Pent-up demand for new products and innovation could give the industry a lift after three years of cost cutting, writes Andrew Baxter
If water-cooler conversations were high on the agenda at CeBIT, the world's largest IT and telecoms show, most exhibitors would want to debate whether or not the current return of optimism is justified, and what will sustain it. This being Hanover, northern Germany, in mid-March, the beer stand is likely to provide a more hospitable venue.
Whatever the weather - grey and chilly is the normal backdrop to this annual shindig - the outlook for CeBIT 2004, which opens tomorrow and runs until next Wednesday, does look brighter than in recent years. One immediate difference from last year is that the event is not being held in the shadow of war - coalition air strikes on Iraq began a day after CeBIT 2003 ended.
But Deutsche Messe, which runs the show, believes the business context in which CeBIT 2004 is being held provides more solid grounds for optimism. "For the last three years cost containment has been a major priority among professional IT and communication technology users," it says. "Now that the economic outlook has improved and companies have increased their IT budgets, the pent-up demand for new products and innovation promises to make 2004 an interesting year."
Last week, organisers announced they were expecting 6,411 exhibitor organisations from 64 countries, down slightly from 6,602 last year. "We have exceeded our cautious targets for rented space and the number of exhibitors by a wide margin," says Ernst Raue, the Deutsche Messe board member responsible for CeBIT. Visitor numbers are not predicted, but dropped from nearly 700,000 in 1999, when the technology sector was booming, to 556,000 last year.
Qualified support for the view that things are picking up came last week with the publication of an annual survey by Gartner, the IT research company, of attitudes among nearly 1,000 chief information officers around the world.
"CIOs have been through the wringer in recent years," says Marcus Blosch, research director at Gartner Executive Programs. "Having weathered the storm of declining budgets and increases management expectations, most now expect to focus on improving the contribution IT makes to the growth of their organisation while still keeping a control on costs."
Even so, the Gartner survey highlights substantial variations between enterprises in areas such as budget growth and investment priorities, and in the degrees to which they are using technology to catalyse the predicted growth.
The more cheerful outlook is shared by industry leaders heading for Hanover. "We are very confident that the customers who show up will be looking for growth. It is very important, as the market picks up, to be innovative," says Henning Kagermann, chief executive of SAP. The German enterprise software company is showing a new version of its ERP (enterprise resource planning) suite, and Mr Kagermann says customers are keen to see this, and discuss upgrades.
Kazuo Furukawa, chief executive of Hitachi's information and telecommunication systems business, also expects a strong level of interest among customers at CeBIT 2004, buoyed by forecasts of 4 per cent growth in the European IT market this year. "It's a very good opportunity for us to promote all our products," he says. These range from data storage systems to a new DVD camcorder, shown in Europe for the first time.
At Alcatel, chief technology officer Niel Ransom agrees that "it looks like (CeBIT 2004) is going to be pretty good." Telecoms carriers, he says, are looking for additional revenues as the provision of basic services becomes cheaper, such as "triple-play" (voice, data, video) solutions for mobile communications. On the enterprise side, he says, basic connectivity has become a commodity: "Now the question is, how do you make use of it, what are the applications that will drive the business on top of that."
Meanwhile, Andy Green, chief executive of BT Global Services, is encouraged by the increase in advisory and consultancy work, which he sees as a good leading indicator. "I'm not completely confident that companies are spending more on IT in total," he says, "but we are having a lot more conversations about how we can make organisations more agile."
The impending enlargement of the European Union is another factor this year, points out Chris Dedicoat, Cisco Systems' senior vice-president for sales in the EMEA region. "It does give an opportunity for the 10 accession countries to see at first-hand, in a live environment, all the opportunities that this industry can provide," he says.
Sustaining the upturn by exploiting emerging trends will also be on the agenda at Hanover. Patrick Kelly, who leads the infrastructure practice at PA Consulting, says utility (or on-demand) computing will be a big trend in the coming year: "Big contracts are already being let and there will be more," he says. "Knitting together utility computing, the ubiquitous network idea and the cheaper, virtually throw-away desktop into a lower cost of ownership model is a tremendous opportunity."
Mr Kelly also sees opportunities and challenges for enterprises in "one of the hottest things around" - RFID (radio frequency identification) tags. "It will take a little time for these to be applied more broadly than the obvious retail applications," he says, "but their ability to gather information on customers and products 10 times a second means the enterprise will be inundated with a richness of data."
And what of the "next big thing?" The notion of a "killer app" is in bad odour, say Vince Tobkin and Michael Garstka of Bain, the US-based consultants, but this is not to say there is nothing much on the technology horizon. In an article on the FT-IT website today, they list a number of technologies - including instant messaging, blade servers and storage area networks - that will "tip" into vast new markets within the next two years.
Whatever technology vendors are trying to push, CeBIT will always be hard work, even if the customers are more receptive this year. Adrian von Hammerstein, chief executive of Fujitsu Siemens Computers, will be at Hanover throughout the event, and with the entire management team there, too, the company's stand will be its unofficial headquarters while the show is on. "CeBIT is an endurance test, but it's also extremely energising," he says. "I come away tired, but full of lots of ideas."
Mr Furukawa of Hitachi feels the same. "It's such a good opportunity for us, so I have to forget my fatigue," he says.
