IDC Canada unlocks new market secrets

If technology vendors want to beat their rivals the way the Toronto Blue Jays defeated the Minnesota Twins on opening day, they need to think more carefully about who they’re pitching to, analysts told the IDC Canada Directions 2006 conference this month.

As part of a “future four” series of presentations on the hardware, software and services markets, IDC Canada vice-president of customer segments Jamie Sharp used the Jays’ 6-3 win over Minnesota on opening night to explain the importance of “sub-vertical” markets. He noted Boston Red Sox slugger Ted Williams achieved a .400 batting average in 1941 that has yet to be surpassed. But the median batting average has remained relatively stable at .260 ever since.

“It has stayed the same because improvements of every aspect of the game have made perfect hitting near impossible,” Sharp said, citing batting coaches and additional skills development instilled in rookie players. “

Sharp said technology vendors, whose products have largely been commoditized, face a similar challenge. The answer, he added, lies in deeper segmentation. Most companies today are product-oriented and

make only minor efforts to tailor their portfolio towards a specific industry. Other firms developed their technology product around a specific vertical, and attempt to grow out of a niche. IDC says about 43 per cent of firms are product-oriented, about 12 per cent are industry-oriented while the remaining 45 per cent are a hybrid of the two.

Segmentation means making more distinctions within established verticals and customizing products and service strategies appropriately, Sharp said.

Although the government does more than 50 per cent of all Canadian IT spending, for example, there are vastly different priorities within the public sector.

While 42 per cent of federal users recently told IDC electronic service delivery (ESD) was a critical area, only 12 per cent of municipalities have it on their radar.

“There’s no point in talking about ESD to municipalities, they’re not interested,” Sharp said. “Voice-over-IP is very hot at the municipal level because they’re working on a lot of CRM and 311-type of projects.”

Similarly, many vendors try to paint the financial services industry with broad brush but Sharp said insurance and capital market firms can be worlds apart from banks.

“There’s still a lot of batch stuff going on in insurance,” he said, “whereas the capital market companies are usually more on the leading edge than anyone.”

When IDC broke down its research into the sub-verticals, analysts discovered that 14 per cent of banks are planning to spend on core banking infrastructure such as data warehouse software, servers and storage. It was the first time since he’d started working as an analyst that core banking emerged as a priority, Sharp said.

Mark Perrella, vice-president of IDC Canada’s technology group, said hardware such as volume servers are expected to see a 90 per cent growth rate this year, far surpassing client devices such as notebooks, which nonetheless are expected to grow 55 per cent. Overall, IDC is predicting a 4.3 per cent growth rate in hardware.

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