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Software update: Enterprise Solutions - Views on News from Equitymaster

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Software update: Enterprise Solutions
Aug 28, 2007

We have been updating our subscribers with different industry verticals and service offerings in our past few articles. In this write-up, we delve a bit deeper into the sphere of Enterprise Solutions. What is Enterprise Solutions?
Enterprise Solutions (ES) is generally one that considers a value to the entire enterprise rather than limiting that value to an individual department or business unit. Typically business intelligence solution initiation and requirements originate from a specific business unit or business group like a department. IT companies can develop that solution in a vacuum, focusing exclusively on the needs of that one unit. This type of development would lead to a highly customized and quickly delivered solution, but one that does not consider that business unit's relationship with the rest of the enterprise and its unique interpretation of business rules measures and processes.

ES provide for a full consistent view of the enterprise. The opposite is to allow each to build their own. The biggest advantage of ES is that there is a uniform representation of data by nature. The biggest disadvantage is that some believe that it cost more to do. The real biggest problem is organisation politics.

Market size and other structural factors
The current market size of ES is around US$ 88 bn. At this juncture, there are only a few large players and several small players and due to this the competition is severe (mainly due to lack of entry barriers) along with surging demand.

On the demand side, the companies are spending on ES but now there has been a sense of conservatism in IT spending in this space. With rising demand, the customers are also demanding that most components be developed offshore. On the supply side, the main concern is the talent scarcity and people with specific skills are short in supply. As the demand for software professionals rises, the attrition shall follow suit. Coupled with the H1 visa worries, the situation could just aggravate.

Going forward
The demand for ES is on the rise but the near term impact will be seen when the companies in the US decide on their CY08 IT spending budget in 3QFY08. While the banking and financial services sector which contributes to most of the ES revenues could cut down on its IT spend owing to the subprime crisis, in the long run this segment will see consolidation and a move towards platform based solutions. Also, companies could gain more from cross-selling their existing products as to grow businesses they will have to dramatically overhaul their cost structure and then use the savings to invest in new solutions.

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