US Tech Market Getting Stronger: US Q2 2013 GDP Report And Data Revisions Show Weak But Improving US Economy, And Better Tech

Andrew Bartels

The US Bureau of Economic Analysis released its preliminary report on second quarter 2013 US GDP, along with both major revisions to US economic data over the past 50 years, and minor revisions to the data on US business investment in information technology goods and services.  Here are my key takeaways from the report, and its implications for the US tech market.

  • US real GDP growth in Q2 2013 came in better than expected.  The 1.7% growth at an annual rate from Q1 2013 was in line with our projection of 1.9%, but better than what many economists had been forecasting.  Growth rates in Q4 2012 and Q1 2013 were revised down to 0.1% and 1.1%, respectively, from the earlier 0.4% and 2.5%.  These revisions indicate that the end of the payroll tax reductions, the higher tax rates for high-income people, and the Federal budget cuts from sequester did take a toll on economic growth, with government consumption declining in Q4 2012, Q1 2013, and Q2 2013, and business investment in factories and offices falling in Q1 2013.  But consumer spending has been solid, with growth of 1.8% in Q2 2013, 2.3% in Q1 2013, and 1.7% in Q2 2013.  Business investment in equipment, which softened to just 1.6% growth in Q1 2013, improved to 6.8% growth in Q2 2013.  And housing continues to be a growth engine for the US economy, with double digit growth rates in residential investment in the past four quarters, and improving home prices boosting consumer confidence and spending.
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Cities, Don't Go It Alone. Service Providers Accelerate Smart City Projects.

Jennifer Belissent, Ph.D.

Local governments – cities, counties, states – are investing in technology.  Why?  Well, a number of factors drive local governments to take a smarter approach to their administration and development: limited budgets, increasing citizen demands, competition for investment and jobs etc. Balancing competing demands on a shoestring budget isn't easy.  City leaders are looking for ways to sustainably transformation city functions such as transportation, healthcare, public safety, utilities, or governance, and in aggregate the city as a whole. And, they increasingly value technology as a means to such a transformation. 

Fortunately, cities do not have to undertake this journey on their own, and they don’t expect to.  In fact, according to Forrester’s Forrsights Budgets and Priorities Tracker Survey, local governments are more likely to expect increases in IT technical consulting than other industries (and more than governments as a whole): 38% of local government IT budget decision-makers expected a 5-10% increase in consulting spend and 2% expected an increase of more than 10%.  Local governments are turning to the experts to help them figure out what this “smart city” thing means for them.

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The Expectation Gap Increases Between Business And IT Leaders

Dan Bieler

Business Technology (BT) is a means to an end. BT is there to support the business objectives. Similarly, the task of IT leaders is to provide the most appropriate technological infrastructure to all employees so that they can pursue the business objectives most effectively. In other words: IT and business leaders should have the same perspective.

Yet, new Forrester survey data indicates several gaps in opinion about network infrastructure aspects between business and IT leaders. We see a risk that IT will purchase network and collaboration assets that do not address the demand by business lines. Similarly, there is a risk that business lines remain unaware of network and collaboration assets that IT has put in place. Under both scenarios, businesses waste valuable resources and end up with an inefficient network and collaboration infrastructure.

Our new report The Expectation Gap Increases Between Business And IT Leaders helps sourcing vendor management professional define an IT and networking strategy that supports overall business goals. This report is a follow-up of our 2012 report, Prepare For The Connected Enterprise Now. Our main messages to business based on the survey results are to:

  • Drive communication infrastructure projects in collaboration with business and IT. Eight out of 10 IT and business leaders consider network and telecom technologies critical to driving staff productivity. Sourcing professionals should focus activities on driving the road map and jointly develop business cases.
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Orange Business Services Analyst Event 2013: The Cobbler Stickes To His Last

Jennifer Belissent, Ph.D.

With Brownlee Thomas, Ph.D., Bryan Wang, Dan BielerHenning Dransfeld, Ph.D., Clement Teo, Fred Giron, Michele Pelino, Ed Ferrara, Chris Sherman

In mid-July, several colleagues and I attended Orange's annual analyst event in Paris.  Our collective observations include:

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Telefonica Deutschland grabs top spot by buying E-Plus - but the real challenges remain the same

Dan Bieler

KPN has agreed to sell E-Plus to Telefónica Deutschland for an implied valuation of €8.1 billion. The transaction will combine the No. 3 and No. 4 carriers in the German mobile market to create the new No. 1 carrier based on a subscriber market share of 37% and 43 million subscribers  (although only a No. 3 based on a 32% revenue market share).

While the deal brings a variety of opportunities, Telefónica will still face an assortment of challenges:

  • Telefónica believes that the deal will unlock synergies of an estimated €5.0 billion to €5.5 billion. About 70% of these synergies will come from opex savings and 30% from capex savings. In addition to processes rationalisation and reduced SG&A expenses, financial, and tax synergies, a stronger competitive position from increased scale, site consolidation, and rationalisation will play a major role. Telefónica is planning to reduce around 14,000 sites. In total, about half of all opex synergies come from network-related savings. This form of network consolidation will be bad news for network infrastructure vendors like Nokia, Ericsson, and Huawei as consolidation hits the largest European market for network infrastructure.
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Understanding Gamification in APAC

Forrester's global analysts have written some great pieces on gamification. In general terms, this research is is just as applicable to the SE Asian markets. However, there are some specific differences within the region that should also be considered. The most important thing to remember is that, while the general principles of gamification definitely hold true within the region, there are still some specific differences that should also be taken into account.
 
First and foremost, we definitely see the same problems in APAC where a lack of clarity on the desired behaviour encourages game play - for games sake. This is probably the worst outcome of all for gamification initiatives, regardless of where they're deployed. If there's no clear desired behaviour change identified, there's absolutely no valid reason to introduce gamification. The real challenge though is ensuring that the right strategy is selected to achieve the right objectives.
 
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Orange Business Services Analyst Event 2013: The Cobbler Sticks To His Last

Dan Bieler

with Brownlee Thomas, Ph.D., Henning Dransfeld, Ph.D., Bryan Wang, Clement Teo, Fred Giron, Michele Pelino, Ed Ferrara, Chris Sherman, Jennifer Belissent, Ph.D.

Orange Business Services (Orange) recently hosted its annual analyst event in Paris. Our main observations are:

  • Orange accelerates programmes to get through tough market conditions. Orange’s’ vision in 2013 is essentially the same as the one communicated last year. However, new CEO Thierry Bonhomme is accelerating cost saving and cloud initiatives in light of tough global market conditions. The core portfolio was presented as connectivity, cloud services, communication-enable applications, as well as new workspace (i.e., mobile management and communication apps).
  • Orange proves its capability in network-based services and business continuity. Key assets are its global IP network and its network-based communications services capabilities. In this space, Orange remains a global leader. These assets form the basis for Orange taking on the role of orchestrator for network and comms services, capabilities that have (literally) weathered the storm, proving its strength in business continuity.
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Understanding Virtualized Videoconferencing

Philipp Karcher
Server virtualization has been and continues to be a top IT priority for good reasons like improving infrastructure manageability, lowering TCO, and improving business continuity and disaster recovery capabilities. In IT's quest to virtualize more workloads, however, videoconferencing has remained on its own island of specialized hardware due to its reliance on transcoding DSPs (digital signal processors), an incredibly compute intensive type of work. Transcoding is necessary for interoperability between unlike videoconferencing systems, and the performance of that specialized hardware has been difficult to match with software running on standard servers. 
 
That is, unless you turn to a model that doesn't use transcoding. Enter Vidyo, whose virtual edition infrastructure delivers comparable performance to its physical appliances since it doesn't have to transcode calls between Vidyo endpoints. Desktop videoconferencing solutions for the most part are available in virtualized models. However, transcoding based videoconferencing is also becoming available virtualized, with LifeSize offering its platform in this model. In the cloud, Blue Jeans -- the poster child for videoconferencing as a service -- has a virtualized platform based on transcoding that also provides a high quality experience. It will be interesting to see how the performance of virtualized transcoding workloads compares to traditional infrastructure.
 
Innovation in videoconferencing today is about making this historically cost prohibitive technology cheaper and easier to deploy. Server virtualization is key to that goal. In conversations with end user companies considering their videoconferencing strategy, virtualization is something they express interest in and would consider the next time they refresh their technology. Here's what vendors in the upcoming Forrester Wave on desktop videoconferencing are doing with virtualization today:
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SAS attempts to bridge the traditional analytics and big data/cloud divide

A number of my colleagues and I attended the recent global SAS analyst event to understand the future of SAS’s business and technology strategy. It was clear to me from this event that SAS is attempting to bridge the increasing divide between “traditional” analytics and the big data and cloud-based analytics worlds.

Here’s a few of our key observations and takeaways from the event:

  • A greater emphasis on visual analytics. The range of tools available and the integration capabilities to enable visual analytics will be significantly improved in future releases.
  • Better support for governance and audit. One of the benefits that any decision support system should provide is better business governance – the transparency and auditability of how and why decisions were made and what data was used to make them. SAS continues to make good progress here.
  • A more encompassing view of big data. Most analytic vendors believe either nothing – or everything - has changed in the emerging world of big data. SAS’s view is generally an inclusive one, which will be more beneficial to clients long-term if successfully implemented. The SAS architecture is evolving towards supporting big data economies of scale, in theory at least.
  • Better integration with all forms of cloud technologies. Still operating largely at the OS virtualisation layer, SAS is nonetheless extending its portfolio to include a range of cloud-enabled architectures. We expect that client demand will drive further development here.
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Embedded connectivity adds new spin to Colt's IT offering

Dan Bieler

Dan Bieler, John Rakowski

Recently we attended a Colt Technology Services analyst day in London. It was great to see a technology services provider who is trying to embrace both disruptive ICT trends and challenges facing enterprise IT. Here is a high level summary of our views from the event:

Dan: Colt views its network assets not as its key differentiators - but its IT services. Although IT services today account for only a small fraction of Colt revenues, Colt views its network infrastructure assets as a means to an end to support IT services. Whilst we agree that network infrastructure runs the risk of commoditisation, Colt’s network helps to differentiate Colt’s offering from both IT service providers without network infrastructure and carriers with a less impressive network footprint. Quality network infrastructure is the basis for developing reliable, secure, and compliant ICT solutions. Maybe Colt ought to view itself more as a communications integrator than an IT Services provider.

John: Colt’s provides a strong European IaaS offering. One of the presentations focussed on Colt’s European datacenter footprint. At Forrester we get many inquiries on hosting and IaaS-specific options for Europe as many clients have to address regulatory and business requirements for data to reside in specific countries. Colt has a substantial number of data centers in European countries including the UK, France, Germany, Spain, Italy, and Switzerland.

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