Consumerization, Systems of Engagement Driving Business Spend on Technology
Less than 10% of business decision-makers outside of IT are not spending their own budget on technology services, and of the 90% that are, almost a quarter of them earmark 21% or more of their unit's expenditures for IT, according to new research from Forrester. Interestingly, this group, which Forrester calls "high spenders," has good relationships with IT and views the CIO and his/her office more positively than lower-spending business leaders.
Twenty percent of high spenders say that their use of consumer technology has changed their expectations of how technology should be used. This group is also opening its wallet to systems-of-engagement-focused technologies: They are three times more likely to be hiring their own IT staff than low spenders -- the 30% that spend 1% to 5% of their budget on IT -- and two times more likely to be investing in smartphone apps and analytics.
Forrester's Forrsights Business Decision-Makers Survey, Q4 2012, found that:
Financial services firms do the most business buying of any industry vertical. Ninety-five percent spend their own money on technology, and 38% fall into the high-spender category.
BYOD is not about attracting younger employees — it's about executives. Thirty percent of senior managers are high spenders.
More business buyers are increasing their spending budget than IT. Business buyers are 20% more likely to increase their spending in technology in comparison with IT decision-makers. High-spending business leaders are 50% more likely.
Gartner: Half of Employers will Require Employees to Supply Their Own Device for Work Purposes by 2017
As enterprise bring your own device (BYOD) programs continue to become more commonplace, 38 percent of companies expect to stop providing devices to workers by 2016, according to a global survey of CIOs by Gartner, Inc.'s Executive Programs
Gartner defines a BYOD strategy as an alternative strategy that allows employees, business partners and other users to use a personally selected and purchased client device to execute enterprise applications and access data. It typically spans smartphones and tablets, but the strategy may also be used for PCs. It may or may not include a subsidy.
BYOD drives innovation for CIOs and the business by increasing the number of mobile application users in the workforce. Rolling out applications throughout the workforce presents myriad new opportunities beyond traditional mobile email and communications. Applications such as time sheets, punch lists, site check-in/check-out, and employee self-service HR applications are just a few examples. Expanding access and driving innovation will ultimately be the legacy of the BYOD phenomenon.
While BYOD is occurring in companies and governments of all sizes, it is most prevalent in midsize and large organizations ($500 million to $5 billion in revenue, with 2,500 to 5,000 employees). BYOD also permits smaller companies to go mobile without a huge device and service investment. Adoption varies widely across the globe. Companies in the United States are twice as likely to allow BYOD as those in Europe, where BYOD has the lowest adoption of all the regions. In contrast, employees in India, China and Brazil are most likely to be using a personal device, typically a standard mobile phone, at work.
How a well-managed BYOD program subsidizes the use of a personal device is critical, and can dramatically change the economics. Today, roughly half of BYOD programs provide a partial reimbursement, and full reimbursement for all costs will become rare. Gartner believes that coupling the effect of mass market adoption with the steady declines in carrier fees, employers will gradually reduce their subsidies and as the number of workers using mobile devices expands, those who receive no subsidy whatsoever will grow.
BYOD does increase risks and changes expectations for CIOs. Unsurprisingly, security is the top concern for BYOD. The risk of data leakage on mobile platforms is particularly acute. Some mobile devices are designed to share data in the cloud and have no general purpose file system for applications to share, increasing the potential for data to be easily duplicated between applications and moved between applications and the cloud.
However, in general, IT is catching up to the phenomenon of BYOD. More than half of organizations rate themselves high in security of corporate data for enterprise-owned mobile devices. This new confidence in the security posture to support BYOD is a reflection of more-mature tools and processes that address myriad needs in the security area.
Salesforce.com passed SAP as the lead vendor in the worldwide customer relationship management (CRM) software market in 2012, according to Gartner, Inc. Total worldwide CRM software revenue totaled $18 billion in 2012, up 12.5 percent from $16 billion in 2011.
Vendors benefited from strong demand for software as a service (SaaS), which represented nearly 40 percent of CRM total software revenue in 2012, as organizations of all sizes sought easier-to-deploy alternatives to replace legacy systems, as net-new applications or to provide alternative complementary functionality.
The top five CRM vendors accounted for nearly 50 percent of CRM software revenue in 2012. Salesforce.com replaced SAP as the largest vendor in the CRM market as its direct sales pushed its CRM revenue to more than $2.5 billion. Second-place SAP's growth was less than one percent in USD terms, largely because currency headwinds were stronger in 2012 and the euro was weak. While SAP was not the worldwide leader in CRM for 2012, it was still the largest vendor in terms of revenue in Western and Eastern Europe.
North America and Western Europe remained the largest regions for CRM, accounting for more than 80 percent of total software revenue, but all regions saw growth. Western Europe's growth was less than one percent, due in part to the strong dollar, which made overall comparisons with prior years difficult. Overall spending in the IT market in Western Europe has been muted because of economic reasons. Areas of growth continued to be in Eastern Europe, Eurasia, and the Middle East and Africa, which saw IT spending for the modernization of countries' infrastructure (utilities, telecommunications, banking and government).
In 2012, vendors continued to expand their offerings with new features and functionality, often through acquisition. The wave of consolidation activity that began flowing through the market in 2009 continued throughout 2012, with more than 50 acquisitions, resulting in increased competition at the top end of the market, with the real start of the global sales forces kicking in some sales. Marketing has been the focus for investment in the past couple of years, growing at more than four times the software industry forecast norm in 2012. Marketing was also the target area for acquisitions by IBM, Microsoft, Oracle and others as analytics, lead quality and multichannel support for social and mobile technologies continue to lead the list of requirements by line-of-business buyers.
U.S. Tech Market will Grow by 6.2% in 2013 and 6.8% in 2014
No one would claim that the US tech market is booming. With Europe still mired in recession and debt problems, US economic growth looking soft, and business and consumer worries about the US government raising tax rates and cutting Federal spending, it is not surprising that businesses and governments are being cautious in their purchases of technology goods and services. But we think the fear is overblown. Forrester's forecast for the US tech market in 2013 and 2014 -- published as "US Tech Market Outlook For 2013 And 2014: Better Times Ahead" -- projects a 6.2% rise in 2013 and a 6.8% growth in 2014 in US business and government purchases of computer equipment, communications equipment, software, IT consulting and systems integration services, and IT outsourcing. Adding in slow growing telecommunications services pulls growth down to 5.7% in 2013 and 6.1% in 2014. That may not be a boom, but it is certainly not a bust.
While CIOs are cautious in their tech buying -- and in the case of the Federal government, actually cutting back -- that caution has and will show up mostly in reduced spending on computer and communications equipment (with the exception of tablets). CIOs will be most aggressive in software, especially for SaaS apps, analytics, and mobile apps. IT outsourcing will see good growth in 2013 as the result of 2012 selection decisions, while IT consulting and systems integration will come on strong in 2014. Business and government purchases of telecommunications services will continue to grow at a slower rate than the overall tech market.
Construction, transportation, education, and healthcare will grow their IT budgets the fastest in 2013. CIOs in these industries will increase their IT spending due to better business conditions (construction, transportation) or market pressures (education and healthcare). CIOs in manufacturing will turn more cautious, and those in the federal government will have to reduce their tech buying in the face of mandated budget cutbacks.
Big Data, Analytics, and Cloud Drove Enterprise Software Growth in 2012
International Data Corporation (IDC) released the latest results from the Worldwide Semiannual Software Tracker. For 2012, the worldwide software market grew 3.6% year over year reaching a total market size of $342 billion, which was in line with IDC's previous forecast of 3.4% and less than half the growth rate experienced in 2010 and 2011. In that sense, 2012 confirms the beginning of a more conservative growth period. In the middle of this scenario, there are faster growing market segments, such as Data Access, Analysis and Delivery, Collaborative Applications, CRM Applications, Security Software, and System and Network Management Software. Every one of these markets grew in the 6-7% range, about double the rate for enterprise software as a whole.
Three primary segments comprise the total software market in IDC's software taxonomy: Applications; Application Development & Deployment (AD&D); and Systems Infrastructure Software. Among the three primary segments, the AD&D segment, which comprised nearly 24% of total software revenues in 2012, was the fastest growing market with a 4.6% year-over-year growth rate. Growth in the AD&D segment was largely driven by the performance of the Data Access, Analysis, and Delivery and the Structured Data Management secondary markets with 6.0% and 5.9% growth rates, respectively. Business Intelligence and Relational Database Management Systems (RDBMS) solutions are pushing the growing trend for these markets because of widening Big Data and Analytics adoption. Big data and analytics are also closely tied to the fast growth social business software markets, where the combination of contextual data and the "right" expertise is becoming critical for supporting enterprise decision making and data driven customer experience solutions.
In the Applications primary market segment, which comprised 49% of total software revenue, year-over-year growth for 2012 was 3.3%, which is slightly lower than for software overall. Within this market segment, CRM and Collaborative Applications stood out with year-over-year growth rates near 7%. While the former is driven by the cloud migration trend and the large investments by businesses to deliver a better customer experience to the "social customer", the latter is largely driven by the Enterprise Social Software market, which grew at 24.8% year over year and gained more than 5 points of market share over three years. Mobile, while not a direct enterprise applications driver, is however a contributing factor and driver for businesses moving to newer and more mobile device agnostic enterprise software.
The third primary segment of the software market is System Infrastructure Software, which comprised 27% of total software revenue and grew 3.3% year over year in 2012. The Security Software and System/Network Management Software secondary segments both grew more than 6% year over year as these solutions provide the infrastructure - whether in the cloud or on-premise - to support the 3rd Platform. Although the other two System Infrastructure Software secondary segment (Storage Software and System Software) had flat growth in 2012, the Virtualization sub-segments had double-digit growth rates.