Technology | Media | Telecommunications

Friday, July 03, 2015

How the Savvy CIOs are Doing More with Less Budget

Enterprise spending on Information Technology (IT) budgets will reach a combined worldwide total of $3.5 trillion in 2015 -- that's a 5.5 percent decline from 2014, according to the latest market study by Gartner. Regardless, smart CIOs are undeterred and are meeting their objectives -- they know how to optimize their budget spend.

Gartner's analysts attribute the current decline to the rising U.S. dollar. But there are clearly several other logical reasons why business technology spending is in a state of flux. One obvious reason is the growing movement towards Open Source technologies.

In constant-currency terms, Gartner says the market is projected to grow by just  2.5 percent. Back in their previous forecast during April, they had forecast IT spending to decline 1.3 percent in U.S. dollars and grow 3.1 percent in constant currency.

Communications services will continue to be the largest IT spending segment in 2015, with spending at nearly $1.5 trillion. However, this segment is also experiencing the strongest decline.

In the device market, smartphones continue to be the leading segment. But, according to Gartner's latest assessment, overall smartphone unit growth will start to flatten throughout the year.

The PC and media tablet market continues to weaken. The expected 10 percent increase in average PC pricing is going ahead, thereby delaying purchases even more than expected. Moreover, the ongoing adoption of low-cost Chromebooks is likely to be a key factor in the current trend.

Enterprise budgets for data center systems in local spending are expected to remain stable for the year, with some CIOs extending life-cycles and deferring replacements as a means of offsetting the price increases of the legacy hardware vendors.

Enterprise software spending is forecast to decline 1.2 percent in 2015, with revenue totaling $310 billion. Gartner analysts said many of the legacy software vendors wont try to raise prices, because software as a service (SaaS) is about trying to maintain market share, not their profitability.

Gartner believes that raising prices could take the troubled legacy software vendors out of consideration. Meanwhile, vendors offering affordable open source software subscriptions are continuing to experience gains -- at the expense of the traditional proprietary software licensing models.

IT services spending in 2015 is projected to decline by 4.3 percent. Gartner expects modest increased spending on consulting in 2015 and 2016. Forward-looking growth for professional services is particularly related to demand for digital business transformation projects.

Increasingly, buyers prefer solutions that minimize time and cost of implementation, driving demand for more-efficient delivery methods, out-of-the-box implementation, and lower-cost solutions.

That being said, training and consulting services for OpenStack deployments are still in high demand, as more organization embrace an open hybrid cloud computing architecture for their IT evolution. Furthermore, open source Platform as a Service (PaaS) cloud offerings are also experiencing strong growth.

Thursday, July 02, 2015

Open Source Subscriptions Disrupt Legacy App Vendors

The ongoing success of open source software subscriptions continues to take a heavy toll on traditional vendors. Application software revenue grew by just 2.7 percent year-to-year for the twenty-three vendors tracked in Technology Business Research (TBR) "Applications Software Vendor Benchmark" study.

Growth was supported primarily by subscriptions revenue of 48.9 percent, compared to 48.2 percent in 4Q14, but dragged down by a license revenue decline of 16.6 percent -- that's compared to a decline of 15.7 percent in 4Q14.

According to the latest TBR assessment, vendor delivery models continue to shift in line with customer consumption patterns -- driving rapid subscriptions growth as open source cloud-based offerings gain traction, but eroding similar traditionally licensed enterprise software products.

"Traditional software vendors must mitigate the impacts of lower revenue per solution as customers select cloud offerings by not only retaining their existing install base, but by also winning market share from competitors and monitoring margin erosion,” said Meaghan McGrath, analyst at TBR.

Especially in the saturated U.S. market, TBR believes that this heightened competitiveness dictates that vendors differentiate with analytics, integration and solutions bundling to appeal to business outcome buyers. The following are top trends curated from software vendor 1Q15 earnings results.

Applications Delivery and Monetization Shifts

The industry-wide transition from license-based models to subscription-driven revenue results in lower price points per offering and lower operating margins. Traditional vendors see overall product revenue erosion in light of this, as some cloud-native vendors continue to experience unprofitable growth.

TBR sees vendors broadening the applicability of their portfolios by bundling products that can be sold as cohesive, integrated solutions to business outcome buyers and building on core technologies with vertically oriented extensions.

Specifically, fragmented growth opportunities in North America require vendors to invest in making their portfolios more applicable to specific business needs. Besides, few open source vendors seem to have mastered the art and science of the subscription-based business model that their customers crave.

How U.S. Currency Strength Challenges Vendors

Currency exchange rate dominated earnings calls in 1Q15, with executives spending a lot of time discussing how rates will impact financial results and how firms will hedge the currencies, which is a greater factor given more ratable, unrecognized revenue from subscription sales.

Those vendors covered in the Benchmark that are based outside the U.S. were hit not in their earnings but in the TBR conversion of their earnings to USD for comparison purposes. Also, TBR says that slowing economic activity compounds uncertainty in international sales within EMEA and APAC and will further threaten applications growth.

Wednesday, July 01, 2015

Hyper-converged Platforms Upside to Reach $10.6 Billion

The software-defined capabilities of hyper-converged platforms are helping organizations overcome challenges related to internal IT processes and infrastructure management, according  to the latest market study by Technology Business Research (TBR).

With strong budgets allocated for future hyper-converged purchases, TBR estimates a $10.6 billion U.S. addressable market over the next 12 months.

"IT customers are smashing into roadblocks with traditional server and storage infrastructure. But they are finding quickly that there are alternatives that provide improved efficiency and better management," said Christian Perry, principal analyst at TBR.

Hyper-converged platforms take converged infrastructure to the next level of streamlined, virtualized solutions, and customers are adopting for a wide range of use cases. According to the TBR assessment, these initial deployments represent tremendous opportunity for vendors across hardware, open source software and related professional services.

TBR believes alternate infrastructures -- such as hyper-converged platforms -- are quickly growing more acceptable in all sizes of IT organizations. Customers continually point to challenges with complexity and burdensome management, particularly in environments with heavy storage requirements.

These storage-centric challenges provide vendors of hyper-converged platforms with an edge over vendors of stand-alone infrastructure and traditional converged systems, as many hyper-converged platforms are built to improve the performance and management of storage-centric workloads.

But while IT buyers are more open to purchasing these infrastructures, they still rely heavily on the vendor to help them with the technology -- from the rollout through ongoing management. Customers expect hyper-converged rollouts will be streamlined and quick, but many point to time and resource investment as a surprising sticking point.

As a result, customers are also buying professional services from the vendor, to help them reduce the burden on their in-house IT staff.

"A mere 11 percent of customers told us they did not purchase any services with their hyper-converged platform, so the opportunity is strong for services bundling. In fact, for every dollar spent on hyper-converged platforms, customers are spending $1.07 on services, and these are services spanning everything from integration and implementation to break/fix support," according to Perry.

Although customers are generally satisfied with their hyper-converged platforms, room for improvement exists, and professional consulting services can help customers overcome at least some of these challenges.

For example, some customers expressed the unexpected need for technical training of internal staff to work with or manage the systems. However, another issue is customer unfamiliarity with hyper-converged platforms vendors due to the nascence of the overall market. TBR believes vendors can expand customer mind-share with messaging that targets IT challenges and business requirements directly.

Tuesday, June 30, 2015

Global M2M Revenue will Reach $40 Billion by 2019

During the last couple of years, machine-to-machine (M2M) technology has become part of the product portfolio on offer by global mobile network operators and a significant revenue stream for M2M specialists.

Telematics remains an area of growth in the broader M2M market, as is security and a variety of mHealth applications. In other sectors, such as the smart home and consumer electronics, Wi-Fi is becoming the dominant technology, though mobile technology is used to access the cloud and is likely to play a subsidiary role.

Meanwhile business models are beginning to account for new technology and open source software related concepts and developments -- one of the latest to gain significant traction is the notion of an Internet of Things (IoT).

Juniper Research now forecasts that the Far East and China region will account for 22 percent of global cellular M2M connections by 2019 -- that's a substantial increase from 15 percent in 2014.

The new research found that concerted ongoing efforts by China's major telecom providers -- particularly in smart metering and connected cars -- will account for the rise of connected devices in China. However, established M2M markets in North America and Western Europe will likely retain the majority of connected device revenues.

"China Telecom, China Unicom and China Mobile have all made strides to embrace M2M," said Anthony Cox, senior analyst at Juniper Research. "In many cases, they are providing end-to-end solutions, supported by systems integration and dedicated charging policies."

The research argued that this surge has been aided by State Grid Corporation of China's plan to spend $68.7 billion in smart grid technologies this year.

Nonetheless, in the case of smart metering, the average revenue generated per device is constrained by complexity in deployment as well as a lack of a clear business model.

Additionally, the research observed a trend from merely connected devices towards connected ecosystems. This development has in turn driven the application of Big Data analytics in some verticals, unlocking the potential of M2M.

Juniper claims that increasing interest in white-space radio spectrum would in turn enable the number of M2M modules to proliferate, due to the lower cost and power requirements of modules designed to function in this spectrum.

Other key findings from the study include:
  • Juniper Research forecasts that the global M2M sector will deliver service revenues of over $40 billion by 2019.
  • M2M in agriculture is increasing in importance for monitoring farm animals and increasing productivity through precise field-mapping.
  • M2M will increasingly form the backhaul infrastructure necessary for emerging Internet of Things applications.

Monday, June 29, 2015

Technology, Media and Entertainment M&A Trends

A new market study by Mergermarket, reveals that 84 percent of Technology, Media and Entertainment (TME) companies expect to see more cross-sector merger and acquisition (M&A) deals over the next two years.

The resulting report from this study outlines the rapidly evolving M&A landscape for global TME companies. This change is being driven by an increasingly fierce battle fought by TME firms who are attempting to gain a competitive edge in the market, via convergence.

In fact, 2014 saw new levels of convergence deals amounting to $34.5 billion, with this trend predicted to increase further, according to the latest worldwide assessment by the Mergermarket Group.

Cross-sector convergence varies widely across the TME sectors. Entertainment businesses are the most willing to branch out, with more than 33 percent planning non-entertainment purchases. This willingness has the potential to put acquisitive businesses ahead, but they must be aware of the potential risks involved in cross-sector acquisitions.

One major challenge for cross-sector acquirers is understanding a new area of business. This can be a steep learning curve. For a big tech company, the biggest challenge is just understanding the new marketplace.

The movie industry doesn’t operate in the same way as music, or the same way as computer games. Moreover, TME companies that are seeking growth are increasingly crossing borders -- with 57 percent saying their next acquisition is likely to be outside their home market.

Of those businesses in search of cross-border opportunities, 37 percent say they are most likely to target the Asia-Pacific region, followed by Western Europe (23 percent) and North America (17 percent).

These expectations must be set against the need for firms to understand the political and regulatory risks in the target markets. Besides, this desire to converge is not limited to the global giants within the industry.

There has also been a recent upsurge in so-called Quad Play deals, in which telecom service providers seek to become a one-stop shop for pay-TV, broadband internet access, fixed and mobile telephony.

"In the face of aggressive and agile competition, trusted business models can no longer be relied upon for growth. For many companies, survival increasingly hinges on developing capabilities beyond their traditional core, said Nick Cheek, global managing editor of Remark, the events and publications division of the Mergermarket Group.

Friday, June 26, 2015

Ongoing Disruption of Video Entertainment in America

Following the launch of the Netflix and Hulu video streaming services in America, most savvy industry analysts knew that while it wasn't clear how long it would take for these offerings to gain momentum, one thing was blatantly obvious -- the disruption of the legacy pay-TV model had begun.

Fast-forward to today, North America already had 50.6 million subscription video on demand (SVOD) homes -- for movie and TV services only, excluding sports -- by end-2014.

That SVOD adoption translates to 38.8 percent of all TV households and 48.1 percent of fixed broadband homes, according to the latest market study by Digital TV Research.

They have assessed that this market penetration represents considerable growth since 2010, when there were just 16.7 million SVOD homes -- that was about 13% of all TV households. Therefore, it has been said that the North American region is the world's most mature for SVOD services.

However, the disruption in the North American video entertainment market is far from over. Digital TV Research estimates that 7.1 million more SVOD homes will be added in 2015 alone.

The SVOD total is forecast to climb to 76.5 million by 2020 -- that's up by 26 million on 2014 -- reaching 57.3 percent penetration of TV households and 65.2 percent of fixed broadband homes.

Meanwhile, SVOD revenues will soar from $0.79 billion in 2010 to $4.46 billion in 2014 -- then onto $7.09 billion in 2020. That said, revenues are forecast to grow by 59 percent between 2014 and 2020.

Now, it's apparent that the market is far from being saturated. In fact, there's an abundance of dissatisfied pay-TV subscribers who seek a solution to their need for a more affordable video entertainment offering.


Overall Video Entertainment Market Development

North American over-the-top (OTT) TV and video revenues will reach $20.5 billion in 2020 -- that's up from $2.6 billion in 2010 and the $13.2 billion expected in 2015.

Advertising on OTT sites will generate revenues of $6.0 billion in 2015, quadruple the $1.4 billion in 2010. Rapid advertising expenditure growth will continue, to reach $10.3 billion in 2020.

Download-to-own (DTO) revenues are forecast to be $2,197 million in 2020 -- that's up from $321 million in 2010 and $1,218 million in 2014. Movies will contribute two-thirds of DTO revenues by 2020, with TV series providing the rest of the growth.

OTT TV and video rental or pay-per-view revenues will expand rapidly, climbing from $169 million in 2010 to reach $591 million in 2014 and then to reach  $999 million in 2020.

According to the Digital TV Research assessment, movies will be the main earner -- providing $715 million by 2020. TV box sets becoming a more popular promotional tool than single episodes.

Thursday, June 25, 2015

Exploring Next-Generation Connected Car Solutions

The emergence of connected infotainment services -- such as off-board navigation, social media integration, music streaming, and in-car Wi-Fi -- is driving the adoption of cloud-based vehicle platforms enabled by embedded or tethered 4G cellular wireless connectivity.

However, more strategic functionality such as OTA for vehicle lifecycle management, analytics and big data for smart mobility and autonomous driving -- and how cars will interact with the wider Internet of Things for services such as vehicle-to-grid and vehicle-to-home -- will be the key drivers propelling cloud service applications into a mainstream automotive technology.

By 2020, more than 40 million cloud-enabled vehicles will ship yearly, according to the latest worldwide market study by ABI Research.

"Despite the numerous benefits of the cloud, including flexibility, scalability, real-time updates and customization, the specific nature of automotive solutions imposes the need for hybrid solutions -- guaranteeing uninterrupted performance when the connection is temporarily lost," said Dominique Bonte, vice president at ABI Research.

On the other hand, vehicle-centric and safety-critical features, such as ADAS and automated driving, will heavily rely on on-board processing due to low latency, availability, and reliability requirements for features such as collision detection with the cloud playing a more complementary role.

ABI believes that it is this delicate balance between on-board and cloud-based service delivery that will constitute the very character of next-generation connected car solutions.

At the same time, the proliferation of cloud computing platforms adds to already growing concerns about privacy breaches and security threats, which in turn impacts safety.

However, the cloud service will likely turn out to be the best possible protection, allowing real-time monitoring and updates, not just for adding or improving features but also to remotely fix security gaps, as BMW recently found.

Inevitably, open source software companies with embedded applications expertise, such as Red Hat along with established telecom vendors and service providers -- such as Ericsson and Verizon -- are positioning themselves as the key providers in this new connected automotive environment.

Wednesday, June 24, 2015

Mobile Money Transfer Revenue will Reach $4 Billion

As mCommerce services continue to gain new users across developing regions -- such as sub-Saharan Africa and emerging Asia -- the early-adopter nations have experienced a mobile money revolution that has empowered the local economies.

While in some early-adopter markets -- such as Kenya and Uganda -- mobile money usage already occurs across more than 50 percent of the adult population, there are still significant sections of the un-banked population it has yet to reach.

According to the latest market study by Juniper Research, mobile network service providers are now benefiting from the boom in mobile money transfer services -- with $2 billion in revenues forecast for this year and $4 billion annually by 2018.

Market Development in Africa

The new research points to the African continent as the leading mCommerce market. In fact, several regional mobile network operators -- such as Vodacom Tanzania and MTN Uganda -- are now generating more than 10 percent of their revenues from mobile money transfers.

Meanwhile, Safaricom’s MPESA service, the trailblazer in the sector, recorded mobile money revenues of more than $330 million in the latest financial year, making it the most successful mobile or online money transfer service worldwide.

According to the Juniper study findings, recent surges in both transaction volumes and values were being driven by increased implementation of both cross-border and intra-national remittance interoperability.

The research cited the traffic uplifts engendered by recent agreements between Safaricom and MTN (for the Rwanda-Kenya corridor) and by national interoperability agreements in markets such as Tanzania and Pakistan.

Opportunities for mCommerce Advancement

There's been a shift in service provider requirements, with the majority now seeking to deploy smartphone applications in tandem with Unstructured Supplementary Service Data (USSD) and Interactive Voice Response (IVR) mobile money transfer solutions.

However, the research cautioned that while inadequate government regulation still constrained growth in a number of markets, in some cases low adoption or activity rates could be attributed to the policies of mobile network service providers.

"There are too many instances where service marketing is inappropriate or incorrectly targeted; where the message simply isn't reaching the desired audience," said Dr Windsor Holden, head of consultancy and forecasting at Juniper Research.

The research also observed that in Nigeria, a number of services had failed to gain repeat usage because of the high cash-out fees, while savings accounts in other markets had withdrawal fees that were inappropriate for low-income users.

Tuesday, June 23, 2015

More Latin Americans are Adopting OTT Video in 2015

Over the Top (OTT) television and video entertainment revenues in Latin America -- across thirteen countries in the region -- are forecast to reach $2.91 billion by 2020, that's up from the $1.13 billion expected in 2015.

From the $2.13 billion in revenues to be added between 2014 and 2020, it's estimated that Brazil will contribute $938 million and Mexico $437 million, according to the latest market study by Digital TV Research.

"Subscription video on demand (SVOD) will remain the region’s largest OTT revenue source," said Simon Murray, principal analyst at Digital TV Research.

This emerging SVOD market is forecast to contribute $1.75 billion by 2020 -- Murray says that's up from next to nothing in 2010.


Pan-regional video services -- such as Netflix, Clarovideo and Movistar -- are now reported to be making an impact and are adding a competitive edge to the SVOD sector in Latin America.

According to their latest assessment, Digital TV Research estimates that there will be 24.05 million SVOD homes subscribed by 2020 -- that's up from 10,000 in 2010 and an expected 9.84 million by the end of 2015.

From the 17.38 million SVOD home additions between 2014 and 2020, Brazil will supply 7.24 million and Mexico 3.32 million OTT video entertainment subscriptions.

Colombia will overtake Argentina to take third place in 2016. By 2020, 15.9 percent of the region's TV households will subscribe to a SVOD package -- that's up from only 4.8 percent at the end of 2014.

That said, overall, Puerto Rico (22.5 percent) and Chile (20 percent) will have the highest penetration of OTT video entertainment services in Latin America by 2020.

Monday, June 22, 2015

Global Pay-TV Market to Exceed 1 Billion Subs by 2020

The worldwide pay-TV market has surpassed more than 900 million subscribers during the first quarter of 2015, representing 48 percent penetration, according to the latest study by ABI Research.

The traditional pay-TV market is likely to grow slowly but steadily over the next 5 years, mainly boosted by the upside opportunity in emerging markets.

"Half of the world's households will have access to pay-TV service by 2017, representing 1 billion subscribers," said Jake Saunders, vice president at ABI Research.

As pay-TV service providers experience increasing competition from alternative platforms -- such as over the top (OTT) video services -- ARPU continues to decline across the various platforms in most markets.

Many of the legacy operators have added OTT content, multiscreen services, and on demand services in order to compete with alternative video entertainment providers. These services have contributed additional revenue to pay-TV operators, as well as aid in maintaining customer loyalty.

Competition is higher in more mature markets such as North America and Western Europe, where pay-TV penetration is as high as 60 to 80 percent of households. A much slower growth rate is expected to occur in such markets in the years to come.

As broadband infrastructure development speeds up in Asia-Pacific, OTT players are starting to target this important combination of established and emerging markets.

Netflix announced its launch in Australia and New Zealand in March 2015, and possibly adding Japan by the end of 2015. Singapore telco, Singtel is developing an OTT platform called HOOQ, to provide services in the Philippines and other markets within the Asia-Pacific region.

The entrant of OTT services is likely to create higher competition in the overall Asian-Pacific pay-TV market, although it could take a while to gain significant penetration in the region.

Worldwide pay-TV market is expected to reach 1.1 billion subscribers, generating $307.5 billion in service revenue by 2020. The Asia-Pacific pay-TV market is likely to grow faster than most other regions in the years to come.

ABI Research forecasts that pay-TV market in Asia-Pacific is expected to grow at a CAGR of 5 percent, generating $79.4 billion in 2020.