Digital Transformation | Hybrid Cloud | IoT

Wednesday, August 21, 2013

How Cloud Service Advances Reward the Bold Leaders

Are you one of those independent executives that uses strategic foresight to gain a decisive lead over competitors that tend to follow the crowd? Granted, it takes courage to make bold moves -- and follow the path that's less traveled. Big rewards tend to go to the confident, not the cautious.

What's your business technology investment strategy for 2013, and beyond?  Does your corporate foresight anticipate success, based upon your ability to deploy quantum-leap technological advances -- like managed cloud services?

According to International Data Corporation (IDC), the economic slowdown in China has driven them to lower their expectations for worldwide IT spending growth this year. IDC now forecasts IT spending growth of 4.6 percent in constant currency for 2013. That's down from the previous forecast of 4.9 percent growth and a sharp deceleration from last year's growth of almost 6 percent.

Despite the lower forecast, IDC expects IT spending will reach $2 trillion for the first time ever in 2013. Meanwhile, total ICT spending, including telecommunications services, will increase by 3.8 percent at constant currency to $3.6 trillion.

How Market Trends Guide Traditional Strategies

According to IDC, capital spending in China and other emerging markets shows signs of weakening from the rapid pace of expansion recorded since 2010. Meanwhile, PC sales face continued pressure from lower-cost tablets in the first half of 2013 and the rapid adoption of cloud services is cannibalizing revenue from traditional sales of software and IT services.

In the U.S., shipments of smartphones and tablets have buoyed the overall market so far this year, but forecasts have been lowered for other hardware market sectors and IT services.

Expectations have also been scaled back in Canada, Western Europe, Brazil, and Central and Eastern Europe, Middle East and Africa (CEMA) as well as in Asia/Pacific (excluding Japan).

Mobile Device Deployments Gain Momentum

The IDC forecast reduction would have been greater, if not for strong sales of mobile internet devices like smartphones and tablets in the first half of the year. More than half of this year's IT market growth will come from mobile devices.

In fact, excluding smartphones and tablets, IT spending will increase by just 1.7 percent in constant currency (down from the previous forecast of 2.6 percent growth).

Worldwide spending on smartphones is now expected to increase by 18.5 percent in constant currency this year (up from the previous forecast of 17.2 percent), while tablet spending will increase by 39 percent -- that's up from the previous forecast of 32.5 percent.

Further Declines in PC Purchases

The PC market, in particular, performed poorly in the first half of 2013 as cannibalization from tablets continues. The economic slowdown in China, reverberating throughout Asia/Pacific, also took a bite from PC revenues.

IDC says that worldwide PC spending is now expected to decline by 7.2 percent in 2013, that's down from the previous forecast of a 2.6 percent decline.

At the same time, U.S. PC sales are a little stronger than expected in the second quarter, but not enough to offset the overall decline in shipments and average prices.

Further Upside Growth of Cloud Services

Traditional IT services expectations have been impacted by economic weakness in some regions -- and continuing cannibalization from cloud services. IDC has lowered the forecast for U.S. IT Services growth in 2013 to 2.9 percent, and worldwide services growth to 3.4 percent.

Software spending -- including Software as a Service (SaaS) -- has so far remained relatively resilient overall, with growth in constant currency of 5.5 percent still expected this year. However, by the end of 2013, almost 10 percent of annual software spending will have moved to the cloud.

"Enterprises are still investing in new software tools and solutions, especially where rapid cost-benefits have been identified, but more software sales are migrating to SaaS and PaaS delivery models," said Stephen Minton, Vice President in IDC's Global Technology & Industry Research Organization.

IDC believes this puts pressure on software vendors to compete with lower-margin cloud service providers, and the growth of cloud is also cannibalizing revenues from IT outsourcing and application hosting.

Choose Progress -- Explore the Cloud Advantage

Is fear, uncertainty or doubt about shifts and changes in the global networked economy holding back your business technology deployments in 2013? Consider the upside opportunities.

Some savvy business leaders are clearly bucking the trend and moving forward with additional new cloud service trials or increasing their current use of available offerings across their whole operations.

During the remainder of 2013, more executives will likely seek ways to harness the advantages of utilizing the just-in-time deployment benefits afforded by mature cloud service offerings.