IT Bell-weather Microsoft Cuts Back - What Does This Mean for IT Services?

Weighing down the stock market (besides the other various bad news) was Microsoft's announcement of its first ever job cuts, in total 5,000 employees.

On one hand, I've felt for many years that Microsoft has lost its "cool factor" in the IT industry, in that during the 90's and into 2000/2001, when Microsoft said something (e.g. entered a new business or predicted the next frontier of IT) -- the market generally took this quite seriously. I'm not sure where exactly this changed (hmmm... maybe .NET ?), but Microsoft has so many businesses and so many announcements, it is hard to keep up what the company's strategy is from one day to the next. Also, its "new" products increasingly seem borrowed, such as its pretty desperate marketing play to change SaaS (Software as a Services) to its own phrase: Software + Services. Beyond this marketing ploy, if anyone can explain to me clearly what is or will be in Windows Live, and what is the difference between Microsoft Dynamics CRM Live and CRM Online... I'm all ears!

But now back to the economic reality: Microsoft's bread-and-butter business is still Windows, shipped on a PC or a Server, and right now, consumers aren't buying many new computers, and businesses are pushing out refresh cycles for at least a year. These are both rather painless short-term ways to decrease IT budgets.

So what does this mean for IT services? Well, all of the sudden, I think a business segment like hardware maintenance is looking a hell of lot sexier (a lifeline for Unisys??? ...ok, maybe not), and as it was shown even in Microsoft's results (its consulting business grew by 16%), consulting services affixed to short-term and scope ROI projects exist and seem to have upside even in this recession. Applying this to the SAP-related services business, as we expected towards the end of last year, the Business Objects offering from SAP should be a very interesting topic, since already there are a lot of industry solutions that are kind of "light weight" tool sets that can show a positive business return within a period of months rather than years.

Please keep checking back regularly the next few weeks as PAC will be covering SAP's upcoming results, (which I don't expect to be very good but should show some pockets of growth and opportunity especially in a few emerging market SME segments), as well as some rather large SAP announcements in early February!