The UK economy appears to be at a crossroads, with analyst predictions varying wildly as to what the future holds. Some predict a boom in the housing market, with prices set to increase, while others predict a collapse and a return to the negative
equity situation we had in the 1980s. Low consumer spending is blamed for poor performances from high-street retailers. Sainsbury’s, Marks & Spencer and Next all blame ‘softness’ in the market. Yet Tesco’s results showed a strong improvement.
Similarly, Cisco returned strong results for its third quarter ended April 2005 that are in sharp contrast to other vendors’ results. IBM was particularly badly hit, with the announcement of 30,000 layoffs – half of them were in Europe, and the UK and Ireland were affected particularly badly.
Enterasys announced its results early to show Wall Street that it is taking dramatic steps on restructuring (although it was the US’s fault for these results, and Europe should escape most of the cutbacks).
The UK’s Marconi befell a fate which would not have been allowed to happen in other European countries. Marconi was ignored by the incumbent telecommunications service provider in its next-generation networking plans, yet another blow to the hapless Marconi shareholders.
Hewlett-Packard (HP), on the other hand, released results that were up by seven per cent year on year (EMEA was up by 10 per cent). The biggest growth areas for HP were software (23 per cent year on year) and services (14 per cent year on year). This compares favourably with results published recently by analyst Ovum Holway as part of its 2005 S(software)/IT services report.
The S/IT services market in the UK is enjoying six per cent growth, mainly because of the loosening of purse strings for projects involving system integrators (SI) and software upgrades as enterprises try to find how they can get more from their IT resources for less cost. The second graph (see right) depicts project services and represents consulting and SI services.
The 2004 findings are the best since 2001 because of strong government spending driven by NHS programmes.
Outsourcing is just over eight per cent in 2004, but this has peaked because of strong competition, and pricing is keen.
Looking at these findings it would seem that the IT market in the UK is in good shape. Networking in particular is very strong, as illustrated by Cisco. Remarkably, the UK is Cisco’s strongest country after the US. When one considers the countries with GDP which are greater than the UK, such as Germany and France in Europe, and Japan, India and China in the Far East, it illustrates the excellent performance by the Cisco UK team. Duncan Mitchell has run the UK Cisco team for the past five years and came to Cisco via its StrataCom acquisition in 1996. This is proof, if it were needed, of the value in acquiring Intellectual Property by acquisition.
However, confidence among London companies has plummeted to an 18-month low, although companies are more optimistic about business prospects than the rest of the country, according to the Institute
of Chartered Accountants. This is hardly surprising given the demise of Rover and the problems Marconi has experienced.
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