information technology and telecommunications market...
TRANSCRIPT
Information Technology and Telecommunications Market Update
Vito MabruccoGroup Vice PresidentIDC Canada
March 18, 2003
[email protected] 369 0033 x 290 Note: May not be reproduced or used in part or
whole without permission from IDC Canada
AGENDAAGENDA
We Have Been Here Before Economic UpdateWorldwide and Canadian ITC MarketsSoftware MarketTelecommunications Services MarketIT Services MarketOutsourcing Top PredictionsWhy are we in this business?
Entering 2002
September 11
Global recession
Telecom winter
Dot-com crash
During 2002
Enron, WorldCom, etc.
Wall Street
Drums of War
Oil Prices
An Industry CrateredWW IT Spending Growth (%)
1999 2000 2001 2002
10.8% 10.4%
-3.5%
-0.5%
We’ve Been Here BeforeWe’ve Been Here Before40 Years of Worldwide IT Spending % Growth$ Billions
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000 -75%
-50%
-25%
1960s 1970s 1980s 1990s
The mainframe crash
Oil crisesThe PC crash
The Gulf war
Vietnam
Reunification
Y2K
9/11
Source: IDC 2002
0 %
5 %
10 %
15 %
2 0 %
2 5 %
1965
1980
1995
2010
Source: IDC 2002
EarlyMainframes
Department Computing
Personal Gadgets/ /Embedded
Personal Computing
Complexity CrisisCentral Computing
Distributed Computing
Client Server Computing
Network Computing
The Long Term Story – WW IT Spending Growth (5 year moving average)The Long Term Story – WW IT Spending Growth (5 year moving average)
Economics, Assumptions and
Expectations
Economic UpdateEconomic Update
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2000 2001 2002 2003 2004
GDP Growth Y/Y
CanadaUS
Source: Consensus Economics, Dec 2002
-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%
10.0%
2000 2001 2002 2003
Business Investment Growth Y/Y
CanadaUS
Canada Highlights:Employment Market Healthy Concern with dependence on US
US Highlights:Layoffs still occurring – Structural ImpactsConcern over consumer sentimentWar Costs = 1% to 2% of GDP Source: IDC Canada 2002
Scenario AssumptionsScenario AssumptionsForecast Downside
Economy GDP 3%-4% Range GDP 2%-3% Range
Profits Results Mixed Unpleasant Surprises
Geopolitics War in Iraq, limited War in Iraq, extended
Oil Prices Up $5/barrel Up $15+/barrel - $40/bbl
Inflation Under 2% Worries over deflation
Scenario AssumptionsScenario AssumptionsForecast Downside
IT Market Maturing Industry Crisis of Confidence in Tech
Telecomm Capex Lower, 3G 2005+ More Bankruptcies, Bad News
Consumers Saturation, Debt Volume and Price Declines
Business Spend with Economy Depression Mentality
Stocks Up slowly 2003 Flounder
Killer Apps None None
The Economy Matters …% Saying It’s “The Main Inhibitor” To IT Spending
0% 10% 20% 30% 40% 50%
Other
Technology Not Delivering
Overspending Last 3 Yrs
Difficult to Show ROI
IT Not Priority
IT Easy to Cut
No Slowdown
Slow Econ/Reduced Profits
Source: IDC IT Manager Survey, July 2002, N=999
Spending Inhibitors In 2003Spending Inhibitors In 2003
High Costs16%
Bus. Climate23%
Low Profits24%
Don't Know8%
Skills Shortage7%
Terrorism2%
Changing Business
Needs16%Other
4%
Reasons That Would Slow IT Spending In 2003(% Listing As Top Cause)
Source: IDC Project Barometer, November 2002, N=914, US Only
Planned IT Spending Distribution 2003Discretionary vs Non Discretionary Bar moves upPlanned IT Spending Distribution 2003Discretionary vs Non Discretionary Bar moves up
Routine Infrastructure
Upgrades46%
Initiatives Already
Underway28%
New Initiatives
26%
IDC Project Barometer, November 2002
Growth Triggers & InhibitorsGrowth Triggers & Inhibitors
0% 10% 20% 30% 40% 50%
Costs
Business Climate
Low Profits
Competition
New Bus Needs
Profits Pick Up
CEO/CFOIT Mgr
Would Accelerate Spending
Would Delay Spending
Source: IDC Project Barometer, November 2002, N=914, US Only
What Customers Want
Industry Pain Point Top 2003 Solution
Banking Customer loyalty CRM
Govt Anti-terror & efficiency Security
Retail More efficient service Store systems
Cap Mkts Meeting regulations Business intelligence
Auto/Aero Reduce procure costs B2B
Source: IDC WW Verticals Research, Jan 2003
Worldwide ITC Perspectives
WW 2003 Key Thresholds
Cell phones installed > 1.5 billioneMailboxes > 1 billionPCs installed > 600 millionInternet Users > 700 millionMobile Internet Users > 250 millionBroadband Households > 80 millionIT Spending Worldwide >$892 billionTelecom Spending Worldwide >$975 billionInternet Commerce Worldwide > $1.5 trillion
Source: IDC 2002
Worldwide ITC Spending GrowthWorldwide ITC Spending Growth
-15%
-10%
-5%
0%
5%
10%
2002 2003 2004 2005 2006
Hardware
Software
Services
Telecom
% Growth
Hardware Recovery – Y2K Boomerang Effect
Source: IDC 2003 Preliminary
Worldwide IT Forecast 2002-2006 (US$M)Driven by Software and Services – and HW RecoveryWorldwide IT Forecast 2002-2006 (US$M)Driven by Software and Services – and HW Recovery
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
US
$M
SVCS 353,853 367,939 392,146 422,679 456,204SW 180,545 188,459 200,881 216,874 234,944HW 326,071 335,286 357,894 378,997 396,123
2002 2003 2004 2005 2006
Source: IDC 2003, Preliminary
5 year CAGR
5.4%5.7%1.6%
Worldwide IT Growth Rates by MarketDriven Down by Hardware Worldwide IT Growth Rates by MarketDriven Down by Hardware
-15%
-10%
-5%
0%
5%
10%
All IT Servers Storage PCs Software Services
200220032004
Source: IDC 2003 Preliminary
WW IT Spending Distribution 2003Shifting Away from North AmericaWW IT Spending Distribution 2003Shifting Away from North America
IDC 2003 Preliminary
42%
29%
10%
9%
3%3%2%2%USA
W Europe
Japan
AP
Latin America
Canada
C Europe
MEA
Canadian ITC Perspectives
Key Thresholds: Canada 2003 Canada 2006Key Thresholds: Canada 2003 Canada 2006
Cell Phones > 13.5 MM 22 MM
Internet Users > 21 MM 25 MM
Internet Buyers > 7.6 MM 11.6 MM
Mobile Internet Users > 2.2 MM 7.9 MM
PCs Installed > 22 MM 24.6 MM
Online Households > 7.7 MM 8.8 MM
Broadband Households > 3.1 MM 5.0 MM
IT Market Canada > $35 BB $38 BB
Telecom Services Canada > $35 BB $42 BB
Internet Commerce Canada > $92 BB $250 BB
Canadian ITC Spending GrowthCanadian ITC Spending Growth
-15%
-10%
-5%
0%
5%
10%
15%
2002 2003 2004 2005 2006
Hardware
Software
Services
Telecom
% Growth
Downward Pressure in SW and Services in 2003/2004
Source: IDC Canada 2003 Preliminary
Canadian IT Forecast 2002-2006 (C$M)Driven by Software and ServicesCanadian IT Forecast 2002-2006 (C$M)Driven by Software and Services
05,000
10,00015,00020,00025,00030,00035,00040,00045,000
C$M
SVCS 15,934 16,299 17,082 17,854 18,746SW 6,278 6,724 7,427 8,141 8,873HW 12,282 11,791 11,731 11,610 11,594
2002 2003 2004 2005 2006
Source: IDC Canada 2002
5 year CAGR
3.7%5.8%-3.0%
Canadian IT Growth Rates by MarketSoftware and Outsourcing Lead GrowthCanadian IT Growth Rates by MarketSoftware and Outsourcing Lead Growth
-20%
-15%
-10%
-5%
0%
5%
10%
15%
PCs Servers Storage Network Software Cons andInt
OpsMgmt
Deploy &Support
ITTraining
% Growth 2002% Growth 2003% Growth 2004
Source: IDC Canada 2002
Canadian IT Market 2001 to 2006Forecast and Downside ScenarioCanadian IT Market 2001 to 2006Forecast and Downside Scenario
0.7%
-1.6%
5.7%
-4.1%
-1.0%
3.0%3.2%
5.6%
6.0%
2.6%2.1%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
2001 2002 2003 2004 2005 2006
Forecast Downside
Forecast CAGR 3.7%
Downside CAGR 0.5%
5 Year IT Spend:
Forecast $194B
Downside $175B
Previous 5 $154B
Source: IDC Canada 2002
Canada - IT Spending by IndustryTotal Public Sector is Largest VerticalCanada - IT Spending by IndustryTotal Public Sector is Largest Vertical
Source: IDC 2002
Manufacturing15%
Government13%
Telecom10%
Retail/Wholesale8%
Primary Resources3%
Health3%
Education3%
Home9%
Utilities3%
Constr1%
Trans3%
Financial Services18%
Bus Serv11%
Banking, Insurance and Financial Markets
Process and Discrete Manufacturing
Federal and Provincial
Canada - IT Spending by Size Lure of Large vs Access to SMBCanada - IT Spending by Size Lure of Large vs Access to SMB
Large63%
Medium16%
Small12%
Home9%$3.4B
$4.5B
$5.6B
$22.6B Small 1-99
Medium 100-499
Large 500+
Coverage ChallengeCompetitive Challenge
Source: IDC 2002
Software Market Perspectives
The Software Shift
$180 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6
Log of WW Software Revenues
System SW, Languages,Mfg & acct’g applications
Integrated system mgt & applications, automated tools
Self-describing content & apps, natural interfaces
Complexity Crisis!
Source: IDC 2003
Software Market DriversSoftware Market Drivers•Crisis of Complexity in Enterprise Software
•Integration of new and existing SW modules is top priority•Software License Model
•Annuity Model - Metrics based on business value of software•Business Process Management
•Shift from physical infrastructure management to business process management
•Focus on simplification of IT – Software Examples•Information search/retrieval/integration and analysis•Device and interpersonal communication•Security, Identity and Authentication•Automation and Integration of Business process•Hardware and network utilization and management
Source: IDC 2002
Simplification Becomes HotSimplification Becomes HotMobile Middleware, 50%XML Database Management Software, 44%Enterprise Information Portals, 41%Speech Processing Applications, 33%Translation/Globalization Applications, 33%Messaging Applications, 31%Distributed File System Software, 28%Packaged Datamart/Data Warehouse, 26%Content Mgmt & Retrieval Applications, 24%Product Information Management (PIM), 23% Security 3A's, 22%Storage Resource Management Software, 22%Logistics, 20%
Highest Growth Software MarketsCAGR 2001-2006
Telecommunications Services
Telecommunications Services
Canadian Telecom: 2003 the Year of InflectionsCanadian Telecom: 2003 the Year of Inflections
1. The gap between revenue-versus-capex spending will widen further in 2003;
2. Consumers will account for more revenue in the local telephone market than business customers;
3. Telecom DSL penetration will surpass cable modems in the high-speed Internet access market;
4. Global wireless adoption will exceed the wireline access lines;
5. Non-PC device use will exceed personal computer penetration; and
6. Migration of data network architecture to IP VPN will supplant VPN use and further drive the adoption of a single, all-IP-based platform by the end of the decade.
Canadian Telecom Market Forecast 2002-2006Wireless and Data Drive Growth Canadian Telecom Market Forecast 2002-2006Wireless and Data Drive Growth
0
5
10
15
20
25
30
35
40
45
2002 2003 2004 2005 2006
Mar
ket R
even
ue (C
$B)
DataInternetWirelessLong DistanceLocal
Source: IDC Canada, October 2002
IT Services Perspectives
Canada Services Spend 2003 - $16B CDNOutsourcing largest spending segment by 2003Canada Services Spend 2003 - $16B CDNOutsourcing largest spending segment by 2003
Consulting and
Integration37%
Deploy and Support
17%Training
5%
Outsourcing and Ops
Mgmt41%
Source: IDC 2003
Declining Annuity
New Delivery Models
Project Size and Competition Challenge
Canadian IT Services SpendingCanadian IT Services Spending
0
2,000
4,000
6,000
8,000
10,000
2002 2003 2004 2007
Consulting & Integration Outsourcing Deploy & Support (hw+sw) IT Education & Training
Source: IDC Canada, 2002
C$M
02-07 CAGR 1.4%
02-07 CAGR 7.7%
02-07 CAGR 2.9%
02-07 CAGR 3.1%
Notes: Does not include Business Services
Canadian Outsourcing Services SpendingCanadian Outsourcing Services Spending
0
2,000
4,000
6,000
8,000
10,000
2003 2004 2005 2006 2007
IT Services XSPs (Sys. infrastructureSP + ApplnSP)Network and Desktop OutsourcingIS OutsourcingApplication Management
Source: IDC Canada, 2002
C$M
Canadian Consulting and Integration Canadian Consulting and Integration
853 803 816 837 863 895
2,936 2,792 2,875 2,991 3,129 3,286
793 817 855 910 977 1,058
1,6381,626
1,812 1,6921,6511,667
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
2002 2003 2004 2005 2006 2007IS Consulting System IntegrationNetwork Consulting & Integration Custom Application Development
CAGR 02-07
-2.1%
5.9%
2.3%
1.0%
C$M
Source: IDC, 2003
Focusing on Consulting & IntegrationFocusing on Consulting & Integration
Currently contracting marketNo killer appLower future growthMore intense competitionSevere Price pressure
Consolidation continuesStrategic sourcing growing in importanceSpending on services solutions (CRM, BI/KM, SCM, etc.) is growing faster than the professional services market as a whole.Increasing focus on upper mid-market spaceTarget niches and specialize by industry
Top Canadian IT Services FirmsTop Canadian IT Services FirmsC&I%Estimated Canadian Services Revenues* C$M FY2002
1. IBM Global Services Canada (incl. PwC Consulting) 2,885 30%
2. CGI Group3. EDS Canada
8. TELUS
10. Fujitsu Consulting
5. Cap Gemini Ernst & Young
9. CSC Canada
7. Accenture
1,5681,220
850
293
260
380
284
307
4. HP Services Canada (not incl. Intria-HP)
Source: IDC, 2003
6. Cognicase 375
Others: DC/Braxton $218m; BearingPoint $140m (90%+)
34%
19%34%
32%
75%9%5%
76%
24%
* Based on IDC estimates for non-captive Canadian services revenue only, product flow-through removed, based on FYE
IT Consulting & Integration Services On the Road to RecoveryIT Consulting & Integration Services On the Road to Recovery
Single digit vs. double digit growthInhibitors
Capital Investment dependentDeclining business confidence in new projectsSolution Integration scaled back to critical elements
DriversNetwork consulting and integhigh priorityInfrastructure reliable and secure
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
"01/02" "02/03" "03/04" "04/05" "05/06" "06/07"
Worldwide GrowthCanadian Growth
eBusiness and Solutions Services
eBusiness and Solutions Services
The Extended Enterprise - eBusiness
EnterpriseApplicationIntegration
CRMCRM
eCommerceeCommerce
InternalSystems
InternalSystems
SCMSCM CustomerFacing
Systems
CustomerFacing
Systems
IntegratedMulti-
ChannelSales, Service,
Marketing
IntegratedMulti-
ChannelSales, Service,
Marketing
ERPand
LegacySystems
ERPand
LegacySystems
Logistics,Distribution,
InventoryManagement
Logistics,Distribution,
InventoryManagement
Customers
Suppliers Customers
Suppliers
Extranet
Intranet Internet
CTI
Source: IDC Canada, 2002
Internet Commerce CAGR of 51% - Reaching $4T WW by 2005Internet Commerce CAGR of 51% - Reaching $4T WW by 2005
IDC Dec 2002 ICMM
0200400600800
1,0001,2001,4001,6001,8002,000
$B U
S
2003 2004 2005 2006
USAEuropeJapanCanadaLatinAP
Canadian 2003 Solution Services ForecastCanadian 2003 Solution Services Forecast
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
CRM Svcs KM Svcs eCommerceSvcs
SCM Svcs ERM Svcs
Contract BasedSpendingProject BasedSpending
Growth Rates (CAGR 02-07)
Project Contract TotalCRM: 2.6% 22.8% 5.9%BI/KM: 5.9% 19.5% 11.8%eComm: -7.1% 10.8% 2.0%SCM: 1.5% 15.7% 4.0%ERM: 0.5% 9.3% 5.5%
C$M
ERP SolutionsERP Solutions
Most mature solutions market segment
Highly penetrated in large business segment
Significant growth opportunity in the contract-based services category, namely application management/outsourcing
Mid-market segment next battleground
Mid-market characterized by small deal sizes partially offset by higher volume license sales and maintenance/support contracts
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
2002 2003 2004 2005 2006 2007
C$M
Project Contract
CRM SolutionsCRM Solutions
$0
$100
$200
$300
$400
$500
$600
$700
2002 2003 2004 2005 2006 2007
C$M
Project Contract
Integration dominates the services opportunity in CRM
Project-based services still expected to grow throughout the forecast period
Smaller, targeted solutions (SFA, MA, Call Center) provide opportunities in wide range of business size categories
Strong ties to complementary IT solutions, i.e., wireless
SCM SolutionsSCM Solutions
Targeted SCM offerings fairly recent offering (as separated from ERP)
Dominance of process and product industries
Project-based services relatively flatHigher growth, smaller size
(currently) in application management services
Procurement and collaboration commerce components still have room to grow
$0
$100
$200
$300
$400
$500
$600
2002 2003 2004 2005 2006 2007
C$M
Project Contract
KM SolutionsKM Solutions
Strongest performer of major solution offerings
Benefiting from the cost reduction/process improvement business imperative
Growth in associated application areas: content management & document management
Significant consulting requirements due to importance of business process optimization and people (using and capturing organizational knowledge)
$0
$50
$100
$150
$200
$250
$300
$350
2002 2003 2004 2005 2006 2007
C$M
Project Contract
eCommerce SolutionseCommerce Solutions
Market potential damaged by the failure of dot.com businesses
Businesses reassessing and postponing B2C ecommerce projects
Those with operating projects are engaging suppliers for management services (applications (deployment/support and AM) and IT)
Strong ROI and business case requirements
$0
$100
$200
$300
$400
$500
$600
2002 2003 2004 2005 2006 2007
C$M
Project Contract
OutsourcingOutsourcing
The Big Picture in OutsourcingThe Big Picture in Outsourcing
Driving towards BPO Model
Network and Desktop
Systems
Applications
Business
IT outsourcing
Business and Applicationsoutsourcing
Creating the total package
Driving towards Utility Model
The Model of Hosting/Utility Delivery: The xSPThe Model of Hosting/Utility Delivery: The xSP
Processexecution
Processsupport
Content
SystemsInfrastructure
Applications
Developmentenvironment
Network
PEPPEP
SISP
DESP
NSP
ASP
CSP
PSPPSP
Common Elements of an xSP Service Offering
BSPBusiness
Service
ASP
ApplicationService
Bell, Telus, AT&T,
IBM, EDS, CGI, HP, Sun
IBM, xwave, CGI, Futurelink
Nexxia, Lexus Nexus
Delivered Over the Network - One to Many - Service Level Based
Leadership Grid for New BPO PlayersLeadership Grid for New BPO Players
?Ability to Gain Share
1. Deep Technology Skills
2. Financial Strength
3. Cultural Fit
4. Change Management
5. Offshore delivery
Opportunity Alignment1. Deep Process Skills 2. Breadth of BPO value chain coverage3. Lower Operating Costs 4. Responsive and meets SLAs
1544 1717 1891 2083
2077 2222 2422 27131475
17052170
2503
0
1000
2000
3000
4000
5000
6000
7000
8000
2001 2002 2003 2004
Human Resources Logistics Customer Care
19.3%
9.3%
10.5%
CAGR
Selected Canadian Business Outsourcing OpportunitiesSelected Canadian Business Outsourcing Opportunities
C$M Large businesses now seeing BPO as acceptableHuman Resources
Most spending on payroll, benefits and pension admin Companies look at outsourcing HR activities above others
LogisticsLogistics planning and IS management still small but growing
Customer CareCanada is low-cost delivery model for U.S. clients
Source: IDC 2002
Utility Computing: An EvolutionUtility Computing: An Evolution
First Generation
$ Billions
Computing Utility
Outsourcing,Managed Services
TraditionalOutsourcing
Second Generation
“Next” Generation
Expenditures
$0
2001 2008
Application OutsourcingApplication Outsourcing
Application Outsourcing Market ForecastTotal AO Spending Approaches $1.7B by 2007Application Outsourcing Market ForecastTotal AO Spending Approaches $1.7B by 2007
AM forecasted to grow at a CAGR of 7.6%, revenue close to C$1.4 billionASP more aggressive adoption rate needed to grow revenue, CAGR of 26.8%
102 135 173 218 271
9571029
11021175
12771379
334
0
200
400
600
800
1000
1200
1400
1600
2002 2003 2004 2005 2006 2007
$M C
dn
ASP Revenue, C$ AM Revenue, C$
Source: IDC Canada, 2002
Key Apps Outsourcing Trends Key Apps Outsourcing Trends
Buyers:A total of 45% of Canadian businesses surveyed spent less than 10%
on application outsourcingFocusing on core competencies still key reason to outsource appsRetaining control still key concern
Vendors:Competition for sustainable market share accelerates Contributing factors include lower contract values, shorter periods,
greater number of wins needed
r
Key Apps Outsourcing Trends Key Apps Outsourcing Trends Opportunities:
Almost one third of application outsourcing revenue is earned from contracts outside of Canada
Percentage expected to increase as Canadian providers capitalize on US based outsourcing
Trends:Appetite for selective apps outsourcing increases, customers look for
rapid and economical solutions Vertical application outsourcing is an important vendor strategyLow brand recognition cited as an important inhibitor by a number of
outsourcersHigh renewal rates can no longer be taken for granted, need to
accommodate frequent renewals
Nearshore ServicesNearshore Services
Defining the TermsDefining the Terms
•Outsourcing:The transfer of ownership by an organization to a third-party supplier for the management and enhancement of ongoing operations for all or part of its IT infrastructure, IT functions, business processes, or business solutions.
•xshore outsourcing:An IT or business process that is being performed by a service provider that makes use of resources in a foreign country.
– Offshore outsourcing typically refers to service provider operations in countries in Asia, Eastern Europe, and South America.
– Nearshore outsourcing refers to service provider operations in a country in close proximity to the clients country of operations, i.e., Canada and the U.S.
Why Examine the Nearshore Services Market?Why Examine the Nearshore Services Market?
Canada is emerging as an important source of lower cost and much-need services for the U.S. marketNearshore services is an approach proven to be particularly successful in many project-based application endeavorsPrevious IDC research demonstrates a unique Canadian value proposition including such considerations as familiar culture, proximity, time zone similarity and lower services costs Global sourcing is emerging as a key component of IT services delivery and understanding the role of Canada is critical
The Offshore Landscape:Multiple Options for EngagementThe Offshore Landscape:Multiple Options for Engagement
*Note: The Business Entity may be an IT vendor (Microsoft, IBM, Intel)
Business Entity*
Creating/ buying a wholly-owned offshore entity
Creating/ buying a wholly-owned offshore entity
Directly purchasing from or contracting with an
offshore firm
Directly purchasing from or contracting with an
offshore firm
Contracting to a services firm who
subcontracts, owns or partners with an
offshore firm
Contracting to a services firm who
subcontracts, owns or partners with an
offshore firm
Building a joint venture or
partnership with an offshore firm
Building a joint venture or
partnership with an offshore firm
Offshore Firm
Offshore Firm Offshore
FirmOffshore
Firm
Offshore Firm
Offshore Firm
Offshore Firm
Offshore Firm
Services Firm
Services Firm
Offshore Firm
Offshore Firm
Joint ventureJoint
venture
No external services spending occurs
External services spending occurs
Hiringoffshore
employees
Hiringoffshore
employees
Hardware & Software: •HP•Microsoft•Oracle•SAP•PeopleSoft•EMC
Outsourcers• Indian: WiPro, TCS,
Infosys, Patni• Eastern European• US – ACS, SAIC
Call Centre BPOs•Minacs•Convergys•Sitel•RMH Teleservices
Big Four•Braxton•BearingPoint•CGE&Y•Accenture
Government Agencies• Industry Canada• HRDC• Economic Development• International Trade• Business Development
of Canada
System Integrators•IBM GS•EDS•CGI•CSC•Fujitsu•Sierra Systems
Offshore Offshore ServicesServices
LandscapeLandscape
The Evolving Competitive EcosystemThe Evolving Competitive Ecosystem
Standards Organizations• ISO• Software Engineering
Institute• Outsourcing Institute• Everest Group• TPI• Shaw Pittman
Development Houses•Mastech•OAO Technology•Eane
Top PredictionsTop Predictions
Drivers For GrowthDrivers For GrowthDrivers For Growth
The Internet
Business integration
Mobile & wireless
Security
Globalization
Hot Spots
Wireless LANs will take off – and put another hurdle in the way of the rollout of 3G services
Rationale Wireless LANs adoption picking up (mostly 802.11b), Carriers start using visitor-based networks ("hot spots") for high-speed Internet - new services revenues. This will slow investment in 3G
Wireless LAN AdoptionUS Wireless “Hot Spots” WW LAN Equipment
0
5
10
15
20
25
30
35
40
45
2002 2006
Thousands
$0
$500
$1,000
$1,500
$2,000
$2,500
2001 2002 2003 2004
Business Consumer
$Million
Source: IDC 2002
Online Messages
Guarantee: Online messages will go up No guarantee: productivity will go up
Total number of emails sent in 2003 to grow 30% to 40 billion a dayCorporate Instant messaging users will grow 100% to 30+ millionIM will add another channel and complexity requiring attention
Rationale
Messaging GrowthWorldwide eMail Messages Daily
0
10
20
30
40
2002 2003 2004 2005 2006
Person-Person
Spam & Alerts
Billions
>40% of all messages sent are spam or automatic alerts
Source: IDC Report #27975
Maturing IT Market
Impacts vendor strategies
Excess capacity, decreasing margins, lower demandStrategy for growth no longer based on market growthDrive for profit gives no relief
Vendor Strategies in Maturing Market
Volume ProviderEnter/Create new commodity markets
Integrated ProviderExpand breadth of expertise + Vertical Focus
Pure Play ServicesExpand breadth of offerings + Partner
SoftwareStake claims on major markets + Partner
The Canadian Advantage
Gains traction and results in action
Lower cost of operationsWorld leading infrastructureSkilled labour forceAccess and Cultural/Business Alignment to the US
Rationale
Why are we in this business?
Why are we in this business?
Worldwide IT Spending
$ Billions
1960s 1970s 1980s 1990s
$0
$500
$1,000
$1,500
$2,000
$2,500
First 40 Years$6 Trillion
Next 10 Years$13 Trillion
atAnnual Growth
of 4%
2000s
The IT Industry and its Bright Future!The IT Industry and its Bright Future!
Source: IDC 2002
