Published on February 24, 2014
Frost & Sullivan 2014 ICT Market Outlook February 2014
Agenda Global Telecom Trends for 2014 Global IT Trends for 2014 Conclusions & Q&A 2
Agenda Global Telecom Trends for 2014 Global IT Trends for 2014 Conclusions & Q&A 3
Top Ten Transformational Telecom Trends for 2014 Smart Devices Mobile OS HTML5 5G Infrastructure IoT/Wearables Big Data Analytics OTT Dominance New Investment Strategy Mobile Gaming 4
Trend #1: Smart Devices Smartphone User Penetration(%) Smartphone ownership stands at roughly 60% in most Western and Developed Asian markets, with Japan being roughly 55% in 2013. Selected Smartphone User Penetration Metrics, 2013E 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Source: Frost & Sullivan. Smartphone migration will be the key revenue driver in the Japanese market in 2014. 5
Trend #1: Smart Devices (continued) Tablet ownership is still under 50% in all major markets and will continue to grow at the expense of the PC market. Tablet Penetration in Selected Markets, 2013E Tablet Penetration (%) 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Source: Frost & Sullivan. Tablet content ARPUs are four times that of smartphone content ARPUs. 6
Trend #2: Mobile OS Android will continue to be the most popular global mobile OS over the next five years although Apple will also grow steadily. Total Smartphone Users (m) Global Smartphone Users by OS, 2007-2017E 3500 CAGR 2013-2017 Others +7.5% 3000 2500 Windows +40.1% 2000 1500 iOS +13.2% 1000 500 0 2007 2008 2009 2010 Android 2011 iOS 2012 2013 Microsoft 2014 Others 2015 2016 2017 Android +13.5% Source: Frost & Sullivan. Windows will not emerge as a major platform until it becomes more open. 7
Trend #2: Mobile OS (continued) Despite the massive growth in Android, the OS remains heavily fragmented compared to iOS due to the large number of devices. iOS Users by Version, November 2013 Android Users by Version, November 2013 Previous Versions, 1% 2.2, 9% 4.3, 18% iOS 6, 19% 2.3, 10% 4.2, 17% 3.2, 13% iOS 7, 80% 4.1, 17% 4, 16% Source: Frost & Sullivan. iOS still accounts for 66% of global mobile application revenue. 8
Trend #2: Mobile OS (continued) Firefox OS has the most industry support among new web-based operating systems and despite setbacks Samsung is releasing smart devices using Tizen. Web-based OS Update, February 2014 OS Firefox Mobile Tizen Ubuntu Sailfish OS Vendor Support Carrier Support Alcatel, LG, ZTE and Foxconn. Panasonic also announced plans to introduce Firefox OSbased smart TVs. As of 2013, Firefox OS-based devices were available in 14 countries in Europe and Central and South Americas. They initially targeted entry-level smartphone segments, or emerging markets where there was a transition from feature phones to smartphones, avoiding markets already dominated by iOS and Android. Samsung recently announced that its Galaxy Some major global carriers have recently exited the Tizen Association such as Gear 2 Smart Watch will Telefonica and France Telecom, while NTT DoCoMo has indefinitely delayed use Tizen instead of releasing a smartphone using the OS. Android. BQ and Meizu have both Vodafone, Three, China Unicom, EE, Deutsche Telekom, Korea Telecom, announced Ubuntu Verizon, and Telstra are among the carriers in the Ubuntu advisory group. smartphones for 2014. Smartphones can be ordered directly from Jolla Sailfish currently has no direct carrier support, employing a B2C strategy while online in the EU with India it will start encouraging Android users to migrate later in 2014. to follow in 2014. Source: Frost & Sullivan. 9
Trend #3 HTML5 HTML5 apps hold great promise in terms of supporting cross-platform support and lowering costs associated with enterprise application use and development. Native vs. HTML5 Application Comparison HTML5 Hardware Readiness Source: NTT. Source: iCapps. Source: visual.ly 10
Trend #4: 5G Infrastructure While LTE networks are being deployed in most countries, most subscribers are found in Japan, South Korea and the USA. Global Mobile Subscribers by Technology, 2009-2018 Source: Ericsson. 11
Trend #4: 5G Infrastructure (continued) Although 5G networks are not anticipated until 2020 at the earliest, several vendors have already launched initiatives. Small cells will be a major part of deployments. Major 5G Initiatives Vendor Mobile Network Evolution 5G Initiative Samsung is looking to be a first mover in 5G, and claims to have transmitted 1Gbps over a distance of 2km using a trial network. Huawei has announced US$600m in 5G investments between 2014 and 2018. It aims to transmit a peek speed of10Gbps. Source: Tektelic. 12
Trend #5 IoT/Wearables Extreme innovations in the wearable technology space will expedite the need for cloud storage. Physical Storage Capacity in Hardware Electronic Tattoo HP Compaq 6305 Pro Lenovo Thinkpad X240 iPad Air iPhone 5S Google Glass Samsung Galaxy Gear 0 100 200 300 400 500 600 Source: Frost & Sullivan. 13
Trend #6: Big Data Saturation of fixed broadband, smartphones and tablets coupled with IoT devices will cause an exponential growth in Internet traffic. F&S APAC Invoiced Sales, 2008-2012 CAGR Source: NTT. Giving enterprises a huge amount of data which can be utilized. 14
Trend #7: Analytics Verizon Wireless is using big data and analytics to offer consumer data to a variety of B2C businesses. Source: Verizon Wireless. 15
Trend #7: Analytics (continued) Web 2.0 companies are also starting to use analytics, notably in order for predictive analyses which result in better-targeted e-commerce offerings. Amazon “Anticipatory Shipping” Patent Facebook Predictive Analysis Example Source: Amazon. Source: Facebook. 16
Trend #8 OTT Dominance Japanese users are the least likely in the world to share most personal data online. 17
Trend #8 OTT Dominance (continued) NTT DoCoMo’s MOU has contracted by 40% in the last two years. NTT DoCoMo Blended MOU, 6/09-12/13 140 Total Minutes of Use 135 130 125 120 LINE Introduced 115 110 105 100 Mobile MOU could decline to extremely low levels in the next five years. Source: NTT DoCoMo. 18
Trend #8: OTT Dominance (continued) In Japan the rise of LINE has caused a massive drop in NTT DoCoMo’s voice ARPU as users opt for free calling. Total Mobile ARPU(JPY) NTT DoCoMo Blended ARPU, 6/09-12/13 LINE introduced 6,000 5,000 CAGR Since LINE Introduction Smart ARPU +6.1% 4,000 3,000 Data ARPU 0.0% 2,000 1,000 Voice ARPU -4.7% 0 Voice ARPU (¥) Data ARPU (¥) Smart ARPU (¥) Source: Frost & Sullivan. NTT DoCoMo now reports a “Smart ARPU” to counterbalance voice declines. 19
Trend #9: New Investment Strategy In response NTT DoCoMo has recently made many non-traditional investments to counterbalance falling voice revenue. NTT DoCoMo Strategic Roadmap NTT DoCoMo Blended MOU, 6/09-9/13 Source: NTT DoCoMo. 20
Trend #10: Mobile Gaming Mobile Game Spending Rates, 2013 Mobile Game ARPUs, 2013 18.0% 30 Mobile Game ARPU(US$) Mobile Game Spending Rate(%) Applications both monetize stronger and with greater frequency in Japan more than anywhere else, making the market very attractive for developers. 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 25 20 15 10 5 2.0% 0.0% 0 Japan South Korea USA UK China Japan South Korea UK USA China Source: Industry Interviews. 21
Trend #10: Mobile Gaming (continued) Total Mobile Applications per Phone Japan ranks third globally in app usage and first in paid app usage. Average Mobile App Usage by Country, 2013 Global Smartphone Users by OS, 2007-2017E Source: Google. 22
Trend #10: Mobile Gaming (continued) Japan is dominated by Puzzle & Dragons and LINE games, making it difficult for other app companies to gain traction in the market. Japan Top Grossing Mobile Apps, November 2013 Market Revenue Share (%) Next 990 Top Grossing Apps Love Live Clash of Clans Keri Hime Quest LINE Wind Runner LINE Chain Chronicle Colopl Baseball LINE Pokopang Quiz Wiz Puzzle & Dragons 0% 10% 20% 30% 40% 50% 60% Source: Appannie, Industry Interviews. 23
Trend #10: Mobile Gaming (continued) Extreme competition for market share has lead to very high Cost per Install (CPI) in Japan. Japan is also the only country in the world where mobile apps are aggressively promoted on TV, print, outdoor signage and celebrity endorsements. Mobile App CPI in Selected Markets, 2013E Japan Mobile Game Advertisements Subway Television Billboard Celebrity Japan CPI Ranges from US$15-US$20! Source: AdParlor. This means that it is very expensive for developers to gain users and they desperately need a more effective way of increasing app downloads. 24
Agenda Global Telecom Trends for 2014 Global IT Trends for 2014 Conclusions & Q&A 25
Global IT Spending Market Overview Overall IT spending surpassed US$4 Trillion in 2013. IT budgets are again rising in most industries, and many new technologies are offering potential cost savings. Global IT Spending 2013 - US$4 Trillion Datacenters 4% Software 8% IT Spending Technology Drivers Technology Drivers Segment Datacenters Iaas, Intelligent DCs Software Saas, Paas Hardware 18% IT Services Outsourcing, Analytics IT Services 25% Connectivity Big Data Connectivity 45% BYOD, Bundling Internet of Things Hardware NaaS, SDN Source: Frost & Sullivan. 26
Top Ten Transformational IT Trends for 2014 BYOD Intelligent Data Centers Converged Infrastructure Software Defined Networking Cloud Computing Evolution 5G Wi-Fi 3D Printing Smart Contact Centers Security IT Department Transformation 27
Trend #1 BYOD BYOD is becoming increasingly adopted, as 70% of enterprises offer at least some form of the service. Mobility budgets have been significantly cut in many cases. BYOD Adoption Survey, July 2013 Source: Aruba Networks. 28
Trend #1 BYOD (continued) Fragmentation and security are the major inhibitors to the BYOD market. A 2013 survey found more than 12,000 Android devices in existence. Global Android Market Share by Device, July 2013 Source: OpenSignal. 29
Trend #2 Intelligent Data Centers In 2014 the focus in the data center space will be efficiency, as enterprises look towards consolidation and intelligent data centers to reduce costs. High Energy Consumption 7% Poor Cooling 6% 25% Running out of rackspace 8% 23% Running out of storage 4% Securing the applications & data 3% Network Latency 5% Implementing Virtualization 3% Managing the virtual infrastructure 5% Lack of visibility into datacenter assets & performance 4% Dearth of IT manpower 19% 4% 0% 33% 37% 29% 20% 35% Less Critical 40% Neutral 10% 28% 39% 30% 10% 29% 41% 23% 12% 28% 37% 19% Least Critical 24% 42% 20% 11% 32% 17% 9% 30% 27% 20% 9% 27% 32% 14% 9% 22% 34% 23% 10% 32% 50% Critical 9% 27% 60% 70% 80% 6% 90% 100% Most Critical Survey done with IT Managers and CIOs in Australia, Hong Kong, China, India, Singapore and Malaysia in Q2 2013. 30
Trend #2 Intelligent Data Centers (continued) In an SDDC, not only are all infrastructure components (servers, storage, network) virtualized, but they are orchestrated through a powerful platform that ensures the components work together. Source: EMC. 31
Trend #3 Converged Infrastructure Converged Infrastructure will become more popular as large IT vendors start to support CI, despite interests in legacy products. Converged Infrastructure Network Elements Converged Infrastructure Spending Source: HP. 32
Trend #4 Software Defined Networking Software Defined Networking will gain momentum in 2014 as big data creates a need for centralized and hence more cost-effective traffic shaping. Asynchronous Data Traffic Example SDN Network Architecture Source: Dell. 33
Trend #5 Cloud Evolution Hybrid clouds will come to the forefront of the CC market in 2014 but private clouds will still be the most commonly deployed solution. F&S Cloud Computing Adoption Survey Private Cloud Services Usage Currently Uses Plan to use within 2 years Hybrid Cloud Services Usage 14.2% Currently Uses 12.6% 41.6% Plan to use but not within 2 years Does not plan to use it Does not plan to use it Public Cloud Services Usage Currently Uses 28.7% 32.3% Plan to use within two years Plan to use but not within 2 years Does not plan to use 12.3% 26.8% 22.3% Plan to use within 2 years Plan to use but not within 2 years 31.6% 25.2% 12.6% 40.0% • A large percentage (41.6 per cent) of enterprises mention that they use private cloud services. • At a regional level, more than half of the enterprises in UK and US point out their current involvement with private cloud services. • The public cloud services model has the highest percentage of enterprises who do not plan to use it in the future. • This is largely because of the security and performance concerns attached to the public cloud service model. • 52.0 per cent of the enterprises in the US currently use this model, which is the largest proportion of users among all the other countries. • 22.3 per cent of the enterprises are currently using the hybrid cloud service model. This points to the low prevalence of true hybrid cloud offerings in the market. Source: Frost & Sullivan. 34
Trend #5 Cloud Evolution (continued) Security, SLA requirements and legacy infrastructure will spur the private cloud, but cost and utility pricing will also fuel hybrid cloud growth. Public Cloud vs. Private Cloud Adoption Source: Frost & Sullivan. Hybrid Cloud Architecture Source: Dell. 35
Trend #6 The Wireless Enterprise 802.11ad is “5G Wi-Fi” is being deployed with peak throughputs of 6GB. This will allow offices to truly become wireless for the first time. 802.11x Standard Evolution “The Wireless Enterprise” Source: NTT. Source: Cisco. Source: Wireless Gigabit Alliance. 36
Trend #7: 3D Printing 3D will radically transform a variety of industries as hardware becomes cheaper this year, and will change the IT structure of the modern enterprise. 3D Printing Market Readiness Matrix 3D Printed Items Handgun Prosthetic Ear Pizza 37
Trend #8: Security APAC markets are the source of most of the world’s DDOS attacks. Attack volumes are increasing significantly in size. Global Internet Attack Traffic by Peak Attack Size, 2010-2013 Global Internet Attack Traffic by Country of Origin, 2Q 2013 South Korea, 0.90% Romania, 1.00% Brazil, 1.40% Other, 11% Russia, 1.70% India, 2.00% Turkey, 2.40% Taiwan, 2.50% Indonesia, 38% United States, 6.90% China, 33% Source: Akamai. 38
Trend #9: Smart Contact Centers Offshoring has not been viable in Japan due to language needs, therefore we foresee voice apps being a major driver in the local contact center market. Japan Contact Center Market by Business Model, 2013 Contact Center Applications Market: Adoption Trends by Technology, Japan, 2012–2019 ACD 0.1% 0.1% 78.0% 78.0% 21.9% CM CTI 21.7% 21.7% IVR 21.9% 0.2% Multimedia Outbound 0.2% Speech Apps In-house In-house Offshore Outsourced Offshore Outsourced WFM Captive Captive Domestic Outsourced Domestic Outsourced Contribution 2012 (%) Outsourced Contribution 2019 (%) WFM 15.0 2.2 9.6 % CAGR (2012-2019) 16.4 12.8 10.0 9.3 Speech OutboundMultimedia Apps 1.7 8.4 2.3 IVR CTI CM ACD 9.2 30.9 17.1 21.1 3.0 10.1 24.2 20.6 15.1 12.9 9.2 3.2 10.9 1.7 39
Trend #10: The Changing Role of the IT Department Cloud services are changing IT Departments to become proactive instead of reactive by offering scalable, real-time and cost-effective services. Traditional Approach to IT New Approach to IT Problem Implementation Build own solution Purchase solution Implementation PaaS IaaS SaaS Problem Source: Frost & Sullivan. 40
Trend #10: The Changing Role of the IT Department (continued) Confidence in the Cloud is growing, and IT executives expect to have full confidence in the cloud by 2020. This will fundamentally change how IT is viewed. Cloud Confidence Percentages New Approach to IT IT Departments will manage the value chain of cloud vendors instead of just “keeping the lights on” Employees who can analyze IT risk, manage large data sets and analyze processes will be highly valued Source: Enterprise CIO Forum. The IT Department will be seen as a business innovators instead of business enablers 41
Agenda Global Telecom Trends for 2014 Global IT Trends for 2014 Conclusions & Q&A 42
Summary Telecom Trends – Smart device ownership is increasing rapidly and mobile OS is evolving to include web-based alternatives. The amount of data is growing exponentially, creating congestion but also opportunities with big data & analytics. OTT Services are destroying the voice market which means operators will have to find alternative investment avenues. Enterprise Trends – BYOD, CI can reduce CAPEX, Intelligent DCs can reduce OPEX Hybrid Clouds, SDN will see further adoption in 2014 Cloud services will fundamentally change the role of the IT department to hold a more strategic role in the organization. 43
Thank you! January 2014
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