by Richard Gordon | November 28, 2013 | Comments Off
Time to take a fresh look at emerging markets. Everyone of late has been saying how important they are – not least me (see various earlier posts). But it seems that now we need to look at our assessment a bit closer.
Growth in emerging markets has been slowing lately… but let’s not completely dismiss these economies just yet. At about 4% or 5%, their growth is still the envy of most developed markets and a key contributor to global growth.
Source: global insight.
According to my colleague George Shiffler, emerging markets are a bit like boats riding a wave, but tethered to developed markets. So that for a while after developed economies had peaked, the emerging ones were still being pulled out to sea on a crest of economic prosperity. But now they’re feeling the backwash of decline. This is similar to what’s happening within emerging markets themselves – with the smaller ones tagging along behind BRIC. And as these countries falter, so do the rest.
Anyway, the result of all this tumult is that global financial markets and those who influence them are starting to reassess emerging regions. Remember in a previous post how I bemoaned the fact that the term “emerging markets” seems a cumbersome and unwieldy way to describe so diverse a section of the global economy? Well, I wasn’t the only one. Increasingly, financial analysts are being more discerning and critical. Instead of looking at “emerging markets” as one category, they’re digging deeper into the detail. They’re distinguishing between those economies that are “getting it right” – with low inflation, solid monetary policies and so on – and those that aren’t, rewarding the good and “punishing” the bad.
These days it’s not enough to say “emerging market growth is faltering”. That may be true in some areas of emerging Asia/Pacific, Eurasia and Latin America, but not in all of them. Take Brazil, for example: although it accounts for about 45% of Latin America’s GDP, and has been hit by several problems lately, it by no means represents every country in that vast continent. And this is crucial when we look at IT spending – we can no longer assume that a whole region can be represented by our definition of “emerging markets”. It’s time to cast a more critical eye over these regions, and separate those that are performing well from those that need more work.
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by Richard Gordon | October 1, 2013 | Comments Off
There is no such thing as “typical enterprise IT spending”. The reality is there are distinct segments, each with their own different business drivers, different IT capabilities and different IT architectures.
Take the data center infrastructure market, where we’re increasingly thinking in terms of four key customer segments: SMB, large enterprise, service providers and hyperscale. Of course, you could keep segmenting down to extra levels of detail within each of these segments, but it is these four groups that we think best illustrate some of the key industry differences. And, in the cloud-era, these differences are becoming even more pronounced, with implications not just on how these companies operate, but on the technology providers that supply (or hope to supply) them.
This change in customer segments can be seen in our data center forecast, where large data centers are predicted to account for 29% of all data center hardware revenue in 2017, up from 22% in 2011. For more details, see : “Forecast Overview: Data Centers, Worldwide, 2013 Update“
My colleague Adrian O’Connell was telling me recently how some of the key technology trends highlight the differing approaches that these customers are taking. Integrated systems represent a trend in the market where systems that were traditionally sold as separate server, storage or network devices are increasingly being packaged together in pre-integrated SKUs. These can be a good fit for many large enterprises or service providers who want to get new applications up and running as quickly as possible, or are lacking the expertise to do the integration activities themselves.
At the other end of the spectrum, though, is the approach taken by the hyperscale companies. These companies, who typically have very large infrastructure requirements and highly skilled teams with tight control over a relatively narrow set of applications, can specify their own system designs and often place little or no value in many of the features typically found in those systems positioned towards enterprise customers. So these hyperscale companies, such as Google, facebook, Amazon, Tencent and Baidu, are increasingly utilising self-build options and sourcing directly from the ODMs, as they seek to bring the greatest efficiencies to their operations.
This is creating tremendous disruption in the server market in particular, and causing a lot of concern amongst the traditional OEMs, but it also has potential impacts in the networking and storage markets too. In a sense, the value chain is up for grabs, with vendors in all parts of the stack – from components to systems, software to services – all blurring the lines between what they offer and how they compete, in an attempt to establish the critical mass in the areas where value will be delivered to the user in the future.
And with the growing influence of hyperscale companies, calculating spending is less about focusing on sales from big-name brands and instead following increasingly complex value chains. With the focus on efficiency and delivering “good enough” IT at the right time, this will all eat away at those big-name vendor margins – no wonder the established vendors are having to rethink their approaches to the market!
Our Webinar series, “Data Center Transformation: Opportunities in Emerging Markets” by Naveen Mishra on 15 October at 8:00 am PT, 11:00 ET, 15:00 GMT and “Reinventing the Future of Data Center Management Services” presented by Bryan Britz on 22 October (same times) will help shed some light.
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by Richard Gordon | September 6, 2013 | Comments Off
Why do we need software? The simple answer is that it manages complexity. The more complex economic activity becomes, the more software is needed to manage and coordinate that activity. If companies want to stay innovative and cutting-edge, they need the latest software.
Historically, software sales to companies have been dominated by two regions: North America and Western Europe. Okay … except that we hear a lot about the increasing tech-savviness of many “emerging” nations, so why aren’t these markets contributing more to overall software sales?
The answer highlights – for me, anyway – some interesting ideas around software, why some regions have so much of it, and how it relates to economic activity. As my colleagues Bianca Granetto and John Rizzuto simply put, the overriding reason why North America and Western Europe dominate software spending today and into the foreseeable future and why emerging regions don’t have much of a look-in (in terms of global share of software spending) is because of the highly diverse and complex nature of North American and Western European economies:
- They basically rely on significant amounts of information technology to manage and coordinate that diversity and complexity. Fundamentally, the more information technology you use, the more software you need to run, manage and update that technology. IT begets software, because software is ultimately what enables the efficient processing and coordination of information which which is the foundation of diverse and complex economic activity.
- And the more you rely on advanced information technology – data centres, applications, and telecommunications – the more you need software to integrate, run, and update it. It’s an important nuance to keep in mind, this idea that software spending is a combination of both new investments as well as spending to maintain previous investments. In a very real sense, software spending is self-reinforcing in that the more spending you do now, the even more spending you’ll likely need to do in the future.
Not surprisingly, software sales vary enormously by industry; specifically, by an industry’s information processing requirements or “IT intensity”. Industries like banking and financial services are highly IT-intensive. Industries like agriculture and mining or even basic manufacturing are much less IT-intensive and much more labour intensive. This is where the differences between mature and emerging economies, in terms of which industries drive the economy, really impacts software sales. In China, for example, agriculture constitutes 10% of Chinese GDP, basic industry, including mining and manufacturing, 45% – these are not high-IT use industries. In contrast, agriculture constitutes just over 1% of US GDP and basic industry just over 19%. Instead, more IT-intensive services like finance, communications and transportation constitute nearly 80% of US GDP, compared to 45% in China (see “The World Factbook”, CIA, https://www.cia.gov/library/publications/the-world-factbook/).
Fundamentally, much of the economic activity in many emerging markets, at this point in their development, simply isn’t IT-intensive enough to justify or generate significant software spending … either in the form of significant new software investments or the maintenance of past investments.
Of course, the emerging market situation is likely to change over time, as these markets move up the value chain in terms of industrial mix, with a gradually increasing portion of the population employed in more and more IT-intensive industries. This, then, will create the same dynamic seen in mature markets, with increasing levels of software spending focused not only on new investments but also on supporting previous projects! We`ll explore further this topic during our upcoming IT spending webinar scheduled for Tuesday 8th of October at 4:00PM UK time – do register now!
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by Richard Gordon | August 27, 2013 | Comments Off
In all the years I’ve been researching IT markets, one big elephant in the room has always been Africa. In relation to global technology trends and their economic impact, this vast, populous, resource-rich continent has always been lumped in with other categories – “Europe and the Middle East”, “Rest of World” or simply “Other” – when people do their analysis. However more recently Africa has been featuring more heavily in our client enquiries…
Companies are gradually sniffing out this new space, intrigued by the opportunities it offers (to that end, check out Gartner Hype Cycle for ICT in Africa, 2013). Do a search on Google for “Africa”, and just below the Wikipedia entry is this recent story: China and India: The scramble for business in Africa. Although it’s mostly about how the two BRIC giants are investing in Africa, right at the bottom there’s this little fact: “Most African countries are growing at 7% to 9%”. Compare that to global GDP growth of about 3%…
Meanwhile, elsewhere in the world, it looks like more “established” emerging markets are starting to falter. This article in The Economist paints a fairly bleak picture: emerging markets will be less likely to drive a global recovery, largely thanks to a combination of weaker commodity prices, slower growth, reduced exports and levels of unrest in some regions. Growth in India has slowed noticeably, while long-term growth in Russia is facing threats from demographic and population problems. The article does at least make the point that many emerging markets have responded to financial troubles better than the supposedly more mature ones did when disaster struck a few years ago. So while growth in China has dipped, this may be largely due to the Chinese government’s moves to rebalance the economy. And in Brazil, when the banks first caught a whiff of trouble, they responded quickly and decisively to limit any overheating. Still, now it seems that people are starting to look to the U.S. and Western Europe for decisive signs of recovery, which may be a bit premature…
So what about Africa? Many African countries are dealing with their inadequate infrastructure, and starting to turn things round. To begin with, we could see low-cost manufacturing move over from China. And if growth carries on the way it seems to be going so far, then eyes will increasingly turn to this new potential economic powerhouse. There is still risk in the continent, most notably political instability, which is a real obstacle to inward investment. And not every African country will develop at the same rate. But the very fact that so much interest is being shown means that those of us in the business of analysing and forecasting, at least, should be paying it serious attention…
Category: Uncategorized Tags: Africa, IT
by Richard Gordon | August 27, 2013 | Comments Off
The more I think about emerging markets, the more the term “emerging” seems a misnomer. When I hear countries and regions described as “emerging”, I have a vision of them as hunched creatures shuffling out of a dark hole somewhere, blinking in the bright sunlight as smiling Western nations beckon them forth into a wonderful, glowing world of plenty…
It seems to me that image couldn’t be further from the truth. Okay, so some emerging markets (and while we’re on the subject, terms like “undeveloped” or “immature” don’t seem to fit either) are struggling relative to their wealthier cousins. But they’re certainly not short of growth. Or interesting, creative ideas – often from governments – about ways to stimulate it.
Not all of these ideas are ones we’d want to emulate, but they are fascinating. According to my colleague Venecia Liu, tech giant Huawei, together with a Chinese bank, has created a video ATM, which allows people to access bank services remotely, almost like sitting across from a teller in a branch. This is quite an efficient way of using the bank’s talent pool, without restricting staff to branches. In India, the government has gone further, deregulating ATMs to allow non-bank entities to own and operate ATM machines. This has allowed one provider – Tata Communications – to manage thousands of ATMs, taking a fee every time, a neat move by the telecom giant into financial services.
Nevertheless, although emerging markets are making a strong contribution to the evolution of the IT landscape, established businesses won’t just be able to waltz into these locations. Indigenous businesses and vested political interests will play a big part in how these markets evolve. For the countries themselves, there are many issues. As China is finding out, when all the workers have flocked to the cities and their once cheap labor runs out, how does an economy continue to grow?
Naturally, investors and expanding companies will be looking for low-cost opportunities and short time-to-value returns. Those still lagging in their emerging market thinking need to consider several key points:
- Emerging markets’ lack of infrastructure creates both an opportunity and an obstacle. Is there a boom market for deploying shipping containers or modular data centers to kick-start momentum? Can ad hoc smart grids and small-cell mobile networks replace traditional broadband and high-grade infrastructure?
- On the money side, how will accountants handle the highly volatile exchange rate fluctuations of local currencies in new markets and between established denominations? How do you prepare long-term forecasts when currencies spike and dive on a weekly basis, and per capita calculations are shaky at best?
A growing industrial base, consumer class and services industry ought to produce growth in all areas. Certainly, watching how this shakes out will make compelling viewing, but to be involved is the opportunity of a generation. We`ll explore this theme further in our upcoming IT spending webinar scheduled for Tuesday 8th October at 4:00PM UK time.
Category: Uncategorized Tags: BRIC, Emerging Markets, IT
by Richard Gordon | August 5, 2013 | Comments Off
What about replacing that traditional family portrait with individual figurines of your loved ones? You`ll need to get yourself to Hamburg and scanned by Twinkind who then create 3D-printed lifelike models. It doesn`t come cheap however, with prices starting from €225 for a 15cm model up to €1,290 for 35cm!
3D printing is an additive technique that uses a device to create physical objects from digital models. My colleague Pete Basiliere pointed out to me that while the technology behind 3D printing has been around (and commercialized) for decades, devices are only recently started to show up on the mainstream consumer’s radar. Every week stories appear of plans for 3D-printed modular cities, cars, or moon bases made from the lunar dust. Then, there are designs for the construction of utilitarian robots with an ability to endlessly replicate themselves. These could eventually reach giant proportions and work to construct whole cities using 3D printing techniques.
That said, the days when such 3D printers are commonplace enough to appear in our homes are a ways off, although the effects of 3D printing are already being felt across a number of industries, including automotive, aerospace, industrial and medical.
3D printing could present a lower cost of entry, eliminate segments of the supply chain and simplify R&D. It won’t all be plain sailing, with copyright and intellectual property questions that must be addressed. Will the existence or threat of such violations result in an expansion of IP-focused legislation?
As the technology behind 3D printing evolves and prices drop – by 2016, Gartner predicts that enterprise-class 3D printers will be available for under $2,000 – there may be no limit to what could feasibly be 3D printed. Driving this market is a new generation of crowd sourced, open-source entrepreneurs focused on businesses and enthusiast consumers, and chasing established industrial players. The recent merger between Stratasys and MakerBot has sparked further interest in this fizzing arena, as it begins to rationalize and starts to deliver on the potential. Stay tuned as this fall we will publish our first Forecast that sizes the 3D printing opportunity.
Category: Uncategorized Tags: 3D printing
by Richard Gordon | July 22, 2013 | Comments Off
In a post a few weeks ago, I touched on the difference between “professional” (or business) computing devices and “consumer” ones, and how the boundary between them is becoming blurred, thanks to the rise of mobility and “bring your own device” schemes. The implications of all this haven’t been lost on other commentators too – see this article in Computer Weekly for starters.
Anyway, the idea came back to me during a recent discussion with various colleagues about where things are going in the strange and wonderful world of devices. Remember “ultramobiles” and “phablets” and the like? Seems they’re set to take over the world. Well, to take over from PCs, anyway. Here’s a number to chew on: our current thinking is that by 2017, 45% of people buying a “computing” device for the first time will buy a tablet rather than a PC.
But hang on – who are we talking about here? Is that half of all buyers, including business buyers? Without getting into too much economic theory, what we’re dealing with are marginal buyers – the ones that drive the market – and in this case it is indeed consumers. But the fact that the question arises perhaps shows just how hazy the dividing line between “consumer” and “business” is becoming. It’s quite likely, for example, that many first-time buyers of tablets may end up using them in a professional setting, either as part of a BYOD scheme or in a startup business.
Blame the Nexus of Forces, the onward march of consumerism – whatever – but we could argue that it’s humble buyers like you and me who are shaping the IT in many businesses today. As the BYOD phenomenon shows, end-user demand is determining much of a company’s IT infrastructure (see this TechTarget article). Unlike other areas of IT, like networks and servers, the machines that people use in the office are being defined by the users themselves, rather than by IT departments.
Still, although the overlap between the two segments seems to be growing, how we analyze them and the conclusions we draw about them are very different. Increasingly, however, the two categories of “business devices” and “consumer devices” seem a bit cumbersome, and in need of some honing. I don’t think it’s a coincidence that our forecast model now allows us to do pretty fine segmentations of users and what they buy …
Distinctions like “consumer” and business” are still meaningful at a higher level. But for how long? Watch this space…
Category: Uncategorized Tags: BYOD, PC
by Richard Gordon | July 8, 2013 | Comments Off
Back to mobility, one of our big themes at the moment. To tie in with Gartner’s webinar on the subject this week (Tuesday 9July at 4pm UK time), let’s look at some unusual and largely unforeseen impacts that mobility is having on the world of technology.
Where better to start than with zombies. You’ve heard of zombie PCs, right? Machines that are abandoned as people switch to mobile computing devices. Well, in South Africa they now have zombie phone lines. These are fixed lines that households are forced to have by law, but which – because of mobility – are left unused, humming menacingly in the background.
Before I go on – a quick aside about terminology. Recently I mentioned how we have to be ever more precise about the meaning of terms we use in our analysis (like “business” and “consumer”). Today’s post highlights it again. “Zombie” PCs and phone lines technically aren’t dead – they still work – whereas real-life zombies, as we all know, are dead. Or at least were dead at some point. And “mobility” itself doesn’t just refer to devices, but also to people being mobile, and doing things on the move. The idea of “fixed” anything is becoming harder to define in this world of mobile everything. And don’t get me started on terms like “prosumer” [what does it actually mean?], “phablet” [rapidly becoming my word of the moment] or “wearables” [watch out for that in the coming months]…)
Anyway, I digress. Another mobility-driven phenomenon we are starting to see is something called “spectrum stealing”. Actually, “spectrum substitution” is more accurate, but stealing makes for better headlines. Because they’re always on the move, folks want video to be streamed to whatever device they happen to have handy. As our viewing experience shifts away from TVs, advertisers are offering “TV anywhere”, promising the moon on a mobile stick. All very well in theory, but for telecom providers this could get messy. Cellular technology can’t keep up, and may not be able to cope. Think about it – at any given moment, if enough people are streaming video to their phones or tablets or phablets or goodness knows what, then everything is simply going to slow down. No wonder, then, that some people have been talking about adding “turbo” buttons to devices. Video streaming too slowly? Simply press the button and – hey presto – more bandwidth. But what if everyone presses the turbo button at the same time? Same problem…
I suppose that, if nothing else, the rise of mobility generates a host of new questions that will need to be answered pretty quickly. In the meantime, if all this whets your appetite for more, why not tune into the webinar next Tuesday? We might even have some answers…
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by Richard Gordon | June 24, 2013 | Comments Off
These past couple of week have been an exciting time for gadget lovers, RAM sellers and semiconductor analysts. Two major events clash with Apple’s Worldwide Developer Conference (often home to new Mac and i-gadget reveals) banging heads with Electronic Entertainment Expo in Los Angeles, where Microsoft and Sony start the major push for their next-generation games consoles.
These are now effectively PCs for the living room, with Microsoft pushing TV integration and a Windows 8-like interface, while Sony has a cloud-gaming service up its sleeve. In semiconductor terms, these new consoles pack in plenty of silicon both coming with ATI processors and graphics chips. The PlayStation 4 has 8GB of 5500MHz GDDR5 RAM and the Xbox One offers 8GB of DDR3 RAM, plus even more components in the smart controllers and camera peripherals.
With both companies hoping to sell many millions of consoles, this will offer a further boost to the RAM market, which is already seeing a bounce in NAND and DRAM sales with Gartner’s latest semi revenue forecast (see “Semiconductor Forecast Database, Worldwide, 2Q13 Update“) showing a strong upside, hitting $320 billion this year, with further growth to come.
Gartner’s aggressive growth prediction of 32% DRAM revenue growth is being driven by smartphones, SSDs and tablets, the new consoles will help to overcome weakening PC sales and lower-specified, cheaper, mobile devices. Check out the DRAM forecast and supporting webinar for further insight and what our opinion is about the timing and magnitude of future industry cycles.
Category: Uncategorized Tags: Apple, DRAM, iPhone, Mac, memory, Microsoft, PlayStation 4, semiconductor content, Sony, Xbox One
by Richard Gordon | June 12, 2013 | Comments Off
My colleagues Chad Eschinger, Luis Anavitarte and Colleen Graham told me a remarkable story recently. Apparently, in some parts of Latin America, at least one big software provider is taking payment in soybeans, which it then sells on commodities markets. The reason is the repatriation of capital – in some countries governments are restricting the movement of currency. Companies can’t shift their earnings out of the country,so have to use their pesos to buy soy beans and the government then allow them to sell the soy bean in the international markets and leave the money (dollars or Euros) abroad.
Bartering is nothing new in Latin America and this story illustrates how the government is obligating providers to change their business model try to negotiate increasingly stringent government regulations. It also illustrates the profound regional differences in software markets. As the chart below shows, Latin America accounts for a fraction of global enterprise software spending, but in many ways it’s where all the action is. Growth in software is strong, as is growth in related markets like IT services. Currency issues aside, many markets in Latin America can only go one way – up – and the recent surge in popularity of the cloud means that we can expect lots of deployments in the next couple of years. Latin America is a subject I’ll come back to in a future post, so watch this space…
Source: Gartner estimates
Back to governments. Anything that happens in the U.S. and Western Europe is likely to have a big effect on the overall software market. And things aren’t exactly rosy in those particular gardens, partly because of government policy. The spectre of sequestration in the U.S. and continued austerity measures in Europe are making everyone jittery, and people are reluctant to spend on anything, software included. It’s worth saying as an aside that, with software, it’s all in the detail: CRM offerings are enjoying growth well above average, and social software is still a surefire way to make money. But the skewed nature of this market, coupled with political vagaries, could force companies to find new and elaborate ways to bend the rules. Today beans, tomorrow – who knows…?
Category: Uncategorized Tags: Latin America; Software;