2017 ICT Enterprise Insights in Merchant Payments

Transcription

1 2017 ICT Enterprise Insights in Merchant Payments Key findings from the 2016/17 survey results Publication Date: 02 Nov 2016 Product code: IT Kieran Hines

2 2017 ICT Enterprise Insights in Merchant Payments Summary Catalyst The rapidly changing business landscape is increasingly impacting ICT strategy and investment. Industry ICT suppliers must understand enterprises' needs at a country and industry level to ensure that their product, marketing, and sales strategies are aligned to customer requirements. To provide this insight, Ovum's ICT Enterprise Insights program, based on interviews with around 7,000 senior IT executives, answers the key questions. This brief focuses on the top findings from this program for payment strategies among merchants. Ovum view Payments technology and services will be a core investment area for merchants in all verticals in The need to deliver on rapidly growing customer expectations around the purchasing journey, and particularly the role that the online and mobile channels play within this, will be the focus point for enhancements both to the payment experience and to wider marketing and CRM strategies. Investment in new payment services will be an important focus area as merchants look for solutions which align with the specific needs of the products or services they sell and the purchasing journey they want to provide. The rapid growth in digital sales is also affecting wider store and physical fulfilment strategies. The need to redefine the in-store experience will see continued investment in physical payment acceptance infrastructure to enable the reimagining of the in-store environment, deliver a more customized end-user experience, and provide a true cross-channel customer journey. Key messages Merchants plan to invest heavily in new payment solutions and related services in 2017, upgrading existing solutions and adding new capabilities in order to drive sales conversions, reach new markets, and enhance the wider customer transaction experience. There will be strong growth in spending on projects to increase sales via online and mobile, with 66% of merchants increasing their investment in these areas, and 30% increasing spend by more than 6%. In line with the investment focus around driving digital sales and the acceptance of new payment tools, there is a diversity in the partners that merchants would prefer to partner with, opening the door for online payment gateways, online payment providers, and mass-market technology companies to deliver services. Recommendations Recommendations for enterprises Merchants of all types and sizes will be focusing heavily on the role that payment services can play in driving new sales and enhancing the customer experience in For some merchants, payment investments will focus on expanding acceptance capabilities, both to increase incremental sales and Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 2

3 2017 ICT Enterprise Insights in Merchant Payments to reach new customer segments or international markets. At the same time, others will be focusing on the role that payment innovations can play in reinventing the purchasing journey, with advances in personalization and customization a priority alongside the drive to make payment authorization as invisible as possible. Remaining on top of the latest payment innovations, and the role that this can play in enhancing the customer experience, is essential for merchants of all sizes and in all industries. Ensure you have a clear payments strategy, but be flexible to adopting payments innovation. The pace of product innovation and competitive change on the supply side of the payment industry has never been more intense, and it is essential that merchants have a clear view on the role payment services will have in their future customer proposition, as well as the flexibility to respond to the opportunities arising from the launch of new products and services. Use new payment services to support the full cross-channel customer journey. As customers continue to default to online and mobile for core elements (in some cases, all elements) of the purchasing journey, having a credible multichannel proposition will increasingly become essential. The role of the in-store channel, and the integration of mobile into the physical store experience, will be key here. Consequently, identifying and working with providers that are able to deliver a seamless cross-channel payment experience will be increasingly critical. Look beyond the payment itself. While payments have traditionally been seen as a standalone area by many merchants, new payment services can play a critical role in the reimagining of the end-to-end customer journey. At the same time, the role that transaction data can play in loyalty and contextual marketing services should not be understated (indeed it has huge value in areas such as inventory management and wider ERP too) and demonstrates that merchants should formulate their payment strategies with this broader view in mind. Recommendations for vendors While cost reduction is an important benefit of payment investment, the ultimate aim is still to drive sales. However, the growing complexity around managing payments remains a challenge. As investment flows into projects to grow online and mobile sales, there is an opportunity for payment providers to position themselves principally as supporters of commerce growth. Strengthening multichannel service offerings, particularly around cross-border and loyalty/crm, will be critical. Focus on supporting sales growth. The ability to support multichannel distribution is already becoming table stakes, yet relatively few providers today have a truly seamless offering across digital and physical payment acceptance. Many mid- to large-sized merchants have multiple acquirer and gateway relationships, creating clear opportunities for consolidation. Opening the door to cross-border commerce is an important area on which to focus, with regulatory, payment tool, and local-market language support all important. Flexibility and contextual relevance will be key. As merchants increasingly focus on delivering a customer experience tailored to both the dynamics of their business and the requirements of an individual customer, the ability to provide payment solutions flexible enough to meet an array of different customer experiences will be key. Supporting pre- and post-sales customer engagement activities will also become increasingly important. As payment services themselves become more and more commoditized, focusing on adding Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 3

4 2017 ICT Enterprise Insights in Merchant Payments value through slick and low-friction processes, supporting loyalty and customer analytics, and enabling new transaction flows will increasingly be a differentiator. Do not forget fraud and security. Transaction-level security is critical for all merchants, and the threat of high-profile data breaches remains top of mind for many large merchants in particular. Technologies such as tokenization will have an important role to play, while decisioning services and broader cyber-security support remain core competencies. POS hardware, CRM/marketing, and payment acceptance will drive IT investment in 2017 Payment solutions will be an important focus area for merchants looking to improve the customer experience Figure 1: The top three IT investment priorities for merchants over the next 18 months Source: Ovum ICT Enterprise Insights Merchants plan to invest heavily in new payment solutions and related services in 2017, upgrading solutions and adding new capabilities in order to drive sales conversions, reach new markets, and enhance the wider customer transaction experience. Across all retail and service businesses, accepting new payment tools will be the single largest top-three IT priority, with 38% of merchants investing in this area. This is a particularly strong focus area in the hotel (49%) and food & grocery sectors (48%), in both cases highlighting the role that payments has in the evolution of both the digital and in-person customer experiences in each industry. At regional level, the focus on investing in new payment acceptance is greatest across Asia, in which 42% of merchants view this as a top-three IT project. This is led by services businesses, with the opportunities to drive incremental sales through the use of mobile payment services a particular focus. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 4

5 2017 ICT Enterprise Insights in Merchant Payments Fraud solutions remain a core focus area, and are the single most important IT project for 13% of all merchants in Unsurprisingly, given the cost of chargebacks and persistent fraud challenges in industries such as travel, this is a bigger focus in businesses trading predominantly via the digital channels, for which decisioning solutions remain an ongoing investment area. Upgrading or replacing point-of-sale (POS) hardware is also a key investment area, with 27% of merchants (rising to 29% among retailers) focusing on this as a leading project for Enhancing the physical payment experience will play an increasingly important role for many merchants, particularly where it enables a significant improvement in the wider customer purchasing journey. For larger businesses, the ability to move away from traditional POS structures is particularly attractive, enabling store sales teams to bring payment-taking capabilities and potentially additional inventory/options or ordering capabilities direct to the customer. For many smaller merchants, the focus will be on enabling and expanding digital payment acceptance, with the range of accounting and business management applications emerging in the mpos segment in particular being a driver of investment. In addition, upgrades to, or the introduction of new, POS services can also bring immediate benefits in the form of better access to inventory management and business performance data. Reflecting the ongoing migration to EMV-accepting infrastructure, POS hardware investments are a particular priority in the US. Across all sectors, 33% cite this as a top-three IT priority for 2017 rising to 36% among service businesses and reflecting a slightly lower focus placed on the impact of the liability switchover among firms in the hotel, leisure, restaurant, and transport verticals. The growing emphasis on driving digital customer engagement, and particularly on gaining insight into a customer s activity across both the physical and digital channels, will see investment also focus on marketing and CRM activities. At a global level, slightly under 38% of merchants will be focusing on these areas as a leading IT project. Closely linked to this is the emphasis placed on customer analytics and loyalty/rewards, which is a focus area for 33% of merchants. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 5

6 2017 ICT Enterprise Insights in Merchant Payments Driving digital channel sales and new payment acceptance sales will see the greatest budget growth in 2017 Figure 2: ICT budget growth by area for merchants in 2017 Source: Ovum ICT Enterprise Insights Investing in driving sales via digital channels is the biggest single area of budget growth for merchants in The growing importance of digital channels across large parts of the customer journey, particularly in completing purchases, will also see merchants expand their investments in projects aimed at growing sales via online and mobile. Budget growth on digital channel projects will be strong in 2017, with 66% of merchants increasing their investment in these areas compared to 2016 (which also saw strong growth on the prior year) and 30% increasing spend by more than 6%. Merchants in South East Asia (86%) and the Middle East and North Africa (73%) will see the highest growth yearon-year, but this is an area of spending increase that is consistently high across all regions. Closely linked here is growth in spending on both the acceptance of new payment tools and the development or enhancement of mobile app estates. Across all markets and segments, 65% of merchants will increase their spending on new payment acceptance in Restaurant and bars (71%) are the segment most focused here, reflecting the role that digital wallets and the use of mobile payment services will have on changing the user experience in this sector. At the same time, the development or enhancement of mobile apps will be an important growth area for just under 65% of merchants, particularly those in South East Asia (84%) and Latin America (81%). Improving the payment process, particularly in digital channels, remains a key focus area for many merchants. Overly complex requirements might lead to basket abandonment, which is extremely costly to those merchants affected. In addition to investing in online and mobile platforms, merchants will also pay close attention to the mechanics of the payment process itself. The gateways and acquirers that focus on streamlining these areas, while also minimizing fraud risk, will be the ones that benefit in the future. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 6

7 2017 ICT Enterprise Insights in Merchant Payments Underpinning all of this are clear expectations over the way in which the distribution of revenues across channels will continue to change. Merchants surveyed as part of Ovum s ICT Enterprise Insights study believe that in-store or physical distribution will account for a 7% smaller share of total sales in 2018 than in 2016, with growth in online and mobile (browser and app) accounting for the change. Sectors which have traditionally relied on in-store distribution, such as department stores (fall of 12% from in-store) and food & grocery (11%) expect to see a larger change over the same period. Strategies to drive greater personalization of the customer experience and to move towards a model of building long-term customer engagement with a brand (rather than campaigns based around more traditional offers and discounts) will see strong growth both in marketing and CRM projects and in projects related to customer data analytics. At a global level, just under 61% of merchants are increasing their investment in this area in 2017, with 28% growing spending by 6% or more. At the same time, 24% of merchants will grow their budgets for customer analytics projects by more than 6%. Mobile and online are particularly important here, both as the source of customer data used for segmentation and personalization and as a key customer touchpoint. Merchants are open to looking outside their current providers for support Figure 3: Merchant preferences on partners to deliver new payment services in 2017 Source: Ovum ICT Enterprise Insights In line with the investment focus around driving digital sales and the acceptance of new payment tools, there is a diversity in the partners that merchants would prefer to work with to deliver growth in their customer reach, experience, and sales conversions. At a global level, 56% of merchants would prefer to work with their current provider or acquirer for new payment services, with 39% looking to existing partners as their top-priority option. Clearly the value placed on minimizing the commercial complexity here, as well as the integration implications of working with new providers is a high one. Interestingly, the proportion seeing their current lead provider as their top-priority option for preferred partner has increased from 33% in Ovum s 2015 ICT Enterprise Insights survey. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 7

8 2017 ICT Enterprise Insights in Merchant Payments At the same time, a significant proportion of merchants would be prepared to work with payment networks directly (58% citing this group as a top-three preferred option) and with online payment providers (57%). The development of open API interfaces by the card schemes is an important development here, but this appetite for scheme-branded services will also open opportunities for acquirers. The growth and strength of the consumer-facing offerings of payment providers such as PayPal, and the wider business services (such as small business credit), continue to be an important factor in their appeal. Indeed, 13% of merchants view this group of players as their first-choice partner for new payment services. The role that online payment gateways play both in improving the payment experience in digital commerce and in opening up new international markets or segments to consumers makes them an important partner for merchants looking to invest in their payment services in Just over 18% of merchants would look to online gateways as their first-choice partner, with transport (26%) and hotels (20%) providing particularly strong opportunities for this group. Despite relatively little traction in the market to date, there is interest among merchants in partnering with telecoms players, technology companies, and social media providers for payment services. Mass-market technology companies, such as Apple and Google, have the biggest traction, with 24% of merchants interested in working with these firms (or brands at least) as a top-three partner of choice, followed by telcos (21%) and social media brands (8%). While this remains relatively smallscale, it is a significant minority of the market place and one which should drive partner and innovation strategies among payment providers, particularly for those with roadmaps for creating APIs for use by third parties. Ovum's ICT Enterprise Insights program IT and communications insight by line of business Technology is playing an increasingly integral business role in enterprises worldwide. However, ICT strategies, adoption, and priorities vary considerably by industry, country, size, and business type. Understanding these differences is critical for ICT providers, with successful vendors being those whose go-to-market approach is aligned to the business objectives of specific client segments. Ovum s ICT Enterprise Insights program has been developed specifically to meet this requirement. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 8

9 2017 ICT Enterprise Insights in Merchant Payments Figure 4: The scope of Ovum's ICT Enterprise Insights mega-survey Source: Ovum ICT Enterprise Insights is the most effective way for vendors to discover, understand, and act on evolving ICT technology investment strategies and priorities. Based on surveys with 7,000 senior IT executives across more than 60 countries, it examines ICT investment strategy from an industry perspective, providing line-of-business depth across the financial services, telecoms and media, public services, and energy sectors. The program provides executive perspectives on a range of topics including business/it drivers, ICT spend allocation, and investment priorities and approach by technology and industry function. Facilitating client-led decision-making within a vendor, ICT Enterprise Insights is designed to support vendors right across their organizations, importantly aligning with data requirements for strategy, product, marketing, and sales functions. To find out more about how this program can help your business, contact us at enquiries@ovum.com, or visit our website: Appendix Methodology ICT Enterprise Insights presents the data from more than 7,000 interviews of CIOs and other senior IT decision-makers conducted between July and October The survey covered more than 60 countries worldwide, looking at industry technology trends across the financial services, telecoms and media, public services, utilities, and retail sectors. The data was subject to industry-leading levels of rigor. Respondents were drawn from panels of prequalified CIOs/senior IT decision-makers who then had to clear a series of screener questions set by Ovum. Interviews were conducted in the respondent's native language where English was not commonly spoken and administered online or via telephone. The resulting data was reviewed by Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 9

10 2017 ICT Enterprise Insights in Merchant Payments Ovum's primary research analysts as well as our sector experts, using quality assurance tools developed by Ovum. Author Kieran Hines, Head of Industries Ovum Consulting We hope that this analysis will help you make informed and imaginative business decisions. If you have further requirements, Ovum s consulting team may be able to help you. For more information about Ovum s consulting capabilities, please contact us directly at consulting@ovum.com. Copyright notice and disclaimer The contents of this product are protected by international copyright laws, database rights and other intellectual property rights. The owner of these rights is Informa Telecoms and Media Limited, our affiliates or other third party licensors. All product and company names and logos contained within or appearing on this product are the trademarks, service marks or trading names of their respective owners, including Informa Telecoms and Media Limited. This product may not be copied, reproduced, distributed or transmitted in any form or by any means without the prior permission of Informa Telecoms and Media Limited. Whilst reasonable efforts have been made to ensure that the information and content of this product was correct as at the date of first publication, neither Informa Telecoms and Media Limited nor any person engaged or employed by Informa Telecoms and Media Limited accepts any liability for any errors, omissions or other inaccuracies. Readers should independently verify any facts and figures as no liability can be accepted in this regard readers assume full responsibility and risk accordingly for their use of such information and content. Any views and/or opinions expressed in this product by individual authors or contributors are their personal views and/or opinions and do not necessarily reflect the views and/or opinions of Informa Telecoms and Media Limited. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 10

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12 2017 ICT Enterprise Insights in the Financial Markets Industry Key findings from the 2016/17 survey results Publication Date: 10 Nov 2016 Product code: IT Daniel Mayo

13 2017 ICT Enterprise Insights in the Financial Markets Industry Summary Catalyst The rapidly changing business landscape is increasingly impacting ICT strategy and investment. Industry ICT suppliers must understand enterprises' needs at a country and industry level to ensure that their product, marketing, and sales strategies are aligned to customer requirements. To provide this insight, Ovum's ICT Enterprise Insights program, based on interviews with around 7,000 senior IT executives, answers the key questions. This brief focuses on the top findings from this program for the financial markets industry. Ovum view ICT investment in the financial markets has always been closely tied to business strategies and the economic environment, with technology underpinning most products and services offered across both the buy side and sell side of this industry. Both sides have experienced high volatility and immense regulatory pressure since the financial crisis, which has resulted in rapidly shifting IT imperatives and evolving investment portfolios. Ovum's ICT Enterprise Insights program reveals some key trends in priorities for With many institutions midway through major structural transformation programs in response to the return on equity implications of regulatory changes, IT priorities have become increasingly driven by the need to enhance IT capability and modernize legacy systems, particularly to deal with the demands of the digital world. Institutions are looking to improve efficiency and remove costs, but also increase resources allocated to client- and market-facing systems and processes to strengthen client relationships and sales and service capabilities. The need to manage conduct risk remains ongoing, with buy side in particular expecting continued growth on the risk and compliance side as it catches up with the strong investment seen on the sell side in recent years. Key messages The need for digital capacity has catalyzed the requirement for legacy modernization. Transformation is driving ICT expenditure growth, particularly for buy-side institutions. The drive for digital is prioritizing investment in client servicing, although risk and performance management remain key. Recommendations Recommendations for enterprises The extent of the structural response required to the financial and regulatory realities of the postfinancial crisis world means that ICT budgets cannot be isolated from cost reduction and efficiency pressures. It is conversely true that effective ICT is now a necessity to be able to balance the conflicting pressures of risk, regulation, capital, changing client requirements, and the need to improve financial performance. This means that IT functions need to ensure that investment to meet short-term requirements around cost reduction and mandatory demands is not managed tactically, but rather Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 2

14 2017 ICT Enterprise Insights in the Financial Markets Industry either leveraged in the case of mandatory investment or part of structural changes in the case of cost reduction. On a practical level, institutions should consider the following: Institutions should not underinvest in the "IT engine." A rebalancing of IT spend from "run the business" to "change the business" is important, particularly with a more positive outlook for ICT budget growth in However, IT infrastructure investment is required to benefit from structural technology shifts (such as being able to leverage private and public cloud) and ensure that security and resilience are not compromised. Institutions should direct investment toward client-facing functions. While efficiency initiatives such as back-office processing automation should remain important, continued restrictions from the regulatory side and evolving client demands mean that the composition of revenue is likely to see an ongoing shift between product lines. Maintaining close customer relationships will be a critical capability for long-term success. Institutions need to view ICT less as efficient transaction processing engines and more as information systems for clients. Clients will be increasingly interested in the ability to access and analyze information produced by financial activity rather than the transactions behind these, and institutions need to provide tools to help clients effectively manage and use information. Alongside this, "digital" is likely to be a key watchword for most institutions in Dealing with digital will be particularly critical for client- or intermediary-facing systems; however, institutions need to realize that operating digitally is about more than having strong online/mobile portals and apps. Digital requires institutions to shift to a real-time, 24x7 model, where processes and information are automated, available, and current across the organization. This impacts back-office systems as much as front-office ones. Recommendations for vendors The ICT Enterprise Insights program has found a number of areas of opportunity for vendors servicing the financial markets sector in 2017, but key points to note include the following: Reducing operating expenditure ranks alongside increasing revenue growth as a core business imperative for financial markets institutions (in contrast to the financial services sector as a whole, where revenue growth is the dominant driver). Vendors should look to provide evidence of hard return on investment as well as softer business capabilities/benefits to avoid project de-prioritization. Legacy modernization has become a top priority for 2017, which should benefit industry platform vendors. However, firms will be seeking a myriad of migration and deployment routes, and vendors will need to support this. SaaS-based approaches will become important, and vendors will need to offer these, although this can be achieved both directly and through partnerships. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 3

15 2017 ICT Enterprise Insights in the Financial Markets Industry The impact of digital is driving spend for legacy modernization and client servicing The need for digital capacity has catalyzed the requirement for legacy modernization Ovum's 2016/17 ICT Enterprise Insights program involved interviews with 279 sell-side and buy-side financial markets institutions across the globe (conducted over 3Q16). Exploring senior ICT executive investment priorities and drivers for 2017, one of the key developments compared with previous years is that managing security is no longer deemed the top IT issue affecting the sector. As shown in Figure 1 (with respondents asked to rank the IT trends shown), security is still a critical area. It is ranked as a top-three trend for 58% of institutions, but it is surpassed as the number-one priority by the need to modernize legacy systems and create digital capability. Figure 1: Key technology trends impacting financial markets institutions in 2017 Source: Ovum ICT Enterprise Insights The key shift here compared with previous years is the high relative prominence of legacy modernization (which historically has tended to be a mid-ranking issue), with the growing importance of driving greater IT/digital capability also evident last year. This is not a reflection of the lower importance of security (which remains critical) but a response to two key drivers: firstly, a major structural shift in the financial markets industry, and secondly, the growing importance of digital as the primary client channel. On the structural side, 2016 has seen a continuation of the external pressures seen in recent years, with higher capital and regulatory requirements combined with low-return markets reducing the sector's return on equity (RoE) levels. This has forced institutions to undertake major transformation programs to restore financial performance, typically involving institutions shifting their business mix to concentrate on their core, profitable sectors/product areas, together with large-scale cost-reduction and capability modernization programs. While these programs are business-wide, technology is a core component of these initiatives, both as an area of focus in its own right and as a source for Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 4

16 2017 ICT Enterprise Insights in the Financial Markets Industry improving capabilities and reducing costs in the wider business. Legacy modernization is a key component within this, with a need to standardize, consolidate, and then modernize the key platforms used to support the business. The impact of the digital world has become particularly pertinent to the buy side (with the sell side having already shifted to electronic channels), with client and intermediary expectations driving the need to employ digital channels for origination servicing/reporting processes (rather than print and mail). Clients are increasingly dissatisfied with quarterly/yearly reporting approaches, where information is provided in a static, transaction-oriented manner, and are demanding ongoing, up-todate, interactive access to their portfolios and fund performance. This has increased the prominence of creating stronger digital capability; however, there has been the increasing realization that digital capability is not only about the digital channel, but also dependent on the overall IT platform of an institution. This has, in turn, also catalyzed the high importance of legacy modernization, driving its relative position as a top IT trend for 2016/17. Transformation is driving ICT expenditure growth, particularly for buy-side institutions At a technology expenditure level, the impact of these trends on ICT budget growth expectations is broadly positive. While revenue performance for financial markets institutions has generally been stronger so far in 2016 than in previous years (albeit with high variation by institution), 2016 ICT spend growth has been relatively conservative for most institutions. As shown in Figure 2, for the majority of institutions, both buy side and sell side, budget growth is expected to remain flat or increase by 1 5%. In contrast, only a small proportion of institutions are reducing spend; however, as these tend to be the higher-tier institutions, the impact on overall market ICT expenditure will be greater than is apparent here. Figure 2: Financial markets ICT budget growth expectations by line of business, Source: Ovum ICT Enterprise Insights Moving into 2017, ICT growth expectations are more positive, with the need to drive digital capability particularly driving investment growth for buy-side institutions. Legacy modernization will have some impact on overall spend, but such projects generally aim to achieve cost efficiencies in the medium term, as well as increase capabilities. Key areas of focus here include IT infrastructure, particularly around the creation of private/hybrid PaaS for key technology stacks; workforce mobility, with employee tablet-based apps of note; and application rationalization and modernization programs to both enhance business capability and tackle the cost of maintaining the legacy "long tail" of applications. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 5

17 2017 ICT Enterprise Insights in the Financial Markets Industry The drive for digital is prioritizing investment in client servicing, although risk and performance management remain key The importance of digital is being clearly seen in ICT investment prioritization at the business function level, driving investment in client servicing and marketing/asset-gathering systems, as shown by their positioning in the top-right quadrant in Figure 3. This shows analysis from Ovum's ICT Enterprise Insights program, combining two questions asked to buy-side participants. The first asked institutions to identify the location of their top three ICT projects for 2017 (in terms of investment value across business function/system areas), with the results shown on the x-axis as a proportion of the total survey base. The second asked institutions about their ICT spend growth plans for each area, using the same scale as in Figure 2 this was converted into a growth score based on the net percentage planning to increase or decrease spend, which is shown on the y-axis. The size of the bubble shows the respective relative investment priority for each area based of magnitude and growth of spend in each area. Figure 3: Buy-side IT investment priorities in 2017 Source: Ovum ICT Enterprise Insights For 2017, the top overall investment priorities are concentrated in two main areas. The first is clientrelated systems, with client servicing and marketing/asset gathering being top investment projects and investment growth areas. This is being driven by the shift to digital-oriented communication and interaction for both origination processes, such as supporting marketing/asset-gathering systems to support intermediary and sales processes, and client servicing to support ongoing client information Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 6

18 2017 ICT Enterprise Insights in the Financial Markets Industry and reporting needs post-investment. The second area is the core business management systems, which heavily drive underlying investment performance (i.e. risk management, performance management, and asset/portfolio management). While clients are demanding greater transparency and access, at the end of the day overall investment performance remains the key success criterion for retail and institutional investors, and firms need to optimize both short- and long-term risk and return performance. Ovum's ICT Enterprise Insights Program IT and communications insight by line of business Technology is playing an increasingly integral business role in enterprises worldwide. However, ICT strategies, adoption, and priorities vary considerably by industry, country, size, and business type. Understanding these differences is critical for ICT providers, with successful vendors being those whose go-to-market approach is aligned to the business objectives of specific client segments. Ovum s ICT Enterprise Insights program has been developed specifically to meet this requirement. Figure 4: The scope of Ovum's ICT Enterprise Insights mega-survey Source: Ovum ICT Enterprise Insights is the most effective way for vendors to discover, understand, and act on evolving ICT technology investment strategies and priorities. Based on surveys with 7,000 senior IT executives across more than 60 countries, it examines ICT investment strategy from an industry perspective, providing line-of-business depth across the financial services, telecoms and media, public services, and energy sectors. The program provides executive perspectives on a range of topics including business/it drivers, ICT spend allocation, and investment priorities and approach by technology and industry function. Facilitating client-led decision-making within a vendor, ICT Enterprise Insights is designed to support vendors right across their organizations, importantly aligning with data requirements for strategy, product, marketing, and sales functions. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 7

19 2017 ICT Enterprise Insights in the Financial Markets Industry To find out more how this program can help your business, contact us at or visit our website: Appendix Methodology ICT Enterprise Insights presents the data from more than 7,000 interviews of CIOs and other senior IT decision-makers conducted between July and October The survey covered more than 60 countries worldwide, looking at industry technology trends across the financial services, telecoms and media, public services, utilities, and retail sectors. The data was subject to industry-leading levels of rigor. Respondents were drawn from panels of prequalified CIOs/senior IT decision-makers who then had to clear a series of screener questions set by Ovum. Interviews were conducted in the respondent's native language where English was not commonly spoken and administered online or via telephone. The resulting data was reviewed by Ovum's primary research analysts as well as our sector experts, using quality assurance tools developed by Ovum. Author Daniel Mayo, Chief Analyst, Financial Services Technology daniel.mayo@ovum.com Ovum Consulting We hope that this analysis will help you make informed and imaginative business decisions. If you have further requirements, Ovum s consulting team may be able to help you. For more information about Ovum s consulting capabilities, please contact us directly at consulting@ovum.com. Copyright notice and disclaimer The contents of this product are protected by international copyright laws, database rights and other intellectual property rights. The owner of these rights is Informa Telecoms and Media Limited, our affiliates or other third party licensors. All product and company names and logos contained within or appearing on this product are the trademarks, service marks or trading names of their respective owners, including Informa Telecoms and Media Limited. This product may not be copied, reproduced, distributed or transmitted in any form or by any means without the prior permission of Informa Telecoms and Media Limited. Whilst reasonable efforts have been made to ensure that the information and content of this product was correct as at the date of first publication, neither Informa Telecoms and Media Limited nor any person engaged or employed by Informa Telecoms and Media Limited accepts any liability for any errors, omissions or other inaccuracies. Readers should independently verify any facts and figures as no liability can be accepted in this regard readers assume full responsibility and risk accordingly for their use of such information and content. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 8

20 2017 ICT Enterprise Insights in the Financial Markets Industry Any views and/or opinions expressed in this product by individual authors or contributors are their personal views and/or opinions and do not necessarily reflect the views and/or opinions of Informa Telecoms and Media Limited. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 9

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22 2017 ICT Enterprise Insights in the Healthcare Industry Key findings from the 2016/17 survey results Publication Date: 08 Nov 2016 Product code: IT Chris Pennell

23 2017 ICT Enterprise Insights in the Healthcare Industry Summary Catalyst The rapidly changing business landscape is increasingly impacting ICT strategy and investment. Industry ICT suppliers must understand enterprises' needs at a country and industry level to ensure that their product, marketing, and sales strategies are aligned to customer requirements. To provide this insight, Ovum's ICT Enterprise Insights program, based on interviews with around 7,000 senior IT executives, answers the key questions. This brief focuses on the top findings from this program for the healthcare industry. Ovum view The results from this year's ICT Enterprise Insights (ICTEI) survey demonstrate CIOs' expectations for continued budget growth, though there will be variation between regions. Healthcare providers will continue to focus on digitizing patient information. For some, this will mean continued investment into electronic patient record (EPR) systems, while for others that have completed their EPR rollouts, attention will shift to developing patient relationship management (PRM) tools. The next months look set to be dominated by attempts to join up the pockets of data to satisfy the growing demand by patients to be more involved in their care. This is leading to additional investment into adjacent areas such health information exchanges (HIEs) and digital services. Ovum's ICTEI survey also shows that while many healthcare providers understand the benefits of digital technologies, they are concerned about the level of disruption to their organization. Healthcare CIOs are having to meet an increasingly complicated set of objectives, many of which are being driven by regulator changes in response to digital technologies. Meeting these challenges requires a new approach to IT. While hospitals take a conservative approach to patient data, they are increasingly embracing cloud services, especially for back-office services, which tend to move first to the cloud along with e-prescribing and pharmacy software. These investments are not without their risks, and the sector has been subject to an increased number of cyber-attacks on hospital systems. In 2017, security will become a larger part of the CIO strategy and focus. Key messages Healthcare budgets reflect providers' investment to address citizen demands. Electronic health record adoption reaches maturity, but raises challenges of securing patient data. Attempts to join up patient data move beyond just clinical data sources. Interest in hospital information exchanges expands in the population healthcare space. Recommendations Recommendations for enterprises Healthcare providers strongly considering PRM strategies should first consider the needs of patients rather than the requirements of clinicians. Providers should seek to understand what a PRM approach Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 2

24 2017 ICT Enterprise Insights in the Healthcare Industry should look like from the patient's point of view and how their current capabilities match. They should then assess the gaps in terms of their current systems' abilities and the challenges of adopting new solutions. To ensure that their strategies are having the desired effect, they should consider developing strong metrics and KPIs in terms of what is required in real time to shape outcomes for patients and what is required from a retrospective position to shape the future direction of the strategy. As providers start to build deeper and richer information stores, they will find this becomes increasingly attractive to nefarious types. Cybersecurity technology is likely to be an area of investment over the next months. Providers must ensure that any security strategy covers emerging areas such as PRM and HIE tools, and they should consider their current provisions for cyber-attacks and recovery procedures. Failure to have a strong strategy and response in place will lead to increasingly tougher fines, because regulators take a dim view of poor security measures. Recommendations for vendors The market for PRM solutions is set to become crowded, and it is attracting the attention of vendors from adjacent areas. Some are choosing to enter directly while others are looking to work within an ecosystem of vendors. Healthcare providers will be looking for vendors that can demonstrate ease of interoperability with existing systems, because healthcare providers and governments have sunk significant amounts into EPR systems, and most are not prepared to write this off. Healthcare providers are naturally conservative when it comes to patient data. Vendors will need to take this into account. Given the focus on security, vendors will need to be able to demonstrate compliance with the appropriate security and compliance rules handed down by national oversight bodies. However, healthcare providers are likely to want to see evidence that vendors can go further. Not all providers will have the same budget expectations, presenting opportunities for vendors to develop propositions that are suited to budgets, skills, and experience. Healthcare providers move to put patient engagement tools front and center Informed patients demand more from healthcare The healthcare sector as a whole continues to be challenged with balancing fiscal constraints and rising demands with the desire to make healthcare more personal yet standardized in terms of delivery. This is being driven by both patients and governments. Patients are becoming more savvy when it comes to monitoring their physical condition with wearable devices. They are also able to access more information on care, such as comparative figures of performance and outcomes, than ever before. Better informed patients lead to greater demand for choice over when and where to have consultations and treatment. Governments for their part are looking at how they can encourage healthcare providers to focus on outcomes rather than volumes and the removal of barriers between the different parts of healthcare through the adoption of technology. This also allows for new models of funding and care delivery to be tested. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 3

25 2017 ICT Enterprise Insights in the Healthcare Industry The combination of greater consumer engagement and participation coupled with the adoption of technologies that support the development of new business models is driving healthcare providers to invest more into areas that support better insight, engagement, and choice. Growth in healthcare technology expenditure reflects market pressures Budget expectations have increased significantly since the last survey in In 2015, 10% of respondents expected to see budgets grow by 6% or more; in 2016, this has increased to 26%. Another 46% expect budgets to grow by 1 5%, as shown in Figure 1. In 2015, just over half of all respondents, 55%, expected budgets to grow by 1% or more. While the headline results mark a departure from the pattern of previous years, there is considerable difference between the regions and service provider type. The challenges facing developing regions differ significantly from those of more mature economies. Developing economies are being pushed to provide universal access, though not necessarily access that is free at the point of use. For mature economies, the pressures are different as they look to provide patients with new ways to consume healthcare that will in turn reduce the overall cost of providing services. Figure 1: IT spending plans Source: Ovum ICT Enterprise Insights Healthcare providers in Latin America show the biggest increase in budgets overall, with 86% of respondents expecting to see budget increases of 1% or more over the next 18 months. Growth in the region is being driven by an increase in the average age of the population: the United Nations estimates that the percentage of Latin America's population aged 65 or over will more than triple between 2005 and At the same time, many Latin American countries are seeing a decline in birth rates and a rise in infectious diseases. There is also an increasing shift toward providing greater Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 4

26 2017 ICT Enterprise Insights in the Healthcare Industry access to healthcare through home healthcare. Expenditure in Latin America is growing faster than that of its wealthier neighbors in North America, where 29% of respondents expect to see budgets increase by 6% or more, while another 50% expect to see budgets increase by 1 5% over the next 18 months. In comparison, respondents in Australasia were more pessimistic, with only 55% expecting budgets to grow by 1% or more over the next 18 months. Overall spending on healthcare services across the region has remained low in comparison with other regions, but as a proportion of economic activity it has actually grown faster than many others. The rise in investment has been linked to the overall rise in prosperity of the region over the last decade. Now that growth is slowing, so too is healthcare expenditure, which is particularly true at the state level. The rest of Asia shows no signs of slowing expenditure. Budgets in European markets, which have been sluggish in comparison to other regions, are starting to recover. There is little to choose between Eastern and Western Europe in terms of growth. However, this hides what are very different growth rates within individual countries. Surprisingly, respondents from countries most severely hit by public sector spending problems over the last decade are the most bullish in terms of budget growth a sign perhaps that the period of underinvestment is now starting to be reversed. Attempts to join up patient data move beyond just clinical data sources The push to adopt solutions that support the joining up of healthcare information continues this year. However, rather than focus on implementing electronic medical records, two other functional areas have emerged as key priorities for investment in 2017: patient relationship management tools and care-coordination systems, as shown in Figure 2. To some extent, electronic health records have helped to improve the quality and flow of information, despite ongoing issues with usability and interoperability. The challenge of coordinating care across various providers and ensuring that statutory service levels are achieved to avoid financial penalties means care providers have to consider joining up a wider set of data than that captured in the course of examiniations, diagnosis, and treatments. Patient relationship management (PRM) tools are being examined as a means to address these challenges. PRM represents a healthcare vision of CRM, facilitating the interaction beween existing and future patients of the healthcare provider, helping to organize and automate the activities that support the patient experience. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 5

27 2017 ICT Enterprise Insights in the Healthcare Industry Figure 2: IT spending plans by domain, next 18 months Source: Ovum ICT Enterprise Insights Interest in PRM is strong across all regions, but it is particularly strong in Europe, especially in Eastern European and Russian Federation countries, which are expecting to see significant increases. The one area where growth appears constrained is Australasia, where less than 50% of respondents indicate any growth in expenditure in this area. The fact that 19% thought spending would decrease by 1 5% in the next 18 months is of concern. The one area where Australasia was not the worst-performing region was investment into financial/revenue cycle management tools. Given the points earlier about the financial pressures on this region, this does make sense. Interest in hospital information exchanges expands in the population healthcare space If care management platforms such as PRM are fast becoming a necessity for providers, then the interchange of patient data between providers becomes paramount. Health information exchanges (HIEs) are being developed as the bridge between different providers to access the same information. HIE platforms can help to support a relationship-driven, real-time, high-touch approach through evidence-based care plans, which can be driven by real-time data. Of course, HIEs are not without their challenges. Healthcare providers are having to invest in HIEs for fear of being excluded from having access to patients' information, and therefore excluded from providing services. Exclusion is an issue for all providers, irrelevant of size. The push to join up data is not likely to recede. Healthcare providers will need to find some way of joining up patient pathways, information sources, and communication channels that can communicate with other HIEs but does not act as a barrier to patient choice by excluding providers outside the HIE. Electronic health record adoption reaches maturity, but raises challenges of securing patient data Programs aimed at driving the uptake of EPR solutions, such as the Health Information Technology for Economic and Clinical Health (HITECH) Act's Meaningful Use program in the US and the National Program for IT (NPfIT) in the UK, have had the desired effect. More healthcare providers have at least some form of EPR deployment now than those that do not. The number of respondents reporting no deployment but with plans to deploy in the next 18 months and those with no plans continues to Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 6

28 2017 ICT Enterprise Insights in the Healthcare Industry decline, dropping from 17% percent in 2015 to 15% this year. The number of those reporting the first installment of EPR in the last 18 months has also declined; last year, 32% or respondents had reported a relatively recent deployment of EHR/EPR solutions, and this has decreased to 27% this year, as shown in Figure 3. The high adoption rates mean that we should expect to see a burgeoning market for second-generation solutions developing as those early contracts start to mature. Figure 3: Current/planned state of EHR/EPR deployment Source: Ovum ICT Enterprise Insights Investment into EPR and HIE systems brings many benefits to those implementing them, ranging from simple cost savings through to increasing medical accuracy. However, they also present an inviting target for ID thieves and hackers. In 2015, the US Government Accountability Office (GAO) reported 56 breaches involving systems storing and transmitting health information in electronic form, up from the 31 it reported in In total, these breaches involved 113 million individual records. The US government is moving to counter this through bills such as the new Cybersecurity Information Sharing Act, requiring the US Department of Health & Human Services to provide healthcare providers with better information on how to secure information and who is responsible for dealing with cyber-attacks against the healthcare provider. Information governance, information security, and cybersecurity need to be managed carefully as part of a wider IT strategy. A conservative approach to patient data is holding back digital activities Last year we highlighted that the continuing push in healthcare to digitize services was occurring across multiple fronts, yet providers were struggling to digitize paper-based systems or transition from legacy systems to new technologies. It should come as no surprise to anybody that the biggest challenge to the adoption of digital is security, as shown in Figure 4. We have already highlighted the damage a relatively small number of successful attacks can cause. Increasing the penetration of network or internet-enabled services will only add to the risk. While hospitals take a conservative approach to shifting patient data into the cloud, they are accepting that in some cases it is OK, especially for back-office services, which tend to move first to the cloud along with e-prescribing and pharmacy software. Yet many still struggle to contend with industryspecific barriers. As in any industry, healthcare organizations need to ensure that they have or are implementing a robust security strategy that considers the implementation of cloud services and HIEs. These should include strong security credentials that allow for data to move between private cloud implementations to hybrid and public clouds as the organization's use matures. Much of this will be dependent on the Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 7

29 2017 ICT Enterprise Insights in the Healthcare Industry capabilities of internal resources, which are in short supply. Healthcare organizations will continue to look to vendors for help with cloud management, implementation, and governance for the immediate future. Figure 4: Top three digital challenges Source: Ovum ICT Enterprise Insights Ovum's ICT Enterprise Insights Program IT and communications insight by line of business Technology is playing an increasingly integral business role in enterprises worldwide. However, ICT strategies, adoption, and priorities vary considerably by industry, country, size, and business type. Understanding these differences is critical for ICT providers, with successful vendors being those whose go-to-market approach is aligned to the business objectives of specific client segments. Ovum's ICT Enterprise Insights program has been developed specifically to meet this requirement. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 8

30 2017 ICT Enterprise Insights in the Healthcare Industry Figure 5: The scope of Ovum's ICT Enterprise Insights mega-survey Source: Ovum ICT Enterprise Insights is the most effective way for vendors to discover, understand, and act on evolving ICT technology investment strategies and priorities. Based on surveys with 7,000 senior IT executives across more than 60 countries, it examines ICT investment strategy from an industry perspective, providing line-of-business depth across the financial services, telecoms and media, public services, and energy sectors. The program provides executive perspectives on a range of topics including business/it drivers, ICT spend allocation, and investment priorities and approach by technology and industry function. Facilitating client-led decision-making within a vendor, ICT Enterprise Insights is designed to support vendors right across their organizations, importantly aligning with data requirements for strategy, product, marketing, and sales functions. To find out more how this program can help your business, contact us at enquiries@ovum.com, or visit our website: Appendix Methodology ICT Enterprise Insights presents the data from more than 7,000 interviews of CIOs and other senior IT decision-makers conducted between July and October The survey covered more than 60 countries worldwide, looking at industry technology trends across the financial services, telecoms and media, public services, utilities, and retail sectors. The data was subject to industry-leading levels of rigor. Respondents were drawn from panels of prequalified CIOs/senior IT decision-makers who then had to clear a series of screener questions set by Ovum. Interviews were conducted in the respondent's native language where English was not commonly spoken and administered online or via telephone. The resulting data was reviewed by Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 9

31 2017 ICT Enterprise Insights in the Healthcare Industry Ovum's primary research analysts as well as our sector experts, using quality assurance tools developed by Ovum. Author Chris Pennell, Practice Leader, Public Sector Ovum Consulting We hope that this analysis will help you make informed and imaginative business decisions. If you have further requirements, Ovum s consulting team may be able to help you. For more information about Ovum s consulting capabilities, please contact us directly at consulting@ovum.com. Copyright notice and disclaimer The contents of this product are protected by international copyright laws, database rights and other intellectual property rights. The owner of these rights is Informa Telecoms and Media Limited, our affiliates or other third party licensors. All product and company names and logos contained within or appearing on this product are the trademarks, service marks or trading names of their respective owners, including Informa Telecoms and Media Limited. This product may not be copied, reproduced, distributed or transmitted in any form or by any means without the prior permission of Informa Telecoms and Media Limited. Whilst reasonable efforts have been made to ensure that the information and content of this product was correct as at the date of first publication, neither Informa Telecoms and Media Limited nor any person engaged or employed by Informa Telecoms and Media Limited accepts any liability for any errors, omissions or other inaccuracies. Readers should independently verify any facts and figures as no liability can be accepted in this regard readers assume full responsibility and risk accordingly for their use of such information and content. Any views and/or opinions expressed in this product by individual authors or contributors are their personal views and/or opinions and do not necessarily reflect the views and/or opinions of Informa Telecoms and Media Limited. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 10

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33 2017 ICT Enterprise Insights in the Higher Education Industry Key findings from the 2016/17 survey results Publication Date: 11 Nov 2016 Product code: IT Navneet Johal

34 2017 ICT Enterprise Insights in the Higher Education Industry Summary Catalyst The rapidly changing business landscape is increasingly impacting ICT strategy and investment. Industry ICT suppliers must understand enterprises' needs at a country and industry level to ensure that their product, marketing, and sales strategies are aligned to customer requirements. To provide this insight, Ovum's ICT Enterprise Insights program, based on interviews with around 7,000 senior IT executives, answers the key questions. This brief focuses on the top findings from this program for the higher education industry. Ovum view With institutions facing pressures to increase operational efficiency, improve student satisfaction, and increase focus on student success, IT plays a pivotal role in delivering key services to provide competitive advantage to each institution. The findings of Ovum's 2016/17 ICT Enterprise Insights survey reveal that colleges and universities are becoming increasingly strategic about leveraging IT as an enabler of innovation and differentiation. However, in order to improve the capacity for innovation, agility, and efficiency over the long term, business and IT leadership must unify their agendas in fundamental ways. Institutions with the ability to do this will be better positioned to navigate industry disruption and meet their strategic goals. Key messages Institutions will increase investments in solutions that fuel differentiation. Improving student outcomes starts with data analytics. Despite slow adoption, the benefits of cloud-based delivery are increasingly compelling. Recommendations Recommendations for institutions Leveraging IT as an enabler of innovation and differentiation is an important step in navigating industry disruption and meeting institutional goals. However, unifying the agendas of business and IT leadership is the key to making efforts more sustainable over the long term. Ovum makes the following recommendations in line with the key findings of the 2016/17 ICT Enterprise Insights survey: Hold your vendors accountable.not only should institutions seek to partner with technology providers with a track record of success in the higher education industry, but they should also ensure that they deliver on products and services. In particular, as the student information system (SIS) modernization trend is underway, institutions should review vendor roadmaps to see how they plan to enhance their offerings with modern functionality. Furthermore, with the progressive move to "as-a-service" offerings become standard, institutions should check the vendor's ability to support institutions as they transition from on-premise to hybrid or full cloud deployments. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 2

35 2017 ICT Enterprise Insights in the Higher Education Industry Support student success strategies with robust student success solutions. Following the development of a sustainable strategy, institutions will need to leverage more data to inform student success efforts, and look toward a student success solution to analyze that data and initiate interventions to help keep students on track. It is important to note that while technology can help to improve student success, the institutional strategy and the ways in which the tools are used contribute more to improvement than do the technologies themselves. Take incremental steps rather than a "big bang" approach to cloud. A hybrid cloud environment enables institutions to migrate elements of their IT landscape in a measured and ordered way without sacrificing the efficiency and scale of a cloud deployment. Consequently, migrating mission-critical solutions to the cloud can be done in an order that aligns with an institution's business cycle. Recommendations for vendors Speed up time to value from solutions.given that a number of institutions currently have heavily customized implementations of SIS, as well as other applications, it is undoubtedly a difficult and time-consuming task to help institutions modernize their solutions and realize greater value. However, vendors can speed up this process by identifying the "low-hanging fruit" where institutions can obtain quick wins and realign value. Move beyond analytics and toward student success solutions. Multichannel, interactional capabilities help to distinguish between an analytics tool and a true student success solution. It is not just about the collection and analysis of data, but also whether that data and analysis prompt the end user to do something to help students, and whether there are a range of channels through which support can be provided. Vendors that have focused their solutions not only on a large number of data collections and analytics but also on interventions will be more valuable for institutions. Strengthen relationships with cloud partners. Cloud technology is essential to delivering a modern student experience and for institutions to deliver on student success. If vendors wish to deliver a top-quality user experience to their customers, then they must strengthen the relationships that power their cloud offerings. For example, if vendors combine their product portfolio with the agility, flexibility, and scale of the cloud mega-vendors such as Amazon Web Services (AWS) and Microsoft Azure, then institutions will receive a better experience. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 3

36 2017 ICT Enterprise Insights in the Higher Education Industry IT will become an enabler of innovation and differentiation in higher education Institutions will increase investments in solutions that fuel differentiation Figure 1: Higher education institutions' IT spending plans by solution area Source: Ovum ICT Enterprise Insights The findings of Ovum's 2016/17 ICT Enterprise Insights survey show that many institutions will increase investments in core enterprise applications during the next 18 months (Figure 1). Spending on SIS will increase more than that on any other application, with 62% of respondents looking to increase spend 27% by 6% or more, and 35% by 1% to 5%. This is unsurprising for two important reasons. First, for most institutions, which have been running on the same SIS solutions for the past 15 years, their solutions have become cumbersome and lacking in many built-in features such as mobility and workflow. Furthermore, the cost of maintaining these solutions has skyrocketed. The advances in technology mean that SIS solutions should no longer be passive, transactional systems of record. Rather, they have the potential to be systems of engagement, which institutions can use to differentiate themselves in the market this leads to the second reason for institutions increasing their investments. The previously stagnant on-premise SIS market is now transitioning to the cloud. In the 2016/17 ICT Enterprise Insights survey, Ovum identified that four major enterprise application vendors, Ellucian, Oracle, SAP, and Workday, would deliver their multitenant software-as-a-service (SaaS) SIS solutions incrementally by Workday, in particular, was the first to announce its plans to develop a student system in the cloud, prompting its competitors to move forward with their own cloud solutions. Surpassing these vendors, Unit4 delivered its cloud-native Student Management solution to the market in 2016, and Campus Management and Jenzabar are also addressing the need for innovation in student systems by offering a variety of cloud-hosted delivery options and enhanced functionality. Undoubtedly, institutions should hold vendors accountable, but even if these vendors do not fulfill time expectations on these solutions, they are accelerating the SIS modernization trend, which is encouraging institutions to increase investments. Thus, the time is ripe for institutions to consider what they want from their SIS solutions and how that should be provided. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 4

37 2017 ICT Enterprise Insights in the Higher Education Industry Improving student outcomes starts with data analytics Figure 2: Higher education institutions' analytics deployment areas Source: Ovum ICT Enterprise Insights The findings of Ovum's 2016/17 ICT Enterprise Insights survey show that institutions have fully deployed or are trialing analytics across major institutional areas (Figure 2). While some areas were unsurprising institutions have been using analytics for finance and budgeting and enrollment management for some time institutions are now starting to use analytics to track student learning and progress (88% of institutions have fully deployed, are trialing, or planning) to improve student outcomes and success. Improving retention and ensuring student success are two of the most important business challenges for institutions globally. The dropout rate from UK higher education institutions has increased for the first time in four years. According to data from the Higher Education Statistics Agency (HESA), 6% of first-degree entrants aged under 21 who enrolled in did not continue their studies beyond their first year. This is an increase on the previous year's non-continuation rate of 5.7%. In the US, the issues of retention and timely degree completion are much worse. The National Center for Education Statistics (NCES) reports that only 59% of students complete a bachelor's degree within six years. Historically, the onus for performance outcomes and retention rested primarily with the student rather than the institution. If a student left a program for academic or personal reasons, it did not reflect poorly on the college or university. However, as costs have risen and the link between an educated workforce and economic development has tightened, many stakeholder groups, including governments and associations, are holding institutions directly accountable. For example, government agencies are increasingly tying funding both direct and indirect through financial aid to performance outcomes and retention. As institutions are increasingly required to report on student outcomes, such as retention, graduation, and even gainful employment rates, they are building increasingly sophisticated reporting capabilities. Reporting to state, provincial, and national agencies is no longer an administrative function, but has Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 5

38 2017 ICT Enterprise Insights in the Higher Education Industry become an executive imperative. However, complying with regulatory statutes for reporting is only a first step with analytics, and is unlikely to yield the institutional transformation required to thrive in the coming decades. Creating innovative new programs, finding new revenue streams, and moving with more agility in the industry will require institutions to embrace a data-driven culture where data is an integral part of the decision-making process rather than simply the outcome of it. Further, data and analytics are valuable only when they provide knowledge that can be acted on by the right people, at the right time, to deliver results. Consequently, student success efforts must move beyond analytics and toward the initiation of interventions, so that students can achieve their desired outcomes. Despite slow adoption, the benefits of cloud-based delivery are increasingly compelling Figure 3: Higher education institutions' choice of delivery models Source: Ovum ICT Enterprise Insights The findings of Ovum's 2016/17 ICT Enterprise Insights survey show that while a number of institutions have either outsourced the delivery of their systems or are using a cloud-based delivery model for most solution areas (Figure 3), there are still a significant number of institutions that have deployed these applications on-premise. Historically, the reasons why institutions have been slow to adopt cloud-hosted services have included security, access to information by third parties, and large, existing investments in on-premise solutions. However, it is, for the most part, understood that cloud computing is the paradigm that will enable agility and drive innovation; hence, an increasing number of institutions are progressing from contemplating cloud services to committing to the move. While cloud services allow institutions to create long-term, predictable budgets to better invest funds and plan for the future, it could be argued that increased agility and innovation are more compelling reasons to migrate to the cloud. Server demands are rarely consistent in any industry. Institutions experience surges during enrollment periods, which settles down during the breaks. Delivering the computing capacity to handle those surges is often a balancing act for institutions. When applications are on-premise, institutions must provision for peak utilization rates with resources wasted during periods of lower demand. As institutional and student needs shift, and new market opportunities arise, the cloud provides resources that can scale up or down as demands vary, thus delivering agility for modern institutions. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 6