After a first half contraction as a result of the global economic crisis, and a modest pick-up in Q309, the final quarter of 2009 brought strong growth in US PC shipments and signs of im
Trang 2Business Monitor International
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INFORMATION TECHNOLOGY REPORT Q2 2010
INCLUDES 5-YEAR FORECASTS TO 2014
Part of BMI’s Industry Report & Forecasts Series
Published by: Business Monitor International
Publication date: April 2010
Trang 4CONTENTS
Executive Summary 5
SWOT Analysis 8
US IT Sector SWOT 8
US Telecoms SWOT 9
US Political SWOT 10
US Economic SWOT 10
US Business Environment SWOT 11
IT Business Environment Ratings 12
Table: Regional IT Business Environment Ratings 14
Market Overview 15
Government Authorities 15
Overview 16
Hardware 18
Software 22
Services 25
Industry Developments 27
Industry Forecast Scenario 29
Table: US – IT Sector (US$mn Unless Otherwise Stated) 32
Internet 33
Table: Telecoms Sector – Internet – Historical Data And Forecasts 33
Macroeconomic Forecast 35
Table: US – GDP Contribution To Growth 39
Competitive Landscape 40
Hardware 40
Software 42
IT Services 46
Company Profiles 48
HP 48
Dell 50
Microsoft 52
IBM 54
Country Snapshot: US Demographic Data 55
Section 1: Population 55
Table: Demographic Indicators, 2005-2030 55
Table: Rural/Urban Breakdown, 2005-2030 56
Section 2: Education And Healthcare 56
Trang 5Table: Employment Indicators, 2001-2006 57
Table: Consumer Expenditure, 2000-2012 (US$) 57
Table: Average Annual Wages, 2000-2012 (US$) 58
BMI Methodology 59
How We Generate Our Industry Forecasts 59
IT Industry 59
IT Ratings – Methodology 60
Table: IT Business Environment Indicators 61
Weighting 62
Table: Weighting Of Components 62
Sources 62
Trang 6Executive Summary
Market Overview
US spending on IT products and services is forecast to reach US$629.3bn by 2014
In BMI’s core forecast scenario, US spending on IT goods and services will reach US$511.4 in 2010 and
then advance at a compound annual growth rate (CAGR) of 5.3% over our five-year forecast period After a first half contraction as a result of the global economic crisis, and a modest pick-up in Q309, the final quarter of 2009 brought strong growth in US PC shipments and signs of improvement in key IT spending verticals
Key market drivers are expected to include:
Growing fixed and mobile broadband penetration
Product innovation such as feature-rich netbooks
Technology innovation such as GPS technology and services
Business model innovations such as virtualisation and software-as-a-service (SaaS)
Economic recovery
Businesses are likely to remain cautious in 2010, despite a slight pick-up towards the end of 2009,
and positive Q409 revenue reports from some leading US IT vendors The recession may have had a lasting impact on the IT market by creating the conditions for the popularity of low-cost netbooks and notebooks and encouraging consideration of new IT delivery models such as SaaS In the light of these and other changes, major vendors have also adjusted their competitive strategies
Industry Developments
In August 2009 the federal government reported on its 2009 calendar year IT spending
Trang 7In full-year 2009, total IT spending including all federal IT investment was measured at US$74.2bn, up 1.99% on the previous year’s total of US$72.8bn In 2010, budgeted federal IT spending is set to rise to US$78.4bn
In September 2009, HP’s EDS unit won a US$30mn contract from the US Department of the Treasury’s
Office of the Comptroller of the Currency (OCC) to provide and maintain end-user computing resources and mobility services
been particularly successful in using the lower priced notebooks trend to bolster its position
Microsoft received credit for a much smoother launch of Windows 7 compared with its previous
operating system, due in large part to better cooperation with other players in the software value chain, including PC vendors and end-users A wave of new PCs were released in Q409 with the new operating system, while Acer and Dell said that, as of launch date, there was zero inventory of Vista machines going into stores
Consolidation is expected to continue to shape the IT services landscape over BMI’s forecast period
In October 2009, computer hardware giant Dell made a US$3.9bn purchase of Perot Systems, while Xerox followed later in the month with its US$6.4bn acquisition of Affiliated Computer Services
Meanwhile, HP said that its integration of EDS was ahead of schedule
Computer Sales
The US addressable market for PCs and accessories is estimated by BMI at US$115.5bn in
2010, with low single-digit growth compared with 2009
Trang 8US PC sales leapt forward in Q409, due to stronger than expected holiday sales, the release of Microsoft Windows 7, and a low base in Q408 In H109 PC shipments were down between 1-2%, compared with the same period of the previous year
Notebooks are the fastest growing PC market segment and were on course to account for around 58% of unit sales in 2009, rising to a projected 81% by 2014 Netbooks are forecast to account for around 12% of notebook sales in the US last year However, the netbook growth trajectory should flatten as the price differential with fully featured notebooks becomes less significant
IT services spending is expected to record growth of 5.5% in 2010, after a sharp deceleration last
year Spending on IT services is quite closely correlated with GDP growth: bad news in a recession
In early 2009 many vendors reported that they were not seeing many major blow-offs on existing deals The most severely hit area is likely to be softer project-type spending such as consulting and software development In the near term, budgets had often already been commissioned, and so the effects were more likely to be felt in the second half of 2009 and in 2010
Trang 9SWOT Analysis
US IT Sector SWOT
Strengths The largest IT market in the world with spending forecast to pass US$500bn in 2010
Despite currently challenging trading conditions, overall IT spending still expected to remain in positive growth territory
Weaknesses In 2009 customers were postponing projects and cutting back on short-term spending,
particularly in areas such as consulting and software development
Opportunities Low base level of sales in H109 should allow for rapid growth at least in the first half
of 2010
As the recession eases, vendors should see more growth in other traditional spending IT verticals such as banks and financial organisations, retail and manufacturing
big- Growing popularity of mobile broadband networks in the US driving netbook sales
New business models like SaaS and virtualisation will continue to make progress
Threats A risk that recovery could be anaemic in 2010, in which case tech spending could
have another hard year
Trang 10US Telecoms SWOT
Strengths Market dominated by postpaid subscribers generating high average revenue per
user (ARPU)
Strong competition with four national operators and several smaller regional players
Strong mobile virtual network operator (MVNO) growth has helped to maintain market growth
Value-added services (VAS) already form a large proportion of revenues
Weaknesses Consolidation in the market has seen the number of regional operators reduced
while national operators get stronger
Market tends to slow steady growth and has yet to reach 100% penetration
ARPUs have fallen as a result of subscribers tightening their belts and the offerings from prepaid operators, creating lower-priced services
Market split between two technologies: CDMA and GSM
Handset exclusivity means vendors cannot sell to the entire market
Opportunities Low-cost unlimited tariffs offer the chance to retain subscribers in the economic
downturn rather than have subscribers move to prepaid services
Expansion of mobile networks, particularly for 3G services, means continued contract opportunities
Data ARPUs increasing and wide variety of mobile content on offer creates chances
to boost revenues from non-voice services
Threats The US economy was among the worst hit by the global economic downturn, with
customer confidence plummeting and subscribers lowering their spending
Weaker dollar has made the cost of contracts higher from external vendors
Trang 11US Political SWOT
Strengths The US is an undisputed superpower and therefore occupies centre stage in
most international diplomacy
A long-standing democracy with vigorous and open political debate
The US continues to attract large numbers of immigrants committed to citizenship and self-advancement
Weaknesses Political debate between Republicans and Democrats has historically shown a
tendency to become more polarised and divisive
As today’s superpower, the US attracts the enmity of a wide range of political groups opposed to the current international status quo
Opportunities The changing political mood (as evidenced by the popularity of unconventional
candidates in the 2008 presidential election, including Obama) and the widespread dissatisfaction of the voting public may encourage both major parties to experiment with more consensual approaches to certain policy areas
Threats The perception of inflexibility and bias in US foreign policy, particularly in the
Middle East, may stiffen opposition and, in a worse case scenario, provide a fertile recruiting ground for radical anti-US groups such as al-Qaeda.Partly as a reaction to foreign policy difficulties, US public opinion may return to isolationist and protectionist modes
US Economic SWOT
Strengths The world’s largest economy with an impressive record of entrepreneurial
dynamism, innovation and a high research and development spend
Despite some threats to its reserve status, the US dollar is treated as an international currency, meaning that investors around the world are prepared to hold US debt Because of this, the US is uniquely able to run large fiscal and current account deficits
Weaknesses Despite the dollar’s role as an international currency, excessive US debt levels
are a risk A decision by Japanese and Chinese central banks to reduce their larger dollar holdings could cause sharp falls in the value of the US currency
Low savings rate by US households, although this has begun to reverse
Opportunities Further liberalisation of international trade through the WTO, coupled with a
more competitive dollar exchange rate, could boost export growth and help restore balance to the US’s external imbalances
Threats Intensified competition from China and other low-wage economies could
accelerate the loss of manufacturing jobs
Large growth in public spending, coupled with tax cuts, will worsen the fiscal deficit, eventually forcing more restrictive monetary policy and slower growth
Trang 12US Business Environment SWOT
Strengths The US boasts the world’s largest single internal consumer market, which
presents tremendous opportunities for businesses of all types and sizes
Few countries offer better environments for entrepreneurial activity, with a highly flexible labour force, a legal system that is friendly to business and significant centres of technological innovation (such as California’s Silicon Valley)
Weaknesses Much of the country’s physical infrastructure is in need of improvement, with
congested roads and airways
US corporate tax is, on average, among the highest in the OECD
Opportunities The Obama administration is committed to improving the nation’s infrastructure,
with stimulus package funds being dedicated to that purpose
The US has often been the origin of new drivers of economic growth booms, and sectors ranging from biotechnology to alternative energy are being discussed as possible catalysts
Threats Government intervention in the economy puts the country’s reputation for free
enterprise at risk
Trang 13IT Business Environment Ratings
BMI’s Americas IT Business Environment Ratings compare the potential of a selection of the region’s
markets over our forecast period, through to 2014 The ratings reflect our consideration of political and economic risks, as well as risks associated specifically with IT intellectual property rights protection and the implementation of government ICT projects
The US is the largest IT market in the region – and indeed the world – and accounts for around 25% of global IT spending Despite the challenge from faster growing IT markets of countries such as China and India, the US is forecast to maintain its global IT market leadership position for some time After three quarters of decline, the second half of 2009 brought a return to growth in US PC shipments and signs of improved confidence in key IT spending verticals
Across both consumer and business segments, US IT spending is expected to have a number of drivers, including the growing popularity of mobile broadband networks, product and technology innovation as well as economic recovery The economic downturn may have accelerated the growth of outsourcing of non-core processes and given additional momentum to IT delivery models such as software-as-a-service (SaaS)
The Latin American economic outlook has improved in Q210 and six of the regional markets covered by
BMI have received upgrades in our Country Structure scores this quarter Low PC penetration means
continued growth potential in a region characterised by significant income and geographical disparities
In many markets, increased penetration of credit cards and credit availability from stores, as well as a growing organised retail sector, should contribute to growth
Brazilian IT spending is expected to bounce back in 2010, as the economy makes a strong recovery from the recession Brazil is our second highest-ranked Americas market, ahead of Mexico in third Brazil scores higher than Mexico on both market and country risk factors, but both have strong growth drivers Meanwhile, Chile’s fourth place reflects its status as one of the most developed markets in the region Chilean IT spending dipped into negative growth territory during 2009, but is expected to bounce back in
2010
In fifth place, Argentina’s IT spending is projected by BMI to grow at a CAGR of 10% over 2010-2014
Recovery after 2010 will be driven by rising incomes, expanding retail channels and more flexible terms from retailers Peru and Colombia are in sixth and seventh spots respectively Peru’s free trade agreement (FTA) with the US will boost demand for IT products and services The regional structure of the Peru
Trang 14Meanwhile, Colombia’s consumer-driven economic boom of the past few years has faded, but a PC penetration rate of around 10% is one of the lowest in the region and indicates untapped potential
Venezuela’s last place in our rankings reflects BMI’s judgement that the economic situation and business
environment in the country are unfavourable for IT spending growth, with consumer-driven growth of recent years cooling due to economic uncertainty, the collapse in oil prices and currency devaluation
There will continue to be areas of opportunity, but BMI anticipates another difficult year in 2010
Brazil and Mexico account for around 75% of PC sales in Latin America, with economic growth lifting millions into a computer-owning middle class However, Brazil currently ranks higher than Mexico on grounds of market size, as well as country risk environment At twice the size of Mexico’s market, Brazil
is already estimated to be the fifth largest PC market in the world Growing broadband penetration, including 3G mobile, will drive the PC markets of both countries
BMI projects that Mexican IT spending will grow again in 2010, despite continued economic
uncertainties Close ties with the US are a long-term driver of IT opportunities; for example, the city of Monterrey is developing as an important outsourcing hub There should also be opportunities in key IT verticals such as financial services, telecoms and government, with other growth sectors in 2010 set to include healthcare, utilities and small and medium-sized enterprises (SMEs)
Despite business environment improvements, there are structural inhibitors in Mexico and Brazil In Brazil, these include a significant digital divide and bureaucracy Mexico has a heavily regulated labour market, while another negative factor is the government’s austerity drive
Chile’s fourth place, ranking ahead of Argentina, is partly earned by having the highest country risk rankings of any of the states in our Latin America table However, with PC penetration of only 18% in Chile and 22% in Argentina, there is considerable room for growth in both states Continued PC sales growth is expected in Argentina, where IT spending is being driven by factors such as greater credit availability and growing broadband penetration In both Chile and Argentina, government ICT policies support market growth
Both Peru and Colombia offer opportunities despite some business environment risks Peru’s market will receive a boost from the FTA with the US There are opportunities in sectors such as banking and
financial services, telecoms, retail, mining and SMEs Government programmes are also a factor,
particularly PCs for schools In Colombia, the government regards ICT as a means to advance its central
Trang 15Investment in Venezuela is likely to remain relatively low, given the political environment, which is increasingly adverse for private investment However, computer shipments should still grow, thanks to government affordable computer programmes and more local production of computers The government’s 2007-2012 Economic Plan has a key role for technology in development and various public bodies are rolling out e-infrastructure projects However, concerns remain about currency devaluation, import restrictions and government policies on issues such as open-source software, which will require investor caution
Table: Regional IT Business Environment Ratings
Limits Of Potential Returns
Risks To Realisation Of
Returns
IT Market
Country Structure Limits
Market Risks
Country Risk Risks
IT BE Rating
Regional Ranking
weighting respectively and are based on a subjective evaluation of industry regulatory and IP regulations (Market) and the industry’s broader Country Risk exposure (Country), which is based on BMI’s proprietary Country Risk ratings The ratings structure is aligned across the 14 industries for which BMI provides Business Environment Ratings methodology and is designed to enable clients to consider each rating individually or as a composite, which the choice depending on their exposure to the industry in each particular state For a list of the data/indicators used, please consult the appendix
at the back of the report Source: BMI
Trang 16Market Overview
Government Authorities
Government Authority National Telecommunications and Information Administration (NTIA),
Department of Commerce
Assistant Secretary for Communications and
The Department of Commerce (DoC) regulates various information technology industry-related areas The DoC is host to several agencies including the National Telecommunications and Information
Administration (NTIA), which advises the president on telecommunications and information-related issues
NTIA itself has several sub-bodies including:
The Office of International Affairs, which helps to foster the ability of US IT companies to compete abroad
The Office of Policy Analysis and Development
The Office of Telecommunications and Information Appliances (OTIA)
Major programmes run by the OTIA include:
The US$4.7bn Broadband Technology Opportunities Program to develop broadband services to underserved areas
A programme to drive the transition to digital television
The Department of Commerce also hosts the National Institute of Standards and Technology, which is a non-regulatory agency that promotes US innovation and standards
Various other federal government ministries are also relevant to IT vendors
Trang 17 Several departments including the Department of Defense, Homeland Security, Health and Human Services, and the Department of Commerce itself are major purchasers of IT products and services
The US Treasury is in charge of tax issues affecting the US industry, including such issues as R&D tax subsidies
The Office of E-Government and Information Technology within the Office of Budget Management is responsible for monitoring federal IT spending across federal departments Overview
The US accounts for around 25% of
global IT spending in terms of both size
and value
Despite the current recession, and the
faster growing IT markets of countries
such as China and India, the US is
forecast to maintain its global IT market
leadership position for some time
BMI estimated US IT spending at around
US$490bn in 2009 As a mature market,
BMI assumes that IT services accounts
for around 44% of US IT spending,
compared with 27% for hardware and 29% for software
Each segment is comprised of several sub-segments In the hardware segment, notebook computers now account for around 58% of sales, and this share is expected to rise to 81% by 2014, pushing desktops down to less than one-fifth of unit sales A major driver will be sales of netbooks, which now account for around 12% of sales, although the netbook growth trajectory will flatten as the price differential with fully featured notebooks becomes less significant
IT Spending 2009
US$bn
Source: BMI forecasts
Trang 18Software also comprises several
segments The business software market
(packaged software), including enterprise
resource management, customer
relationship management, human
resources management, financial
applications and so on, as well as
business intelligence and other
information-enabling applications, is
estimated to account for around one-third
of revenues Middleware, including
systems management and database
management software, accounts for
between 15-20% of spending Operating
systems of PCs, servers, and mainframes, as well as storage systems, account for around 20% of
spending Internally developed software accounts for a declining share of the market The software market is being transformed with the rise of the SaaS delivery model
The main segments in IT services include
implementation, systems integration (SI),
maintenance and service, as well as
higher value services such as consulting
and software development, and managed
services/outsourcing
BMI counts most custom-developed
software in IT services
Custom-developed software has declined in
importance as packaged software has
become more specialised and customised
to particular industries, and it may now
account for around 10% of commercial
Trang 19The two largest IT spending verticals are
discrete manufacturing and government,
which have typically accounted for
around 10% of total IT spending each
Banking has traditionally also accounted
for a similar amount although it remains
to be seen what will happen to bank IT
spending in the wake of the financial
crisis Other significant IT spending
verticals include retail, wholesale,
telecoms and construction
US consumers are sophisticated and
enthusiastic consumers of consumer
electronics products including computers According to the Consumer Electronics Association, the average US household spent US$1,405 on consumer electronics products during the period March 2007-
March 2008 Meanwhile, BMI estimates IT spend/capita was just below US$1,600 in 2009 However, a
mature market with high penetration rates requires product and technology innovation to drive continued growth: the average US household has 2.5 PCs
Hardware
BMI forecast that the US computer and accessories market will grow 3.2% in 2010 after a robust
performance in Q409 PC market 2010-2014 CAGR is projected at 3.5% and value could reach the US$132bn mark by 2014
2009 Performance and 2010 Outlook
US PC sales leapt forward in Q409, due to stronger than expected holiday sales, and a low base in Q408
Volume PC sales were up by at least 25% according to market research firms Gartner and IDC The US addressable market for PCs and accessories is estimated by BMI at US$115.5bn in 2010, with low single-
digit growth compared with 2009 In H209, the US PC market finally showed signs of recovery, with low single-digit growth in Q309, following three consecutive quarters of shipments decline In H109 PC shipments were down between 1-2%, compared with the same period of the previous year Sales
contracted around 1% in Q109 and 2% in 2009
The recovery in Q409 was based however mainly consumer purchases of notebooks, while the corporate
PC segment remained sluggish Low priced notebook and netbooks were the main drivers, along with the
Software: Segments
2009
Source: BMI forecasts
Trang 20launch of Windows 7, and vendor and retailer promotions Vendors targeted consumers with aggressive marketing and price points which eroded profitability
However, the downside to this was significant downwards pressure on prices, with consumers unwilling
to pay big bucks, and looking for good enough solutions to their computing needs Lower prices were also driven from the supply side, with vendors competing fiercely due to the market slowdown, and the disruptive popularity of low-priced netbooks
The strong response by consumers in this environment to netbooks and ultra-slim laptops ended up pushing prices of notebooks into the sub-US$500 range Average PC selling prices were estimated to
have fallen by around 20% as between 2008 and the first half of 2009 However, BMI believes that prices
will remain relatively stable in 2010
The credit crunch and consumer and business retrenchment contributed to the slowdown, which started in Q408, after demand had remained fairly robust through the first three quarters of the year According to the United States Information Technology Industry Statistics service, the replacement rate for desktop PCs had stretched from four years to five years, and for notebooks to around three years, due to the economic uncertainty
Annual computer sales are forecast at 69mn units this year, up from around 66mn in 2009 Shipments are projected to reach 84mn by 2014 Despite the challenging trading conditions in 2009, vendor reports indicated that many segments of the US computer market proved surprisingly resilient Particularly in Q409 he market has outperformed, not only analyst expectations, but also some emerging markets
Business demand remained sluggish going into 2010 Businesses are expected to maintain a cautious attitude to IT investments in 2010 due to uncertainty about the economic recovery, but there could be a boost, particularly in the second half of the year, from computer hardware tenders delayed from 2009 In
2010, sales of Microsoft’s new Windows 7 operating system, and new Core technology, have the
potential to help trigger a new cycle of hardware upgrades Much will depend on business confidence
The launch of Windows 7, in October 2009, reportedly saw closer collaboration between Microsoft
and leading PC vendors like HP, Acer and Dell Both Acer and Dell said that, as of launch day, there was
to be zero inventory of Vista-based machines going into stores However, Windows 7 requires less power than its predecessor, Vista, and so there is a possibility that some consumers may simply decide to
upgrade their existing machine rather than buy a new one
Trang 21Prior to the global economic crisis, PC sales had growth peaked in Q308, but then fallen off as the effects
of the crisis started to impact consumer confidence The two leading PC vendors HP and Dell saw sales decline by around 4% and 16% respectively in that period Dell was harder hit because of its relatively greater reliance on desktops and the enterprise segment There were reports of some companies deferring spending as tighter margins and flagging export sales increased a focus on the bottom line
Segments
Notebooks are the fastest growing PC market segment and projected to be on course to account for nearly 60% of unit sales in 2009, rising to a projected 81% by 2014 Netbooks are forecast to account for around 12% of notebook sales in the US last year Some evidence from Q209 suggested that the ratio could be even higher, perhaps even above 20%
The netbook growth trajectory is expected to flatten as the price differential with fully featured notebooks becomes less significant Meanwhile, enhanced versions of netbooks with features like larger screens and more powerful processors should further blur the line between the two categories
The popularity of netbooks in H109 drove a big increase in shipments for the notebook category as a whole, accounting for around 80% of notebook segment growth Meanwhile, in H109 commercial sales
of desktops and notebooks fell by a double-digit factor, and commercial desktop purchases were also down Desktop sales declined in both consumer and commercial segments and are expected to
comprise less than one-quarter of the PC market by 2014
Drivers
Back-to-school sales were an important driver of the recovery in PC shipments in Q309 Even in H109 the consumer channel was the main growth area, with consumers continuing to spend on notebooks, despite the recession Consumer spending was stronger than anticipated and should continue to drive opportunities going forward Lower prices and product innovation apparently offset some of the effects of falling consumer confidence
One additional driver both of increased sales and of lower prices is the move of telecoms operators into the PC retail space With increasing mobile and fixed broadband penetration, notebooks and netbooks have become popular wireless connectivity options for consumers As in other markets, telecoms
operators have emerged as significant distribution channels for netbooks, which are offered to subscribers
bundled with broadband service packages AT&T and Verizon have moved quickly to offer these to
subscribers for subsidised prices of as low as US$50
Trang 22The continuing build-out of Wi-Fi networks in major cities is also an important driver of demand for netbooks Studies have suggested a relatively greater demand in cities such as New York, San Francisco and Boston, where Wi-Fi is relatively ubiquitous
Netbooks
While the popularity of netbooks was well timed to help offset PC market stagnation during the global economic slowdown, some vendors expressed concern that the cheaper portable computers would erode
margins for the industry The recession has boosted the fortunes of lower priced Taiwanese vendor Acer
in the US this year, while traditionally higher end vendors like Apple have suffered Notebook prices in
the US$500-600 range are already common Intense competition in the current economic climate and a reduction in component prices and manufacturing costs are among other drivers of low prices
Netbook prices were expected to stabilise at around the US$350-400 level during the 2009 back-to-school
season In Q409 the launch of a new version of Intel’s Atom chip, code-named ‘Pine Trail’, was
scheduled with the new chip billed as a cheaper, and more efficient, version than the current Atom, which helped to drive the netbook explosion
A future industry trend is likely to be vendor concentration on ultra-thin notebooks, or power-saving notebooks computers, which can potentially bridge the divide between netbooks and fully fledged
notebooks Netbooks are also likely to be enhanced, with larger screen and hard-drive sizes
NetTabs
It is anticipated that this year will see the emergence of the NetTab, a new form factor device between the size of a smartphone and a netbook NetTabs are being designed to appeal to consumers who find a smartphone inconvenient for consuming video media, or surfing the web, but for whom a netbook is still too big or heavy NetTabs are expectedly to be significantly more expensive than smartphones, and between US$400-US$800, and despite a previous mixed track record with this form factor, are seen as a growth area in 2010-2011
Trang 23Software
Software CAGR for 2010-2014 is
projected at around 8.0%, as the
addressable market grows to around
US$188.8bn In the current economic
climate, business software vendors will
look to pitch efficiency gains, as
declining margins encourage companies
to focus on reducing costs
2010 Outlook
It is forecast the US software market will
be worth US$148.3bn in 2010, with
single-digit growth from 2009 Sales of
Windows 7 are expected to provide a
boost to the operating system market in
2010 This year should see a boost from systems upgrades deferred from last year when the economic crisis had an impact across sectors Strong economic headwinds led some companies to review IT budgets
or look to defer systems updates and may have given additional momentum to alternative software models such as SaaS and cloud computing
Piracy
Despite being an advanced market, it is still estimated that around 20% of software used in the US in
2008 was illegal or pirated According to lobbying group the Business Software Association, total losses from illegal software in the US market were around US$9bn in that year The industry continues to push for stiffer penalties Legal history was made in H109 when a 39-year-old woman received a six-month jail sentence in federal prison for selling illegal software
Operating Systems
BMI estimates that operating systems and storage software account for around 10% of the US software
market Growing PC sales have driven the share up from around 5% a few years ago PCs account for about 40% of the operating system segment, with servers, mainframes and storage devices making up the rest
The launch of Microsoft’s Windows 7 operating system in October 2009 was the most significant event for Microsoft since the launch of Windows 95 Windows Vista ran into problems when business users
Netbooks Share Of Total Notebook Shipments
Oct 2008-April 2009
Source: The NPD Group (2009)
Trang 24found that many of their business applications could not run on the Vista operating system There were also complaints from both business and household users about performance defects, generally due to the large amount of processing power and memory required by Vista By all accounts, the Windows 7 launch went much more smoothly, thanks to closer cooperation in the pre-launch period between Microsoft and other players in the software value chain, including PC vendors and end-users
Microsoft has a lot riding on the new release, given the continuing challenge from open source The company has taken a couple of steps to fix perceived problems with Vista On the compatibility problem, Microsoft has tackled this with a free extension to Windows 7 called XP Mode This allows users to run Windows XP applications on Windows 7 According to estimates, as many as one in five Vista users had found that they could not run XP applications on the new operating system Secondly, Windows 7 will use less processing power and memory than Windows Vista
BMI projects that Windows 7 will provide a boost to the operating system software market in 2010 The
new system will attract more support from businesses than Windows Vista did, largely because Windows
XP is now getting old Businesses that declined to upgrade from XP to Vista, due to reported problems with the latter, will now go straight to Windows 7 Microsoft will still offer reduced support for XP until
2015, but many hardware manufacturers will start to wind down their support from about 2012 This, as much as the lack of support from Microsoft, will be the factor that drives business upgrades to Windows
7 Microsoft also argues that Windows 7 can help businesses to save costs, enabling IT departments to be run more efficiently
Windows 7 is better suited to virtualisation than either Windows XP or Windows Vista Virtualisation looks set to become an important trend in IT in the next few years and allows businesses to simplify the management of desktop PCs by running desktop applications and storing user data within the data centre Given the current economic climate, however, IT directors will need to justify any upgrade in terms of cost savings
Open Source
The economic downturn was projected to add to the trends that are driving adoption of open source software The desire to make savings has led some businesses and customers to look more closely at open source software However, many customers have by now made a realistic assessment of the advantages and disadvantages of open source and have adopted a practical approach
A key issue and precondition for the more widespread adoption of open source will be the development of
Trang 25software BMI expects this trend to continue with the development of more support infrastructure for the
most important open source applications
Most netbook computers originally came with open source Linux operating systems due to the heavy systems requirement of Windows Vista Netbooks were therefore seen as a threat to Microsoft’s revenues However, Microsoft has fought back by allowing netbooks to ship Windows XP, bringing its market share back up
Business Software
Business software is estimated to account for around 50% of total US software revenues Spending on applications such as enterprise resource planning (ERP), customer relationship management (CRM), financial management systems and information software is perhaps around 60% of the sub-category total Middleware, such as database management systems and systems management tools, accounts for around 40%
The majority of enterprise software demand, in functional terms, is currently for ERP and supply chain management Despite a relatively mature market, there still remains plenty of potential for ERP
implementations in industries such as consumer products, telecommunications, energy, engineering, construction, transportation, food & beverage, retail and metal working
ERP demand drivers include increasing operational efficiency, coordinating global supply chains and modernising logistics and warehouse functions Meanwhile, business intelligence and other information-enabling software will continue to be one of the fastest growing product areas
Software is often seen as an investment that helps to save costs and that will make an impact on the
bottom line However, over BMI’s five-year forecast period, more investment can be expected to be in
utility software and serviced-oriented architectures rather than traditionally packaged PC software Major application areas such as ERP, CRM and business intelligence, security and supply chain management are increasingly being delivered this way
Surveys indicate that an average ERP implementation for manufacturing and distribution companies takes
around 19 to 20 months, with an average sales cycle of around four months A survey by Panorama Consulting Group found that average total cost of ownership was in the region of US$8.6mn
Companies spent around 23% of the total implementation budget on business implementation costs, including third-party consulting
Trang 26Cloud Computing And SaaS
The economic crisis may have given lasting additional momentum cloud computing business models where applications are hosted on a centralised server and accessed remotely Most cloud computing currently comprises of consumer applications such as webmail, social networking, and ecommerce applications However a combination of enterprise objectives such as cost reduction and greater
efficiency should combine to drive more adoption of cloud services in 2010 The biggest software
opportunities will be in non-critical file storage, or customer-facing applications such as CRM
Sales in the business SaaS segment by vendors such as Google and Salesforce.com continued to grow
during the economic downturn SaaS has won more acceptance as smaller businesses have increasingly had to meet performance, visibility and compliance standards previously expected more of larger
companies SaaS potentially enables these smaller companies to meet these needs cost-effectively,
enabling them to compete and offer better service
Larger companies, particularly in the technology sector, are also now experimenting with an on-demand
software model Leading sector company Salesforce.com counts Cisco and Dell among its accounts, with
around 30,000 and 40,000 subscribers at each company respectively as of mid-2009
Services
IT services spending is expected to record growth of 5.5% in 2010, after a sharp deceleration last
year Spending on IT services is quite closely correlated with GDP growth: bad news in a recession
2010 Outlook
It is estimated the US IT services market will be worth US$227.3bn in 2010 with a ramp up of spending
after a sharp deceleration in 2009 compared with 2006-2008 Infosys and IBM both cut 2009 revenues
projections last year However, the most pain was felt by vendors that are more exposed to the crisis-hit financial sector
In early 2009 many vendors reported they were not seeing many major blow-offs on existing deals However, there were reports of IT managers in various sectors reviewing spending In the near term, budgets had often already been commissioned, and so the effects were more likely to be felt in the second half of 2009
Verticals
Trang 27were responding by trying to diversify away from financial services to other verticals and by targeting resources at markets outside the US
Early signs, however, were that many large companies in key IT verticals such as finance had maintained previously budgeted spending A Society For Information Management (SIM) survey at the end of 2008 found that around 80% of IT officers expected IT budgets to increase or remain the same in 2009 Much will depend, however, on the strength and timing of US and global economic recovery, which remains a subject of debate among economists The likelihood of IT budgets being cut will increase the longer the slowdown lasts
Segments
The most severely hit area is likely to be softer project-type spending such as consulting and software development Contractors are being cut and hiring frozen as customers postpone projects and cut back on short-term spending particularly in areas such as consulting and software development
Outsourcing, which is to some extent countercyclical, is likely to be less affected, even if the view that recession actually acts as a driver for outsourcing spending does not necessarily hold up As companies come under cost pressures, some may use outsourcing as a way to reduce costs However, the main beneficiaries are likely to be service providers in major global destinations such as India and the
Philippines The same goes for offshore software development
Custom software development has been moving to lower cost countries for many years India remains the main destination but faces competition from other suppliers such as Eastern European countries, Ireland, Israel, Russia and China Spending on application development tools has grown substantially in the past decade
Trang 28Industry Developments
2009 Federal IT Spending
In August 2009 the federal government
reported on 2009 calendar year IT
spending In full-year 2009, total IT
spending including all federal IT
investment was measured at US$74.2bn,
up 1.99% on the previous year’s total of
US$72.8bn A total of 7,409 investments
were made; 781 investments made by
federal agencies were classified as
‘major’ These major investments
accounted for US$38.6bn of the total
The Department of Defense was the
largest spending department again, with US$33.0bn spent, down from US$37.0 the previous year The Ministry of Homeland Security ranked second with US$6.2bn, up from US$5.3bn the previous year Health and Human Services spent US$5.9bn up from US$5.6bn
Looking forward to 2010, budgeted
federal IT spending is set to rise to
US$78.4bn The biggest spending agency
is once again projected to be the
Department of Defense, with budgeted
spending of US$33.4bn However, the
largest budgeted increase is for the
Department of Commerce, where IT
spending is set to increase from
US$3.6bn to US$6.4bn next year
Accountability
The government has rolled out a new
feature, ‘IT Dashboard’ to monitor IT
projects across the federal government This reflects pressure for cost cutting and increased efficiency in
Federal IT Spending (US$bn)
2009-2010
US Office of E-Government and Information Technology
US IT Spending By Federal Agency
2009
US Office of E-Government and Information Technology
Trang 29making related to IT projects, from accountability to personnel and contracting The information will be used to decide which projects should be cancelled
In Q309 the Department of Veterans Affairs announced that it would temporarily halt 45 IT projects that were either behind schedule or over budget and work to determine whether the projects should be
continued The total value of the projects was approximately US$200mn The worst offender was 110% over budget and 17 months behind schedule The move is part of the administration’s drive to make the federal government more transparent, accountable and efficient
Trang 30Industry Forecast Scenario
US spending on IT products and services is forecast to grow to US$511bn in 2010 and reach a level of US$629bn by 2014 After three quarters of decline as a result of the global economic crisis, the second half of 2009 brought a return to growth in US PC shipments and signs of improved confidence in some IT verticals The fourth quarter of 2009 saw PC shipments leap at least 25%, and while this was mainly due
to consumer notebook purchases, there was also a slight pick-up in business spending
However, the recession may have had a lasting impact on the IT market by creating the conditions for the popularity of low-cost netbooks and notebooks, and encouraging consideration of new IT delivery models such as SaaS In light of these and other changes, major vendors have also adjusted their competitive strategies
2010 Outlook
In our core forecast scenario, IT market growth will increase advance at a CAGR of 5.5% over our year forecast period Key drivers will include growing mobile and fixed broadband penetration, product innovation such as feature-rich netbooks, technology innovation such as GPS technology and services, and economic recovery
five-In Q409, PC shipments leapt by around 25%, due mainly due to consumer demand for priced notebook and netbooks, along with the launch of Windows 7, and vendor and retailer promotions Economic uncertainty, high unemployment, and tighter credit conditions will continue constrain consumer spending this year and ensure that the market remains price sensitive Vendors had hoped that the launch of
Windows 7 would shift the market dynamic back towards fully featured PCs, but the initial impact was modest
In 2010 vendors will focus on new form factors, such as smaller notebooks which blur the distinction between a notebook and a netbook NetTabs are also projected to be a growth area in 2010-2011, and will appeal to consumers who find that smartphones are not convenient for web surfing or multimedia
Trang 31Overall the US IT market already showed signs of recovery in H209 from the effects in H109 of the economic and financial crisis sparked by the sub-prime lending market crisis PC shipments were up by nearly 4% in Q309, and by a double-digit factor in Q409, but revenues were hit by continued downwards pressure on prices Vendors competing for market share implemented price cuts which seriously eroded
margins However, BMI expects prices to remain relatively stable in 2010
Recovery
The low base level of sales in H109 should allow for rapid growth at least in the first half of 2010, similar
to the situation in Q409 BMI expects that IT spending could pick up quite quickly, once business
confidence returns and the recession has reached its trough Investment plans could be dusted off and resumed However, there remains a possibility that the economic recovery could be anaemic in 2010, or even that there could be a ‘double-dip’ recession, in which case tech spending could have another hard year
Regardless of the exact strength and timing of the recovery, the current economic environment will offer some opportunities to vendors The tough trading conditions for many businesses have strengthened the need to reduce costs through improved data management and other efficiencies
Drivers
Across both consumer and business
segments, the US IT market is expected
to have a number of drivers One is the
growing popularity of mobile broadband
networks in the US and applications such
as location-based-services that are based
on these These are boosting demand for
netbooks and notebooks, which are
increasingly favoured for connectivity
In the consumer segment, the
affordability of netbooks compared with
traditional notebooks has helped to
prevent stagnation in the notebook category Telecoms carriers such as AT&T have played a part in this
by bundling subsidised netbooks with service contracts for as little as US$50 Notebooks meet consumer demand, not only for mobile connectivity and work productivity, but also entertainment
IT Spending – Segments
2007-2013 (US$bn)
Source: BMI
Trang 32SaaS, the rented software model, is expected to be increasingly important Vendors are now rolling out more customised SaaS solutions for small and mid-sized businesses Virtualisation is making headway and will continue to do so, and virtualisation is proceeding to more and more parts of the data centre
The current economic downturn may also have accelerated the growth of outsourcing of non-core
processes and a shift Already more and more software development has been outsourced to India and other locations, and vendors will be able to make the case that external spending on IT solutions can help the bottom line and add to efficiency
Segments
Government remains a key end-user, with federal IT spending budgeted to increase to US$78.4bn in 2009
as governments at federal state and local levels continue to issue IT tenders New government
programmes, including the possibility of an expansion of healthcare, will generate lucrative new
opportunities for IT vendors
As the recession eases, vendors should see more growth in other traditional big-spending IT verticals such
as banks and financial organisations, retail and manufacturing With a wave of mergers and acquisitions expected in the banking industry in the wake of the fallout of the financial crisis, more opportunities should be generated
Small businesses represent a particular vendor target There are more than 8mn small businesses in the
US, which represents a substantial market However, particularly in the current economic climate, there are significant differences between the needs of businesses in different industries Increasingly, vendors will need a customised approach based on industry-specific needs, such as has long been offered to larger companies
Summary
The hardware market is predicted to grow from US$135.8bn in 2010 to US$155.2bn in 2014 Software spending should rise from US$148.3bn to US$188.8bn, and IT services from US$227.3bn to US$285.3bn over the forecast period