NEWS

Are telcos losing ground to the IT sector in a converging market?

There is mounting evidence that a bull-run of enterprise confidence in ICT expenditure and in the ability of vendors to deliver on their promises is producing steady if unspectacular growth in European technology markets. The latest figures from the European Information Technology Observatory (EITO) suggest that ICT spending in the European Union will grow by 3.1% in 2006 to €644bn. EITO is also now forecasting overall ICT growth in the EU in 2007 of 2.9% to €663bn.

Yet the EITO figures also reveal a discrepancy between the IT and telecom sides of this particular equation. Thus, IT spend will grow by 3.8% this year within the EU-25, while telecom will be up by 2.5%. In 2007, those growth rates are forecast at 4.2% and 1.7% respectively. The divergence may be explained away by the mere fact of IP-based services, such as voice, migrating onto what are essentially IT-led systems. But does this also suggest that enterprise users have more confidence in the IT vendors than in their traditional telecom counterparts?

There is an irony in the fact that when the more left-field dot.com players imploded in 2000-1, the more stolid telecom carriers were dragged down almost as far. The widening gap in growth between IT and more traditional comms may explain why old-style telcos are busy trying to re-invent themselves as 'IT carriers'. The likes of BT in the UK, France Telecom and Deutsche Telekom in Germany are laying down the convergence/systems integration card with a heavy fist.

Commenting on EITO's latest forecasts, Bruno Lamborghini, chair of EITO, says “an overall positive business climate and improved general economic development together with new digital convergence technologies are favourable for ICT investment. The boom in broadband lines, together with the strong recovery of software and IT services markets, open new opportunities for Europe to actively participate in the new digital challenges at world level.”

Yet what EITO's stats seem to show, and what will worry the telecom powerhouses, is that even their wireless and broadband offerings are slipping down the value chain. These appear to have become commoditised far more quickly than they might have expected, and certainly far faster than their business models would have budgeted for.

The primary issue may be one of enterprise confidence. For some reason, users accept the need to upgrade and innovate where IT is concerned. The same level of trust, or the basic belief in 'buying in' to new telecom technologies in a strategic sense, including network-based convergence, seems conspicuously absent.

Commenting on EITO's latest forecasts, Bruno Lamborghini, chair of EITO, says “an overall positive business climate and improved general economic development together with new digital convergence technologies are favourable for ICT investment. The boom in broadband lines, together with the strong recovery of software and IT services markets, open new opportunities for Europe to actively participate in the new digital challenges at world level.”

Yet what EITO's stats seem to show, and what will worry the telecom powerhouses, is that even their wireless and broadband offerings are slipping down the value chain. These appear to have become commoditised far more quickly than they might have expected, and certainly far faster than their business models would have budgeted for.

The primary issue may be one of enterprise confidence. For some reason, users accept the need to upgrade and innovate where IT is concerned. The same level of trust, or the basic belief in 'buying in' to new telecom technologies in a strategic sense, including network-based convergence, seems conspicuously absent.