Martin Hingley's Blog

2010 ITC Highlights

• The world ITC market will grow 4.7% to $6.4 Trillion
• Telecom Service will show 0% growth, Hardware 13%, Software 11% and IT Service 6%
• Asia Pacific is outgrowing other regions
• EMEA spending is sluggish, affected by government austerity and currency problems
• Those offerings associated with Cloud Computing (OS, SaaS, Internet Service, Broadband) have been growing faster than others

What happened this year in the ITC market? Here at ITCandor we thought it was a good time to review the major trends. We’ve been very active in market modelling as always and show here a precise of our findings, which are also available for purchase if you need business planning information of course.

The World ITC Market Grows 4.7% To $6.4 Trillion

The credit crunch in September 2008 created a significant drop in demand for ITC offerings (see Figure 1 for a comparison of revenue and revenue growth), it also created significant disruption to the seasonality of sales from which we are only just unravelling. Our current sizing (complete to Q3) suggests that worldwide market growth will by 4.7%, accounting for $6.4 Trillion and making up for the 4.2% fall in the market in 2009.

Telecom Service Continues To Lead ITC Categories In 2010

Despite many years discussing ‘convergence’ there remain a number of important differences between the Telecom Service market and other ITC categories. In particular its suppliers are typically large ex-nationalised companies with a massive presence in their home territory. IT companies are far more international. We believe planning processes are also different – Telecom suppliers tend to start with by paying governments to exploit technologies such as 3G, while IT suppliers tend to start (or at least assume to start) from raw silicon.
Telecom Service is by far the largest of the four ITC categories (see Figure 2 for a comparison of the four). However, perhaps because it is mature and large, Telecom Service has been sluggish in 2010 – for the full year we expect 0% growth, while Hardware will post 13%, Software 11% and IT Service 6% more than in 2009.

ITC In Asia Pacific Booms, But Lags In EMEA

The credit crunch had a deeper immediate effect on ITC spending in Asia Pacific and the Americas than it did on EMEA (see Figure 3 for a comparison using constant currencies – the Yen and the Euro for A/P and EMEA). There have been some other interesting regional differences. In particular:

• The Americas show more dynamism in spending – certainly higher peaks in the years before 2008; the recovery in ITC spending has been strong, although there’s a slight downward curve in the most recent quarter
• Asia Pacific had sluggish ITC sales for a number of years before the credit crunch; perhaps due to this the region has had the strongest growth in 2010: not only has Japan recovered, but China and India are investing more than before in technology
• EMEA has demonstrated less dynamic growth than the other regions over a long period; the affects of the credit crunch were shallower, but more long lasting; when looking to the future the crisis with the Euro and constricted government spending look likely to contribute to a continued under-performance.

At the country level we believe India (+27%), Brasil (+12%), China (+15%), Japan (+11%) have shown the strongest growth in ITC spending, while Greece (-10%) and Portugal (-8%) have seen the steepest declines. 2010 was a year in which many countries struggled to grow, with many EMEA ones declining slightly.

Operating Systems, SaaS, Converged Devices And Internet Services Were The Most Strongly Growing ITC Offerings In 2010

There are many different types of offering in the ITC market, ranging from the massive (but slowly growing) fixed line and wireless telecom services to a number of smaller – and sometimes rapidly growing – classes. We’ve captured the changes over the last year in Figure 4. To be precise we’ve shown the revenue for the year to the end of Q3 2010 along the Y-axis, the revenue growth for the year (the annual value against that for the year ending in Q3 2009) along the X-axis, with the size of the bubble indicating the net profit associated with each offering. We’ve left the titles of some of the smaller categories, but you can read our Q2 analysis or contact us if you need to know more. There were some interesting developments in 2010. In particular:

• Most offerings saw revenue growth and have become more profitable in the year: even the two largest telecom services improved: in general it looks as if our industry is well on the way to recovery
• Operating Systems and SaaS are both small classes and yet showed dramatic growth: in the case of the latter Microsoft’s Windows 7 has been the major cause: SaaS is of course the most notable Cloud Computing product – it will move down and to the right as it becomes more successful over the next few years
• Converged Devices include smart phones of course and along with Implementation services, Internet and Broadband are also key components of Cloud Computing
• The Application class was in the middle in terms of revenue size and growth, but larger in terms of profit; an increasing focus on smart phones and virtualisation has driven growth in the year; it is currently too early to plot the contribution of gaming applications, although it looks unlikely that they will grow over 2009 levels

Outsourcing service is akin, but separate from Cloud Computing. Local and international suppliers of managed services found the going hard in 2010 and will find it harder still in the year ahead.

Some Conclusions – Good Fuel For Making Predictions

It’s been a better year for ITC suppliers than we predicted, especially in non-Telecom sectors. The disruption of the credit crunch continued in the shape of government austerity budgets and currency troubles, contributing to a small decline in spending in many European countries. However it was a year in which BRIC and other emerging countries bought more ITC products and services than ever before, helping contribute to the overall growth.
The convergence of IT and C is continuing apace – witness the mass adoption of smart phones and their app in 2010. It was also a year in which Cloud Computing became a reality for many, as the 50% growth of SaaS demonstrates.
This is a one of a series of posts we are publishing, summarising this year’s stats and themes and predicting the key trends in the next. As always your ideas and observations are much appreciated. Please contribute by leaving a comment on this article.

Filed under: Hardware, IT Service, Software, Telecoms Service Tagged: | Asia Pacific, China, Cloud Computing, EMEA, hardware, India, IT Service, ITC, Japan, Russia, SaaS, software, Telecom Service, USA