As more organizations in different industries consider emerging applications for robotics technology, new business models for vendors are also envisioned. Robotics-as-a-Service (RaaS) is an elastic concept. It refers to robotics systems providers that in addition to selling products, will now rent or lease their product to customers as a full-service solution.
Though the total market continues to grow, competitive pressure on robotics vendors to maintain profit margins means that they'll have to broaden growth opportunities beyond selling robots as products. Following a recent worldwide market study, ABI Research highlights the potential of RaaS in unlocking the next phase of robotics adoption.
Robotics Market Development
Overall, ABI Research estimates that the installed base for RaaS will grow from 4,442 units in 2016 to 1.3 million in 2026. The yearly revenue from RaaS providers is expected to increase from $217 million in 2016 to nearly $34 billion in 2026.
"This will make the yearly revenue of RaaS providers -- including all payments for services -- greater than the shipment revenues for industrial robots, which currently accounts for the lion's share of the robotics industry in terms of revenue," said Rian Whitton, research analyst at ABI Research.
The RaaS installed base over 10 years between 2016 and 2026 is characterized by a of 66 percent CAGR. This is particularly prevalent in the markets with the largest RaaS installed base -- namely logistics, manufacturing, and hospitality, over the 10-year forecast period.
The biggest benefit of RaaS is that end users can now shift their capital expenditure (CAPEX) to an operational expenditure (OPEX), allowing them to deploy solutions without large upfront costs. RaaS providers, in turn, benefit from a steady stream of income from service offerings.
The benefits of RaaS are undeniable for end-users and robotic systems providers alike, and ABI Research forecasts that it will become much more popular in a relatively short space of time.
However, to achieve new growth, providers must start to educate the market on the benefits of migrating to an OPEX model, instead of a CAPEX-driven model. Companies such as Aethon, Locus Robotics, Savioke, and Sarcos Robotics are offering a RaaS model for their enterprise clients.
This model creates a lower barrier to adoption as well as provides an opportunity for robotics suppliers to establish a long-term service relationship with their end users, with more flexibility, scalability, and upgradeability in mind.
Outlook for Robotic Technology Applications
Logistics is currently the biggest market sector, but there are plenty of potential across various verticals. According to the ABI assessment, RaaS is the next phase of market development, opening robotics up to new use cases. Therefore, manufacturing, logistics, and healthcare are not the only market sectors to benefit from RaaS offerings.
RaaS will bring robotics to new market sectors that have not previously had significant robotic systems adoption -- those vertical industry applications include agriculture, security & surveillance, retail, hospitality, oil & gas, and waste management.
Technology | Media | Telecommunications
Tuesday, June 19, 2018
Friday, June 15, 2018
Why Legacy PC Vendors Promote Device-as-a-Service
Once upon a time, a few years ago, technology industry analysts reported on global market growth for new devices -- where personal computers, media tablets and smartphones were in demand by both consumers and businesses. However, then came widespread market saturation, and declines in demand.
Worldwide tablet and PC shipments will fall by 2.1 percent to 398 million units in 2018, according to the latest market study by Canalys. But this represents the smallest decline of the past four years and sets the tone for an era of stability. So, when does the market trend return to growth? That remains a mystery.
Personal Computing Device Market Development
Consumer refresh cycles have started to stabilize, and the legacy PC vendors have focused on new categories, such as gaming PCs, Chromebooks and convertibles. On the commercial side, Microsoft Windows 10 migration is a driver for hardware refresh, as some businesses are forced to move from Intel Skylake-generation architectures to newer processor technologies.
"Commercial customers will be a vital driver for PC shipments in 2018," said Ishan Dutt, research analyst at Canalys. "Vendors now have several strategic options for achieving growth."
Firstly, several vendors are now tracking their customers that are still running Windows 7 and will specifically target these accounts with sales teams. Secondly, vendors will promote and invest further in Device as a Service (DaaS) offerings, which lock-in PC refresh cycles.
But shifting from a transactional to contractual selling model is a major operational challenge for customers and channel partners, and this will prevent DaaS becoming a major revenue stream in the near-term.
And finally, several PC vendors will invest to grow the Google Chrome OS platform outside of the United States this year, with a specific focus on the education sector.
"Consumer demand will remain weak overall," said Dutt. "Components such as DRAM will remain constrained in the short-term, and vendors will pass most of the increased costs onto customers, driving up ASPs."
But dedicated gaming PCs have emerged as a modest hotspot in large markets -- such as the United States, China, Russia, Japan and South Korea -- where eSports has helped to generate an appetite among younger consumers with disposable incomes who are willing to spend for high performance.
The consumer market is also more likely to see new brands challenging HP, Lenovo and Dell. Despite the sector's weak performance, there are lower barriers to entry from a channel perspective compared with the commercial sector. Huawei and Xiaomi are attempting to disrupt selected markets, but nether yet has a range of products or channel partners to displace the legacy incumbents.
Despite a recent rise in iPad shipments, the tablet category remains in decline as consumers show a preference for smartphones as their primary mobile devices and rely on traditional PCs for more compute-intensive tasks. The category is expected to contract by almost 3 percent per year on average from 2017 to 2022, down almost 150 million units from the market peak in 2014.
Once a consumer-centric product, tablets are now shifting in a commercial application direction. The connectivity, portability and display size of cheaper slate tablets deliver a solid value proposition to important industry verticals -- such as education, healthcare and retail.
Outlook for Commercial Tablet Applications
Often, these devices are locked to a single application for a specific business function, such as point of sale (PoS). But knowledge workers need more, and corporate resellers are now pitching detachable tablet devices -- such as the iPad Pro and Surface Pro -- to businesses as part of workforce transformation initiatives.
But these devices represent a very small proportion of the commercial PC market, as IT managers still face constraints, such as price, number of ports, compatibility with peripherals and the prospect of managing an ecosystem of multiple operating systems.
Worldwide tablet and PC shipments will fall by 2.1 percent to 398 million units in 2018, according to the latest market study by Canalys. But this represents the smallest decline of the past four years and sets the tone for an era of stability. So, when does the market trend return to growth? That remains a mystery.
Personal Computing Device Market Development
Consumer refresh cycles have started to stabilize, and the legacy PC vendors have focused on new categories, such as gaming PCs, Chromebooks and convertibles. On the commercial side, Microsoft Windows 10 migration is a driver for hardware refresh, as some businesses are forced to move from Intel Skylake-generation architectures to newer processor technologies.
"Commercial customers will be a vital driver for PC shipments in 2018," said Ishan Dutt, research analyst at Canalys. "Vendors now have several strategic options for achieving growth."
Firstly, several vendors are now tracking their customers that are still running Windows 7 and will specifically target these accounts with sales teams. Secondly, vendors will promote and invest further in Device as a Service (DaaS) offerings, which lock-in PC refresh cycles.
But shifting from a transactional to contractual selling model is a major operational challenge for customers and channel partners, and this will prevent DaaS becoming a major revenue stream in the near-term.
And finally, several PC vendors will invest to grow the Google Chrome OS platform outside of the United States this year, with a specific focus on the education sector.
"Consumer demand will remain weak overall," said Dutt. "Components such as DRAM will remain constrained in the short-term, and vendors will pass most of the increased costs onto customers, driving up ASPs."
But dedicated gaming PCs have emerged as a modest hotspot in large markets -- such as the United States, China, Russia, Japan and South Korea -- where eSports has helped to generate an appetite among younger consumers with disposable incomes who are willing to spend for high performance.
The consumer market is also more likely to see new brands challenging HP, Lenovo and Dell. Despite the sector's weak performance, there are lower barriers to entry from a channel perspective compared with the commercial sector. Huawei and Xiaomi are attempting to disrupt selected markets, but nether yet has a range of products or channel partners to displace the legacy incumbents.
Despite a recent rise in iPad shipments, the tablet category remains in decline as consumers show a preference for smartphones as their primary mobile devices and rely on traditional PCs for more compute-intensive tasks. The category is expected to contract by almost 3 percent per year on average from 2017 to 2022, down almost 150 million units from the market peak in 2014.
Once a consumer-centric product, tablets are now shifting in a commercial application direction. The connectivity, portability and display size of cheaper slate tablets deliver a solid value proposition to important industry verticals -- such as education, healthcare and retail.
Outlook for Commercial Tablet Applications
Often, these devices are locked to a single application for a specific business function, such as point of sale (PoS). But knowledge workers need more, and corporate resellers are now pitching detachable tablet devices -- such as the iPad Pro and Surface Pro -- to businesses as part of workforce transformation initiatives.
But these devices represent a very small proportion of the commercial PC market, as IT managers still face constraints, such as price, number of ports, compatibility with peripherals and the prospect of managing an ecosystem of multiple operating systems.
Wednesday, June 13, 2018
Digital Transformation Spending will Reach $1.1 Trillion
Across the globe, CEOs continue to promote business technology-enabled growth. Worldwide spending on the technologies and services that enable digital transformation (DX) is forecast to be more than $1.1 trillion in 2018 -- that's an increase of 16.8 percent over the $958 billion spent in 2017, according to the latest market study by International Data Corporation (IDC).
DX spending will be led by the discrete and process manufacturing industries, which will not only spend the most on DX solutions but also set the agenda for many DX priorities, programs, and use cases.
Discrete manufacturing and process manufacturing are expected to spend more than $333 billion combined on DX solutions in 2018. This represents nearly 30 percent of all DX spending worldwide this year.
Digital Transformation Market Development
From a technology perspective, the largest categories of spending will be applications, connectivity services, and IT services as manufacturers build out their digital platforms to compete in the digital economy.
The main objective and top spending priority of DX in both industries is smart manufacturing, which includes programs that focus on material optimization, smart asset management, and autonomic operations.
IDC expects the two industries to invest more than $115 billion in smart manufacturing initiatives this year. Both industries will also invest heavily in innovation acceleration ($33 billion) and digital supply chain optimization ($28 billion).
Driven in part by investments from the manufacturing industries, smart manufacturing ($161 billion) and digital supply chain optimization ($101 billion) are the DX strategic priorities that will see the most spending in 2018.
Other strategic priorities that will receive significant funding this year include digital grid, omni-experience engagement, omnichannel commerce, and innovation acceleration.
The strategic priorities that are forecast to see the fastest spending growth over the 2016-2021 forecast period are omni-experience engagement (38.1 percent compound annual growth rate (CAGR)), financial and clinical risk management (31.8 percent CAGR), and smart construction (25.4 percent CAGR).
"Some of the strategic priority areas with lower levels of spending this year include building cognitive capabilities, data-driven services and benefits, operationalizing data and information, and digital trust and stewardship," said Craig Simpson, research manager at IDC.
To achieve its DX strategic priorities, every business will develop programs that represent a long-term plan of action toward these goals. The DX programs that will receive the most funding in 2018 are digital supply chain and logistics automation ($93 billion) and smart asset management ($91 billion), followed by predictive grid and manufacturing operations (each more than $40 billion).
The programs that IDC expects will see the most spending growth over the five-year forecast are construction operations (38.4 percent CAGR), connected automated vehicles (37.6 percent CAGR), and clinical outcomes management (30.7 percent CAGR).
Each strategic priority includes a number of programs which are then comprised of use cases. These use cases are discretely funded efforts that support a program objective, and the overall strategic goals of an organization.
Outlook for New DX Use Cases
Use cases can be thought of as specific projects that employ line-of-business and IT resources, including hardware, software, and IT services. The use cases that will receive the most funding this year include freight management ($56 billion), robotic manufacturing ($43 billion), asset instrumentation ($43 billion), and autonomic operations ($35 billion).
The use cases that will see the fastest spending growth over the forecast period include robotic construction (38.4 percent CAGR), autonomous vehicles – mining (37.6 percent CAGR), and robotic process automation-based claims processing (35.5 percent CAGR) within the insurance industry.
In the construction industry, DX spending is expected to grow at a compound annual rate of 31.4 percent while retail, the third largest industry overall, is forecast to grow its DX spending at a faster pace (20.2 percent CAGR) than overall DX spending (18.1 percent CAGR).
DX spending will be led by the discrete and process manufacturing industries, which will not only spend the most on DX solutions but also set the agenda for many DX priorities, programs, and use cases.
Discrete manufacturing and process manufacturing are expected to spend more than $333 billion combined on DX solutions in 2018. This represents nearly 30 percent of all DX spending worldwide this year.
Digital Transformation Market Development
From a technology perspective, the largest categories of spending will be applications, connectivity services, and IT services as manufacturers build out their digital platforms to compete in the digital economy.
The main objective and top spending priority of DX in both industries is smart manufacturing, which includes programs that focus on material optimization, smart asset management, and autonomic operations.
IDC expects the two industries to invest more than $115 billion in smart manufacturing initiatives this year. Both industries will also invest heavily in innovation acceleration ($33 billion) and digital supply chain optimization ($28 billion).
Driven in part by investments from the manufacturing industries, smart manufacturing ($161 billion) and digital supply chain optimization ($101 billion) are the DX strategic priorities that will see the most spending in 2018.
Other strategic priorities that will receive significant funding this year include digital grid, omni-experience engagement, omnichannel commerce, and innovation acceleration.
The strategic priorities that are forecast to see the fastest spending growth over the 2016-2021 forecast period are omni-experience engagement (38.1 percent compound annual growth rate (CAGR)), financial and clinical risk management (31.8 percent CAGR), and smart construction (25.4 percent CAGR).
"Some of the strategic priority areas with lower levels of spending this year include building cognitive capabilities, data-driven services and benefits, operationalizing data and information, and digital trust and stewardship," said Craig Simpson, research manager at IDC.
To achieve its DX strategic priorities, every business will develop programs that represent a long-term plan of action toward these goals. The DX programs that will receive the most funding in 2018 are digital supply chain and logistics automation ($93 billion) and smart asset management ($91 billion), followed by predictive grid and manufacturing operations (each more than $40 billion).
The programs that IDC expects will see the most spending growth over the five-year forecast are construction operations (38.4 percent CAGR), connected automated vehicles (37.6 percent CAGR), and clinical outcomes management (30.7 percent CAGR).
Each strategic priority includes a number of programs which are then comprised of use cases. These use cases are discretely funded efforts that support a program objective, and the overall strategic goals of an organization.
Outlook for New DX Use Cases
Use cases can be thought of as specific projects that employ line-of-business and IT resources, including hardware, software, and IT services. The use cases that will receive the most funding this year include freight management ($56 billion), robotic manufacturing ($43 billion), asset instrumentation ($43 billion), and autonomic operations ($35 billion).
The use cases that will see the fastest spending growth over the forecast period include robotic construction (38.4 percent CAGR), autonomous vehicles – mining (37.6 percent CAGR), and robotic process automation-based claims processing (35.5 percent CAGR) within the insurance industry.
In the construction industry, DX spending is expected to grow at a compound annual rate of 31.4 percent while retail, the third largest industry overall, is forecast to grow its DX spending at a faster pace (20.2 percent CAGR) than overall DX spending (18.1 percent CAGR).
Friday, June 08, 2018
Digital Business Talent: Why It's a Top Priority for CEOs
Who is leading digital transformation at the most forward-thinking organizations across the globe, and what are the most significant roadblocks to their progress? That depends, on who you ask. Let's consider the most common digital business challenges today, and how savvy leaders overcome them.
Digital growth tops the list of CEO business priorities in 2018 and 2019, according to the latest worldwide market study by Gartner. However, as growth becomes harder to achieve, CEOs are concentrating on changing and upgrading the structure of their companies -- including digital business investments.
Exploring Digital Business Transformation Culture
"Although growth remains a CEO's biggest priority, there was a significant fall in simple mentions of it this year, from 58 percent in 2017 to just 40 percent in 2018. This doesn't mean CEOs are less focused on growth, instead it shows that they're shifting perspective on how to obtain it," said Mark Raskino, vice president at Gartner.
The Gartner survey of CEO and senior business executives in the fourth quarter of 2017 examined their business issues, as well as some areas of technology agenda impact. In total, 460 business leaders in organizations with more than $50 million in annual revenue were qualified and surveyed.
IT remains a high priority coming in at the third position, and CEOs mention digital transformation, in particular. Workforce has risen rapidly this year to become the fourth-biggest priority, up from seventh in 2017. The number of CEOs mentioning workforce in their top three priorities rose from 16 percent to 28 percent.
However, when asked about the most significant internal constraints to growth, employee knowledge and progressive talent issues were at the very top of the list. CEOs said a lack of 'skilled talent' and workforce capability, by far, is the biggest inhibitor of digital business development progress.
Culture change is a key aspect of digital transformation. Gartner found that CIOs agreed it was a very high-priority, but only 37 percent of CEOs said a significant or deep culture change is needed by 2020. Regardless, when companies that have a digital growth initiative are compared with those that don't, the proportion in need of culture change rose to 42 percent. Enough said.
"These survey results show that if a company has a digital initiative, then the recognized need for culture change is higher," said Mr. Raskino. "The most important types of change that CEOs intend to make include making the culture more proactive, collaborative, innovative, empowered and customer-centric. They also highly rate a move to a more digital and tech-centric culture."
Survey respondents were asked whether they have a management initiative or transformation program to make their business more digital. Sixty-two percent said they did. Of those organizations, 54 percent said that their digital business objective is transformational while 46 percent said the objective of the initiative is optimization.
In the background, CEOs' that use of the word 'digital' has been steadily rising. When asked to describe their top five business priorities, the number of respondents mentioning the word 'digital' at least once has risen from 2.1 percent in the 2012 survey to 13.4 percent in 2018.
This attitude toward digital business development is backed up by CEOs' continuing intent to invest in IT infrastructure. Sixty-one percent of respondents intend to increase spending on IT in 2018, while 32 percent plan to make no changes to spending and only seven percent foresee spending cuts.
Ongoing Digital Culture Development Challenge
The Gartner survey showed that the percentage of survey respondents who think their company is an 'innovation pioneer' has reached a high of 41 percent -- that's up from 27 percent in 2013 -- with fast followers not far behind at 37 percent.
"CIOs should leverage this bullish sentiment by encouraging their business leaders into making commitments to digital business change," said Mr. Raskino. "However, superficial digital change can be a dangerous form of self-deceit. The CEO's commitment must be grounded in deep fundamentals, such as genuine customer value, a real business model concept and disciplined economics."
Digital growth tops the list of CEO business priorities in 2018 and 2019, according to the latest worldwide market study by Gartner. However, as growth becomes harder to achieve, CEOs are concentrating on changing and upgrading the structure of their companies -- including digital business investments.
Exploring Digital Business Transformation Culture
"Although growth remains a CEO's biggest priority, there was a significant fall in simple mentions of it this year, from 58 percent in 2017 to just 40 percent in 2018. This doesn't mean CEOs are less focused on growth, instead it shows that they're shifting perspective on how to obtain it," said Mark Raskino, vice president at Gartner.
The Gartner survey of CEO and senior business executives in the fourth quarter of 2017 examined their business issues, as well as some areas of technology agenda impact. In total, 460 business leaders in organizations with more than $50 million in annual revenue were qualified and surveyed.
IT remains a high priority coming in at the third position, and CEOs mention digital transformation, in particular. Workforce has risen rapidly this year to become the fourth-biggest priority, up from seventh in 2017. The number of CEOs mentioning workforce in their top three priorities rose from 16 percent to 28 percent.
However, when asked about the most significant internal constraints to growth, employee knowledge and progressive talent issues were at the very top of the list. CEOs said a lack of 'skilled talent' and workforce capability, by far, is the biggest inhibitor of digital business development progress.
Culture change is a key aspect of digital transformation. Gartner found that CIOs agreed it was a very high-priority, but only 37 percent of CEOs said a significant or deep culture change is needed by 2020. Regardless, when companies that have a digital growth initiative are compared with those that don't, the proportion in need of culture change rose to 42 percent. Enough said.
"These survey results show that if a company has a digital initiative, then the recognized need for culture change is higher," said Mr. Raskino. "The most important types of change that CEOs intend to make include making the culture more proactive, collaborative, innovative, empowered and customer-centric. They also highly rate a move to a more digital and tech-centric culture."
Survey respondents were asked whether they have a management initiative or transformation program to make their business more digital. Sixty-two percent said they did. Of those organizations, 54 percent said that their digital business objective is transformational while 46 percent said the objective of the initiative is optimization.
In the background, CEOs' that use of the word 'digital' has been steadily rising. When asked to describe their top five business priorities, the number of respondents mentioning the word 'digital' at least once has risen from 2.1 percent in the 2012 survey to 13.4 percent in 2018.
This attitude toward digital business development is backed up by CEOs' continuing intent to invest in IT infrastructure. Sixty-one percent of respondents intend to increase spending on IT in 2018, while 32 percent plan to make no changes to spending and only seven percent foresee spending cuts.
Ongoing Digital Culture Development Challenge
The Gartner survey showed that the percentage of survey respondents who think their company is an 'innovation pioneer' has reached a high of 41 percent -- that's up from 27 percent in 2013 -- with fast followers not far behind at 37 percent.
"CIOs should leverage this bullish sentiment by encouraging their business leaders into making commitments to digital business change," said Mr. Raskino. "However, superficial digital change can be a dangerous form of self-deceit. The CEO's commitment must be grounded in deep fundamentals, such as genuine customer value, a real business model concept and disciplined economics."
Tuesday, June 05, 2018
How AI will Advance Mobile Messaging App Evolution
There has been a significant evolution in the variety of use cases for mobile Application to Person (A2P) messaging. Historically, A2P was used for alerts and as a billing mechanism and carrier for simple content and services, both for one-off downloads or actions (e.g. voting) and for recurring payments.
The latter use case has declined in the past 5 years, due to a combination of the transition to an app-based economy, largely driven by card billing and by regulatory action -- in markets such as the U.S. and the UK -- against the many known fraudsters.
However, the near demise of this use case has been more than offset by the emergence of alternative opportunities, many of which have themselves been created by consumer adoption of software apps and smartphones.
A2P Messaging Market Development
A recent worldwide market study by Juniper Research found that revenues from Rich Communication Services (RCS) messaging will exceed $9 billion by 2022 -- that's up from an estimated $126 million in 2018. RCS, backed by Google, supports rich media content including video sharing and file transfers.
The latest market research found that mobile network operator RCS revenue potential is firmly rooted in A2P services, which includes automated messages from companies to their customers.
A2P RCS will bridge the gap between the ubiquity of SMS and the enhanced experience that Over-the-Top (OTT) applications bring. Juniper forecast that over 90 percent of RCS traffic will be A2P by 2022, as companies benefit from rich media functionality and large reach to enhance engagement.
However, Juniper analysts discovered that initial pricing and attractive business models will likely play a pivotal role in encouraging the early adoption of this technology. Mobile network operators are advised to implement an event-based model involving a simple charge per delivered message to ease the transition from SMS to RCS. Juniper forecasts that global RCS users will near 2 billion by 2022.
"Operators’ support for RCS is growing as the revenue potential becomes apparent. While the technology has been unsuccessful as a Peer-to-Peer (P2P) messaging channel, its capabilities as an A2P service will prove popular with advertisers," said Sam Barker, senior analyst at Juniper Research.
Juniper recommended that all telecom service providers must consider fair usage policies while implementing new pricing models. For example, a model based on the number of RCS interactions would necessitate such a policy to guard against straining their mobile networks.
Outlook for A2P Messaging Use Cases
Juniper Research analysis also predicted that Artificial Intelligence (AI) technology will be needed to facilitate conversational communication that minimizes response times.
Until then, it suggested that APIs support interactive media-rich content to foster confidence amongst mobile service users. Additionally, it urged platforms to include fallback to SMS to ensure message termination.
The latter use case has declined in the past 5 years, due to a combination of the transition to an app-based economy, largely driven by card billing and by regulatory action -- in markets such as the U.S. and the UK -- against the many known fraudsters.
However, the near demise of this use case has been more than offset by the emergence of alternative opportunities, many of which have themselves been created by consumer adoption of software apps and smartphones.
A2P Messaging Market Development
A recent worldwide market study by Juniper Research found that revenues from Rich Communication Services (RCS) messaging will exceed $9 billion by 2022 -- that's up from an estimated $126 million in 2018. RCS, backed by Google, supports rich media content including video sharing and file transfers.
The latest market research found that mobile network operator RCS revenue potential is firmly rooted in A2P services, which includes automated messages from companies to their customers.
A2P RCS will bridge the gap between the ubiquity of SMS and the enhanced experience that Over-the-Top (OTT) applications bring. Juniper forecast that over 90 percent of RCS traffic will be A2P by 2022, as companies benefit from rich media functionality and large reach to enhance engagement.
However, Juniper analysts discovered that initial pricing and attractive business models will likely play a pivotal role in encouraging the early adoption of this technology. Mobile network operators are advised to implement an event-based model involving a simple charge per delivered message to ease the transition from SMS to RCS. Juniper forecasts that global RCS users will near 2 billion by 2022.
"Operators’ support for RCS is growing as the revenue potential becomes apparent. While the technology has been unsuccessful as a Peer-to-Peer (P2P) messaging channel, its capabilities as an A2P service will prove popular with advertisers," said Sam Barker, senior analyst at Juniper Research.
Juniper recommended that all telecom service providers must consider fair usage policies while implementing new pricing models. For example, a model based on the number of RCS interactions would necessitate such a policy to guard against straining their mobile networks.
Outlook for A2P Messaging Use Cases
Juniper Research analysis also predicted that Artificial Intelligence (AI) technology will be needed to facilitate conversational communication that minimizes response times.
Until then, it suggested that APIs support interactive media-rich content to foster confidence amongst mobile service users. Additionally, it urged platforms to include fallback to SMS to ensure message termination.
Thursday, May 31, 2018
Worldwide Smartphone Market Still Growing Slowly
All consumer electronics devices eventually reach market saturation, where most of the people that crave the product already have it. After declining by 0.3 percent in 2017, the worldwide smartphone market will shrink again this year.
Smartphone shipments are forecast to drop by 0.2 percent in 2018 to 1.462 billion units, which is down from 1.465 billion in 2017 and 1.469 billion in 2016. However, IDC expects the market to grow by 3 percent annually from 2019 onwards. Worldwide shipments should reach 1.654 billion in 2022 -- that's a five year compound annual growth rate (CAGR) of 2.5 percent.
Smartphone Market Development
The biggest driver of the 2017 shipment downturn was the saturated market in China, which saw its smartphone market decline 4.9 percent year-over-year. Tough times are expected to continue in 2018, as IDC forecasts consumption in China to decline another 7.1 percent before flattening out in 2019.
The biggest upside potential in Asia-Pacific continues to be India, with volumes expected to grow 14 percent and 16 percent in 2018 and 2019. Chinese OEMs will continue their strategy of selling large volumes of low-end devices by shifting their focus from China to India.
So far most have been able to get around the recently introduced India import tariffs by doing final device assembly at local India manufacturing plants. As for components, almost everything is still being sourced from China.
"With 2017 now behind us a lot of interesting market dynamics are unfolding," said Ryan Reith, program vice president at IDC. "Even though it declined 5 percent in 2017, China remains the focal point for many given that it consumes roughly 30 percent of the world's smartphones."
According to the IDC assessment, the boom in India is likely to continue in the years to come, but the move toward building up local production has certainly caught the eye of many in the consumer electronics industry.
Outside of Asia-Pacific, the biggest regions for growth will be the Middle East, Africa, and Latin America. All three regions have relatively low penetration rates and plenty of upsides. Historically, economic challenges have been the main inhibitor of growth over the past two years.
Outlook for 5G Smartphone New Growth
IDC predicts the first commercially ready 5G smartphones will likely appear in the second half of 2019, with a ramp-up across most regions happening in 2020. IDC projects 5G smartphone volumes to account for roughly 7 percent of all smartphones in 2020, or 212 million in total. The share of 5G devices should grow to 18 percent of total volumes by 2022.
That being said, although overall smartphone shipments will decline slightly in 2018, the average selling price (ASP) of a smartphone will reach $345 -- that's up 10.3 percent from the $313 ASP in 2017. This year many vendors will continue to focus on the ultra-high-end segment of the market, creating a surge of premium flagship devices in the developed markets during 2018.
Smartphone shipments are forecast to drop by 0.2 percent in 2018 to 1.462 billion units, which is down from 1.465 billion in 2017 and 1.469 billion in 2016. However, IDC expects the market to grow by 3 percent annually from 2019 onwards. Worldwide shipments should reach 1.654 billion in 2022 -- that's a five year compound annual growth rate (CAGR) of 2.5 percent.
Smartphone Market Development
The biggest driver of the 2017 shipment downturn was the saturated market in China, which saw its smartphone market decline 4.9 percent year-over-year. Tough times are expected to continue in 2018, as IDC forecasts consumption in China to decline another 7.1 percent before flattening out in 2019.
The biggest upside potential in Asia-Pacific continues to be India, with volumes expected to grow 14 percent and 16 percent in 2018 and 2019. Chinese OEMs will continue their strategy of selling large volumes of low-end devices by shifting their focus from China to India.
So far most have been able to get around the recently introduced India import tariffs by doing final device assembly at local India manufacturing plants. As for components, almost everything is still being sourced from China.
"With 2017 now behind us a lot of interesting market dynamics are unfolding," said Ryan Reith, program vice president at IDC. "Even though it declined 5 percent in 2017, China remains the focal point for many given that it consumes roughly 30 percent of the world's smartphones."
According to the IDC assessment, the boom in India is likely to continue in the years to come, but the move toward building up local production has certainly caught the eye of many in the consumer electronics industry.
Outside of Asia-Pacific, the biggest regions for growth will be the Middle East, Africa, and Latin America. All three regions have relatively low penetration rates and plenty of upsides. Historically, economic challenges have been the main inhibitor of growth over the past two years.
Outlook for 5G Smartphone New Growth
IDC predicts the first commercially ready 5G smartphones will likely appear in the second half of 2019, with a ramp-up across most regions happening in 2020. IDC projects 5G smartphone volumes to account for roughly 7 percent of all smartphones in 2020, or 212 million in total. The share of 5G devices should grow to 18 percent of total volumes by 2022.
That being said, although overall smartphone shipments will decline slightly in 2018, the average selling price (ASP) of a smartphone will reach $345 -- that's up 10.3 percent from the $313 ASP in 2017. This year many vendors will continue to focus on the ultra-high-end segment of the market, creating a surge of premium flagship devices in the developed markets during 2018.
Monday, May 28, 2018
IoT and Blockchain will Transform Global Cargo Industry
The online tracking of trailers, containers, rail wagons and cargo boxes is becoming increasingly common in all markets across the globe. New technology, such as the Internet of Things (IoT) and blockchain, will enable more secure automation of this activity.
Berg Insight released the findings from their latest global market study. The number of active tracking devices deployed for cargo loading units -- including trailers, intermodal containers, rail freight wagons, air cargo containers, cargo boxes and pallets -- reached 3.7 million worldwide in 2017.
Market Development of Cargo Tracking Devices
Growing at a compound annual growth rate (CAGR) of 19.6 percent, the number of devices is expected to reach 8.9 million by 2022, according to the Berg Insight forecast. Based upon the current assessment, the tracking solutions market will greatly benefit from a digital transformation.
Trailer telematics is the most developed market today, however in terms of installed units the intermodal container tracking market is expected to take over the leading position during the forecast period.
The markets for rail freight wagon and air freight cargo tracking are smaller but will grow substantially during the next five years. Berg Insight ranks ORBCOMM as the largest vendor of tracking solutions for cargo loading units, having a significant installed base of trailers as well as containers.
The company has been highly involved in M&A activity related to real-time asset tracking, including notable acquisitions such as Blue Tree Systems, Euroscan and WAM Technologies.
Moreover, ORBCOMM has been involved in the joint Maersk and AT&T project to equip Maersk’s entire fleet of nearly 300,000 refrigerated containers with real-time tracking solutions.
The project is one of the largest cellular-based wireless industrial IoT deployments of its kind. ORBCOMM is together with SkyBitz, Omnitracs, Spireon and I.D. Systems the leading players on the North American trailer telematics market -- based upon the number of active units.
The European trailer telematics market is smaller than the North American and is dominated by Idem Telematics, Schmitz Cargobull and Novacom. On the market for container tracking solutions, two major vendors are Envotech and Numerex based in Malaysia and the U.S. respectively.
Asto Telematics and Nexiot based in Europe, and Amsted Rail based in North America, are key vendors offering tracking solutions for rail freight wagons. Sensitech and Sendum Wireless are notable players in the general cargo segment, also offering solutions for air freight cargo tracking.
Outlook for Remote Tracking Solutions
"The market for remote tracking solutions for cargo containers has entered a growth period that will continue for several years to come," said Martin Bäckman, IoT analyst at Berg Insight. He adds that there will be a strong focus on increased supply chain visibility and cargo transport security.
"Customers today demand and expect information about the status and location of their shipments in real-time and shippers who cannot provide this type of data will miss out on business opportunities," concludes Mr. Bäckman.
Berg Insight released the findings from their latest global market study. The number of active tracking devices deployed for cargo loading units -- including trailers, intermodal containers, rail freight wagons, air cargo containers, cargo boxes and pallets -- reached 3.7 million worldwide in 2017.
Market Development of Cargo Tracking Devices
Growing at a compound annual growth rate (CAGR) of 19.6 percent, the number of devices is expected to reach 8.9 million by 2022, according to the Berg Insight forecast. Based upon the current assessment, the tracking solutions market will greatly benefit from a digital transformation.
Trailer telematics is the most developed market today, however in terms of installed units the intermodal container tracking market is expected to take over the leading position during the forecast period.
The markets for rail freight wagon and air freight cargo tracking are smaller but will grow substantially during the next five years. Berg Insight ranks ORBCOMM as the largest vendor of tracking solutions for cargo loading units, having a significant installed base of trailers as well as containers.
The company has been highly involved in M&A activity related to real-time asset tracking, including notable acquisitions such as Blue Tree Systems, Euroscan and WAM Technologies.
Moreover, ORBCOMM has been involved in the joint Maersk and AT&T project to equip Maersk’s entire fleet of nearly 300,000 refrigerated containers with real-time tracking solutions.
The project is one of the largest cellular-based wireless industrial IoT deployments of its kind. ORBCOMM is together with SkyBitz, Omnitracs, Spireon and I.D. Systems the leading players on the North American trailer telematics market -- based upon the number of active units.
The European trailer telematics market is smaller than the North American and is dominated by Idem Telematics, Schmitz Cargobull and Novacom. On the market for container tracking solutions, two major vendors are Envotech and Numerex based in Malaysia and the U.S. respectively.
Asto Telematics and Nexiot based in Europe, and Amsted Rail based in North America, are key vendors offering tracking solutions for rail freight wagons. Sensitech and Sendum Wireless are notable players in the general cargo segment, also offering solutions for air freight cargo tracking.
Outlook for Remote Tracking Solutions
"The market for remote tracking solutions for cargo containers has entered a growth period that will continue for several years to come," said Martin Bäckman, IoT analyst at Berg Insight. He adds that there will be a strong focus on increased supply chain visibility and cargo transport security.
"Customers today demand and expect information about the status and location of their shipments in real-time and shippers who cannot provide this type of data will miss out on business opportunities," concludes Mr. Bäckman.
Wednesday, May 23, 2018
Telecom Service Providers Embrace IT Transformation
Savvy communication service provider CIOs and CTOs have abandoned the past -- where they would align their new technology infrastructure investments with traditional IT and networking equipment vendors. In hindsight, the status-quo disruption was somewhat inevitable.
Today, 77 percent of all telecom service providers will now require some level of digital transformation over the next three years, to meet the changing market needs in their franchise area and to remain competitive, according to the latest worldwide market study by 451 Research.
Telecom Transformation Market Development
Specifically, service providers are challenged by IT and networking automation, scalability and reliability issues. But they're not alone. Traditional technology hardware and software vendors will also have to compete with the public cloud providers, as service providers consider hyperscalers for their next compute and storage purchases, since many enterprises are moving workloads off-premises.
"Over the next two years, 60 percent of enterprises will run most of their IT in off-premises environments," said Al Sadowski, research vice president at 451 Research.
As such, the traditional vendor community must adapt their product roadmaps, marketing programs and sales strategies to address the growing role service providers will play. 451 research has launched new surveys to help quantify the drivers and priorities.
According to the 451 Research assessment, telecom service providers now choose vendors to work with based upon what services they must provide to customers and what differentiates them in the market.
In the 451 Research survey results, 39 percent of service providers identified reliability as the most important vendor selection criterion -- which mirrors the top end-customer pain point revealed to service providers.
They're also not afraid to forgo traditional hardware solutions in favor of simpler solutions to provision. For example, among respondents, 57 percent will deploy hyperconverged platforms in the next 12 months -- that's up from 38 percent deployed today.
Additionally, the most represented services are not the fastest-growing IT segments, but remain backup and disaster recovery. Creating a competency for new technology and attracting customers takes time for service providers, especially when 39 percent still prefer to work with a small group of strategic partners.
Outlook for Service Provider Transformation Opportunities
The vendors that can prove their IT and networking solutions to be reliable and of value to their customers are more likely to succeed. Other key findings from the survey include:
In summary, market disruption has caught up with the legacy IT and networking vendors. That said, this is an exciting time for the most forward-looking technology vendors that have embraced agile marketing and design thinking methodologies. They're not afraid to explore new business models and open innovation strategies that enable progressive market development plans.
Today, 77 percent of all telecom service providers will now require some level of digital transformation over the next three years, to meet the changing market needs in their franchise area and to remain competitive, according to the latest worldwide market study by 451 Research.
Telecom Transformation Market Development
Specifically, service providers are challenged by IT and networking automation, scalability and reliability issues. But they're not alone. Traditional technology hardware and software vendors will also have to compete with the public cloud providers, as service providers consider hyperscalers for their next compute and storage purchases, since many enterprises are moving workloads off-premises.
"Over the next two years, 60 percent of enterprises will run most of their IT in off-premises environments," said Al Sadowski, research vice president at 451 Research.
As such, the traditional vendor community must adapt their product roadmaps, marketing programs and sales strategies to address the growing role service providers will play. 451 research has launched new surveys to help quantify the drivers and priorities.
According to the 451 Research assessment, telecom service providers now choose vendors to work with based upon what services they must provide to customers and what differentiates them in the market.
In the 451 Research survey results, 39 percent of service providers identified reliability as the most important vendor selection criterion -- which mirrors the top end-customer pain point revealed to service providers.
They're also not afraid to forgo traditional hardware solutions in favor of simpler solutions to provision. For example, among respondents, 57 percent will deploy hyperconverged platforms in the next 12 months -- that's up from 38 percent deployed today.
Additionally, the most represented services are not the fastest-growing IT segments, but remain backup and disaster recovery. Creating a competency for new technology and attracting customers takes time for service providers, especially when 39 percent still prefer to work with a small group of strategic partners.
Outlook for Service Provider Transformation Opportunities
The vendors that can prove their IT and networking solutions to be reliable and of value to their customers are more likely to succeed. Other key findings from the survey include:
- Intel and AMD are no longer the only game in town for servers over the next 12 months – Arm’s cost and flexibility show promise. Plus, IBM Power is the HPC market leader.
- There is strong interest in open networking projects, but limited adoption (so far).
- Twenty-one percent of service providers do not have a formal strategy for handling IoT.
- The General Data Protection Regulation (GDPR) and Brexit are likely accelerants for service expansion within the EU over the next 12 months.
In summary, market disruption has caught up with the legacy IT and networking vendors. That said, this is an exciting time for the most forward-looking technology vendors that have embraced agile marketing and design thinking methodologies. They're not afraid to explore new business models and open innovation strategies that enable progressive market development plans.
Monday, May 21, 2018
Could 5G Wireless Disrupt the Broadband Status-Quo?
Across the globe, most wireline service providers operate in a monopoly or duopoly environment where competition is limited and somewhat predictable. The prior limitations of wireless broadband internet access have not impacted the wireline status-quo. That could change.
The worldwide fixed wireless broadband access market has been growing steadily over the past several years. ABI Research now forecasts that the market will grow by 30 percent in 2018 and will generate $18 billion in service revenue. That being said, let's explore the market dynamics.
Wireless Broadband Market Development
As 5G fixed wireless broadband access is about to be launched in North America during 2018, it's likely to expand and provide some telecom service provider customers with better quality service in the years to come.
Today, LTE is the most widely used technology to provide fixed wireless broadband service across the world. Fixed LTE is mainly deployed for residential broadband service in the areas where fixed broadband infrastructure is poor, enabling network operators to provide residential broadband service more cost effectively compared to wired broadband deployment.
Recently, United States’ operator Verizon Wireless announced its plans to launch 5G fixed wireless broadband service to a 'select' group of its residential customers in the second half of 2018.
Verizon plans to first launch 5G fixed wireless broadband service in California followed by additional markets later and expects initial 5G fixed wireless broadband deployment to cover around 30 million U.S. households.
In addition to Verizon, other network operators -- including AT&T and Charter -- are also carrying out 5G fixed wireless broadband tests in 'select' markets in the United States. 5G fixed wireless trials are not limited to North America.
In Europe, Orange, Elisa, and telecom infrastructure company Arqiva are performing 5G fixed wireless trials. In APAC, Australia’s Optus is planning for 5G fixed wireless service launch in 2019.
"5G fixed broadband access is expected to enable robust services with a reliable capacity to meet the need of residential broadband users. 5G technology can support a theoretical speed up to 20 Gbps with latency 1 ms, enabling operators to provide superior broadband access without installing fiber-optic cables to every single household," said Khin Sandi Lynn, industry analyst at ABI Research.
According to the ABI assessment, early 5G fixed wireless broadband access is likely to focus in dense urban areas and in rural areas when 5G is widely launched commercially. They forecast that the worldwide fixed wireless broadband market will grow at a CAGR of 26 percent, generating $45.2 billion in revenue during 2022.
Outlook for Increased Broadband Competition
Governments have an important role to play in setting public policies that encourage wireless broadband services to compete directly with incumbent wireline broadband service providers. The current 5G 'select' deployment plans seem to indicate that telecom service providers won't utilize the technology to increase competition.
If they're left alone to decide where they choose to deploy 5G services -- without government intervention -- then it's likely there won't be any meaningful disruption of the current status-quo. Furthermore, in North America, local telecom regulators -- such as the 'State Utility Commission' -- are unlikely to act in the interests of consumers, given their prior track record. Therefore, the Federal government is where consumer groups must seek policy change that results in more real competition.
In the Global Networked Economy, every nation competes via telecom infrastructure investment. In this environment, myopic thinking is the enemy of progress. Incumbent telecom service providers investment strategy typically focuses on their own commercial interest, not in the national interest.
The worldwide fixed wireless broadband access market has been growing steadily over the past several years. ABI Research now forecasts that the market will grow by 30 percent in 2018 and will generate $18 billion in service revenue. That being said, let's explore the market dynamics.
Wireless Broadband Market Development
As 5G fixed wireless broadband access is about to be launched in North America during 2018, it's likely to expand and provide some telecom service provider customers with better quality service in the years to come.
Today, LTE is the most widely used technology to provide fixed wireless broadband service across the world. Fixed LTE is mainly deployed for residential broadband service in the areas where fixed broadband infrastructure is poor, enabling network operators to provide residential broadband service more cost effectively compared to wired broadband deployment.
Recently, United States’ operator Verizon Wireless announced its plans to launch 5G fixed wireless broadband service to a 'select' group of its residential customers in the second half of 2018.
Verizon plans to first launch 5G fixed wireless broadband service in California followed by additional markets later and expects initial 5G fixed wireless broadband deployment to cover around 30 million U.S. households.
In addition to Verizon, other network operators -- including AT&T and Charter -- are also carrying out 5G fixed wireless broadband tests in 'select' markets in the United States. 5G fixed wireless trials are not limited to North America.
In Europe, Orange, Elisa, and telecom infrastructure company Arqiva are performing 5G fixed wireless trials. In APAC, Australia’s Optus is planning for 5G fixed wireless service launch in 2019.
"5G fixed broadband access is expected to enable robust services with a reliable capacity to meet the need of residential broadband users. 5G technology can support a theoretical speed up to 20 Gbps with latency 1 ms, enabling operators to provide superior broadband access without installing fiber-optic cables to every single household," said Khin Sandi Lynn, industry analyst at ABI Research.
According to the ABI assessment, early 5G fixed wireless broadband access is likely to focus in dense urban areas and in rural areas when 5G is widely launched commercially. They forecast that the worldwide fixed wireless broadband market will grow at a CAGR of 26 percent, generating $45.2 billion in revenue during 2022.
Outlook for Increased Broadband Competition
Governments have an important role to play in setting public policies that encourage wireless broadband services to compete directly with incumbent wireline broadband service providers. The current 5G 'select' deployment plans seem to indicate that telecom service providers won't utilize the technology to increase competition.
If they're left alone to decide where they choose to deploy 5G services -- without government intervention -- then it's likely there won't be any meaningful disruption of the current status-quo. Furthermore, in North America, local telecom regulators -- such as the 'State Utility Commission' -- are unlikely to act in the interests of consumers, given their prior track record. Therefore, the Federal government is where consumer groups must seek policy change that results in more real competition.
In the Global Networked Economy, every nation competes via telecom infrastructure investment. In this environment, myopic thinking is the enemy of progress. Incumbent telecom service providers investment strategy typically focuses on their own commercial interest, not in the national interest.
Friday, May 18, 2018
How Digital Business Skill Demand Drives IT Investment
Strategic investment in business technology is led by CIOs and CTOs that launch new digital transformation initiatives. Those digital growth plans result in the modernization of IT infrastructure. However, an internal IT staff skills shortfall will continue to fuel demand for more savvy and experienced digital business talent.
Worldwide revenues for IT Services and Business Services totaled $502 billion in the second half of 2017 (2H17) -- that's an increase of 3.6 percent year-over-year (in constant currency), according to the latest market study by International Data Corporation (IDC).
Digital Business Services Market Development
"As customers look to digital transformation initiatives to stay relevant in the new economy, vendors face both opportunities and challenges," said Xiao-Fei Zhang, program director at IDC. "While automation and new cloud delivery models reduce overall price, new digital services will require clients to spend more time and resources to modernize their existing IT environment,"
For the full year 2017, worldwide services revenues came to just shy of the $1 trillion mark. Year-over-year growth was around 4 percent, which slightly outpaced the worldwide GDP growth rate.
The growth in professional services reflects stronger business confidence that's fueled by a brighter economic outlook and a shared sense of urgency for large-scale digital transformation projects.
Looking at different services markets, project-oriented revenues continued to outpace outsourcing and support & training, mainly due to organizations freeing up pent-up discretionary spending from earlier years and feeling the need to digitize their organizations via large scale projects.
Specifically, project-oriented markets grew 4.6 percent year-over-year to $186 billion in 2H17 and 5 percent to $366 billion for the entire year. Most of the above-the-market growth came from business consulting: its revenue grew by almost 7.8 percent in 2H17 and 8.2 percent for the entire year to $115 billion.
In large digital transformation projects, high-touch business consultants continue to extract more value than mere IT resources do. Most major management consulting firms posted strong earnings in 2017.
IT-related project services, namely custom application development (CAD), IT consulting (ITC), and systems integration (SI), still make up the bulk -- more than two thirds -- of the overall project-oriented market.
While growing slower than business consulting, these three markets showed significant improvement over the previous year: CAD, ITC, and SI combined grew by 3.7 percent year-over-year to $251 billion for the full year 2017.
IDC believes that some 2015 and 2016 projects were pushed out to 2017, which helped to drive up spending during 2H17. This coincides with the strong rebound on the software side, as IT project-related services are largely application driven.
Because large digital business projects not only drive up new services but also pull in traditional services, IDC believes that the actual volume of IT project services grew even faster in 2017 but was offset somewhat by lower pricing.
In outsourcing, revenues grew by 3.3 percent year-over-year to $238 million in 2H17. Application-related managed services revenues (hosted and on-premise application management) outpaced the general market – growing more than 6 percent in 2H17 and 5.8 percent for the entire year.
Enterprise buyers have leveraged automation and cloud delivery to reduce the cost of operating IT applications. For example, infusing artificial intelligence (AI) into application life-cycle activities to drive better predictive maintenance and application portfolio management.
However, in their continuing drive for digital transformation, organizations are increasingly relying on external professional services providers to navigate complex technical environments and supply talent with new skills (hybrid cloud, big data analytics, machine learning, blockchain, etc.).
Digital transformation also requires organizations to standardize and modernize their existing IT application assets. Therefore, IDC forecasts application outsourcing markets to continue outpacing other outsourcing markets in the coming years.
Outlook for IT Outsourcing Service Growth
On the infrastructure side, while hosting infrastructure services revenue grew by 4.9 percent in 2H17, positively impacted by cloud adoption, IT Outsourcing (ITO), a larger market, declined by 2 percent. Combined, the two markets were essentially flat.
IDC believes that while overall infrastructure demand remains robust, the ITO market is negatively impacted the most by cloud cannibalization across all regions: cloud, particularly public cloud, reduces price far greater than new demand grows. For example, IDC estimates that, by 2021, almost one third of ITO services revenue will be cloud-related.
Worldwide revenues for IT Services and Business Services totaled $502 billion in the second half of 2017 (2H17) -- that's an increase of 3.6 percent year-over-year (in constant currency), according to the latest market study by International Data Corporation (IDC).
Digital Business Services Market Development
"As customers look to digital transformation initiatives to stay relevant in the new economy, vendors face both opportunities and challenges," said Xiao-Fei Zhang, program director at IDC. "While automation and new cloud delivery models reduce overall price, new digital services will require clients to spend more time and resources to modernize their existing IT environment,"
For the full year 2017, worldwide services revenues came to just shy of the $1 trillion mark. Year-over-year growth was around 4 percent, which slightly outpaced the worldwide GDP growth rate.
The growth in professional services reflects stronger business confidence that's fueled by a brighter economic outlook and a shared sense of urgency for large-scale digital transformation projects.
Looking at different services markets, project-oriented revenues continued to outpace outsourcing and support & training, mainly due to organizations freeing up pent-up discretionary spending from earlier years and feeling the need to digitize their organizations via large scale projects.
Specifically, project-oriented markets grew 4.6 percent year-over-year to $186 billion in 2H17 and 5 percent to $366 billion for the entire year. Most of the above-the-market growth came from business consulting: its revenue grew by almost 7.8 percent in 2H17 and 8.2 percent for the entire year to $115 billion.
In large digital transformation projects, high-touch business consultants continue to extract more value than mere IT resources do. Most major management consulting firms posted strong earnings in 2017.
IT-related project services, namely custom application development (CAD), IT consulting (ITC), and systems integration (SI), still make up the bulk -- more than two thirds -- of the overall project-oriented market.
While growing slower than business consulting, these three markets showed significant improvement over the previous year: CAD, ITC, and SI combined grew by 3.7 percent year-over-year to $251 billion for the full year 2017.
IDC believes that some 2015 and 2016 projects were pushed out to 2017, which helped to drive up spending during 2H17. This coincides with the strong rebound on the software side, as IT project-related services are largely application driven.
Because large digital business projects not only drive up new services but also pull in traditional services, IDC believes that the actual volume of IT project services grew even faster in 2017 but was offset somewhat by lower pricing.
In outsourcing, revenues grew by 3.3 percent year-over-year to $238 million in 2H17. Application-related managed services revenues (hosted and on-premise application management) outpaced the general market – growing more than 6 percent in 2H17 and 5.8 percent for the entire year.
Enterprise buyers have leveraged automation and cloud delivery to reduce the cost of operating IT applications. For example, infusing artificial intelligence (AI) into application life-cycle activities to drive better predictive maintenance and application portfolio management.
However, in their continuing drive for digital transformation, organizations are increasingly relying on external professional services providers to navigate complex technical environments and supply talent with new skills (hybrid cloud, big data analytics, machine learning, blockchain, etc.).
Digital transformation also requires organizations to standardize and modernize their existing IT application assets. Therefore, IDC forecasts application outsourcing markets to continue outpacing other outsourcing markets in the coming years.
Outlook for IT Outsourcing Service Growth
On the infrastructure side, while hosting infrastructure services revenue grew by 4.9 percent in 2H17, positively impacted by cloud adoption, IT Outsourcing (ITO), a larger market, declined by 2 percent. Combined, the two markets were essentially flat.
IDC believes that while overall infrastructure demand remains robust, the ITO market is negatively impacted the most by cloud cannibalization across all regions: cloud, particularly public cloud, reduces price far greater than new demand grows. For example, IDC estimates that, by 2021, almost one third of ITO services revenue will be cloud-related.
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