Released on = April 16, 2007, 5:13 am

Press Release Author = Bharat Book Bureau

Industry = Marketing

Press Release Summary = Executive Summary

They estimates that the UK computer market, as defined by this report, was worth
£36.96bn in 2002 - a marginal decline on the figure for the previous year. In 2003,
the market again saw little change in value, with sales reaching an estimated
£37.11bn.

Press Release Body =
The Computer Market Review

Executive Summary

They estimates that the UK computer market, as defined by this report, was worth
£36.96bn in 2002 - a marginal decline on the figure for the previous year. In 2003,
the market again saw little change in value, with sales reaching an estimated
£37.11bn.

The market can be divided into three broad sectors: hardware, software and services.
All three sectors experienced a sharp reduction in annual sales growth between 2001
and 2003, in stark contrast to the rapid growth that was experienced at the end of
the 1990s. Hardware was hit especially hard: the sector saw a decline in value in
both 2002 and 2003.

This sudden reversal in the industry\'s fortunes reflects a major contraction in
growth in IT budgets, with buyers becoming much more cost-conscious. Overspending
has been eliminated, and clients will only buy a new IT system after considering its
return on investment. IT infrastructure (especially security, systems administration
and data management) is a priority for the leading buyers today, and the key factors
determining spending are value for money, getting the best out of existing
investments, and low total cost of ownership.

In this environment, all three sectors are struggling to generate high profit
margins, but the hardware sector is finding it the most difficult. Software and
services (particularly services) are generally more profitable than hardware, with
large organisations seeking to exploit their existing computing resources and also
to lower their operating costs by outsourcing non-core activities. This explains why
several major hardware/software manufacturers, including IBM, Hewlett-Packard,
Oracle, Dell and Sun, have moved strongly into the services market in the past 5
years.

At the same time, the management of IT infrastructure is changing: in major
organisations, senior data-centre managers are centralising purchasing decisions and
the physical architecture is also becoming increasingly centralised, with new
concepts such as utility computing and service-centric computing coming to
prominence. This is adding complexity to the marketplace for vendors.

The slowdown in the computer market reflects the fact that large enterprises are the
key purchasers of computer products and services, and these organisations\' purse
strings have been tightly drawn. Unsurprisingly, many companies that have
traditionally sold only to large enterprises are now focusing on small and
medium-sized enterprises (SMEs) - a market that, in turn, is becoming crowded and
competitive.

Among the major organisational buyers, the Government has become an increasingly
important client for the computer industry, given its large-scale plans to adopt
e-government and its increased investment in IT infrastructure for public bodies
such as the National Health Service (NHS).

In the future, the three sectors of the market - software, hardware and services -
will increasingly merge. Already, the software market is seeing changes in its
delivery models and licensing structures as two new concepts - software as a service
(SaaS) and application services provision - begin to have an impact on the market.
In the future, as utility computing develops, the hardware sector will see similar
changes. Concepts such as `e-business on demand\' will see core hardware and software
systems delivered as a service to major data-centre users.

The computer market has experienced a change of gear: high annual growth rates have
given way to more modest annual increases in revenue, and the market is entering a
mature phase of growth. Even after 2004, when Key Note predicts that the fortunes of
the industry will improve, annual growth in the market\'s value will be less than 7%.

Over the next 5 years, clients will have the upper hand in the market and will be
less willing to tolerate underperforming products and services. Consequently,
development costs will rise as vendors seek to bring to market `bug\'-free products
and fully-developed service offerings - all in an environment of slow annual growth
in revenue.

The main vendors will be looking to retain or improve their profitability (i.e. cut
costs), generate the research resources required to launch new products, and buy in
the expertise needed to offer complete computer solutions (as clients will
increasingly want to use organisations that can offer a completely integrated global
solution). This will force consolidation in the industry and give a competitive
advantage to companies of scale. The big will get bigger, while the small will
either go out of business or target specific niches

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