Frost & Sullivan
2014 ICT Market Outlook
February 2014
2
Agenda
Global Telecom Trends for 2014
Global IT Trends for 2014
Conclusions & Q&A
3
Agenda
Global Telecom Trends for 2014
Global IT Trends for 2014
Conclusions & Q&A
4
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
5
Trend #1: Smart Devices S
mart
phone U
ser
Penetr
ation(%
) Selected Smartphone User Penetration Metrics, 2013E
Smartphone ownership stands at roughly 60% in most Western and Developed
Asian markets, with Japan being roughly 55% in 2013.
Smartphone migration will be the key revenue driver in the Japanese market in
2014.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Source: Frost & Sullivan.
6
Trend #1: Smart Devices (continued) Table
t P
enetr
ation (
%)
Tablet Penetration in Selected Markets, 2013E
Tablet ownership is still under 50% in all major markets and will continue to grow at
the expense of the PC market.
Tablet content ARPUs are four times that of smartphone content ARPUs.
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Source: Frost & Sullivan.
7
Trend #2: Mobile OS Tota
l S
mart
phone U
sers
(m
)
Global Smartphone Users by OS, 2007-2017E
Android will continue to be the most popular global mobile OS over the next five
years although Apple will also grow steadily.
Windows will not emerge as a major platform until it becomes more open.
CAGR
2013-2017
Others
+7.5%
Windows
+40.1%
iOS
+13.2%
Android
+13.5%
0
500
1000
1500
2000
2500
3000
3500
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Android iOS Microsoft Others Source: Frost & Sullivan.
8
Trend #2: Mobile OS (continued)
iOS Users by Version, November 2013
Despite the massive growth in Android, the OS remains heavily fragmented
compared to iOS due to the large number of devices.
iOS still accounts for 66% of global mobile application revenue.
iOS 7, 80%
iOS 6, 19%
Previous Versions, 1%
2.2, 9%
2.3, 10%
3.2, 13%
4, 16% 4.1, 17%
4.2, 17%
4.3, 18%
Android Users by Version, November 2013
Source: Frost & Sullivan.
9
Trend #2: Mobile OS (continued)
Web-based OS Update, February 2014
Firefox OS has the most industry support among new web-based operating
systems and despite setbacks Samsung is releasing smart devices using Tizen.
Source: Frost & Sullivan.
OS Vendor Support Carrier Support
Firefox Mobile
Alcatel, LG, ZTE and
Foxconn. Panasonic also
announced plans to
introduce Firefox OS-
based 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.
Tizen
Samsung recently
announced that its Galaxy
Gear 2 Smart Watch will
use Tizen instead of
Android.
Some major global carriers have recently exited the Tizen Association such as
Telefonica and France Telecom, while NTT DoCoMo has indefinitely delayed
releasing a smartphone using the OS.
Ubuntu
BQ and Meizu have both
announced Ubuntu
smartphones for 2014.
Vodafone, Three, China Unicom, EE, Deutsche Telekom, Korea Telecom,
Verizon, and Telstra are among the carriers in the Ubuntu advisory group.
Sailfish OS
Smartphones can be
ordered directly from Jolla
online in the EU with India
to follow in 2014.
Sailfish currently has no direct carrier support, employing a B2C strategy while
it will start encouraging Android users to migrate later in 2014.
10
Trend #3 HTML5
Native vs. HTML5 Application Comparison HTML5 Hardware Readiness
HTML5 apps hold great promise in terms of supporting cross-platform support and
lowering costs associated with enterprise application use and development.
Source: NTT.
Source: iCapps. Source: visual.ly
11
Trend #4: 5G Infrastructure
While LTE networks are being deployed in most countries, most subscribers are
found in Japan, South Korea and the USA.
Source: Ericsson.
Global Mobile Subscribers by Technology, 2009-2018
12
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.
Source: Tektelic.
Vendor 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.
Major 5G Initiatives Mobile Network Evolution
13
Trend #5 IoT/Wearables
Physical Storage Capacity in Hardware
Extreme innovations in the wearable technology space will expedite the need for
cloud storage.
Source: Frost & Sullivan. 0 100 200 300 400 500 600
Samsung Galaxy Gear
Google Glass
iPhone 5S
iPad Air
Lenovo Thinkpad X240
HP Compaq 6305 Pro
Electronic Tattoo
14
Trend #6: Big Data
F&S APAC Invoiced Sales, 2008-2012 CAGR
Saturation of fixed broadband, smartphones and tablets coupled with IoT devices
will cause an exponential growth in Internet traffic.
Giving enterprises a huge amount of data which can be utilized.
Source: NTT.
15
Trend #7: Analytics
Verizon Wireless is using big data and analytics to offer consumer data to a variety
of B2C businesses.
Source: Verizon Wireless.
16
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.
Source: Facebook.
Amazon “Anticipatory Shipping” Patent Facebook Predictive Analysis Example
Source: Amazon.
17
Trend #8 OTT Dominance
Japanese users are the least likely in the world to share most personal data online.
18
Trend #8 OTT Dominance (continued) Tota
l M
inute
s o
f U
se
NTT DoCoMo Blended MOU, 6/09-12/13
NTT DoCoMo’s MOU has contracted by 40% in the last two years.
Mobile MOU could decline to extremely low levels in the next five years.
LINE
Introduced
Source: NTT DoCoMo.
100
105
110
115
120
125
130
135
140
19
Trend #8: OTT Dominance (continued) Tota
l M
obile
AR
PU
(JP
Y)
NTT DoCoMo Blended ARPU, 6/09-12/13
In Japan the rise of LINE has caused a massive drop in NTT DoCoMo’s voice
ARPU as users opt for free calling.
NTT DoCoMo now reports a “Smart ARPU” to counterbalance voice declines.
CAGR Since
LINE Introduction LINE introduced
Smart ARPU
+6.1%
Data ARPU
0.0%
Voice ARPU
-4.7%
Source: Frost & Sullivan.
0
1,000
2,000
3,000
4,000
5,000
6,000
Voice ARPU (¥) Data ARPU (¥) Smart ARPU (¥)
20
Trend #9: New Investment Strategy N
TT
DoC
oM
o S
trate
gic
Roadm
ap
NTT DoCoMo Blended MOU, 6/09-9/13
In response NTT DoCoMo has recently made many non-traditional investments to
counterbalance falling voice revenue.
Source: NTT DoCoMo.
21
Trend #10: Mobile Gaming
Mobile Game Spending Rates, 2013
Applications both monetize stronger and with greater frequency in Japan more than
anywhere else, making the market very attractive for developers.
Mobile Game ARPUs, 2013
Source: Industry Interviews.
0
5
10
15
20
25
30
Japan South Korea
UK USA China
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
Japan South Korea
USA UK China
Mobile
Ga
me S
pendin
g R
ate
(%)
Mobile
Gam
e A
RP
U(U
S$)
22
Global Smartphone Users by OS, 2007-2017E
Japan ranks third globally in app usage and first in paid app usage.
Source: Google.
Average Mobile App Usage by Country, 2013
Tota
l M
obile
Applic
atio
ns p
er
Phone
Trend #10: Mobile Gaming (continued)
23
Japan Top Grossing Mobile Apps, November 2013
Japan is dominated by Puzzle & Dragons and LINE games, making it difficult for
other app companies to gain traction in the market.
Mark
et R
evenue S
hare
(%
)
Source: Appannie, Industry Interviews.
0% 10% 20% 30% 40% 50% 60%
Puzzle & Dragons
Quiz Wiz
LINE Pokopang
Colopl Baseball
Chain Chronicle
LINE
LINE Wind Runner
Keri Hime Quest
Clash of Clans
Love Live
Next 990 Top Grossing Apps
Trend #10: Mobile Gaming (continued)
24
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.
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.
Mobile App CPI in Selected Markets, 2013E Japan Mobile Game Advertisements Subway Billboard
Television Celebrity
Japan CPI Ranges from US$15-US$20!
Trend #10: Mobile Gaming (continued)
25
Agenda
Global Telecom Trends for 2014
Global IT Trends for 2014
Conclusions & Q&A
26
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.
Source: Frost & Sullivan.
Global IT Spending 2013 - US$4 Trillion
Datacenters 4%
Software 8%
Hardware 18%
IT Services 25%
Connectivity 45%
IT Spending Technology Drivers
SegmentDatacenters Iaas, Intelligent DCs
Software Saas, Paas
Hardware BYOD, Bundling
IT Services Outsourcing, Analytics
Connectivity NaaS, SDN
Inte
rnet o
f Thin
gs
Big
Data
Technology Drivers
27
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
28
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.
29
Trend #1 BYOD (continued)
Global Android Market Share by Device, July 2013
Fragmentation and security are the major inhibitors to the BYOD market. A 2013
survey found more than 12,000 Android devices in existence.
Source: OpenSignal.
30
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.
4%
4%
5%
3%
5%
3%
4%
8%
6%
7%
23%
19%
20%
17%
20%
14%
23%
23%
25%
19%
39%
41%
37%
42%
29%
27%
32%
34%
37%
33%
27%
28%
29%
28%
35%
32%
30%
27%
22%
32%
6%
9%
10%
10%
12%
24%
11%
9%
9%
9%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Dearth of IT manpower
Lack of visibility into datacenter assets & performance
Managing the virtual infrastructure
Implementing Virtualization
Network Latency
Securing the applications & data
Running out of storage
Running out of rackspace
Poor Cooling
High Energy Consumption
Least Critical Less Critical Neutral Critical Most Critical
Survey done with IT Managers and CIOs in Australia, Hong Kong, China, India, Singapore and Malaysia in Q2 2013.
31
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.
32
Trend #3 Converged Infrastructure
Converged Infrastructure Network Elements
Converged Infrastructure will become more popular as large IT vendors start to
support CI, despite interests in legacy products.
Converged Infrastructure Spending
Source: HP.
33
Trend #4 Software Defined Networking
Asynchronous Data Traffic Example SDN Network Architecture
Software Defined Networking will gain momentum in 2014 as big data creates a
need for centralized and hence more cost-effective traffic shaping.
Source: Dell.
34
Trend #5 Cloud Evolution
F&S Cloud Computing Adoption Survey
Hybrid clouds will come to the forefront of the CC market in 2014 but private clouds
will still be the most commonly deployed solution.
Source: Frost & Sullivan.
41.6%
31.6%
12.6%
14.2%
Private Cloud Services Usage
Currently Uses
Plan to use within 2 years
Plan to use but not within 2 years
Does not plan to use it
32.3%
26.8%
12.3%
28.7%
Public Cloud Services Usage
Currently Uses
Plan to use within two years
Plan to use but not within 2 years
Does not plan to use
22.3%
40.0%
12.6%
25.2%
Hybrid Cloud Services Usage
Currently Uses
Plan to use within 2 years
Plan to use but not within 2 years
Does not plan to use it
• 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.
35
Trend #5 Cloud Evolution (continued)
Public Cloud vs. Private Cloud Adoption
Security, SLA requirements and legacy infrastructure will spur the private cloud, but
cost and utility pricing will also fuel hybrid cloud growth.
Source: Dell. Source: Frost & Sullivan.
Hybrid Cloud Architecture
36
Trend #6 The Wireless Enterprise
802.11x Standard Evolution “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.
Source: NTT.
Source: Cisco. Source: Wireless Gigabit Alliance.
37
Trend #7: 3D Printing
3D Printing Market Readiness Matrix 3D Printed Items
3D will radically transform a variety of industries as hardware becomes cheaper
this year, and will change the IT structure of the modern enterprise.
Handgun
Prosthetic
Ear
Pizza
38
APAC markets are the source of most of the world’s DDOS attacks. Attack
volumes are increasing significantly in size.
Source: Akamai.
Indonesia, 38%
China, 33%
United States, 6.90%
Taiwan, 2.50%
Turkey, 2.40%
India, 2.00%
Russia, 1.70%
Brazil, 1.40%
Romania, 1.00%
South Korea, 0.90%
Other, 11%
Global Internet Attack Traffic
by Country of Origin, 2Q 2013
Trend #8: Security
Global Internet Attack Traffic by
Peak Attack Size, 2010-2013
39
Trend #9: Smart Contact Centers
Japan Contact Center Market by
Business Model, 2013
Contact Center Applications Market: Adoption
Trends by Technology, Japan, 2012–2019
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.
78.0%
0.1%
0.2%
21.7%
21.9%
In-house Captive
Offshore Outsourced Domestic Outsourced
ACD
CM
CTI
IVR
Multimedia
Outbound
Speech Apps
WFM
ACD CM CTI IVR Multimedia Outbound Speech Apps
WFM
Contribution 2012 (%) 21.1 17.1 30.9 9.2 2.3 8.4 1.7 9.3
Contribution 2019 (%) 15.1 20.6 24.2 10.1 3.0 9.6 2.2 15.0
% CAGR (2012-2019) 1.7 10.9 3.2 9.2 12.9 10.0 12.8 16.4
78.0%
0.1%
0.2%
21.7% 21.9%
In-house Captive
Offshore Outsourced Domestic Outsourced
Outsourced
40
Trend #10: The Changing Role of the IT Department
Traditional Approach to IT
Cloud services are changing IT Departments to become proactive instead of
reactive by offering scalable, real-time and cost-effective services.
Source: Frost & Sullivan.
Problem
Build own
solution
Purchase
solution
Implementation
New Approach to IT
PaaS IaaS SaaS
Implementation
Problem
41
Trend #10: The Changing Role of the IT Department
(continued)
Cloud Confidence Percentages
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.
Source: Enterprise CIO Forum.
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
The IT Department will be seen as a
business innovators instead of
business enablers
42
Agenda
Global Telecom Trends for 2014
Global IT Trends for 2014
Conclusions & Q&A
43
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.
Thank you!
January 2014