The Commercial Advantages of Blockchain Technologies

The initial commercial interest in cryptocurrency IT infrastructure was the potential to enable an alternative to government-backed fiat currencies. However, now most of the forward-looking focus is on blockchain, the distributed ledger technology that underpins the new applications.

Although deployments are still very much in the realm of the early adopter, blockchain has proven advantages across several vertical industries: it is safe, decentralized, transparent and can reduce intermediary costs.

Blockchain Use Case Market Development

While many CIOs and CTOs believe that blockchain likely has a way to go before becoming a mainstream technology within their sector, five compelling use cases across asset tracking, financial services and digital identity are already in production.

They offer valuable business process improvements to the pioneering organization that has already deployed a blockchain -- whether in terms of increased efficiency, reduced fees and fraud, or full transparency across the whole network.

According to the latest worldwide market study by Juniper Research, the total value of B2B cross-border payments immutably stored on a blockchain will exceed $4.4 trillion by 2024 -- that's up from $171 billion in 2019.

Blockchain enables real-time clearing and settlement for B2B transactions, while offering increased transparency and reduced costs. These practical applications can deliver significant other benefits.

The new research revealed that financial institutions will save $7 billion by 2024, due to the automation of ‘Know Your Customer’ checks, allied to the involvement of blockchain in identifying users via self-sovereign identity.

Juniper Research assessed 15 leading blockchain vendors, scoring them on experience in the sector, marketing efforts and customer deployments along with their blockchain solutions. Juniper identified the 5 leading vendors as follows: IBM, Infosys Finacle, Guardtime, R3 and Ripple.

The analyst research scored IBM highly for its diverse blockchain solutions in production, with a strong client base for many vertical industries. Additionally, Infosys Finacle has established itself as a leading blockchain provider for financial institutions, with global partners and popular solutions.

"The implementation of blockchain is part of a wider strategy for financial institutions to digitally transform operations," said Dr Morgane Kimmich, research analyst at Juniper Research. "Blockchain will enable stakeholders to reduce operational costs in a competitive market that is becoming increasingly commoditized."

The research found that Ripple, Visa and IBM are driving blockchain innovation in cross-border payments. Ripple has led the market since 2012, capitalizing on its early mover advantage to grow to over 200 financial institution partners in 2019.

Outlook for Blockchain Applications Innovation

However, Ripple is facing increased competition from Visa B2B Connect and IBM Blockchain World Wire, which have already grown their presence in 60 countries and have high-profile partners in the financial services ecosystem.

Moreover, the Juniper analyst anticipates that both companies will continue to exploit their global presence, trusted brand names and established business partner networks to scale their solutions. These market leaders are experienced in market development, moving new product and service offerings beyond the early adopter segment. More deployment growth is sure to follow their lead.

Why End-to-End AI Hardware Solutions are Disruptive

How can IT vendors and cloud service providers differentiate their artificial intelligence (AI) offering, when the solutions tend to have the same basic capabilities? The answer could be new semiconductor chipsets that disrupt the status quo.

During the last two years, several hyperscale cloud service providers -- including Alibaba, Amazon, Facebook, Google, Huawei, and Tencent -- have been busy designing their own in-house chipsets for handling AI workloads in their data centers.

According to the latest worldwide market study by ABI Research, cloud service providers commanded a 3.3 percent market share of the total AI Cloud chip shipments in the first half of 2019.

AI Chipset Market Development

These players will increasingly rely on their own in-house AI chips and will be producing a total of 300,000 cloud computing AI chips by 2024, representing 18 percent of the global cloud AI chipsets shipped in 2024.

The requirements for intelligent services by many enterprise verticals are also pushing cloud service providers to upgrade their data centers with AI capabilities, which has already created more demand for cloud AI chipsets in recent years.

ABI Research has forecast that revenues from these chipset shipments will increase significantly in the next five years -- from $4.2 billion in 2019 to $10 billion in 2024.

Established chipset suppliers such as NVIDIA, Intel, and, to a certain extent, Xilinx will continue to dominate the market, thanks to the robust developer ecosystem they've created around their AI chipsets.

However, these vendors will increasingly face intensive competition from many new entrants and challengers, particularly their clients, namely the hyperscale global cloud service providers.

"The approach by webscale companies to develop in-house AI chips allows for better hardware-software integration and resources tailored to handle specific AI networks, which serves as a key differentiating point not only at the chipset level but also at the cloud AI service level," said Lian Jye Su, principal analyst at ABI Research.

This trend, initiated by Google in 2017, has led to many other webscale companies to follow Google’s track. Baidu immediately followed with its own AI chipset, Kunlun, in 2018, and later in the same year, Amazon introduced its Inferentia chip to support its Amazon Web Service (AWS).

According to the ABI assessment, Huawei is another captive company that has made a move toward using its in-house chips for its cloud services in an attempt to reduce its reliance on Western chipset suppliers. The company launched Ascend 310 and 910 in 2018 and has since expanded its product lineup into a series of cloud AI hardware, including an AI accelerator card and AI system.

Recently, Huawei launched Atlas 900, an AI training cluster which is a direct competitor to NVIDIA’s DGX and features over 1,000 Ascend 910 chipsets.

Outlook for AI Chipset Competition Growth

"This further expands the footprint of cloud AI service providers, as they are also competing with Intel and NVIDIA for the mindshare of developers. By offering end-to-end AI hardware solutions, Google, Amazon, and Huawei can ensure that their users will enjoy the ease of development and deployment while creating an active and vibrant developer community around their chipset solutions and ultimately generating a large user base for their cloud AI services," concluded Su.

However, as more enterprise CIOs and CTOs seek ways to gain a competitive edge via their artificial intelligence deployment strategies, we'll likely see a corresponding shift away from platform supremacy, and more emphasis on practical AI applications that enable the user's desired business outcomes. Let's not forget, enterprise developers focus on the needs of line-of-business leaders.

Exploring New 5G Opportunities for IoT Applications

Outdoor surveillance cameras will be the largest market for 5G wireless Internet of Things (IoT) solutions worldwide over the next three years, according to the latest global market study by Gartner.

The municipal deployed surveillance camera market will represent 70 percent of the 5G IoT endpoint installed base in 2020, before contracting to 32 percent by the end of 2023.

5G IoT installed endpoints for outdoor surveillance cameras will reach 2.5 million in 2020, 6.2 million units in 2021 and 11.2 million units in 2022, but will be surpassed by connected cars in 2023.

5G IoT Applications Market Development

"Cameras deployed by city operators or used to ensure building security and provide intruder detection offer the largest addressable market as they are located outdoors, often across cities, and require cellular connectivity," said Stephanie Baghdassarian, senior research director at Gartner.

Gartner predicts that the 5G IoT endpoint installed base will more than triple between 2020 and 2021, from 3.5 million units in 2020 to 11.3 million units in 2021. By 2023, the 5G IoT endpoint installed base will approach 49 million units.

According to the Gartner assessment, 5G capabilities open up new enterprise market opportunities, so communications service providers (CSPs) must assess the use cases to prioritize investment in IoT solutions development.

In 2023, the automotive industry will become the largest market opportunity for 5G IoT solutions. It will represent 53 percent of the overall 5G IoT endpoint opportunity in that year.

Within the automotive sector, embedded connected-car modules are the largest use case. Embedded endpoints in connected cars for commercial and consumer markets will represent an installed base of 19.1 million units out of a total of 25.9 million 5G endpoints in the automotive sector by 2023.

"The addressable market for embedded 5G connections in connected cars is growing faster than the overall growth in the 5G IoT sector," said Ms. Baghdassarian.

Commercial and consumer connected-car embedded 5G endpoints will represent 11 percent of all 5G endpoints installed in 2020, and this will reach 39 percent by the end of 2023. In addition, the share of connected cars actively connected to a 5G service will grow from 15 percent in 2020 to 74 percent in 2023.

This growth will reach 94 percent in 2028, when 5G technology will be used for Cellular V2X communications that enable messaging within vehicles and between vehicles, infrastructure, pedestrians, cyclists and more.

Outlook for 5G IoT Use Case Demand Growth

Ultimately, automobiles that are actively connected to a 5G wireless service will help to keep traffic moving and improve road safety.

"As the automotive industry will be the largest sector for IoT endpoints and 5G IoT use cases in the long term, we recommend that CSPs that want to be relevant in the 5G IoT market put this industry at the forefront of their investments. They should do this in terms of personnel who understand the sector and of partnerships that will move the market forward," concluded Ms. Baghdassarian.

China will Continue to Lead Global eRetail Payments

By the end of 2019, eCommerce will have a significant role to play in economic growth, with 44 percent of the global population forecast to purchase physical goods and 27 percent purchasing digital goods.

Moving deeper in the digital era, retailers are now focused on customer retention and reduced costs through the application of new technologies -- such as artificial intelligence (AI), blockchain, internet of things (IoT) and machine-to-machine communications (M2M), among others.

The growth of eRetail transactions has been so significant over the last decade that online payments for physical goods purchases exceeded the $2 trillion mark for the first time in 2017.

Two years later, the market size has grown to $2.9 trillion spent online for the purchase of physical goods worldwide in 2019; reaching a compound annual growth rate (CAGR) of 9.8 percent.

Payment Platforms Market Development

According to the latest worldwide market study by Juniper Research, revenue from payment platforms that enables merchants to process payments will grow from $106 billion in 2019 to $158 billion by 2024.

Juniper now forecasts that over half of global revenue will be generated in China by 2024 -- primarily owing to its increasing consumer affluence, and vast usage of Chinese social payments platforms such as WeChat Pay.

However, Juniper also forecasts losses from payment fraud will grow by 70 percent over the next five years. Their analyst urges payment platform providers to leverage the efficiency of emerging technologies to fight this increasingly sophisticated threat.

The research recommends payment platform providers invest immediately to diversify their solutions. As a result, they must offer services such as store management solutions, customer insights and merchant capital finance in order to remain competitive.

"The market will move beyond solely offering payments in the near future by expanding to new services," said Dr Morgane Kimmich, research analyst at Juniper Research. "These value-added services will enable payment platforms to differentiate themselves in a saturated market and build out new business models to allow vendors to generate additional revenue."

The global research study assessed 16 payment gateway platforms; scoring them on their service capabilities, breadth of offerings and future market prospects. Juniper Research positioned the five leading vendors as: Fiserv, PayPal, FIS, CyberSource and Adyen.

Outlook for Payment Applications Leadership

The research scored Fiserv highly for its acquisition of First Data, which enabled it to create an end-to-end solution in the payments space and a wide range of payments -- such as the Clover point-of-sale (POS) system.

Fiserv and FIS have both significantly increased their customer reach and breadth of solutions through recent mega-mergers. This has allowed both companies to further assert their strong positions in the payment gateway marketplace.

Cloud IT Infrastructure Demand Continues to Fluctuate

Demand for computer servers, disk storage systems, and networking hardware deployed within an enterprise hybrid cloud environment remains strong. Moreover, the investment in non-cloud on-premises infrastructure seems assured by the CIO and CTO need to deliver superior security and compliance with IT regulatory requirements in several key industries.

According to the latest worldwide market study by International Data Corporation (IDC), vendor revenue from sales of IT infrastructure products for cloud environments -- including public and private cloud -- declined 10.2 percent year-over-year in the second quarter of 2019 (2Q19), reaching $14.1 billion.

Cloud IT Infrastructure Market Development

IDC also lowered its forecast for total spending on cloud IT infrastructure in 2019 to $63.6 billion, down 4.9 percent from last quarter's forecast and changing from expected growth to a year-over-year decline of 2.1 percent.

Vendor revenue from hardware infrastructure sales to public cloud environments in 2Q19 was down 0.9 percent compared to the previous quarter (1Q19) and down 15.1 percent year over year to $9.4 billion.

This segment of the market continues to be highly impacted by demand from a handful of hyperscale cloud service providers, whose spending on IT infrastructure tends to have significant upward and downward swings. That ongoing fluctuation creates volatility for the IT infrastructure vendors.

After a strong performance in 2018, IDC expects the public cloud IT infrastructure segment to cool down in 2019 with spending reaching $42 billion -- that's a 6.7 percent decrease from 2018. Although it will continue to account for most of the spending on cloud IT environments, its share will decrease from 69.4 percent in 2018 to 66.1 percent in 2019.

In contrast, spending on private cloud IT infrastructure has shown more stable growth since IDC started tracking sales of IT infrastructure products in various deployment environments. In the second quarter of 2019, vendor revenues from private cloud environments increased 1.5 percent year-over-year reaching $4.6 billion. IDC expects spending in this segment to grow 8.4 percent year-over-year in 2019.

Overall, the IT infrastructure industry is at crossroads in terms of product sales to cloud vs. traditional IT environments. In 3Q18, vendor revenues from cloud IT environments climbed over the 50 percent mark for the first time but fell below this important tipping point since then.

In 2Q19, cloud IT environments accounted for 48.4 percent of vendor revenues. For the full year 2019, spending on cloud IT infrastructure will remain just below the 50 percent mark at 49 percent.

Longer-term, however, IDC expects that spending on cloud IT infrastructure will grow steadily and will sustainably exceed the level of spending on traditional IT infrastructure in 2020 and beyond.

Spending on the three technology segments in cloud IT environments is forecast to deliver growth for Ethernet switches while computing platforms and storage platforms are expected to decline in 2019.

Ethernet switches are expected to grow at 13.1 percent, while spending on storage platforms will decline at 6.8 percent and compute platforms will decline by 2.4 percent. Compute will remain the largest category of spending on cloud IT infrastructure at $33.8 billion.

Sales of IT infrastructure products into traditional (non-cloud) IT environments declined 6.6 percent from a year ago in Q219. For the full year 2019, worldwide spending on traditional non-cloud IT infrastructure is expected to decline by 5.8 percent, as the technology refresh cycle driving market growth in 2018 is winding down this year.

By 2023, IDC expects that traditional non-cloud IT infrastructure will only represent 41.8 percent of total worldwide IT infrastructure spending -- that's down from 52 percent in 2018. This share loss and the growing share of cloud environments in overall spending on IT infrastructure is common across all regions.

Most regions grew their cloud IT Infrastructure revenues in 2Q19. Middle East & Africa was fastest growing at 29.3 percent year-over-year, followed by Canada at 15.6 percent year-over-year growth. Other growing regions in 2Q19 included Central & Eastern Europe (6.5 percent), Japan (5.9 percent), and Western Europe (3.1 percent).

Cloud IT Infrastructure revenues were down slightly year-over-year in Asia-Pacific (excluding Japan) (APeJ) by 7.7 percent, Latin America by 14.2 percent, China by 6.9 percent, and the USA by 16.3 percent.

Outlook for Cloud IT Infrastructure Investment

Long-term, IDC expects spending on cloud IT infrastructure to grow at a five-year compound annual growth rate (CAGR) of 6.9 percent, reaching $90.9 billion in 2023 and accounting for 58.2 percent of total IT infrastructure spend.

Public cloud data centers will account for 66 percent of this amount, growing at a 5.9 percent CAGR. Spending on private cloud infrastructure will grow at a CAGR of 9.2 percent.

Why Device Vendors Can't Rely on Bright Shiny Objects

As more digital technology innovations reside in software apps, and part of those software functions reside in a public cloud, the value of device-centric innovation has been eclipsed. Chances are, the device that you already have in your possession is 'good enough' to access those software-defined services.

Worldwide shipments of devices -- personal computers (PCs), media tablets and mobile phones -- will decline by 3.7 percent in 2019, according to the latest worldwide market study by Gartner.

Personal Device Market Development

Gartner estimates there are more than 5 billion mobile phones used around the world. After years of growth, the worldwide smartphone market has reached a tipping point. Sales of smartphones will decline by 3.2 percent in 2019, which would be the worst decline the category has seen.

"This is due to consumers holding onto their phones longer, given the limited attraction of new technology," said Ranjit Atwal, senior research director at Gartner.

The lifetimes of premium smartphones -- for example, Google Android and Apple iOS phones -- continue to extend through 2019. Their quality and technology features have improved significantly and have reached a level today where users see high value in their device beyond a two-year time frame.

Consumers have reached a threshold for new technology and applications: according to the Gartner assessment, unless the devices provide significant new utility, efficiency or experiences, users do not necessarily want to upgrade their smartphones.

That being said, Gartner forecasts the share of 5G-capable phones will increase from 10 percent in 2020 to 56 percent by 2023. "The major players in the mobile phone market will look for 5G connectivity technology to boost replacements of existing 4G phones," said Mr. Atwal.

Still, less than half of communications service providers (CSPs) globally will have launched a commercial 5G network in the next five years. More than a dozen service providers have launched commercial 5G services in a handful of markets so far.

To ensure smartphone sales pick up again, mobile providers are starting to emphasize 5G performance features, like faster speeds, improved network availability and enhanced security. Gartner expects to see 5G phones account for more than half of phone sales in 2023. As a result of the impact of 5G, the smartphone market should return to growth at 2.9 percent in 2020.

Meanwhile, worldwide PC shipments totaled 63 million units and grew 1.5 percent in the second quarter of 2019, yet it's unclear if external economic issues still cast uncertainty over PC demand this year. PC shipments are estimated to total 256 million units in 2019 -- that's a 1.5 percent decline from 2018.

The consumer PC market will decline by 9.8 percent in 2019, reducing its share of the total market to less than 40 percent. The collective increase in consumer PC lifetimes will result in 10 million fewer device replacements through 2023. With the Windows 10 migration peaking, business PCs will decline by 3.9 percent in 2020 after three years of growth.

Outlook for New Personal Device Demand

"There is no doubt the PC landscape is changing," said Mr. Atwal. "The consumer PC market requires high-value products that can meet specific consumer tasks, such as gaming. Likewise, PC vendors are having to cope with uncertainty from potential tariffs and Brexit disruptions."

Ultimately, the vendors that design new personal devices -- including PCs and smartphones -- must consider evolving their business models to be based more on annual service income, rather than reacting to the annual peaks and troughs of spending on new devices. The 'bright shiny object' era of personal device marketing has lost its luster (with the exception of the most devoted Apple fanboys).

Furthermore, the trend of 'good enough' lower-cost devices having very similar basic specifications as the more higher-cost devices further complicates the marketing challenge for vendors that have struggled to differentiate the expensive devices that offer minimal additional benefits to the user.

AI Deep Learning Transforms Industrial Manufacturing

Artificial Intelligence (AI) has been portrayed as a technology that can revolutionize the industrial manufacturing sector. The sentiment is somewhat valid, but the scenario is complex. AI in industrial manufacturing is a collection of use cases at different phases of the manufacturing process.

According to the latest worldwide market study by ABI Research, the total installed base of AI-enabled devices in industrial manufacturing will reach 15.4 million in 2024 -- with a CAGR of 64.8 percent from 2019 to 2024.

Artifical Intelligence Market Development

"AI in industrial manufacturing is a story of edge implementation," said Lian Jye Su, principal analyst at ABI Research. "Since manufacturers are not comfortable having their data transferred to a public cloud, nearly all industrial AI training and inference workloads happen at the edge, namely on device, gateways and on-premise servers."

To facilitate this, AI chipset manufacturers and server vendors have designed AI-enabled servers specifically for industrial manufacturing. More and more industrial infrastructure is equipped with AI software or dedicated AI chipsets to perform AI inference.

Despite these solutions and the wealth of data in the manufacturing environment, the implementation of AI in industrial manufacturing has not been as easy as expected. Among all the industrial use cases, predictive maintenance and equipment monitoring are the most commercially implemented so far, due to the maturity of associated AI models.

The total installed base for these two use cases alone is expected to reach 9.8 million and 6.7 million, respectively, by 2024. It is important to note that many of these AI-enabled industrial devices support multiple use cases on the same device due to advancements in AI chipsets.

Another commercial use case currently gaining momentum is defect inspection. The total installed base for this use case is expected to grow from 300,000 in 2019 to over 3.7 million by 2024.

This is a use case that is popular in electronic and semiconductor production, where major manufacturers have been partnering with AI chipset and software vendors to develop AI-based machine vision to perform surface, leak and component-level defect detection, microparticle detection, geometric measurement, and classification.

Conventional machine vision technology remains popular in the manufacturing factory, due to its proven repeatability, reliability, and stability. However, the emergence of AI deep learning technologies opens the possibility of expanded capabilities and flexibility.

These AI algorithms can pick up unexpected product abnormalities or defects, go beyond existing issues and uncover valuable new insights for manufacturers.

Outlook for Industrial Manufacturing AI Applications

At the moment, manufacturers are facing significant competition in building and training in-house data science teams for AI implementation. Most AI experts prefer to work with webscale giants or AI startups, making talent acquisition a challenging task for industrial manufacturers.

"As such, they are left with one viable option, which consists of partnering with other players in the AI ecosystem, including cloud service providers, pure-play AI startups, system integrators, chipset and industrial server manufacturers, and connectivity service providers. The diversity in AI use cases necessitates the creation of partnerships," Su concludes.

Mobile Financial Services Upside in Emerging Markets

Across the globe, millions of people don't have a bank account -- they're the 'unbanked' masses. Mobile Financial Services (MFS) are alternative financial instruments that allow individuals, without an account at a traditional banking institution, to engage in financial activity via their mobile device -- such as a low-cost smartphone or media tablet.

Since the inception of 'mobile money' services from the telecom provider in Kenya over ten years ago, these solutions have been instrumental in enabling financial inclusion in emerging markets, where large segments of the population have been unserved, or underserved, by traditional banks.

Mobile Financial Services Market Development

With the ability to reach anyone who owns a mobile device and the benefit of rolling out cost-effective agent networks, MFS players have managed to fill a gap which has been a challenge for traditional financial institutions within emerging markets.

According to the latest worldwide market study by Juniper Research, the total transaction value of the MFS market will exceed $1 trillion by 2024 -- that's rising from $580 billion of current transaction value in 2019.

This is a growth of 70 percent and equally promising as the fintech market in mature markets. The upside potential for MFS is significant. Juniper analysts identified a range of untapped opportunities in Latin America for services such as microfinance, microloans and money transfer, as a key driver of MFS growth over the next five years.

Juniper forecasts that the total number of users accessing MFS in Latin America will grow 20 percent on average annually over the next five years. This is predicted to grow twice as fast as saturated markets such as Africa and the Middle East.

In response to the findings of their study, Juniper has urged the mobile financial service vendors to leverage the existing relationships and launch new innovative services in these underserved markets.

It also forecasts that the number of MFS users in all emerging markets will reach 1.2 billion by 2024 -- growing from 890 million in 2019. Africa and the Middle East will account for over 600 million users alone by 2024 -- owing to the high reliance on mobile devices for banking services.

Outlook for MFS Growth in Emerging Markets

According to the Juniper assessment, CICO (Cash In, Cash Out) transactions will be the largest driver of growth for the MFS market -- exceeding a value of $590 billion by 2024. CICO allows users to access traditional banking services, such as deposits and withdrawals, via mobile devices.

Juniper has also encouraged MFS providers to expand their agent networks to rapidly grow their customer bases. It also forecasts that fostering confidence amongst users for CICO transactions will lead to the increased adoption of more comprehensive MFS products, such as microloans and microinsurance, in the future.

AI Developers Drive New Demand for IT Vendor Services

Preparing for the adoption of new technologies is challenging for many large enterprise organizations. That's why savvy CIOs and CTOs seek information and guidance from vendors that can assist them on the journey to achieve digital business transformation. Meanwhile, investment in artificial intelligence (AI) systems and services will continue on a high-growth trajectory.

According to the latest worldwide market study by International Data Corporation (IDC), spending on AI systems will reach $97.9 billion in 2023 -- that's more than two and a half times the $37.5 billion that will be spent in 2019. The compound annual growth rate (CAGR) for AI in the 2018-2023 forecast period will be 28.4 percent.

Artificial Intelligence Market Development

"The AI market continues to grow at a steady rate in 2019 and we expect this momentum to carry forward," said David Schubmehl, research director at IDC. "The use of artificial intelligence and machine learning (ML) is occurring in a wide range of solutions and applications from ERP and manufacturing software to content management, collaboration, and user productivity."

Artificial intelligence and machine learning are top of mind for most organizations today, and IDC expects that AI will be the disrupting influence changing entire industries over the next decade.

Spending on AI systems will be led by the retail and banking industries, each of which will invest more than $5 billion in 2019. Nearly half of the retail spending will go toward automated customer service agents and expert shopping advisors & product recommendation systems. The banking industry will focus its investments on automated threat intelligence and prevention systems and fraud analysis and investigation.

Other industries that will make significant investments in AI systems throughout the forecast include discrete manufacturing, process manufacturing, healthcare, and professional services. The fastest spending growth will come from the media industry and federal or central governments with five-year CAGRs of 33.7 percent and 33.6 percent respectively.

Investments in AI systems continue to be driven by a wide range of use cases. The three largest use cases -- automated customer service agents, automated threat intelligence and prevention systems, and sales process recommendation and automation -- will deliver 25 percent of all spending in 2019. The next six use cases will provide an additional 35 percent of overall spending this year.

The use cases that will see the fastest spending growth over the 2018-2023 forecast period are automated human resources (43.3 percent CAGR) and pharmaceutical research and development (36.7 percent CAGR). However, eight other use cases will have spending growth with five-year CAGRs greater than 30 percent.

Decision-makers across all industries are now grappling with the question of how to effectively proceed with their AI journey.  That's why the largest share of technology spending in 2019 will go toward services, primarily IT services, as firms seek outside expertise to design and implement their AI projects.

Hardware spending will be somewhat larger than software spending in 2019 as firms build out their AI infrastructure, but purchases of AI software and AI software platforms will overtake hardware by the end of the forecast period with software spending seeing a 36.7 percent CAGR.

Outlook for AI Applications Development Growth

On a geographic basis, the United States will deliver more than 50 percent of all AI applications development spending throughout the forecast period, led by the retail and banking industries. Western Europe will be the second-largest geographic region, led by banking and discrete manufacturing.

China will be the third-largest region for AI spending with retail, state or local government, and professional services vying for the top position. The strongest spending growth over the five-year forecast period will be in Japan (45.3 percent CAGR) and China (44.9 percent CAGR).

Digital Transformation Raised the Bar for Skilled Talent

More CEOs have now voiced concerns that their workforce is not ready for the implications of digital business transformation trends. Few believe that their HR team is capable of reimagining the future of work to drive high-performance across the organization.

Just imagine, 45 percent of managers say they don’t feel confident in their ability to develop the skills employees need to succeed. In addition, managers lack time to coach their direct reports -- they're spending on average 9 percent of their time on skills development.

Bridging the Digital Skills Gap

Employee skill development challenges are particularly problematic in a multi-generational work environment. Millennials report wanting feedback 50 percent more often than other employees -- a Gartner survey found that more than 70 percent of HR executives believe that managers should get more involved in coaching employees compared with three years ago.

"Today’s organizations are undergoing a digital transformation that directly impacts how they do business, and they are finding a significant skills gap within their workforces," said Jaime Roca, senior vice president at Gartner. "Our research found that 70 percent of employees have not mastered the skills they need for their jobs today, let alone the skills needed for their future roles."

Organizations that are most successful at developing their employees have focused on cultivating what Gartner calls 'Connector managers', who are able to connect employees to the right people and resources at the right time. In fact, Connector managers boost employee performance by up to 26 percent and more than triple the likelihood that their employees will be high performers.

Connector managers achieve unparalleled performance from their direct reports by making three essential connections:

Employee Connection

The employee connection involves all the individual interactions managers have with their employees, including providing direct feedback, coaching and sharing performance expectations. Connector managers anchor their time in active listening and asking questions that build trust and help them understand employee context.

Developing a deep and rich upfront relationship with employees helps managers accurately identify needs, interests and aspirations, and this upfront investment ensures that Connectors provide more targeted development at the right times and on the right skill needs.

Team Connection

Gartner research reveals that approximately one-quarter of employees already count on teammates as a primary source of feedback. However, while most employees are willing to share knowledge and discuss strengths with their peers, very few are willing and open to sharing their skill gaps.

Making the team connection relies more on a manager crafting an open environment for skill sharing to occur organically, not the manager’s ability to explicitly match employees for coaching. Connector managers start building this team ecosystem by leveraging the intelligence they gather during the employee connection.

Their foundational understanding of what drives and motivates each employee allows them to tailor the broader team environment to match employees’ individual motivators -- and create a productive and trusting space.

Organization Connection

Connector managers help their employees build bridges across and outside of the enterprise to make the best -- not just the most -- connections. To do this, managers must give employees visibility into skills across the organization and help them prepare to extract value from each exchange and reflect on lessons learned after the fact.

While external connections are one good option for best-fit development, in many organizations, it is equally possible to find these sources internally. Ultimately, the organization connection does not require a large internal or external network.

Connectors are resourceful and become 'mapmakers' for their employees, helping them determine how and where they can identify 'best-fit' connections inside and outside the organization.

"The role of the manager in coaching and developing people has rightfully become a high priority for organizations today as they navigate an environment of heightened change and complexity," said Mr. Roca.

Regardless of industry, function or region, Connector managers can increase employee willingness to go above and beyond by up to 38 percent and can improve employee engagement by up to 40 percent.