1. The Race Is On! Which States and Vertical Markets Should IT Vendors Target for Growth? Jessica Goepfert Program Manager U.S. Vertical Research Juan Orozco Senior Analyst Global Research Organization

2. Agenda  Economic outlook  Vertical IT budget and spending outlook  U.S. Black Book overview  Optimal investing for growth –Example of IT services firm  Essential guidance  Question & answer session

3. Assess the Current Condition GDP ↑

4. Assess the Current Condition

5. GDP ↑ Assess the Current Condition

6. GDP ↑ Assess the Current Condition

7. GDP ↑ On the path to recovery

8. Total North America Resources sector Banking & credit inst. Insurance Telecommunications Financial svcs. Retail trade Wholesale trade Communications Process mfg. Assess the Current Condition Resources, financial services, and telecommunications are most optimistic Q: What is your outlook on the business prospects for your organization today? N = 1,278 Source: IDC’s Enterprise Technology Trends Survey, Preliminary 2004

9. Assess the Current Condition Source: IDC, 2004 U.S. IT Spending Forecast Market Size (000s) 0 20 40 60 80 100 0%1%2%3%4%5%6%7% Financial services Manufacturing Retail and Wholesale Communications & Media Resources and Construction Health Care Services Transportation Utilities 5-Year CAGR %

10. Top Ten Largest States, 2003 IT Spending Source: United States Black Book: State IT Spending Vertical Market, 2004

11. Source: United States Black Book: State IT Spending by Vertical Market, 2004 1.California 2.New York 3.Texas 4.Illinois 5.Florida 6.Pennsylvania 7.Ohio 8.New Jersey 9.North Carolina 10.New Jersey Greatest IT Spend Spend 1.Arizona 2.Nevada 3.New Mexico 4.North Carolina 5.Connecticut 6.Utah 7.Maryland 8.Georgia 9.New Hampshire 10.Texas Highest CAGRS Top Ten States by IT Spending, 2003 1.California 2.New York 3.Texas 4.Illinois 5.Florida 6.Pennsylvania 7.Ohio 8.New Jersey 9.North Carolina 10.New Jersey 1.Arizona 2.Nevada 3.New Mexico 4.North Carolina 5.Connecticut 6.Utah 7.Maryland 8.Georgia 9.New Hampshire 10.Texas

12. Spotlight: Arizona  Arizona as a whole is recovering at a faster clip than the U.S.  Opportunity is around discrete manufacturing (high tech, aerospace and defense)  Motorola production facility at risk in Phoenix  Average cost of doing business in Arizona  A change in political party could impact aerospace and defense industry

13. Spotlight: North Carolina  Opportunity is in the banking industry  Positioned to recover at a pace faster than the nation, despite dependence on textiles  Wachovia and Banknorth Group are among the largest employers in the state  Lower cost of doing business

14. Manufacturing Financial Service Retail / Wholesale Up-and-Comers Vary by Vertical

15.  We’re a small IT services firm in NY  Our tasks: –Determine the best locations to set up new offices –Develop a sales and marketing strategy for a new banking solution  Criteria –Market coverage must be at least $15B in 2003 –Overall CAGR of at least 5% –Set up budget $1.5 M Set the Stage

16. Source: United States Black Book: State IT Spending by Vertical Market, 2004 Focus on IT Services in Banking New York 6.17% California4.60% Texas5.16% Illinois 6.00% North Carolina9.32% Florida4.15% Ohio5.67% Pennsylvania2.13% Michigan5.12% Georgia5.27%

17. Optimal Investment Solution Source: IDC, 2004 SolutionConstraints 2003 total market opportunity (M) 15,35315,000 CAGR (%) 6.6%5.0% Total investment$1,368,000$1,500,000 Texas

18. Essential Guidance  Plan for where the market is going, not just where it is  Recognize the various costs of doing business in a particular state  Take into account regional trends and cultural differences and tailor marketing accordingly  Cut through the hype and the noise  It’s not all about the data

19. Contact Info Questions? Please email us at Jessica Goepfert jgoepfert@idc.com Juan Orozco jorozco@idc.com

20. In Search of State IT Dollars Budget Shortfalls Will Impact 5 Largest States Source: IDC, May 2003. Preliminary data. Avg. CAGR = 5.2% IT Spending 5-Year CAGR (5 Largest States) 2002–’07 CAGR

21. Find New Top Spenders Source: IDC, May 2003. Preliminary data. Avg. CAGR = 5.2% IT Spending 5-Year CAGR (5 Fast Growing States) 2002–’07 CAGR