Google enters mobile advertising space with AdMob acquisition

In a push to expand its digital advertising empire to cellphones, Google has agreed to acquire AdMob, a fast-growing mobile advertising start-up, for $750 million in stock, the companies said.

AdMob is one of the top sellers of banner ads on iPhone applications and Web pages that can be retrieved from mobile phones. The acquisition could help establish Google as an early leader in the small but rapidly expanding mobile phone advertising business.

The deal shows that Google is serious about becoming a major player in the mobile advertising ecosystem, said Neil Strother, an analyst with Forrester Research. It puts Google in the front-runner position.Strother and other analysts said that position could prove tenuous. The mobile advertising business, which has long been hailed as the next big thing, remains embryonic.

Agencies

Can MS takes on Google with free Office software?

Microsoft will release a free version of its dominant Office software that users can access over the Web, catching up with products that arch rival Google launched three years ago.

The world’s largest software maker will offer a word processor, spreadsheet, presentation software and a note-taking program with the same look and feel of their counterparts in the Office suites that it sells for personal computers.

It is the latest salvo in an intensifying war between the two technology giants. Google announced plans last week to challenge Windows with a free operating system. Microsoft introduced a new search engine, dubbed Bing, last month, that has taken a small amount of market share from Google.

A free version of Office could hurt sales of Microsoft's top-selling and most profitable business unit. One of Office's most popular titles is a home version that sells for $150. It includes the four programs that Microsoft will give away.

“Microsoft is in a tough spot. Their competition isn't just undercutting them. They are giving away the competitive product,” said Sheri McLeish, an analyst with Forrester Research. The Office division rang up operating profit of $9.3 billion in the first three quarters of the software maker's current fiscal year. — Reuters

McLeish said she expects Microsoft to overtake Google in the market as the hundreds of millions of people who use Office flock to try out the Internet version.

Microsoft will seek to make money by using it to lead those users to its ad-supported websites, including the Bing search engine. Analysts have said that Bing's early signs of success suggest Microsoft may be rounding the corner in efforts to turn around its money-losing Internet division.

Microsoft will release the free offering when it starts selling Office 2010, it next major release of the product, sometime in the first half of next year. Its current version came out in January 2007.

The software maker unveiled an early release on Monday at a conference for business partners in New Orleans. It will be distributed to tens of thousands of testers.

Company spokeswoman Janice Kapner said the free Web version will provide "a very rich experience" and probably have more functionality than Google.

Office 2010 is among a wave of upgrades to Microsoft programs planned over the next year. A new version of its ubiquitous Windows operating system is coming out in October and a new version of its widely used email server is also in the works.

Microsoft also plans two other Internet versions of Office for businesses.

It will host one of them at its own data centers, charging a yet-to-be-announced fee for that service. Businesses with premium service contracts will have the choice of running the Web-based version from their own data centers at no extra cost.

Agencies

Will global tech spending decline in 2009?

Technology companies face a bumpy ride in 2009. Global business and government spending on computer, software and communications products and consulting services is expected to decline 3 percent this year, Forrester Research said in a report due out Tuesday.

This would mark the first decline since 2002, when information-technology spending dropped 6 percent after falling the same amount in 2001.

However, this downturn is not expected to last as long. Forrester projects tech spending to recover next year, rising as much as 9 percent in 2010.

In addition to the recession, the strengthening dollar is also to blame for the drop-off Forrester sees this year. Just as the weak U.S. currency boosted the growth rate of technology purchases made in dollars in 2008, the now-stronger dollar will hurt it in 2009, according to Forrester. Western Europe's technology spending rate is a good illustration of the currency discrepancy: measured in dollars, tech purchases in the region will be down 7 percent in 2009. Tech purchases in euros will be up 1 percent.

To neutralize the effect of currency changes, Forrester also projected the global technology market using a ``basket'' of local currencies, weighed for how big a share of the market each region holds. Using this measure, technology purchases are expected to have grown by 4 percent in 2008 and post growth of 3 percent in 2009, and 6 percent in 2010.

Certain aspects of technology will fare better. For example, Forrester expects software purchases to total $388 billion this year, the same as in 2008. But computer equipment purchases, which includes personal computers, servers and storage devices _ are expected to decline 4 percent, to $434 billion. That's because businesses often see software as a moneysaving tool, while buying new computer equipment is something that can be put off until more prosperous times.

There are other trends at play, too, such as an ongoing decline in the server market, independent of the economy, said Forrester analyst Andrew Bartels. More companies are embracing server virtualization, a technology that allows one server to function as multiple machines, saving companies money and energy. Businesses are also realizing that their employees can use BlackBerrys, iPhones and small laptops known as netbooks for work. So, the analyst said, rather than issuing workers both a PC and a BlackBerry, companies might stick with just a BlackBerry.

A decline in demand for personal computers and other electronics weighed on the semiconductor industry for much of 2008. Intel Corp., the company behind the bulk of microprocessors that serve as the brains of PCs, lowered its fourth quarter revenue guidance for the second time last week amid weaker than expected demand.

While 2009 does not look good when it comes to tech spending, things aren't as dismal for the sector as they were in 2001 and 2002, after the bursting of the 1990s Internet bubble. In each of those two years, Bartels noted, technology spending declined 6 percent _ and that would have been true regardless of currency fluctuations.

Since then, technology has become so interwoven into how a company operates that it's no longer considered discretionary spending.

``It is the muscle of companies,'' Bartels said. ``It allows them to do what they want to do.''

Agencies

Will IT slowdown continue till Q3 of 2009?

The tech slowdown will continue up to the third quarter of 2009, according to global research firm Forrester. IT consulting and systems integration services will hit the wall in 2009, while IT outsourcing growth will remain moderate in 2009 and 2010, getting a small respite from the economic slowdown, it said in its report released on Thursday.

Because of the slowdown, companies will turn to vendors that can help cut costs, but growth in IT outsourcing revenues will remain moderate due to the use of lower-cost offshore resources and smaller-scale outsourcing deals, among other reasons, according to the report.

On a positive note, the Research firm said that while the US IT market outlook is bad, it is better than the 2001-02 technology downturn. “This time, computer equipment vendors will see declines of 5-10% in US revenues on a quarterly basis, not the 20% to 25% drops of the early 2000s,” said Andrew Bartels, the report’s author and vice-president, Forrester Research.

Forrester has projected a growth of 1.6% growth in IT spends for 2009, assuming a decline in US GDP in the third quarter of 2008. The decline will accelerate in the fourth quarter of 2008 and the first half of 2009 before a weak recovery starts in the second half, the report titled ‘US IT Market Outlook: Q4 2008’ said.

The report is based on an analysis of US Department of Commerce data and the financial reports of 49 IT vendors.

The industries that present the best opportunities for IT vendors in 2009 will be the federal government, primary production, consumer products and pharmaceuticals, chemicals and oil and gas, public services like healthcare and education, insurance, utilities, telecom, and most professional services which will not be impacted much by the recession.

On the other hand, those most likely cut back their IT purchases are IT goods and services including financial services, consumer durables, construction and housing, retail, and industrial products (including autos).

The financial services industry is expected to cut IT purchases by 3% in 2008 and by 4% in 2009. While the construction industry is expected to cut purchases back by 2% in 2008 and 2009. The retail industry will have no growth in IT purchases in 2009, and IT buying by industrial manufacturing will slow to 1% in 2009, it noted.

Those with mixed IT buying prospects include high-tech products, wholesale trade, media and entertainment, transportation and logistics. Some professional services like consulting and advertising services will see slowing of growth in either 2008 or 2009, it pointed out.

Source: Economic Times

40pc of large businesses cut their IT budgets

More than 40 percent of large businesses have cut their IT budgets this year due to the global economic slowdown, according to a new survey by Forrester Research. The Forrester Business Data Services report surveyed nearly 950 senior IT managers across North America and Europe regarding their IT services spending and overall services strategies and priorities.

The economy’s affect on IT spending is evident in some specific data points contained in the report: Forty-three percent of firms have already cut their overall IT budgets in 2008 in reaction to the slow down in the global economy, while 24 percent of firms have put discretionary spending on hold. Twenty-eight percent of respondents said the economy has had no impact on their IT budgets.

Asked how the economy will affect IT services spending, 70 percent of respondents said they will likely negotiate lower rates with suppliers, and 16 percent said they have already cut their IT services spending.

IT departments in the financial services industry were hit hardest — 49 percent of IT shops in the financial services sector have cut their budgets. At the other end of the spectrum is the media, entertainment, and leisure industry, where only 39 percent of respondents said they have had to reduce spending.

IT departments in North America have been affected by the economy more than their European counterparts: 49 percent of North American firms have cut their IT budgets compared with 31 percent of respondents in Europe; although it should be noted that the Forrester survey was fielded in Q2 2008 prior to the deteriorating economic conditions in Europe.

“This is not an across-the-board spending slowdown; the impact of the economy on IT budgets varies widely by industry and geography,” said Forrester Research vice president and principal analyst John C. McCarthy, who is in India at present for a workshop. “With regard to the services sector, the slowdown has firms renegotiating rates, being more selective in choosing vendors, and examining spending plans more thoroughly, but they are still expecting to pay more for services. The demand for enterprise IT services has not dropped significantly.”

Regarding the state of spending on enterprise IT services, the report illustrates a number of trends: The demand for services holds steady. Forty-five percent of firms plan to increase their use of applications outsourcing, while 43 percent of firms are increasing their use of infrastructure outsourcing. Forty-three percent of respondents said they are moving more work offshore.

Infrastructure outsourcing expects to grow. Convergent telecommunications and network management is a hot area of growth as 20 percent of firms will outsource this service in 2008.
Few firms have fully tapped into offshore resources. Only 9 percent of firms use offshore resources wherever and whenever possible. A growing number of firms are interested in exploring more offshore work, with 14 percent ramping up use, 19 percent piloting, and 22 percent not using offshore but actively tracking developments. Of those firms not sending work offshore, a majority cite the questionable quality of the work done.

Satisfaction with outsourcing remains low. While overall firms are satisfied with their decision to use a third party, 52 percent say their biggest challenge with existing IT services and outsourcing relationships is that cost savings are lower than expected. Other noteworthy challenges include inconsistent or poor service quality (40 percent) and the inability of the vendor or contract structure to respond rapidly to changing business needs (35 percent).

Terror strikes; Is outsourcing safe?

Terror times; Is outsourcing safe?

large global firm runs its trading desk out of Mumbai. Bookings for a leading airline are happening out of another office in a neighbouring city, while the telecom infrastructure of an overseas operator is being remotely monitored from another location in the country.

A terror attack on any of these sites can have significant implications for corporations in the US and other parts of the developed world as India emerges as the world’s back-office.

For instance, if a trade is not squared off on time, the firm will have to carry higher liabilities. Wednesday’s attack raises questions about the vulnerability of these locations to terror threats and the preparedness of firms and authorities to tackle them.

The issue assumes importance as nearly seven out of every 10 outsourced processes come to India, according to industry estimates. While 6-7 years ago, business process outsourcing (BPO) mostly involved basic data entry, a number of mission critical processes such as airline bookings and investment research are now taking place out of offices in Mumbai, Pune and Bangalore.

In its strategic review, Nasscom, the apex industry body, notes, “Indian BPO has undergone significant transformation since its inception over a decade ago... The past few years have seen the scope of these services expand progressively to include more complex processes involving rule-based decision making and research requiring informed judgment and domain knowledge,” the apex industry body notes.

Indian firms also manage infrastructure worth over $3-4 billion remotely for clients. Damage to these locations can bring down desktops and servers, besides crippling entire sections of organisations outside India. “After 9/11, there is a greater appreciation of the risk arising from a terror attack,” admits KPMG executive director Akhilesh Tuteja.

“But the level of preparedness even for mission critical operations is below average,” he adds. The redundancy plan usually involves a backup and mutiple service providers to ensure connectivity. But process capability and an ability to swiftly execute the process at another centre are not a reality in most cases.

“Disaster recovery plans are like an insurance you may never use. There is now an awareness about the need to have them, but the decisions are usually postponed because this is not an investment that will result in growth. Firms usually make investments for growth,” says PriceWaterhouseCoopers managing consultant Nikhil Donde.

Companies are saving costs amid the slowdown, as every bit can eat into margins. Multinational parents are managing a majority of the mission critical operations by way of captives. Ideally, 70% of the process should be offshored and 30% retained at the onsite location to minimise the risks, according to Mr Tuteja. But again there is a trade-off on costs, with real benefits kicking in only when the process is completly offshored.

In client contracts with third-party firms, it is not uncommon to find clauses related to business process continuity (BCP). However, these clauses rarely go into specifics and are usually interpreted in terms of having a multi-locational presence, back-up capability and multiple connectivity providers. Rarely do they consider whether the alternate locations will have people with the necessary skills. And this is really the biggest threat in a terror attack, when people at one location can be killed, say the experts.

Source: Economic Times

A ‘prolonged’ recession would impact IT industry

The on-going recession would mean several quarters of declines in IT purchases…Software and IT services vendors will start to feel the pinch.

Forrester Research, an independent research firm has outlined an IT spending scenario for a long and deep recession for technology companies. According to this latest Forrester scenario, “A prolonged recession would mean several quarters of declines in IT purchases, not just two or three quarters with little or no growth in late 2008 and first half 2009.” This is the first time Forrester has outlined the possibility that the economic crisis could spark a short-term contraction in IT spending as opposed to a slowdown in growth.

The latest Forrester report offering this scenario - What The Financial Crisis Means To The Tech Market, by Andrew Bartels (VP & Principal Analyst, Forrester Research), states that on a full year 2009 basis, a sustained recession could lead to annual US IT spending growth of 2-3% and global IT spending growth of 3-4%. Says Bartels, “This is just a scenario as an acute financial crisis has hit not only the US but also countries in Europe and Asia.”

In his Sept’08 review of the US IT market, Bartels had predicted a distinct slowdown in growth for US business and government purchases of technology goods and services due to an assumed recession starting in the third quarter. Elaborates Bartels, “We continue to estimate global IT spending growth in 2009 being 7-8%, and we are still sticking to our forecast of a sharp decline in growth – instead of a contraction – for US tech purchases. Why? Our tech market forecast already presumes the recession that is actually happening… Still, with the financial crisis now spreading around the world, risks have grown that the US and other major countries will experience a longer and deeper recession than we had expected.

This scenario will help technology vendors to be prepared, and to mould their strategy, according to the economic environment.” He further adds, “The Software and IT services vendors will anyways – with or without the said scenario – start to feel the pain though sales of these products and services have so far avoided much slowdown in 2008. They will be hit hard in the next three quarters. Still, "hit hard" is relative — vendors in these categories will have on average 3% to 5% growth instead of the 9% to 12% growth they've seen earlier in 2008.” Stating that the rules for technology vendors’ success have changed, Bartels recommends, especially to the US based vendors, to refocus on the US market as it (US market) is likely to recover from a global slowdown sooner and stronger than other markets.