ITCandor 2009 Market Share And Forecast Highlights
- The Credit Crunch led to an unprecedented fall in ITC spending beginning in Q4 2008
- A fall in microprocessor sales preceded the overall market decline – something important to remember for next time
- Many vendors experienced their strongest ever quarterly revenues in Q4 2009
- A number of vendors grow their revenues by more than 30% in Q4 2009
- Asia Pacific has performed worst of the regions during the recession
- EMEA business, although shallower in 2009, has shown no real signs of improvement in Q3 or Q4 2009
- ITCandor predicts a ‘double dip’, or W-shaped forecast for ITC revenues in 2010
- Samsung led the $1.1T ITC hardware market in 2009 with a 8.3% share
- IBM led the $1.4T IT Service market in 2009 with a 4.1% share
- AT&T led the $3.0T Telecom Service market in 2009 with a 2.7%
- Microsoft led the $643B Software market in 2009 with a 4.3% share
Now that all of the results are in for the 90 suppliers I track in my market model I wanted to share some thoughts with my readers on forecasting the recovery of the ITC market. As you know I split out into Hardware, IT Service, Software and Telecom Service categories and look at the market in the Americas, Asia Pacific and EMEA regions.
The ITC Recovery Was Too Fast In Q4 2009 – Get Ready For A Double Dip
I’ve mentioned many ties before that the downturn in the ITC market began with the Credit Crunch. The fall of business in Q4 2008 was unprecedented, not least because it wiped out usual seasonality of the market. In Figure 1 I show a view of revenue growth by category and quarter from 2008 to 2009, with a forecast for 2010 (my forecasts go all the way to 2013, but I’m being selective). Software remained relatively strong and hardware weak in the beginning of the downturn, a picture reversed in the recovery – at least to the extent that hardware growth is leading us out of the downturn. The recovery in Q4 2009 was very strong, especially for hardware suppliers. For instance:
- Samsung, RIM, Western Digital, Compal, Amazon, AMD, ZTE, Seagate, Lenovo, Apple and SDK all experienced growth of over 30% over Q4 2008
- Vendors experiencing their largest ever quarterly revenues included Acer ($5,200m), Amazon ($9,519m), Apple ($15,683m), ARM ($139m), CA ($1,128m), Canon ($10,622m), China Telecom ($7,944m), Citrix ($451m), Compal ($4,628m), Deutsche Telekom ($24,021m), eBay ($2,371m), EMC ($4,100m), Google ($6,674m), HP ($31,214m), Intel ($10,569m), Lenovo ($4,784m), Microsoft ($19,022m), NetApp ($944m), Nintendo ($7,060m), RedHat ($193m), RIM ($2,608m), Salesforce ($332m), Samsung ($28,069m), SAP ($4,708m), Tandberg ($270m), Western Digital ($2,619m), Wistron ($4,610m) and ZTE ($2,522m)
These high growth rates were due in part to the complete collapse of the market the previous year – an ‘easier compare’ if you will and many of the larger revenues have been able to add the non-organic growth of acquired revenues to their business. However I believe the accelerated growth of the last quarter points to the distinct possibility of a ‘W-shaped’ recovery in business levels. Although I don’t expect growth to become negative, I do expect growth rates to decline from the 7.4% for ITC and certainly from the 10.8% for hardware in Q4 2009.
A Fall In Microprocessor Sales Heralded The Downturn In Q3 2008
I suppose we can all be wise after a fall, but I’m very interested in trying to dissect the downturn in order to remember lessons for next time. As well as tracking the revenues generated from end-users (whether through direct or indirect channels) I also look at vendor-to-vendor revenues, which are either ‘Original Equipment Manufacturing’ (OEM) when talking about hardware or components and ‘Channel Margin’ when thinking about the revenues made by the distribution channel. Figure 2 shows how the fall in microprocessor revenues (just part of OEM business) preceded the fall in hardware revenues. how distribution revenues tracked hardware revenues and how all three lines preceded the fall in overall ITC market revenues.
When looking at the recovery we can see how the situation has been reversed, with microprocessor and hardware revenues leading us out of the downturn by reaching positive ground.
ITC Growth In EMEA And Asia Pacific Is Weaker Than The Americas
I’ve often written about how important it is to take currency into account when looking at market growth and forecasts. I carefully recalculate regional values into representative currencies in order to calculate real growth when building my market model. My latest results are shown in Figure 3. This shows that Asia Pacific, once values are recalculated in Japanese Yen has had the poorest experience of the downturn, although it did grow faster than EMEA in Q4 2009. EMEA, on the other hand, had by and large the least problems at the beginning of the downturn – although it showed no sign of upturn in either Q3 or Q4 2009. The Americas have so far experienced a V-shaped downturn and reached a 3.8% positive growth in Q4 2009. However, as argued above, I expect growth rates to dip in later quarters of 2010 contributing to a W-shaped recovery for the ITC industry.
The Absolute ITC Market Size Shows The Dramatic Effect Of The Credit Crunch
If we look at the effect of the credit crunch we see a significant change in traditional market sizing. Figure 4 shows ITC revenues by quarter and category for the period between 2008 and 2010. The lack of a market peak in Q4 2008 and subsequent decline shows a different view of the downturn. It is perhaps more reassuring given the massive market size that our industry now commands. In total I believe the ITC market dropped 7.7% to $6.2 Trillion in 2009 and will grow by 3.9% to $6.4 Trillion in 2010.
Samsung, Microsoft, IBM And AT&T Led The ITC Market By Category In 2009
In building the ITCandor market model I take care to include representative vendors and I have build category and sub-category shares to qualify the list. In Figure 5 I show the market shares of the major categories of the ITC market. It shows some interesting results. In particular:
- Hardware was worth $1.1 Trillion in 2009 and is now the second smallest of the categories (although it remains the second largest in Asia Pacific); it is also the most global, with the major vendors taking significant proportions of the market; in 2009 Samsung led the market with an 8.3% share –thanks largely to its mobile handset sales; HP held a 7.0% share and was the leader of the IT market, although it might want to consider addressing the Communications market as others have in the top seven
- The Software market is the smallest ITC category, accounting for $643 Billion in 2009; here Microsoft led with a 4.3% share, followed by IBM with 3.3%; Oracle is gaining ground with a 3.0% share, while Nintendo managed a 1.0% share through sales of its gaming titles
- The IT Service market was worth $1.4 Trillion in 2009 and is the larges IT category; IBM held a significant lead over other vendors with a 4.1% share; HP – largely through the acquisition of EDS – also held a strong second position with a 2.6% share; Google and Amazon (with 1.7% share each) demonstrate the extent to which Internet-based service are encroaching on traditional IT Services business
- Telecom Service is the least global of the four categories in the sense that the market leaders took a smaller share of revenues in 2009; it is also the largest single category accounting for a massive $3.0 Trillion revenue in the year; the market was led by AT&T whose business is largely in the USA; Telefonica has managed to become more international than most, expanding from Spain to sell its services in Latin American countries and in Europe through its O2 acquisition; the other major players are almost all national champions with the exception of Vodafone, whose concentration on mobile communications placed it in forth position
This is only a small sample of the market shares by region, category, country and sub-markets which exist within the ITCandor market model. Please contact me if you want more details.
Some Conclusions – Recovery Is Under Way, But Don’t Expect And Easy Ride
These data show the extent to which the ITC market was severely damaged by the credit crunch, which first hit in Q4 2008. If we suspect something similar is happening at some time in the future we could do worse than look in detail at the OEM suppliers – especially the microprocessor companies which showed the earliest fall in revenues in 2008. Of course the hardware markets were over-stocked at the time, so the reduction in inventory also affected the component suppliers. While some markets were slower to feel the downturn, none were immune – and in fact Software looks as if it was ‘last in, last out’.
As I look forward into 2010 I am very encouraged to see the recovery is already under way. The substantial growth of revenues in Q4 2009 was due largely to an ‘easier compare’, given the disaster of the previous year. However I believe the recovery is over-heating. If indeed many vendors continue to grow organic revenues significantly and to record quarterly revenues, they will find it impossible to justify their headcount reductions and other significant cost-cutting activities taken in 2009. However, I believe most will have a harder time than they expect. In particular you should get ready for a W-shaped recovery – a double dip – and expect the rest of the year to be turbulent, before we reach a period of reasonable single-digit growth rates in 2011 and beyond.
Are you a market planner in the ITC industry? Do you have a different view of the forecast for 2010? If so, please contribute by adding a comment to this article.
Filed under: ITC Market, Market Share And Forecast Tagged: | Acer, Amazon, AMD, Apple, ARM, CA, Canon, China Telecom, Citrix, Compal, credit crunch, Deutsche Telekom, distribution, double dip, eBay, EMC, Forecast, Google, hardware, HP, Intel, IT, IT Service, ITC, Lenovo, Market-Share, microprocessor, Microsoft, NetApp, Nintendo, OEM, Recovery, RedHat, RIM, Salesforce, Samsung, SAP, SDK, Seagate, software, Tandberg, Telecom Service, W-shaped recovery, Western Digital, Wistron, ZTE
