It’s hard to believe almost a year has passed since our last Summits for CIOs in Asia Pacific. Our team is ramping up preparations to this year’s CIO Summit series and I’m looking forward to meet you at the events which will kick off in Sydney on August 14, Singapore on August 19 and Mumbai on August 21. Themed “Beyond IT: Empower Digital Business in the Age of the Customer”, Forrester’s 2014 Summits will focus on the significant shift we’ve seen in CIO’s traditional focus from the design and deployment of internal systems focused on process control to digital products and services for their customers.
Of particular importance on the digital journey are three domains: customer experience, the mobile mind shift and the transformation of big data into actionable business insights. Each of these topics will feature prominently at the Summits with select analysts flown in to delve deeper into how CIOs can overcome some of these challenges through Forrester guidance.
My colleague Thomas Husson (Marketing Leadership) and I teamed up again to identify the most impactful and new mobile trends for 2014. (See the full report here.)
You might ask, "how does one decide what are going to be the big trends?" Good question. For me, there are several points of input. In 2013, I had the opportunity to interview close to 200 companies in the course of doing research for Forrester's next book, The Mobile Mind Shift, as well as for my own research. I spoke to some of the best and brightest enterprises (e.g., retailers, hotels), technology companies (e.g., sensors), and vendors in the United States, Europe, China, Australia, India, Japan, Korea, Canada, and beyond. I had the opportunity to do field research in China and Korea - to walk the streets, visit stores, observe consumers and interview executives about one of the most exciting mobile markets in the world. More than 40 of the interviews were in the exciting space of mobile health and wellness. Thomas and I surveyed several hundred mobile executives. I also collaborated with Thomas who has incredible breadth and depth of knowledge of Europe.
At a time when mobile banking and mobile payments dominate the financial news, it is easy to forget about the humble automated teller machine (ATM). Customers take them for granted, until an IT glitch prevents them from withdrawing their money, that is. Only a couple of weeks have passed since the latest media uproar caused by a computer failure at the UK’s Royal Bank of Scotland and NatWest. The Daily Mail responded immediately with an alarming title, “'Cyber Monday' computer meltdown EMPTIES customers' accounts and leaves millions unable to access cash.”
Coca-Cola recently announced that it is jumping into the red-hot Indian online retail arena by selling directly to consumers and small businesses, a first for a FMCG (CPG) company in India. While the Indian online retail story is still being written and Forrester is bullish about the long-term prospects for this channel, the immediate challenges need to be managed effectively.
Logistics and fulfillment are the largest challenges of them all in India, with more than half of all online retail sales being done using cash on delivery (COD). While COD is essential in a nascent eCommerce market, it can have a large negative impact on business margins. This is exacerbated in a nascent market where consumers are testing this new medium of ordering goods, as the return rates can be quite high. In India, reportedly, the return rates can vary from 5% to more than 25%, depending on the category, the demographics of the online buyers, and their online tenure (experience with the Internet).
The Asia Pacific (AP) growth engine did not fire on all cylinders in 2012, leading Forrester to revise its IT purchases growth forecasts for the year. While Australia, South Korea, and several ASEAN tech markets are showing continued solid growth, in other markets like China, India, Japan, Malaysia, and Vietnam, political leaders are struggling in the face of growing economic problems. My colleague Andy Bartels and I, with the help of Forrester’s AP analyst team, have recently published our revised IT purchase growth forecasts for 2013. Here are our key expectations by country:
2012’s slowdown in China will be short-lived. Despite a slowdown in 2012, China continues to attract intense vendor interest because of its size and potential for further growth. The expected government stimulus efforts in the country will offset factors such as weak demand from businesses and governments. The slowdown in 2012 (+9%) is therefore likely to be short-lived, with stronger growth resuming in 2013 (+10%).
India’s IT growth will remain slower than expected through 2014. 2012 (+7%) was a relatively lackluster year for the tech market in India. Worse than expected economic growth, combined with political gridlock on economic reforms, kept the tech market from reaching its full potential in 2012. While we expect the public sector to drive India’s IT spending growth, the impact will be limited through 2014 due to the parliamentary elections scheduled for that year.
As of late 2011, more than half the organizations we surveyed in Asia Pacific excluding Japan (APEJ) are either currently using or actively planning cloud initiatives — 52% in fact. This number has nearly tripled since 2009.
But adoption rates alone don’t tell the whole story. Vendor strategists should also be closely tracking how organizations evolve from ad hoc, disjointed cloud projects to well-defined, effectively managed cloud procurement. Our recent survey results indicate a surprising degree of maturity across the region — along with some clear areas for growth.
Centralized IT procurement of cloud services varies widely across the region. Australia (82%) and India (83%) currently lead in driving centralized procurement and management of cloud services through IT. Both markets are well above the regional average of 74%. This is no surprise for Australia, which is the most mature market for cloud computing in the region. But the strong results for India are surprising, and indicate the strong potential for a sharp increase in demand for cloud services over the next six to 12 months as early projects begin delivering positive returns. Only 66% of respondents in China are currently centralizing cloud procurement and management — not unexpected given the relative lag in cloud adoption in China relative to other APEJ markets.
Organizations in China are least likely to have a formal cloud strategy in place. Fifty-six percent of respondents in China currently see unsanctioned buying by the business outside of IT. This is the highest rate in APEJ by far, where the average is 35% and there are lows of 23% in Australia and 25% in Singapore.
In an interview with the Economic Times in India, Dell announced yesterday that it was readying a war chest of about US$1 billion for IT services related acquisitions in India. Here is why I think this announcement is important for Dell:
First, Dell needs to continue strengthen its global delivery network and industrialization capabilities. Dell bolstered its IT services market position with the Perot Systems acquisition in 2009. Since then, the company has made clear its development ambitions in India from an offshore perspective — including during the first analyst event they hosted in India in September 2011. The company lags far behind the services behemoths, including IBM, which has more than 100,000 staff in India working for international clients.
The India domestic market is also becoming a top priority for all major tech vendors. Forrester expects this market to grow by 20% in 2012 in local currency (see my recent report on the future of IT services in India). Japanese companies like NTT Data have launched aggressive inorganic growth strategies to tap this booming market (Dimension Data in 2010 — which was at the time part of the top 10 IT services firms in India via its Datacraft subsidiary — and more recently Netmagic Solutions). And Forrester expects more Japanese investments in the coming few months.
While IBM, HP, and Wipro Infotech are leading the IT services market in India, Dell is still marginal in terms of system integration and managed services activities. So it’s high time that Dell strengthens its presence in India.
After years of looking at how the online markets of Asia Pacific are emerging from an online shopping perspective, we are thrilled to announce our first online retail forecast for China, Japan, South Korea, India and Australia.* Some findings from the forecast:
Japan still takes the top spot in the region. Japan retains its dominance in the region with some $45 billion in online retail sales this year. Indeed, while China’s combined B2C and C2C spending surpasses B2C spending in Japan, Japan is still the leader in traditional online retail sales. And despite the fact that online consumers in Japan are purchasing across a wide variety of categories, some category purchases like beauty have shifted online in Japan in a way they have not in the US or Europe.
China’s growth rates will propel it ahead of Japan in the very near future. China’s combined B2C and C2C sales — the two are nearly impossible to separate** — are poised to reach $49 billion in 2010. China’s CAGR will be double that of the US, Western Europe and Japan, and it’s clear that China will be the eCommerce market most likely to rival that of the US.
Australia’s robust growth will be driven by an increasingly vibrant online retail sector. The online marketplace in Australia is marked today by a large number of cross-border transactions, but there is growing momentum among local players. Though less than half the size of the online retail markets in Japan and China, Australia’s growth rates are slightly higher than those of Japan and its US and Western European counterparts.
International orders grew 34% for HP . . . not this year but actually back in 1964 when non-US orders accounted for 23 percent of HP’s revenues. While the growth of non-US tech revenues is in the news today, HP’s international orders first exceeded domestic orders not recently but as far back as 1975.
In my research on market entry and market opportunity assessment (MOA), I recently spoke to strategists at HP about how they evaluate markets. As I was leaving the building, I stopped in to the HP museum and spent some time with the HP archivist. The highlights of the visit include seeing the first HP device built in the now famous Palo Alto garage and a calculator that brought back memories of my father in his overstuffed chair “figuring out how to pay for college.” I was not only impressed by the history embodied in that room but also with the value that HP places on recording and memorializing its “life” as an organization. Not to sound too sappy but it really brings the company and the industry to life.
I’ve spent the last few weeks reading through some documents on the history of HP’s entry into international markets. There are valuable lessons to be gleaned from their experiences. I’ve written about many of those lessons in reports and blog posts but thought I'd draw out a few of them here.
Last December I wrote about Building B2B Technology Markets, looking at how to penetrate a market with almost none of the traditional characteristics of a mature technology market? As technology vendors increasingly look to emerging markets as a significant opportunity and source of growth, this question becomes more pressing. The report explored some of the elements of Cisco’s Country Transformation initiatives in order to identify steps in the process of building market infrastructure:
For example, the report looked at partnering with governments to encourage market-friendly policies and investment in the necessary technology infrastructure to support market development and overall economic growth. And, from a sales perspective, trade associations provided an alternative channel to reach small and medium businesses in markets where distributors and resellers weren't available.
But, another element critical to successful market development is the ecosystem of partners developing solutions specific to the particular market, or even just contributing local innovation for new approaches to broader global issues. Building B2B Technology Markets discussed finding local organizations to act as partners in the market, and even investing in educational initiatives, but missed the next step of how to help create these new local ecosystem partners.