Technology | Media | Telecommunications

Wednesday, October 26, 2016

Ongoing Quest for Viable OpenStack Business Models

IT infrastructure vendors are hopeful that, one day, their investment in the support of OpenStack is proven worthwhile. According to the latest worldwide market study by 451 Research, revenue from OpenStack business models are forecast to exceed $5 billion by 2020 and grow at a 35 percent CAGR.

So far, OpenStack revenue has come from cloud service providers offering multi-tenant IaaS, but the latest research indicates that private cloud revenue will exceed public cloud by 2019. Meanwhile, even though it's true that OpenStack has experienced new growth, the vendor revenue contribution is relatively small.

That being said, based on their latest analysis, 451 Research believes that OpenStack profitability will likely be achieved in the private cloud space, and in providing the hybrid orchestration for public cloud integration with on-premises or hosted OpenStack environments.

OpenStack Use Case Development

"This year OpenStack has become a top priority and credible cloud option, but it still has its shortcomings," said Al Sadowski, research vice president at 451 Research. "We continue to believe the market is still in the early stages of enterprise use and revenue generation."

451 Research analysts expect an uptick in revenues from all sectors and geographic regions, especially from those companies in the OpenStack Products and Distributions category that are actively targeting enterprises.

Today, there are examples of organizations across most vertical sectors running commercial workloads on OpenStack, but in general it remains a platform for test and development environments, web hosting and preliminary proof-of-concept pilot projects.

451 Research predicts a growing number of OpenStack use cases across software-defined networking (SDN), network function virtualization (NFV), mobile and Internet of Things (IoT) by both service providers and enterprises.

These new applications are in addition to traditional OpenStack use cases in big data, DevOps and PaaS. Moreover, while container software is viewed as mostly beneficial and complementary to OpenStack, ongoing Linux container adoption could easily eclipse OpenStack. That's a huge concern for some vendors.

Outlook for Cloud Computing Adoption

OpenStack mind-share continues to grow for enterprises interested in deploying cloud-native applications in greenfield private cloud environments. However, its appeal is limited for legacy applications and for those enterprises already comfortable using hyperscale public cloud service providers.

There are several marquee enterprises with OpenStack as the central component of cloud transformations, but many enterprises are still concerned -- for valid reasons -- of the perceived complexity associated with configuring, deploying and maintaining OpenStack-based architectures.

Tuesday, October 25, 2016

Open Source Foundation Shares OpenStack Progress

Many CIOs know they must respond to the growing demand for public cloud services within their organizations. Building a private cloud with on-premises infrastructure is a path to progress, and OpenStack is the software platform.

The eighth User Survey conducted by the OpenStack Foundation demonstrates the maturity and broad adoption of the open source cloud platform, pointing to significant increases in the percentage of full production deployments.

The results of the latest survey findings were released by the foundation leadership, along with a new survey dashboard, now in beta, and six global filter categories enabling anyone to perform their own analysis on the data.

OpenStack Market Development Trends

The market study is intended to enable a better understanding of user attitudes, organization profiles, use cases, and technology choices surrounding OpenStack deployments. Data is shared with the OpenStack community to help make design decisions and plan for the future development agenda of the project.

Key OpenStack study findings include:
  • Seventy-two percent of OpenStack users cite bottom-line cost savings as their number one business driver, and the quest for top-line digital business innovation is also important for many.
  • The Net Promoter Score (NPS) for OpenStack deployments -- an indicator of user satisfaction --continues to tick up, eight points higher than a year ago.
  • Containers continues to lead the list of emerging technologies, as it has for three consecutive survey cycles. In the same question, interest in NFV and bare metal is significantly higher than a year ago.
  • Kubernetes shows growth as a container orchestration tool.
  • Seventy-one percent of deployments catalogued are in “production” versus in testing or proof of concept. This is a 20 percent increase year over year.
  • OpenStack is adopted by companies of every size. Nearly one-quarter of users are organizations smaller than 100 people.

Key Business Drivers for OpenStack Adoption

Users choose OpenStack for its ability to increase their operational efficiency -- 17 percent ranked this #1; 63 percent #2. Another key reason for OpenStack adoption is to accelerate their ability to innovate and compete by deploying applications faster -- 86 percent of respondents ranked this in the top three.

Users also commonly selected "avoiding vendor lock-in with an open platform and ecosystem with flexible underlying technology choices" and "standardizing on the same open platform and APIs that power a global network of public and private clouds" as top business drivers.

Other popular responses included attracting top technical talent and achieving security and/or privacy goals with control of their platform. That being said, finding skilled and experienced cloud architects is often the first challenge, and obtaining the compensation budget for their salary requirement is the second.

Monday, October 24, 2016

Technology, Media and Telecom 2016 M&A Deal Update

Technology, Media & Telecommunications (TMT) mergers and acquisitions (M&A) activity has improved in 2016, with deal value experiencing two consecutive quarterly increases, according to the latest worldwide market study by Mergermarket.

Case in point: during the third quarter (Q3) of 2016, a reported 666 deals worth $179.6 billion represented a 39 percent climb in value -- that's compared to Q3 2015 (828 deals, $128.8 billion).

With year-to-date activity (2,168 deals, $403.1 billion) still 21 percent lower by value when compared to the Q1-Q3 2015 period (2,410 deals, $510.2 billion), a re-balancing effect following the 2015 record high is still impacting the market.

Why Market Development Gained Momentum

Furthermore, according to the Mergermarket assessment, Q3 2016 strength demonstrates that some M&A deals put on-hold at the beginning of the year -- due to uncertainties about the UK Brexit referendum and the British and American central bank interest rate policies -- were processed over the summer months.

Still, just 666 TMT deals were recorded during the quarter -- that's fewer than both Q3 2015 (828 deals) and Q3 2014 (756 deals). But there's a trend of larger deal sizes, with average value seeing two consecutive quarterly increases in 2016 to reach $493.9 million -- that's the highest Q3 value since 2013 ($668.4 million).

M&A targeting the Technology sub-sector during both Q3 (492 deals, $147.5 billion) and the year-to-date period (1,631 deals, $299.3 billion) resulted in the highest values on Mergermarket record (since 2001), with the tech sub-sector accounting for 74.3 percent of all TMT M&A value so far in 2016.

That being said, after a better than expected third quarter, TMT M&A activity is now anticipated to remain somewhat unpredictable during the fourth quarter (Q4) of 2016.

Market Outlook for TMT Deals in 2016

M&A activity in U.S. and European markets will be influenced by economic conditions, and the outcome of the U.S. presidential election. Meanwhile, China is expected to continue its quest for increased acquisitions globally, targeting Technology and Media corporations in those developed markets.

Apparently, there's a cautiously optimistic outlook for overall M&A deal activity in the latter part of 2016.

"Any software company, any SaaS company that has a recurring revenue model should continue to be hot," said Garland Allison, partner at Perkins Coie. "Security, fintech and healthcare computing are areas that should see increased deal activity, particularly on the private equity front, in the latter half of this year."

Friday, October 21, 2016

Fintech is Driving the Digital Banking Services Market

While many people now prefer digital banking and online channels, a sizable group still prefer an in-branch experience -- particularly when compared with a call to the bank's customer service center. While this continued to be the case in the past 12 months, it will change as more banks utilize multiple channels.

This transition is likely to be centered on the mobile device as banks enhance their smartphone apps with more functionality and increased security. It's a trend that will coincide with the declining workforce and the number of bank branches.

Mobile Banking Market Development

"Recent industry shifts highlight why traditional banks must respond rapidly to retain market share by cultivating new revenue channels and enhancing existing base through sustained innovation," said Nitin Bhas, head of research at Juniper Research.

Over 2 billion mobile users will have used their devices for banking purposes by the end of 2021 -- that's compared to 1.2 billion this year globally.

Growth in mobile banking is being driven by consumer adoption of banking apps and the changing way consumers manage their finances.

According to the latest worldwide market study by Juniper Research, the number of mobile banking logins are now exceeding that of internet banking logins in many markets.

For example, the British Bankers' Association announced that banking app logins in the UK reached a record 11 million per day during 2015, compared to 4.3 million internet banking logins during the same period.

Meanwhile, a recent survey conducted by Juniper Research found that around 65 percent of mobile banking customers in the U.S. and the UK markets use an app to conduct banking services.

Outlook for Online Banking Growth

The study also found that banks are becoming increasingly concerned that their market position is being undermined by new fintech vendors that are enabled by evolving technology and regulations to enter the marketplace.

For example, in the UK alone 5 new digital banks received licences or launched services so far in 2016, with a reported 20 additional banks currently in talks with regulators to receive a new licence.

Furthermore, by 2017, banks in the EU will be compelled to open their software APIs. This will result in many innovative new products that analyze user data to create more attractive financial services for customers.

Thursday, October 20, 2016

IT Security Spending will Reach $101.6 Billion in 2020

IT security issues continue to be top-of-mind for many enterprise organizations. Worldwide revenues for security-related hardware, software, and services will grow from $73.7 billion in 2016 to reach $101.6 billion in 2020, according to the latest market study by International Data Corporation (IDC).

This security-related spending represents a compound annual growth rate (CAGR) of 8.3 percent -- that's more than twice the rate of overall IT spending growth, over the five-year forecast period. The ongoing demand for hybrid cloud infrastructure will likely be a catalyst for enhanced security.

"Today's security climate is such that enterprises fear becoming victims of the next major cyber attack or cyber extortion," said Sean Pike, program vice president at IDC. "As a result, security has become heavily scrutinized by boards of directors demanding that security budgets are used wisely and solutions operate at peak efficiency."

Security Solutions Market Development

The industries making the largest investments in security solutions in 2016 will be banking ($8.6 billion), followed by discrete manufacturing, federal or central government, and process manufacturing.

These four industries will deliver 37 percent of worldwide security revenues this year and will remain the largest industries in terms of total spending throughout the five year forecast.

The industries that will see the fastest growth in their security investments will be healthcare (10.3 percent CAGR), followed by telecommunications, utilities, state/local government, and securities and investment services. Each of these industries will experience CAGRs above 9.0 percent over the forecast period.

The largest category of new investment will be security-related services, which will account for nearly 45 percent of all security spending worldwide in 2016. The largest segment, managed security services, is forecast to generate revenues of $13 billion this year.

Security software will be the second largest category in 2016, with endpoint security, identity and access management, and security and vulnerability management software driving more than 75 percent of the category's revenues.

Security hardware revenues will reach $14.0 billion in 2016, led by purchases of unified threat management systems. One of the fastest growing segments of the security products market will be user behavior analytics software with a CAGR of 12.2 percent.

Outlook for Security Market Growth

Managed security services will generally be the largest market segment of new spending among the industries making the largest security investments. Identity and access management software and unified threat management hardware will typically receive the greatest share of revenues in each of these categories.

From a geographic perspective, the United States will be the largest market for security products throughout the forecast. In 2016, the U.S. is forecast to see $31.5 billion in security-related investments. Western Europe will be the second largest market with revenues of nearly $19.5 billion this year, followed by the Asia-Pacfic (excluding Japan) region.

Asia-Pacfic (excluding Japan) will also be the fastest growing region with a CAGR of 13.8 percent over the 2016-2020 forecast period, followed by the Middle East & Africa (MEA) and Western Europe.

Wednesday, October 19, 2016

Ecosystems: the Next Evolution of Digital Transformation

A new type of commercial infrastructure needs to be built that reshapes business, according to the latest market study by Gartner. Moreover, they believe that enterprise CIOs are the builders of this infrastructure, which Gartner calls the "civilization infrastructure" for the next decade.

Clearly, many CIOs now feel the need to redefine their role, as IT strategy shifts to other executives. Meanwhile, Gartner has forecast that worldwide IT spending will total $3.4 trillion by the end of 2016 -- that's a 0.3 percent decline from 2015.

In 2017, however, global IT spending is projected to grow 2.9 percent and reach $3.5 trillion. Growth will be driven by the software and IT services segments. Worldwide spending on software is projected to grow 7.2 percent, and IT services 4.8 percent.

Garner analysts believe that software and IT services will be key to the development of the civilization infrastructure. That said, in many organizations today, Line of Business (LoB) leaders have already assumed control of their business technology destiny.

An Opportunity for Legacy CIOs to Evolve

"Civilization infrastructure will forever change the way people engage socially, digitally, and physically through connected sensors and digital intelligence," said Peter Sondergaard, senior vice president at Gartner.

"CIOs will participate in the building of a new digital platform with intelligence at the center," Mr. Sondergaard said. "That platform will enable ecosystems, connecting businesses and collapsing industries. It will change society itself, and the way people live."

This civilization infrastructure will be a new digital platform that extends beyond traditional IT infrastructure using new technologies not familiar to the typical IT department. According to the Gartner assessment, the new digital platform consists of five domains.

"Each of these domains are interconnected and interdependent. All have a role, and all are required," Mr. Sondergaard explained. "Your new digital platform will allow you to participate in the evolving world of business, government, and consumer ecosystems. Because ecosystems are the next evolution for digital. It’s how you compete at scale."

The five elements of the new digital platform:

Traditional core IT systems. This is how CIOs run and scale operations. It’s building on what’s already been built. It’s taking high performing traditional IT systems and modernizing them to be part of the digital platform.

Customer experience. This is how CIOs connect and engage in new ways. The digital customer experience may be the only one that the customers have. This is how the business engages in the digital world.

The Internet of Things (IoT). This is how the organization senses and acts in the physical world. Adding devices to the IoT domain is the easy part. Processes, workflows, and data integration are much harder. In fact, two-third of organizations have had to rework their existing IT systems to accommodate IoT.

Intelligence. This is how the systems analyze, learn and decide independently. CIOs start with traditional data management, data science and data intelligence. Algorithms determine the action. The new type of intelligence, driven by machine learning is artificial intelligence.

Ecosystem Foundation. This is how the enterprise interacts as an institution in the digital world. Ecosystems go beyond the capability to decide, CIOs need to build the capability to interact with customers, partners, adjacent industries, even your competitors.

Tuesday, October 18, 2016

OpenStack Gains Momentum within the Telecom Sector

Informed telecommunications service providers have reduced their infrastructure cost and improved their development agility by adopting open source software.  According to findings from a recent survey, 85.8 percent of telecom industry respondents consider OpenStack to be essential or important to their success.

The survey, commissioned by the OpenStack Foundation, explores current usage and adoption plans of telecom service providers -- particularly with respect to Network Functions Virtualization (NFV), 5G cellular communications, Internet of Things (IoT) and enterprise cloud computing.

Facing unprecedented traffic and rapidly evolving customer expectations, telecom providers worldwide are accelerating their adoption of NFV to increase network agility and mitigate costs, and OpenStack has emerged as the NFV infrastructure platform of choice.

OpenStack Market Development Results

The OpenStack survey included 113 responses from representatives of telecom companies around the world: 54 percent from the U.S. market, 14.2 percent from Europe, 11.5 percent from the Asia Pacific region, 8.9 percent each from Central or South America and Canada; and 2.7 percent from the Middle East.

Highly Valued: 85.8 percent consider OpenStack to be essential or important to their success.

Rapid Adoption: Telecoms are already using or currently testing new use cases with OpenStack for:
  • NFV: 60.3 percent using or testing; 37.8 percent considering (total 98.1percent)
  • IoT: 41.3 percent using or testing; 49.5 percent considering (total 90.8 percent)
  • 5G: 30.6 percent using or testing; 49.1 percent considering (total 79.7 percent)

Multiple Benefits: In popularity order, the benefits cited most often are:
  • Offer new services more quickly (This was by far the most-cited benefit, outpacing the next by 24 percent)
  • More rapid virtualization of the data center
  • Reduced operational cost
  • Reduced software cost

Strong Community Engagement: 73.5 percent of respondents are engaged with OpenStack, primarily by contributing to the software, contributing requirements and use cases, and attending OpenStack Summits and OpenStack Days community events. Neutron is the OpenStack project most contributed to, followed closely by Nova.

OpenStack Neutron Plug-in Popularity: The survey revealed that telecoms are using a mix of open source and commercial OpenStack Neutron plug-ins for Software-Defined Networking (SDN) and virtual switching. The variety of plug-ins selected in the survey validate OpenStack's strategy of providing user choice.

Containers on the Rise: 99 percent of respondents are considering containers for both VNFs and business applications. 68.4 percent will definitely use containers for VNFs, and almost all others are considering them (30.6 percent). This is slightly higher than using containers for business apps (63.6 percent definitely or likely, 35.5 percent potentially).

“The flexibility and versatility of OpenStack as a cloud and NFV platform allows telecom companies to combine business and communications IT under a single technology,” said Jonathan Bryce, executive director of the OpenStack Foundation.

Monday, October 17, 2016

Retail Spend via Mobile will Reach $2.1 Trillion by 2021

Online retailers have been a source of disruption for many incumbents around the globe. Over the past decade, eRetail adoption has accelerated and in 2015 online payments for physical goods totaled $1.66 trillion, while sales of digital goods and services generated a additional $754 billion.

Credit and debit card payments have been the primary payment method in the online arena. There are now about 9.5 billion credit and debit cards in circulation worldwide. Moreover, the dominance of the leading payment card provider is reinforced by the fact that online retailers typically prefer these cards.

Meanwhile, there's been an important shift in the market. In the past, the smartphone was used as a means of discovery, but not purchase of products and services. Now, the smartphone is used for both product discovery as well as the actual purchase. New technologies are enabling this shift.

eRetail Market Development Trends

According to the latest market study by Juniper Research, the integration of technologies such as bots and natural language interfaces will lead to remote goods purchases by mobile totaling $2.1 trillion by 2021. That growth represents a 100 percent increase from the anticipated spend on physical and digital goods in 2016.

Juniper analysts believe that rising smartphone use in digital retail was the underlying cause for stakeholder development in the following areas: bots, natural language processing, disruption at the payment gateway, and understanding shopper intent through conversation.

The Juniper study found that shoppers would likely abandon online experiences where keyword search and menu-driven website navigation systems were in place. It suggested that where merchants deployed conversational interfaces -- such as bots and natural language search -- they would be able to meet the consumer needs.

The North Face, for example, has developed an intelligent digital assistant to help consumers choose the appropriate product on their retail website. Meanwhile, Facebook, Google and online retailers such as Etsy are investing heavily in similar real-time analytics to transform the online retail experience.

"Product search and discovery is a key stage in the shopper journey," said Steffen Sorrell, senior analyst at Juniper Research. "Offering a conversational consumer interface, then marrying intent with contextual product data will drive merchant differentiation."

Outlook for Online Payment Innovation

Additionally, the study revealed that substantial activity is taking place to improve the consumer experience at the point of payment. Disruptive players are simplifying the online shopper's journey by re-engineering the checkout process.

Klarna, the Swedish eCommerce company, avoids using card number entry or usernames and passwords. Instead, online retail shoppers can enter more basic identification information, such as their email address and postcode.

Meanwhile, cognitive computing and machine learning is being used to minimize the chance of payment rejection. Adyen, for example, are applying the new technology to avoid payment rejection due to bad formatting or mis-routed connections to the acquiring bank.

Friday, October 14, 2016

Mobility Solution Revenue will Reach $1.7 Trillion in 2020

Worldwide mobility revenues are forecast to grow from $1.5 trillion in 2016 to more than $1.7 trillion in 2020, according to the latest market study by International Data Corporation (IDC). That's a compound annual growth rate (CAGR) of 2.2 percent -- or about $40 billion in annual revenue gains.

Mobility revenues will primarily come from purchases of hardware and connectivity services. However, software revenues will likely experience double-digit growth, as app developers meet the mobility needs of both consumers and businesses.

Software revenue growth will result from investments in mobile application development platforms, new mobile enterprise use cases, and mobile enterprise security solutions. By 2020, spending on software will increase by 15 percent, driven by mobile DevOps and mobile security capabilities.

Mobility Solutions Market Development

"Despite the belief that the mobility market is maturing, there is still plenty of opportunity to drive enterprise spend especially at the software layer," said Carrie MacGillivray, vice president at IDC. While more than half of all mobility revenues are generated by consumer spending, a number of industries are making significant investments in mobility products and solutions.

The banking industry is leading the way at the worldwide level with mobility investments forecast to surpass $100 billion by 2020. Discrete manufacturing, professional services, and retail are the next largest industries in terms of mobility investments.

According to the IDC assessment, the industry that will deliver the fastest revenue growth over the 2015-2020 forecast period is healthcare (5.1 percent CAGR), followed by telecommunications, professional services, and utilities.

Within the U.S. market, while the healthcare provider industry is still expected to be among the top 5 growth areas for mobility, spending is starting to temper. However, there is more growth in the securities and investment services industry, where mobility projects are focused on enabling more productivity.

Outlook for Mobility Applications Growth

From a company size perspective, large and very large businesses will see spending growth that surpasses the overall market. These firms will be investing in mobile solutions that provide new capabilities to customers and partners.

IDC expects small offices with 1 to 9 employees to continue delivering the largest share of global mobility revenues, as these businesses invest in a variety of mobile devices and apps, as an affordable alternative to traditional desktop IT solutions.

The Asia-Pacific region (excluding Japan) -- led by strong investments in China -- will be the largest overall mobility market in terms of total revenues, which are forecast to exceed $500 billion in 2020.

The United States represents the second largest region, and the region with the strongest growth forecast, with a 4.7 percent CAGR. Latin American and the Middle East and Africa will also see revenue growth greater than the overall market.

Thursday, October 13, 2016

Telecom Providers Embrace Cognitive App Development

Mobile internet applications are evolving rapidly. Cognitive computing technologies will inspire telecom service providers to profoundly change their business model in new creative ways. Deploying intelligent voice control apps on smartphones was just the beginning of this trend.

As an example, mobile network operators are increasing their investment in big data analytics and machine learning technologies as they transform into digital application developers and cognitive service providers.

With a long history of handling huge datasets, and with their path now led by the IT ecosystem, mobile operators will devote more than $50 billion to big data analytics and machine learning technologies through 2021, according to the latest global market study by ABI Research.

Cognitive Technologies Market Development

"Machine learning-based predictive analytics are applicable to all aspects of the telecom business," said Joe Hoffman, vice president at ABI Research. "It's important that operators master and internalize these technologies and not rely solely on their vendors’ expertise. Executives that overlook big data and machine learning risk irrelevance."

Machine learning can deliver benefits across telecom provider operations with financially-oriented applications -- including fraud mitigation and revenue assurance -- which currently make the most compelling use cases.

Legacy analytics are rule-based solutions that cannot keep pace with the criminal element, but machine learning excels at spotting trending anomalies, according to the ABI analyst assessment.

Predictive machine learning applications for network performance optimization and real-time management will introduce more automation and efficient resource utilization.

Telecom big data solutions include the commercial IT infrastructure, such as the open source, Java-based Hadoop ecosystem, SQL/NoSQL data management, and associated orchestration platforms.

Outlook for IT Infrastructure Investment

Spending on this infrastructure will exceed $7 billion in 2021. But the greatest benefits are from using predictive analytics to improve telecom business performance, with machine-learning-based predictive analytics to grow at nearly 50 percent CAGR and reach $12 billion through 2021.

"These are exciting times for mobile broadband as we see the convergence of IT and telecom, virtualization with SDN or NFV, the adoption of artificial intelligence machine learning, and the ubiquitous coverage of all-IP 4G and 5G networks," concludes Hoffman.

Aided by cloud computing infrastructure and machine learning, mobile service providers can become a data-driven business that's accelerated via DevOps and automated processes. In a few years, mobile networks will transform into supercomputer hubs with cellular radios attached, continuously re-engineered for optimal performance.