Skip to main content

Large-cap tech entering a period of out-performance? Here's why

Read an interesting article at ComputerWorld today that got me thinking. The title: "IT centralization is back in fashion."

It is useful to think about what this means for IT organizations and the vendors that support them.

Why centralize?

With technology assets centralized in one place, it's easier to take advantage of opportunities for efficiency and streamlining such as virtualization, storage de-duplication, cloud computing and outsourcing, all of which promise to lower costs.

Centralization also makes it easier to create an effective disaster recovery strategy, minimize labor redundancies (ie, reduce expensive IT staff), get volume discounts on technology purchases, and lower maintenance and training costs through standardization.

Is the trend real?

There's some statistical evidence of a tilt toward IT centralization. In Computerworld's recent Forecast survey, 37% of 312 respondents said it's likely that their IT units will become more centralized in the next 12 months. And in a 2009 IBM survey of 2,500 CIO worldwide, 76% of respondents said they anticipated having a strongly centralized infrastructure in five years.

IBM itself last year completed a shift to centralized IT management, reducing the number of data centers it operates from 155 to five and trimming its portfolio of applications from 15,000 to 4,500.

Which vendors will qualify?

The move to centralization will see CIOs looking to vendors who can offer several of the following major benefits:
  • Products should efficiently scale up to handle greater numbers of user and transactions.
  • Vendors must offer greater out-of-the box integration of wide-ranging functionality
  • Vendors should also offer IT services either for system implementation or longer-term outsourcing
  • Vendors who can offer quantity discounts or concessions on corporate-wide site-license pricing will have an advantage
The largest IT vendors are the companies that most easily meet all the requirements listed above. This means companies like Cisco Systems, IBM, Oracle, Hewlett-Packard, EMC, VMWare, SAP, Computer Associates, Teradata, Microsoft, Dell, NetApp, Juniper Networks, Fiserv, BMC Software and Compuware.

The folks at IBM think we have a 5-year cycle during which the centralization trend will maintain its popularity before the pendulum begins to swing in the opposite direction. During that time, large-cap tech stocks can be expected to out-perform.


Anonymous said…
so which company you like best?..csco,msft,ibm??

Popular posts from this blog

Brazil - in a bubble or on a roll?

A couple of years ago, no one recognized the real estate bubble even though it was under everyone's nose. Now, analysts and bloggers are seeing bubbles everywhere they look. One of them, they say is in Brazil whose Bovespa stock market index has doubled in the last 12 months. Does the bubble accusation hold water? I don't think so and here are 7 reasons why Brazil is by no means a bubble economy: Exports have held up over the past year thanks to demand from China for Brazil's soya exports and iron ore. This was helped by the the Brazilian government's drive to improve trade links with Asia and Africa. Export diversification, spurred by a more active trade policy and increased focus on "south-south" trade under current president Lula, helped mitigate the decline in demand from OECD (Organization for Economic Co-operation and Development) countries A "sensible" economic framework has been in place since the 1990's. This has included inflation

Unlock Stock Market Profits - Key #1

This is the first in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. ( Click here to read the original post ) There are two basic steps to investing. First, you need to find stocks that seem to have some potential. Then you have to determine whether these stocks are actually good investments. There are many stocks that at first glance look interesting, but further research reveals that there are too many negatives to warrant taking a position. This first post in the series starts at the beginning: getting good investment ideas. Key #1: If something special is happening to a stock, it will be reflected in some kind of unusual activity in the markets. As individual investors, we will never be the first to know; however, unusual activity can be an early sign that allows us to follow the Wall Street professional

Unlock Stock Market Profits - Key #4

This is the fourth article in a series of posts describing 10 tools to help you identify and evaluate good investing ideas. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. ( Click here to read the original post ) With this fourth post, we will continue another step along the path of finding stocks that seem to have some potential. The first post in the series discussed how to use unusual activity to identify investing ideas. The second post described how to use stock screeners. The third post described how to use lists of new highs and new lows. This post will focus on identifying social or business trends in order to find investing ideas. Information on new trends might turn up anywhere. In conversation with friends or business associates, in newspapers or magazines, on TV or though your work. The key is to be aware of trends and how they start, stop or change. We'll start by describing what