Forrester has just published our forecast for the 2014-2015 global tech market (January 2, 2014, “A Better But Still Subpar Global Tech Market In 2014 And 2015”), and we are predicting that business and government purchases of information technologies (IT) will grow by 6.2% in US dollars in 2014, and by 5.5% in exchange-rate-adjusted or local currency terms. (Note that this data includes purchases of computer equipment, communications equipment, software, IT consulting and systems integration services, and IT outsourcing services, but does not include purchases of telecommunications services.) The US dollar growth rate will be distinctly better than the 1.6% growth in US dollars in 2013, though constant currency growth will be only somewhat better than the 4.3% growth in 2013. Still, the global tech market won’t see strong growth until 2015, and even then the 8.1% US dollar and 6.9% local currency growth rates will be well below the double-digit growth rates of the late 1990s and 2000 era.
Three interconnected and reinforcing themes will define the global tech market this year:
As research for my upcoming report on cloud adoption among banks in Asia Pacific (AP), I’ve spent the past several months interviewing senior IT and business decision makers at banks and other financial institutions across the region. I’ve also met with banking regulators and spoken with cloud providers with a strong AP presence. Look for the full report early in the new year. In the meantime, I wanted to share some key findings.
Cloud adoption is among the top priorities for most banks in the region. In fact, contrary to popular belief, I’d categorize cloud adoption as nearly mainstream among banks in many parts of Asia Pacific. But adoption drivers vary based on the cloud approach. Private cloud initiatives, for instance, centered on data center transformation to drive improved operational efficiency and cost savings. Public cloud initiatives typically focus on expanding mobile banking capabilities and other customer-facing systems of engagement — the key to customer retention and overall growth.
I recently had a meeting with executives from Tech Mahindra, an Indian-based IT services company, which was refreshing for the both the candor with which they discussed the overall mechanics of a support and integration model with significant components located half a world away, as well as their insights on the realities and limitations of automation, one of the hottest topics in IT operations today.
On the subject of the mechanics and process behind their global integration process, the eye opener for me was the depth of internal process behind the engagements. The common (possibly only common in my mind since I have had less exposure to these companies than some of my peers) mindset of “develop the specs, send them off and receive code back” is no longer even remotely possible. To perform a successful complex integration project takes a reliable set of processes that can link the efforts of the approximately 20 – 40% of the staff on-site with the client with the supporting teams back in India. Plus a massive investment in project management, development frameworks, and collaboration tools, a hallmark of all of the successful Indian service providers.
From a the client I&O group perspective, the relationship between the outsourcer and internal groups becomes much more than an arms-length process, but rather a tightly integrated team in which the main visible differentiator is who pays their salary rather than any strict team, task or function boundary. For the integrator, this is a strong positive, since it makes it difficult for the client to disengage, and gives the teams early knowledge of changes and new project opportunities. From the client side there are drawbacks and benefits – disengagement is difficult, but knowledge transfer is tightly integrated and efficient.
In 2013 enterprises got real about cloud computing. In 2014 we will integrate it into our existing IT portfolios - whether IT likes it or not. The moves by DevOps and line of business aren't going to stop and can't be ignored. So 2014 will be the year IT Ops relents, stops fighting and gets with the program formally by developing real strategies for embracing the cloud, managing cloud-based application deployments and empowering the business to keep being agile. As the Age of the Customer arrives, all the focus shifts to the Systems of Engagement and the agility in refining these critical customer tools. Cloud technologies and services represent the fastest way for the business to reach new buyers and breathe new life into aging applications. In 2014 cloud leverage will be both traditional and disruptive as the business and IT put cloud to work.
Below are the top ten cloud actions we predict will happen in enterprise IT environments in 2014. Recommendations for what Forrester clients should do about these changes can be found here. Our predictions are:
Forrester attended Microsoft’s second annual Asia Pacific Analyst Summit in Singapore last week for an update on the company’s progress in transforming into a devices and services company. The event highlighted Microsoft’s strengths and exposed some obvious challenges, which I’ve shared below. Forrester clients can access further event-related analysis and implications here.
Day One: Impressive Capabilities And A Strong Understanding Of Customer Needs
Day one was well designed and delivered, with a clear focus on customer and partner case studies and go-to-market strategies based on three core imperatives:
Transforming IT. Focusing primarily on Cloud OS, Windows Azure, and Office 365, this imperative highlights Microsoft-enabled capabilities and resources to help IT organizations transform both internal data centers and IT delivery.
Engaging customers and employees. This imperative essentially combines mobility and social to help organizations thrive in the age of the customer by delivering improved customer service and customer and user experiences.
Accelerating customer insight and business process improvement. This imperative targets the changing needs and expectations for data and information access and real-time decision making via a combination of traditional analytics and big data.
At this time 12 months ago, we released our predictions for what changes in the market would be brought about by the maturing of cloud computing. Looking back on the year, we can now see that, while the promise of a maturing market was strong, maturity was by no means uniform and thus our predictions proved to be a mixed bag.
1. We’ll finally stop saying that everything is going cloud. Grade: A. While the C-suite might still be preaching this as a long-term vision, we got real about what should and should not go to the cloud given its current maturity and capabilities. The guiding principles of architecture and economic model served as sufficient evidence that many traditional workloads have no business on the public cloud. And we started to see early signs of enterprises recognizing that the private cloud isn’t the new name for virtualization but is indeed a separate environment and not all apps in the data center are destined for this pool.
After a couple less-than-home-runs in the cloud game, it looks like CenturyLink might just have a real contender. The US midwestern telecommunications leader pulled the trigger on yet another acquisition this morning - Tier 3, a legitimate cloud platform provider. The real question is whether this is the latest in a long string of acquisitions that have failed to hit the mark, or a sign that they finally got it right.
CenturyLink is a Lego company built through a string of acquisitions all bolted together. It rolled up several telecom players to get to its current size and presence in that market. And it has bought now three cloud companies.
Over the past few months, SAP Services has embarked on a major software-enabled services transformation of its offerings and operating models. The strategic intent is to increasingly rely on IP-based solutions (including SAP’s Rapid Deployment Solutions portfolio and assemble-to-order methodology) to deliver outcomes faster, with lower risks for clients and, eventually, support value-based pricing. Next on SAP Services’ transformation road map? I believe that the organization needs to quickly change the perception of the rest of the SAP ecosystem, which still views SAP Services as a competitor.
SAP Services’ business model used to merely rely on staffing “rock star” consultants on client projects in order to facilitate the implementation of complex solutions. The new strategy aims at positioning the 15,000 service professionals on SAP’s newer solutions (e.g., cloud, mobile, HANA . . .) in order to ensure that early projects generate the promised outcomes. In order to achieve this goal, the delivery teams need to be much more focused on collaborating internally (with the R&D team, for instance) as well as externally (with clients). SAP Services will also need to increasingly work collaboratively with its partners in order to ensure the success of the overall SAP-as-a-Platform strategy.
My colleagues at Forrester and I have been puzzling over the discrepancy between the wealth of attractive new mobile, cloud, and smart computing technologies in the market, and the relatively weak record of actual growth in tech spending that our tech market forecasting numbers show. Certainly, the recessions in Europe and weak economies in the US, Japan, China, India, Brazil and other emerging markets explain part of the weakness in tech buying. In addition, cloud computing’s impact on the timing of tech spending (reducing initial upfront capital purchases of owned hardware and software while increasing future subscription payments for use of these resources) means that spending that in the past would have occurred in current years has now been pushed into the future. Lastly, as a recent Economist article pointed out, business investment in general has been low compared to GDP and to cash distributed to shareholders this decade, as CEOs with stock option compensation have focused on meeting quarterly earnings-per-share targets instead of investing for the longer term (see Buttonwood, “The Profits Prophet,” The Economist, October 5, 2013). Still, even taking these factors into account, tech investment has been growing more slowly relative to economic activity than in past cycles of tech innovation and growth.
In 2012, I wrote a blog titled Private Cloud: 'Everyone's Got One, Where's Yours?' which looked at the perception of private cloud versus the reality of the environments that carry this name. Although reported interest and adoption were high, most environments fell short of the basic characteristics of cloud. Almost 1.5 years later, Forrester continues to see interest in and reported adoption of private cloud -- according to Forrester's Hardware Survey, in 2014, 55% of North American and European enterprises plan to prioritize building an internal private cloud, and 33% already having adopted private cloud. Despite the increased awareness in private cloud shortcomings, Forrester found that only 1/4 of these "private cloud" environments establish self-service access for its users. What's most interesting is that most of these enterprises aren't looking to private cloud for cloud-specific benefits.