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INTRODUCTION: How did it all start?

25 years ago when People & Computers (http://www.pc.co.il/), the Interdisciplinary Center for
Technology Forecasting (http://ictaf.tau.ac.il) in Tel Aviv University together with IBM and Digital
(I was in Digital at that time) tried to understand the Information Technology Market in
Israel (with a clear focus on Hardware and Software Products).

The study highlighted the problems involved in making surveys in a small market with
very few players. We received about 1000 interview results (by Tel Aviv University
students) from vendors and users. We tried to get a result we could agree on but failed.
The numbers showed that the procurement managers (although they agreed to the survey
interview) distorted the truth. The vendors were sure to double or triple their sales
numbers. If we added the “interview dollar results”; the amount that industries bought with
what the vendors sold, there was a one to ten correlation.

After the unsuccessful first try, some of us (vendor marketing) decided to work
together and try to share data that wouldn’t be used (by the others) except for the
statistical results. So by 1986 we started sharing data for analysis (I am sure we all added
a little to make our results better) and we started to get a picture of the market. Each one
of us used the data together with their own analysis/methodology.

I tried to correlate data with account managers (sales) but found that when sales
quotas are involved I couldn’t get a straight answer. I couldn’t get them to understand the
difference between total IT spent and Digital’s sales potential in a certain account.
Example: when an AS/400 or IBM Mainframe was in an account, Digital sales people didn’t
count IBM sales in that account in their reports…. IT spent not relevant (they said).

Conclusions for the first Israeli IT Market studies:

1. Hardware and software could be checked (at that time) because there were import
tariffs and they were in the public domain. The complication was that every vendor
used different import categories for its products in order to minimize taxes.
2. Value added services were given as an add-on to hardware/software sales and was
subsidized.
3. IT budgets sat on the table of CIOs and they were not going to share it with
“students”.
4. Every vendor recognized revenue in a different way (i.e.: hardware/software
recognized when installed or when used, project recognized when sold or when invoices
are paid, percent of software recognized as revenue in Israel, percent of software
maintenance recognized as revenue) and none represented the IT market that
interested me .
5. Every user recognized his “IT expenditure” differently based on his financing,
amortization and company budgets (i.e.: building, electricity, IT salaries and
communication costs are not always in the IT books) and again none represented the IT
market that interested me.
6. There were a lot of contractor/subcontractor relationships that blurred the real IT
vendor in a project (a lot of double bookings). The vendor with the knowledge compared
to the vendor that got the project.

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7. Vendor evaluations in value added services should be done by a combination of the
amount of employees in a certain area of expertise and the revenues in that area.
Giving more value to “fixed price” projects than “cost plus with no SLA” project.
8. Israel has two areas where some of the vendors sell their products/services and none
is really part of the IT Market:
a. Military Projects that are not IT projects had to be taken out of the market
size. The IDF has IT units and those should be taken into account.
b. High Tech companies use computer professionals and buy software/hardware
products to incorporate into their products (OEM) : this is not part of the IT
Market. The same High Tech companies have IT departments and that should
be counted.
9. The sum of all IT expenditures (from users) has to be equal to all IT sales (from
vendors). This is called an EQUILIBRIUM MODEL. Most research firms are either a
“demand-based” (market information based on data from users of IT) or “supply-
based” (market information based on data from IT vendors). STKI is one of the only
research firms using an equilibrium model in the world and the only one in Israel.
10. The three distinct markets (hardware, software and value added services) and their
sub-parts have to be clearly defined (what it encompasses , the players and the
buyers)
11. In some markets, international vendors sell direct and through partners that add value
to the sale or not. We had to show the double booking and the value added.
12. This meant I had to define “Israel IT Market” so that it could be meaningful for both
vendors and user departments.
13. We also understood that Public Companies presenting their annual reportsin good faith
and under regulation but the financial reports do not show:
a. Real revenues of software licenses and maintenance.
b. Real revenues of hardware sales.
c. Differentiate between new projects and continuing projects revenues. New
projects should count more.
d. Separate work/ products for OEMs and military non-IT projects.
e. Distinguish between work done by the vendor’s employees and work outsourced
to another vendor.
f. Show the revenues from projects done in fixed price, cost plus (SLA defined)
and staff augmentation (non SLA) projects.
g. Distinguish between work done by high level professionals in a project and
staff augmentation employees in the clients IT department.
h. Distribution of profits between staff augmentation (highly profitable) and
projects (less profitable).

STKI’s “Israeli IT Market” Definition & Model:

STKI definition of the Israeli IT market should include the following:

1. Basically we want to count everything that IT departments buy and vendors sell for
the IT use in Israel.
2. While personnel expenditures of employees’ salaries is not counted, staff
augmentation is counted.

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3. Hardware expenditures are counted taking out any amortization and other financial
amounts.
4. Software expenditures include licenses and maintenance costs.
5. Value Added Services had to neutralize contractor/subcontractor relationships and
give credit for the project only to the vendor doing the actual work.
6. IT Market covers all “outside” expenditures of IT departments in Israel.
a. IT departments of multinational companies that have their headquarters in
Israel are counted but not the expenses of subsidiaries outside of Israel
that buy their products or services locally.
b. Only local expenditures of Israeli subsidiaries of multinationals are counted.

So what STKI analysts do during the year?


1. During the year STKI analysts meet with clients (users) and answer inquiries
for them. 2010-11 we had over 600 meetings face to face with clients (CIOs
and their managers) and answered over 2,000 inquiries. We also meet with
groups of 15-30 users and discuss predetermined subjects (we call this round
tables). Between 11/2009 till 3/2011 STKI hosted over 90 round tables. STKI
runs about 30 surveys a year about subjects from security implementation to
software development. In our interactions with IT users (e.g. CIOs, IT
managers), our objective is to understand the role of IT in the organization and
the corresponding IT strategy, as well as to gain an overview of ongoing and
planned projects and strategic decisions. Furthermore, there is an exchange of
thoughts on the users’ experience with IT vendors and their criteria for
vendor selection.

STKI analysts are involved in:


a. Quality assessments of products and vendors
b. Strategy and architectural solutions
c. Procurement questions
d. Decisions on new technologies
e. Understand their budget
f. Help in best practices/staffing ratios for the Israeli Market
g. Much more

2. During the same time they meet with vendors and answer inquiries for them.
During 2010-2011 we had over 500 face to face meetings and answered over
1,500 inquiries. We also met with over 60 vendors for vendor briefings (vendors
describe their past performance and future strategies). Through the
interactions with IT vendors we gain a profound understanding of the
organization, portfolio, and the market positioning of the relevant vendors. This
way we can assess the revenue information by different dimensions. Moreover,
we discuss the market perspectives and outline our market development
scenario.

STKI analysts are involved in :


a. Market understanding
b. Industries needs and projects
c. New products and services
d. Product packaging and marketing strategies
e. Much mor

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So how does STKI deliver it’s research ?

To present our results we use several methods:

1. Trends and Technologies (look at STKI Summit presentations)

2. Round Table Summaries (http://www.scribd.com/drjimmys)

3. Israeli Vendor Tiers presentation s


(http://www.slideshare.net/jimmyschwarzkopf/stki-summit-2011-israeli-market-data)

4. Projects/services market positioning in over 100 categories

5. Israeli IT department Staffing Ratios


(http://www.slideshare.net/jimmyschwarzkopf/stki-it-israel-2011-staffingratios)

METHODOLOGY (Equilibrium Model)


Starting after our annual STKI Summit (this year it was our 18 th) we maintain our
market model and update it (our segmentation is adjusted when the market changes)
constantly.

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STKI activity year goes from Summit to Summit, in other words from 1 of April till the
end of March. Our summit has been scheduled at a time that all budgets have been closed
and we have time to meet and discuss them with clients. At that time vendors can also
discuss the past year and new strategies with us.

What companies (IT departments) does STKI cover?

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STKI Analysis covers over 100 categories:

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STKI covers about 300 vendors that work in the IT Market of Israel:

VENDORS WE COVER IN OUR ANNUAL STUDY


012-Smile Bezeq Int Comsec HDS Lynx openstorage Service Wise Web Tech
2Bsecure Bgate Consist Headon Magalcom Opisoft ServIT Websense
Hevra Le MAGIC
A10 BIconix Corvette Oracle SGI Wise
Automazia Software
Accenture BICS Covertix Highview Maglan Orantech SIT Xact
Accesslayers BIG LK Crossbeam HILAN Malam-Team Orcanos SmartIT Xerox
Acer BITplus C-soft HMS ManofIT Or-Team SoftwareAg Xioma
Yael
ACS Blat-Lapidot CyberArk HP Matan Panorama SQLink
Software
Active View BlueCoat Data Cube I.E.Mittwoch Mateor penguinIT SteerU Yside
Advantech BluePhoenix db@net IBM Matrix Perfecto Mobile Symantec Zebra
Ziv
Afek Systems Brillix DBbest IdeoMobile Maxoft Pisga Sysnet
systems
Aginix Broadigital DDN idigital McAfee PNMsoft Systematics
AKT Brocade Decimus Imperva Med1 Point of View Systematics
Alcatel-Lucent Brother DELL Innocom Menahel4U Polycom Tadiad
Tadiran
ALD Bugsec Deloitte InnoVAD Methoda Proceed
Telecom
Alexander Mia
Bunkersec Diffdoof Insightix ProcessGene Taldor
Schneider Computers
Business &
Almog Documentum Integrails Microsoft Pro-fix Tata
Decisions
Aman
Business Design doITwise Integrity Midlink Prolink techmind
Computers
Business
Amarel Dor –IT Intellinx milgam Promisec Tescom
Solutions
Amdocs Bynet DynaSec Intentia Israel MindU PWC Testpro
Anagal Byon E121 IPGroup Minicom PZProjects ticomsoft
APC C4 E4D IPV Security Mobideo Qesem Tiuv
Tnuva-
Ardom CA Edmiso IT Analyzer Moblin Quicksoft
Milenium
Arrow ECS Calanit Carmon ELAD IT Com Moding Raan Todan
Artis calcom EMC IT Navigator MOST Radware Top Group
ARX Canon Emerset itassist MSP Raz-Lee Toshiba
Attunity CBIT EMET ivory MultiPoint Realcommerce Trainmate
Auto Font CEMax Enix Juniper MyBusiness Rels Trigerplus
Avaya Centerity Enterasys Kaminario Ness Renaissance TripleC
Avcom Check Point EPSON Kasperky Lab NetApp Rittal Trustnet
Aviv Checkmarx Ernst & Young Kav marachot Netsuite Riverbed Tulip
Avner Strauss chipPC Eshbel Kineo Netvision Safend Valinor
Avnet Cisco Eternity Kwizcom Netwise Safenet Valire
Axperts Citadel ewave Lehavi New Age Salesforce ValuePlus
Barracuda
Citrine BI F5 LENOVO Nextcom Samsung Varonis
Networks
BBT Citrix FBC Lexmark NGSoft SAP Veidan
BDA Comax ForeScout LG Normative Secoz Veracity
BDO Comda Fortinet Liacom Oasis-Tech Secure Islands VisionBI
BenefIT Comm IT Gartner Libi Tech Omnisys Securenet VMWare
BeyondIT Commtouch GlassHouse LogOn One1 Sensecom Wanova
Bezeq Complete Gstat ludan opal systems Sentrigo Waterfall

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