The City has always been convinced that the IT industry is a long-term growth market, but has also been suspicious of it. Now, however, the market is wading in up to its waist. In the past, UK fund managers have spent their cash on IT service companies, such as outsourcers or systems integration and disaster recovery firms, in preference to software firms. Services are seen as less risky because turnover is contracted into the future, for example in the three to five year contracts typical of outsourcers such as Capita or ITNet. In this latest rally the star turns are companies such as Baltimore, Kewill Systems, AIT, NSB Retail and Recognition Systems - all software firms. These companies are in vogue because of application service provision (ASP), or software rental. The theory goes that by renting the application, software companies have long-term contracted revenue streams, just like service companies. But the ASP movement still has not proved itself in its key target market, the SME sector. Nor is there any evidence that ASP attracts new users. In fact ASP has been most successful among larger organisations, where it is cannibalising existing IT spend. But so far, the City has fallen for the marketing hype. Hype has also been in evidence from the London Stock Exchange (LSE). On 4 November, it launched techMark. Composed of 174 companies, techMark spans software and services, IT hardware, telecoms, electronics, aerospace, media, and leisure, ranging from the largest FTSE 100 to the smallest FTSE Fledgling companies. While raising the profile of the IT sector is good news, LSE's ability to bring fresh IT flotations to London is debatable. Its knees were already bloodied after the decision by JSB Software to de-list from the Alternative Investment Market and move to Brussels-based Easdaq. In addition, the day after techMark was launched, Nasdaq - the high-profile US stock market favoured by many high-tech companies - announced that it would launch in Europe next year. Nasdaq's next stop is Japan in 2001. Like techMark, Nasdaq hopes to attract some of Europe's fastest-growing companies. Also, an eight-bourse consortium led by London and the main Deutsche Boerse in Frankfurt is due to launch a pan-European link-up late next year. One could assess the present rally in shares of IT companies as more of the same as the City belatedly catches up with the latest IT industry trend. However, be careful not to dismiss it too easily. The next millennium promises to be a very positive one for the IT sector. Investors are now more attuned to the message, and the plethora of stock markets will keep the profile of the IT industry high.
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