants. Figure 10 provided a view of the cur-rent alliance–partnership network that currently exists between IT&T ven-dors. This analysis provides a means for analysing alliances and partnerships from a holistic marketplace view. A more detailed analysis of the competitive impact of key marketplace mergers and acquisitions was presented in chap-ter 6. The ability to visualise the complementary or diverse nature of a pro-spective merger and its potential impact on the overall competitive landscape is a unique and sought-after capability of Visual Markets.
Finally, key-player analysis is more closely aligned to the traditional use of social network analysis techniques. This chapter reviewed the market from an individual firm or person perspective. The science of networks identifies those “key players” who occupy advantageous positions in a network. They may be established central connectors or players who are bridging clusters, be they market sectors or large- to small-firm connectors. The trend toward innovative technologies being sourced from small-scale operators more than internal departments of the major players will ensure that the brokering role will become increasingly important. Those individuals identified, who have either deep experience in a single sector or can bridge multiple market sec-tors, will be sought after for their experience and ability to influence the mar-ket. The key-player analysis was able to identify prospective key players on the strength of their affinities with particular sectors or the firms they have worked for. Ultimately, influence has to be enacted through people, so it is important that any market research technique pay some attention to the
“people channel” as well as the firms those people work for.
In summary, we hope that this report has at least sparked your curiosity about different ways in which you can improve your organisation’s compet-itiveness or utility. The global financial crisis provides a graphic reminder of the power of networks and how even the best “experts” can be blindsided by the speed and impact that the network effect can have on a marketplace. As mentioned in the introduction, Visual Markets is a market research meth-odology; each analysis presented herein is a snapshot of a marketplace at a particular point in time. It is important that this methodology be continu-ously employed in order to provide status updates of dynamically evolving networks and markets. The next section explains how you can be part of this market-research evolution.
Can’t see enough detail about your particular situation? Like to ask questions specifically related to your own competitive environment? Visual Markets is principally a market-research methodology. While we believe that we have included sufficient data to provide new insights into the rapidly evolving Australian IT&T marketplace, invariably the data used to develop this report may fall short of the detail you are looking for in your particular business context. Visual Markets is designed to provide organisations with tailored in-depth analysis that helps answer the following questions:
Service providers
What does my competitive position look like?
What is the reach of my competitors—what is their “footprint”?
What is the reach of my alliance partners?
How does my partner profile compare to those of my competitors?
What might be the impact of this merger on our competitive position?
Users and clients
Which other user organisations have relationships with my providers?
Which service providers have existing working relationships that will allow them to work better together to meet my objectives?
How well are my service providers positioned to deliver innovation?
How can I find out about technologies that can add real value to my business?
Keeping current
KEEPING CURRENT
With Visual Markets, organisations can get answers to questions that tradi-tional market research is incapable of answering. Visual Markets helps organ-isations generate unique knowledge about the IT software and services market through analysing current relationships as well as providing the platform for predicting the future. Where appropriate, Visual Markets can deploy its pro-prietary networks survey software to capture new information, not available in the public domain, for analysis. In other words, we can provide a cust-omised application of the Visual Markets methodology for your particular business context by helping you collect primary data about your partnering and alliances position. When used in conjunction with our existing market networks database, it can provide you with a solid business strategy for mov-ing forward in your marketplace.
We will be continually updating our networked marketplace data for the Australasian IT&T industry. We are also looking to develop data sets for other similarly complex markets as demand dictates. Some examples are pro-vided on the supporting Web site www.visualmarkets.net. This site will also feature periodic updates of selected content.
Contact us to discuss:
Subscription service for quarterly updates
Customised analyses for individual firms or sectors
Optimice Pty. Ltd.
23 Loquat Valley Road
Bayview NSW 2104
Sydney, Australia
Phone +61 (0) 2 8002 0035
Fax +61 (0) 2 8213 6274
www.optimice.com.au
Dr. Laurence Lock Lee, Cofounder, Optimice Pty. Ltd., author
Laurence Lock Lee has worked in and around the IT industry for some 35 years. He is an acknowledged lead-ing practitioner in social and value network analysis for organisational change. He has consulted widely with major corporate and government clients and presented at academic and industry forums in Australia, Europe, Asia, and the USA. Prior to cofounding Optimice, he was a Principal Consultant with Computer Sciences Corporation (CSC), where he led the knowledge and information management consulting practice and was
a research member of CSC’s global leading-edge forum. Prior to that he worked for many years with BHP Billiton within its corporate research lab-oratories, leading its IT research programs on knowledge-based systems and artificial intelligence. Laurence holds a Ph.D. from the University of Sydney, his research being on corporate social capital effects on share market per-formance. He is the author of IT Governance in a Networked World: Multi-Sourcing Strategies and Social Capital for Corporate Computing (Information Science Reference).
Cai Kjaer, Cofounder, Optimice Pty. Ltd.
Cai Kjaer has deep experience in Business Relationships, Knowledge and Information Management, Collaborationand Organisational and Value Network Analysis. For the past 12 years he has worked in both internal and client-facing roles. He has consulted extensively with organisa-tions in both the public and private sectors, as well as presented conferences in Australia and abroad. Cai was previously a Principal Consultant with Computer Sci-ences Corporation (CSC), General Manager (ANZ) forImplementation Management Associates, and is a found-
ing partner in Optimice. He has extensive experience in senior consulting, change leadership, and implementation roles successfully delivering large-scale global business transformation projects. His work experience is diverse and he has been working nationally and internationally with a range of cli-ents from government agencies to the world’s largest resources companies. Cai holds a Master of Law from the University of Copenhagen.
About the key contributors
Len Rust, Executive Director, Dialog Marketing Services
Dialog Marketing Services is a marketing consultancy spe-cialising in the information technology industry.
Before he established Dialog, Len spent 19 years with International Data Corporation (IDC), which he joined in 1979 as Managing Director. He was appointed Vice President, Asia/Pacific region, in 1983. Prior to joining IDC, Len held several senior positions with major IT ser-
vices companies in Australia and New Zealand. He has been involved in senior roles in many areas of the industry including engineering, operations, customer support, and sales and marketing. Len is best known for his highly regarded publication The Rust Report, in which he provides a weekly com-mentary on the Australian IT industry.
ABOUT THE KEY CONTRIBUTORS
VIS
UAL MARKET
S
Optimice Pty. Ltd.
23 Loquat Valley Road
Bayview NSW 2104
Sydney, Australia
Phone +61 (0) 2 8002 0035
Fax +61 (0) 2 8213 6274
www.optimice.com.au