Trends and Opportunities in the global Software and IT Services industry

Eugen Schwab-Chesaru
Vice President, Research – Head of Central & Eastern Europe Digital Business Services, teknowlogy Group
SECR 2019

- Major Business and IT Challenges
- IT Budgets Evolution
- Top10 IT topics companies consider the most important to invest in during the next three years
- Importance of the different types of IT services over the next two years
- Companies’ approach to digital transformation
- Goals of Digital Transformation projects
- Relevance of digital technologies
- Usage areas for Cloud Computing
- Use of cloud deployment models in IT departments
- Business usage areas for cloud computing
- Cyber Security Challenges
- Drivers for implementing security measures
- Status quo of cyber security measures
- Investments in different cyber security areas
- IT Decision Makers – changes and evolution of the responsibilities
- Rates for IT Services in the main Western European markets
- PAC Recommendations for IT Suppliers and for IT Users
- The Russian Software and IT Services market: Maturity Curve – positioning of the main 15-20 IT Hot topics in Russia, depending on their maturity on the local market, incl. comments & remarks.

Transcript

1. TRENDS AND OPPORTUNITIES IN THE GLOBAL SOFTWARE AND IT SERVICES INDUSTRY St. Petersburg | November 2019
2. About the teknowlogy Group Bucharest – Darmstadt – Hamburg – London – Munich – Paris Network of 150 experts The leading independent European research and consulting firm in the field of digital transformation, software and IT services.
3. Our Group model Software vendors & IT services companies IT users Drive your IT business Secure your environment Transform your business Select your solutions & partners
4. Agenda 1 Main Business and IT Challenges 2 Major IT trends – Digital, Cloud, Security 3 Rates for IT Services 4 PAC Recommendations 5 The Russian Software and IT Services market
5. Main Business and IT Challenges (1) Major challenge How would you rate the following economic challenges for your company? Minor challenge Current economic situation in the home country 33% 49% Reaching new customer groups and revenue areas 40% 44% Cost reduction and efficiency pressure 46% 38% Achieving greater control and transparency of processes 34% 46% Increased competition 38% 47% Impact of exchange rates 26% 40% Agility and innovative power to address the rapidly changing market environment 38% 48% © PAC - a teknowlogy Group Company, 2019 International economic situation (Brexit, protectionism, etc.) 37% 44%
6. Main Business and IT Challenges (2) Major challenge How would you rate the following IT challenges for your company? Minor challenge The changing needs of customers in a digital world 39% 44% Active contribution of IT to optimizing business processes 35% 46% Shortage of skilled IT professionals 42% 39% Smooth and secure IT operations (availability, security, compliance) 37% 44% Optimization of IT sourcing 31% 53% Pressure on IT operations to reduce costs and improve efficiency 41% 40% Optimization of end-user experience 31% 51% © PAC - a teknowlogy Group Company, 2019 IT-OT convergence / collaboration between business lines and IT 30% 49% Active contribution of IT to create new business models 35% 45%
7. IT Budgets Evolution 0% 3% Will strongly decrease (>10%) Will considerably decrease (7–10%) Will slightly decrease (3–6%) 7% Will strongly increase (>10%) Will considerably increase (7–10%) Will slightly increase (3–6%) 37% 17% 61% INCREASE Will strongly increase (>10%) Will considerably increase (7-10%) Will slightly increase (3–6%) Will strongly decrease (>10%) Will considerably decrease (7–10%) Will slightly decrease (3–6%) How will your local IT budget change in 2020 compared to 2019? © PAC - a teknowlogy Group Company, 2019 Local IT budget Local department- specific IT budget 9% 12% DECREASE Will remain about the same: 26% Will remain about the same: 24% 0% 2% 4% DECREASE 2% 45% 16% 72% INCREASE 11%
8. IT topics - the most important to invest in Does your company intend to spend more, about the same, less or nothing on the following IT topics over the next two years? Cyber security Analytics and data management (incl. big data and BI) © PAC - a teknowlogy Group Company, 2019 47% 38% 10% 34% 49% 11% Cloud computing (IaaS/PaaS/SaaS) 39% 41% 14% Artificial intelligence (AI)/ machine learning 32% 39% 13% Digital workspace/UCC (incl. social collaboration & mobility) 31% 48% 16% Internet of Things (IoT)/ machine to machine (M2M) 30% 43% 15% 37% 45% 11% Digital transformation with respect to customer experience Robotic process automation (RPA) 25% 41% 16% More About the same Less Application modernization (upgrades, migration, custom development) 32% 48% 16%
9. Major trends in IT services Gain in importance Do you expect the following services to gain, maintain or lose in importance for your company over the next two years? Maintain importance © PAC - a teknowlogy Group Company, 2019 Lose in importance Infrastructure operation 38% 54% 8% Software as a service 43% 48% 9% Testing 31% 57% 12% Business process or services outsourcing (BPO) 38% 54% 9% 37% 55% 8% Application management Business application-related services 38% 54% 8% 40% 51% 9% Infrastructure-related project services (migration, optimization)
10. Companies’ approach to digital transformation 39% 38% 14% 8% We execute a company-wide digital/IoT strategy for the entire enterprise We execute individual digital/IoT projects in selected business areas but we don't have a company-wide strategy We're still at the beginning – at the planning & discussion stage We haven't discussed this topic yet Which statement best describes your company's approach towards digital transformation/IoT? Breakdown of responses from companies worldwide, expressed in % (n = 1575) (single selection) 66% 63% 58% A dedicated budget for digital transformation initiatives has been allocated, in addition to the standard IT budget Dedicated human resources and/or a digital transformation leader have been assigned to digital transformation initiatives A dedicated organization or governance structure has been implemented Which statement applies to your company? Breakdown of responses from companies worldwide, expressed in % (n = 1575) (multiple selection)
11. Goals of Digital Transformation projects Major goal In general, which of the following aspects is a major goal, a minor goal or not a goal at all in your current digital transformation projects? Minor goal © PAC - a teknowlogy Group Company, 2019 Optimizing internal processes (operational excellence) 59% 35% Establishing new value networks and digital ecosystems 46% 41% Improving the digital customer experience 58% 33% Establishing an agile and inno- vative organization and culture 51% 40% Creating new digital business models and positioning 57% 33% (“Not a goal at all” not shown) Enhancing existing products And services 53% 40%
12. Relevance of digital technologies Low-code/no-code platforms 5% Tracking and traceability 48% IoT-enabled data gathering & transmission 30% IoT platforms 29% IoT-enabled payment 16% In which of the following solutions and technologies does your company plan investments within the next 2 years? Blockchain 23% Artificial intelligence/machine learning 48% Robotic process automation (RPA) 24% Augmented/virtual reality 33% 3-D printing 20% © PAC - a teknowlogy Group Company, 2019 Robotics (man-machine collaboration) 35%
13. Usage areas for Cloud Computing In which areas is the usage of cloud computing already realized, planned within the next two years, or at least conceivable? © PAC - a teknowlogy Group Company, 2019 Already realized Planned Neither in use nor planned, but conceivable SaaS for specific solutions (e.g. CRM, SRM, HCM) 45% 29% 21% Server capacity 51% 25% 22% Web hosting 60% 22% 11% Storage and/or backup 50% 28% 13% SaaS as a strategic software platform, such as ERP 31% 27% 25% Platform for application develop- ment, testing, and operations (PaaS) 41% 33% 22% IaaS-based hosting of traditional business applications 41% 30% 21% Data-centric services (e.g. for Machine learning, AI, IoT) 34% 34% 22%
14. Cloud deployment models in IT departments For which of the following topics is the cloud already in use, planned for the next two years, or at least conceivable? IT/Cyber security Internet of Things (IoT)/ machine to machine (M2M) © PAC - a teknowlogy Group Company, 2019 Already in use Planned for the next two years Neither in use nor planned, but conceivable 55% 23% 14% 49% 27% 15% 34% 40% 18% Industry-specific applications 55% 22% 16% Setup of a new (digital) business area/unit 35% 37% 20% 51% 28% 13% Office and digital workspace (incl. collaboration & ECM) Artificial intelligence (AI)/ Machine learning 25% 38% 24%
15. Business usage areas for cloud computing In which of the following business areas is the cloud already in use, planned for the next two years, or at least conceivable? © PAC - a teknowlogy Group Company, 2019 Already in use Planned for the next two years Neither in use nor planned, but conceivable 45% 33% 17% Human resource management (HRM) Customer experience management and CRM 44% 35% 15% 44% 30% 17% Supplier relationship management (SRM) Finance and accounting management (F&A) 48% 24% 20% Supply chain management (SCM) 39% 38% 18%
16. Cyber Security Challenges We are experiencing an increase in external cyber attacks and new threats. Generally, our employees do not pay much attention to cyber security and do not behave in a responsible way. The cloud is making it harder to control data and applications. New and/or advanced regulations are forcing us to be compliant and to give cyber security higher priority We are not sure of the perimeter we have to protect (visibility). The IoT (Internet of Things) makes it harder to control operational technologies (OT) such as ICS and SCADA. Strongly agree Agree 22% 38% 21% Neither agree nor disagree 14% 28% 21% 24% 34% 25% 27% 37% 24% 12% 27% 20% We lack cyber security skills. 12% 34% 24% 22% 29% 29% To what extent do you agree with the following statements regarding cyber security in your company? © PAC - a teknowlogy Group Company, 2019
17. Drivers for implementing security measures Major reason Which of the following aspects are a major reason, a minor reason or no reason at all to initiate security measures in your organization? Minor reason © PAC - a teknowlogy Group Company, 2019 The deployment of cloud, IoT, Industry 4.0, and other digital solutions 41% 36% A deadline for becoming compliant with new regulatory obligations 43% 38% A recent audit and internal risk analysis 39% 42% We have been a victim of a cyber attack 35% 31% A supplier and/or partner from our ecosystem has been a victim of a cyber attack 38% 38% Pressure from our customers 35% 42%
18. Status quo of cyber security measures Dedicated cyber security team 61% Top management involvement in security matters 69% Staff awareness training on cyber security 80% Incident response program for IT security 64% Cyber security compliance program 67% Which cyber security measures and activities have already been implemented in your company and if so, would you recommend them to other companies based on your experience? Dedicated cyber security team 60% Top management involvement in security matters 61% Staff awareness training on cyber security 63% Incident response program for IT security 58% Cyber security compliance program 53% Measures for inter-departmental collaboration 73% Cross-company cooperation 63% Initiatives to improve technical expertise on cyber security 68% Initiatives to improve business expertise of cyber security personnel 65% Company-wide risk management program 36% Measures for inter-departmental collaboration 41% Cross-company cooperation 38% Initiatives to improve technical expertise on cyber security 37% Initiatives to improve business expertise of cyber security personnel 23% 70% Company-wide risk management program Already implemented Recommended to other companies © PAC - a teknowlogy Group Company, 2019
19. Investments in different cyber security areas 28% 57% 42% 47% 35% 54% In which of the following cyber security areas are you planning to invest heavily, make some investments or not invest at all in the next 12 months? Heavy investments Some investments 34% 59% Governance, risk and compliance (SIEM, SOC, GDPR and NIS, AML, fraud detection, risk management, etc.) Application and data security (encryption, password, DLP, DevSecOps, white/blacklisting, CASB, etc.) Identity and access management solutions (IDM, SSO, ID federation, biometrics, access, etc.) Infrastructure-based solutions (network/endpoint protection, EDR, EPP, mobility, anti-virus, firewalls, UTM, IPS, gateways, etc.) © PAC - a teknowlogy Group Company, 2019
20. IT Decision Makers – changes and evolution of the responsibilities 33% 67% Line of business manager IT department manager 36% 34% 33% 28% 26% 23% 23% Production, operations, project planning Sales & customer relationship management Customer service & field service Human resources Research and development Marketing, press & public relations Supply chain management & logistics 32% 45% 23% Management board Head of department Team lead
21. Rates for IT Services – Europe Average by Major Country 411 547 428 589 904 553 793 1245 888 1031 1424 1096 1318 1805 1480 0 500 1000 1500 2000 FR DE UK FR DE UK FR DE UK FR DE UK FR DE UK Junior Consultant Consultant Senior Consultant Manager Senior Manager EUR / day
22. PAC Recommendations (1) IT Suppliers Cloud Service providers should strive for coherent concepts for hybrid and multi- cloud environments that enable customers to create a vendor and business agnostic IT environment for digital business models. Digital Providers should align their own capabilities and capacities to digital topics and also build up complementary ecosystems in order to expand the resource pool with trained specialists. Efficiency Suppliers should align their offerings with customers’ efficiency needs such as automation, as well as cost saving services, e.g. outsourcing. In times of agile software development and DevOps, providers need to find answers to how to combine in agile projects an onsite presence on the one hand and nearshore/offshore on the other. Security Companies want to open their IT systems in the course of the platform economy and digitalization but are often unable to guarantee security due to a lack of skills. Security providers can help with innovative services here.
23. PAC Recommendations (2) IT Users Analyze Companies should carefully analyze new technology in order to assess its potential and benefits. AI, for example, is an interesting and much-discussed topic that can have an effect in almost all segments but is not yet mature enough in many areas. Partners Co-development and co-business models with partners and providers should be extended to the development of all new products/services. Digitalization can only be achieved with a range of different skills, which cannot be found within a single company. IT departments IT users should make sure to not bypass the IT department if they want to boost digital transformation. Bypassing IT may give the impression of being quicker, but problems (technical, financial) will undoubtedly arise when the solution is rolled out to the whole company. Security IT users need security expertise, processes, and strategies, not to mention awareness of potential threats. Security is a long-term issue, so companies should not expect quick solutions.
24. The Russian Software and IT Services market Maturity Curve Emerging new topic still small volume buoyant growth Growing young topic already sizeable volume still substantial growth Mature mature topic substantial volume low growth Declining established topic substantial volume negative growth Artificial Intelligence (AI) Big Data Internet of Things (IoT) Real time Analytics Robotic Process Automation (RPA) Cloud computing Core banking modernization CRM Cyber Security eGovernment Enterprise Applications Infrastructure consolidation Omni-channel Solutions SaaS Custom Software Development Finance & Accounting SW (on premise) Legacy Modernization Operating Systems SAP C&SI Testing Hardware installation and support Office automation (on- premise)
25. THANK YOU for your attention teknowlogy Group 1 Boulevard des Bouvets, 92 000 Nanterre, France Phone: +33 (0)1 53 05 05 53 www.teknowlogy.com www.sitsi.com PAC Eastern Europe 12 Negustori street, Bucharest, Romania Phone: +40 (0)21 410 75 80 Mobile: +40 (0)722 630 248 VP – CEE VP – Research Mobile: +40 722 630 248 eschwab@teknowlogy.com Eugen Schwab-Chesaru