Martin Hingley's Blog

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I’ve been busy building my market model over the last few weeks and wanted to report my findings across regions and broad categories, which have also been published in full in a market presentation on this site. I’ve increased the number of major vendors in the model to 72 and, as before, split the numbers by quarter from the beginning of 2003. I’ve also plotted each company’s net profit and headcount progress. In this bulletin I will cover the broad trends and try to predict the bottoming out of the recession and the beginning of the recover.

Software And IT Services Get Worse – Hardware And Telecom Services Improve In Q2 2009

Overall the market decline wasn’t as bad in Q2 as in Q1 2009. In total I calculate a fall of 13.6% to $1.464 trillion, compared with a 17.0% fall the previous quarter. For details please see Table 1.

Table 1 – World ITC Market By Offering ($US Billion) Q3 2008 – Q2 2009

Source: ITCandor, August 2009

Notes: I’ve factored this up to show an estimate of total market sizes

Although Hardware’s decline was still the biggest (17.6%) of the four generic offerings, the others are catching up, with Software falling by 17.0%, IT Service by 13.5% and Telecom Service by 11.4%. As we’ve noted before, no sectors are immune from this downturn – which is proving to be more severe than those in 1992 and 2001. A longer-term picture of growth trends by quarter is shown in Figure 1.
The dramatic downturn beginning in Q3 2008 and the similarity of decline for all 4 categories of offering demonstrate the extent to which the ITC industry has been affected by the economic crisis.

Who Are The Biggest Players In World ITC?

In this section I thought I’d share my findings on the largest vendors by type of offering. I’ve summed the annual years to the end of Q2 for the last to years, which gives an indication of market share movements. I’ve excluded channel margins from tables 2-4, making this just the revenues of each vendor. I’ve ‘calendarised’ those vendors (like HP, Dell and Oracle) whose financial reporting quarters end in different months. I’ve merely assumed that each month represents one-third of each quarter to do this. I’ve also estimated the revenues of those vendors which have not yet reported Q2 results. Like all my statistics I constantly update the numbers and will restate any major deviancy from these statistics.
The ITC industry is very large, making any estimation of its total size problematic. I believe in the year to June 2009 its was worth some $6.1 trillion. There are many participants, which means that the leading vendors have relatively small market shares when compared to smaller markets.
In the case of the total ITC market (all Hardware, IT Service, Software and Telecom Service revenues) the leading players are AT&T, HP and IBM. Interestingly although the Telecom Service area accounts for 50% of ITC revenues, its vendors are often slightly smaller than the largest hardware and full-range IT suppliers. This is because Telecoms markets are national to computer companies’ international ones.
Larger vendors often gain share in a downturn as some of the smaller companies go out of business. There is slight evidence of this in the 0.2% gain in market share for the top 7 suppliers. HP’s acquisition of EDS allowed it to gain share, while Vodafone was the only leading vendor to lose share in the year, as can be seen in Table 2.

The Hardware Market Was Worth $6.6 Trillion In The Last Year

Table 2 – World ITC Annual Market Share ($US Billion) – Q308-Q209 and Q307-Q208

Source: ITCandor, August 2009
There are less players in the hardware market, as can be seen by the larger market shares of the leading vendors (see Table 3). Again we can see something of a shakeout of the smaller vendors, as the ‘Other’ category has declined by 0.5% over the year. HP leads this market, followed by Samsung (a leading supplier of mobile phones among other ITC hardware). Despite the fact that all major vendors sold less hardware in the last year than the previous one, there have been some strong movements in market share – with HP, Dell, Sony, Hitachi and Canon gaining over the year. The strong currency exchange rate movements have affected this picture strongly, with the Japanese companies’ performance looking far worse in Yen than in $US.

Table 3 – World ITC Hardware Annual Market Share ($US Billion) – Q308-Q209 and Q307-Q208

Source: ITCandor, August 2009

IBM Leads The World IT Services Market With a 4.3% Share

IT service also shows a shakeout of smaller vendors, with the ‘Other’ vendors losing 0.9% share in the year (see Table 4). This was due in large part to the acquisition of EDS by HP, whose own market share increased by 1% as a result of this and its own organic growth. IBM remains firmly in first position with a consistent 4.3% share in both years. Siemens is the only major supplier to lose share during the year, due perhaps to the sell-off of its stake in Fujitsu Siemens to Fujitsu in the last 6 months.

Table 4 – World IT Service Annual Market Share ($US Billion) – Q308-Q209 and Q307-Q208

Source: ITCandor, August 2009

Microsoft Is The Clear Leader Of The Software Market

The smallest category in the ITC market is software, which accounted for only 10% of supplier revenues in the last year (see Table 5 and Figure 2). Interestingly Microsoft’s position is the strongest as a leader of the 4 categories. Its performance in the last year has been largely the same as the software market overall. Oracle and (to a lesser extent) IBM have both gained share in the last year.

Table 5 – World ITC Software Annual Market Share ($US Billion) – Q308-Q209 and Q307-Q20

8

Source: ITCandor, August 2009

Telecoms Service Accounts For 50% Of the World ITC Market

The largest category of offerings in the ITC market is Telecom service (see Table 6). Consequently the market shares of the leading vendors are smaller than in other areas. AT&T is not only the largest vendor here, but it also had strong growth in the year gaining 0.2% market share in the process. Of the other vendors Vodafone lost significant business and market share during the year. We’ve noted elsewhere that the Telecom service market has been as badly affected by the economic downturn as the other ITC markets, despite the sector’s potential advantages of dematerialisation and travel avoidance.

Table 6 – World Telecom Service Annual Market Share ($US Billion) – Q308-Q209 and Q307-Q20

8

Source: ITCandor, August 2009

Some Conclusions – Watch Your Market Share In A Falling Market

If you’re a vendor, it’s very important to check your market share in a falling market. Sometimes a decline in revenues brings about introverted cost control activities before the position is properly assessed. There are plenty examples of suppliers who are gaining share despite doing less business. A downturn is an excellent time to acquire companies, as HP with EDS, IBM with SPSS, Oracle with Sun (as long as the US government and the EU raise no objection) and others have learnt.
Please let me know if you want a “pdf” copy of this article and I’ll send it straight out. I’ll be address

Filed under: Market Share And Forecast Tagged: | Accenture, AT&T, CA, Deutsche Telekom, EMC, France Telecom, Fujitsu, Google, HP, IBM, Martin Hingley, Microsoft, Oracle, Siemens, Sprint, Symantec, Telecom Italia, Telefonica, Vodafone