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Analysts examine how IT can drive business growth at Gartner Symposium/ITxpo

The year 2007 is on pace to be a milestone year for the IT industry, as worldwide IT spending is projected to surpass $3 trillion, according to Gartner. IT spending in 2007 will reach $3.1 trillion in 2007, an 8 percent increase from last year, and spending for 2008 is forecast grow 5.5 percent and total $3.3 trillion.

During the opening keynote at the Gartner Symposium/ITxpo, being held here through October 12, Gartner outlined how IT leaders must be able to respond to change quicker than ever before. There is a need for flexibility, and a need for agility.

Peter Sondergaard, senior vice president and global head of Research at Gartner, said IT leaders should create two IT budgets for 2008. The first should reflect the same kind of marginal growth prepared during the past six years. The second budget should assume the need to cut costs in response to the arrival of a possible recession.

"The business plans that you had in June are probably not going to completely address the changed conditions of your business in November," Sondergaard told an audience of 6,000 IT decision makers. "Together with your business colleagues and your CEO you are going to have to deliver new efficiencies, new innovations and new ideas to sustain profitability and growth. IT will be core to many of those responses."

The challenge for IT leaders is how they are going to react.

"Simply delivering internally focused savings isn’t going to be enough," Sondergaard said. "You (IT leaders) need to step up to the challenge of delivering new solutions to those critical business imperatives."

On a worldwide basis, IT spending continues to grow at a rapid pace in developing countries. In fact, one-third of IT spending now occurs outside of North America, Western Europe, and Japan. "This development will create new innovation in IT, new competitors, new usage patterns, and continued cost improvement benefits for users," he said.

As IT moves East and South, it will mostly affect the growing areas of the industry. End-user spending will globally move towards software, services, and all aspects of mobility. These categories made up 57 percent of spending in 2006, will become 60 percent in 2008, and are forecast to have grown to 63 percent in 2011.

Only 6 percent of developers working on Open Source software have adopted GPLv3, according to Evans Data Corp’s recently released Open Source Software Development Survey.

Two-thirds say they will not be adopting GPLv3 anytime in the next year, and 43 percent say they will never implement the new license. In addition, almost twice as many would be less likely to join a project that implements GPLv3 than would be more likely to join.

"GPLv3 is controversial because it imposes restrictions on what you can do with programs implemented under this license," said John Andrews, president and CEO of Evans Data Corp.

He added, “Developers are confused and divided about those restrictions, with fairly equal numbers agreeing with the restrictions, disagreeing with them, or thinking they will be unenforceable.”

Other findings from this in-depth survey of over 380 developers working on Open Source projects, include:

• Lack of skills in an organization was the greatest barrier to a migration from Windows to Linux

• The Apache Foundation was identified as the organization having the best Open Source offerings
• A third of Open Source developers are developing desktop applications

GPLv3 also incorporates a clause to forbid licensees from bringing patent infringement suits, directly attacking the recent Novell-Microsoft alliance. Seventy percent of the developers in the survey felt that alliance had been bad for the Open Source community.

Apple Inc. calls it the iPod nano—but the latest version of the company’s compact music player introduced last week is virtually a completely new design, reusing almost no components and sporting a bevy of fresh suppliers compared to the previous model, according to a dissection conducted by iSuppli Corp.'s Teardown Analysis service.

Component suppliers making their nano product line debut in the latest version include Micron Technology Inc., Dialog Semiconductor GmbH and Intersil Corp., while Synaptics Inc. returns to the platform after an absence.

"The changes in components have resulted in significant cost reductions in the nano design, allowing Apple to offer a product that is less expensive to build and that has enhanced features compared to its predecessor,” said Andrew Rassweiler, senior analyst and teardown services manager for iSuppli.

Dropping the BOM
iSuppli’s Teardown Analysis team has dissected the low-priced version of the new nano and has determined the product carries a Bill of Materials (BOM) cost of $58.85 for the 4Gbyte version and $82.85 for the 8Gbyte version. iSuppli’s estimate of the new nanos’ BOMs is strictly limited to costs for components and other materials used to construct the product. The estimate does not include costs for manufacturing, software, intellectual property, accessories and packaging. The BOM figures also do not include research and development costs, since such data cannot be derived from a teardown and component analysis.

The BOM of the new 4Gbyte nano is 18.5 percent lower than the $72.24 direct materials cost of the previous version of the nano released in late 2006. The new product has the lowest BOM of any member of the nano line analyzed by iSuppli.

Raising the margin
The retail price of the 4Gbyte version is $149, compared to a hardware BOM of $58.85. For the 8Gbyte version, the retail price is $199, compared to a hardware BOM of $82.85. Apple’s products traditionally have been sold at retail pricing that is about twice the level of their hardware BOM costs, based on iSuppli’s teardown extensive analysis of devices including the iPhone, the iPod shuffle and previous members of the iPod nano line. This represents a high level compared to most electronic products. For the new nanos, Apple has exceeded even its usual lofty standards.

Out with the old, and in with the nano
The arrival of new nano semiconductor suppliers, Micron, Dialog and Intersil—and the return of Synaptics has been accompanied by the departure of previous part providers, NXP Semiconductors and Cypress Semiconductor Corp. in the latest version of the product. Such wholesale supplier swaps are not unusual for Apple, which frequently switches its component partners. With Apple, it seems, no supplier is safe, and no slot is a given.

Micron a big winner in the new nano
US semiconductor supplier Micron was the most notable addition to the nano. This represents the first time that iSuppli’s Teardown Analysis Service has identified a Micron part in an iPod.

In the nano torn down by iSuppli, Micron was the maker of the high-density NAND flash memory that serves as media storage, worth $24 in the 4Gbyte version of the product and $48 in the 8Gbyte version. This gave Micron the largest single portion of value in the nano of any supplier at 40.8 percent for the 4Gbyte version and 57.9 percent for the 8Gbyte.

Apple’s primary suppliers of NAND flash historically have been Korea’s Samsung Electronics Co. Ltd. (which has been the dominant seller), Japan’s Toshiba Corp. and Korea’s Hynix Semiconductor Inc. Micron is last in share position as a supplier to Apple for NAND flash, and only began shipping small quantities during the last year. While this is a major win for Micron, Samsung remains the world’s largest maker of NAND-type flash and is likely to continue to be used as a supplier by Apple, iSuppli believes.

Samsung: Kicking apps and taking names
One of the biggest and most important slots on the nano is the combined core video processor/microprocessor chip in the system, supplied by Samsung. Costing $8.60, the Samsung core IC processor accounts for 14.6 percent of the 4Gbyte version's BOM, and 10.4 percent of the 8Gbyte's BOM.

This is the second time around for Samsung’s core processing IC in the nano line; in the version of the nano released in late 2006, Samsung supplied the core processing IC as well. Samsung also contributed 32Mbytes of Mobile SDRAM, worth $2.72, or 4.6 percent of the 4Gbyte BOM and 3.3 percent of the 8Gbyte BOM.

Big sales for little nanos
iSuppli tentatively forecasts that total iPod nano shipments will reach about 23 million units in 2007 and 27.9 million during 2008.

“Consumers will be interested in buying the nanos due to their enhanced features, mainly video capability and a high-quality display,” said Chris Crotty, senior analyst, consumer electronics for iSuppli.