Predicts 2013: Emerging Markets Capitalizing on Top IT Trends

Transcription

1 Predicts 2013: Emerging Markets Capitalizing on Top IT Trends Published: 26 November 2012 Gartner for Business Leaders G Analyst(s): Luis Anavitarte, Alfonso Velosa, Lillian Tay, Neha Gupta New market opportunities keep arising in emerging markets, suggesting a permanent review of strategies by technology and service providers. Key Findings The smart city concept is beyond embryonic in top emerging markets but still in the formative stage. Many companies in emerging markets are investing resources in experiments to develop their own ecosystem platforms. The digital cloud storage market continues to attract investments of various players including personal cloud providers, online storage and sync providers, and digital locker service providers. Local communications service providers (CSPs) and device vendors in emerging markets will have a higher probability of success in the personal cloud market than global device and apps players. Recommendations Based on successful implementations elsewhere, inform officials in Brazil, Russia, India, Mexico and China (BRIMC) about the concept of smart cities and how it will become fundamental in the development process and the organization of work around their vertical markets. CIOs in emerging markets should develop explicit "bring your own device" (BYOD) policies on hardware and platform types. CSPs should invest in providing ubiquitous data connections in emerging markets. Cloud storage providers should initially tie up with mobile device vendors and CSPs with strong brands in order to gain a foothold, and then focus on building their own brands.

2 Strategic Planning Assumptions By 2016, top cities in BRIMC countries will adopt the smart city information and communication technology (ICT) concept as a guide for planning and executing development. By 2016, the next major ecosystem for consumer electronics (smartphones and tablets) will evolve in an emerging market. By 2016, more than 15% of consumers' digital content will be stored in the cloud in emerging markets. By 2017, that number will grow to 20%. By 2016, the local CSPs and device vendors combined will have more than a 60% share of the personal cloud market in emerging markets. By 2015, at least 25% of vendors' device sales will come from in-country online retailers in the BRIMC countries. Analysis What You Need to Know Our emerging-market IT predictions this year touch on adoption, innovation, personal cloud and online retail. The central element is transformation in these markets by the deployment of technology and the rising market opportunities for technology and service providers. Another underlying element is the need for technology and service providers to develop monetization strategies tailored to these top emerging markets, particularly while deploying goods and services for smart city initiatives, and while deploying online shopping for IT products. Strategic Planning Assumptions Strategic Planning Assumption: By 2016, top cities in BRIMC countries will adopt the smart city ICT concept as a guide for planning and executing development. Analysis by: Luis Anavitarte Key Findings: The ICT smart city concept has moved from embryonic to formative and is now gaining form as a methodology and ecosystem for sustainability over time and efficiency of city development. The smart city concept will become the de facto way to organize cities in top emerging markets. The smart city concept's implementation will bring three winners in top emerging markets: citizens, governments and technology providers. Page 2 of 11 Gartner, Inc. G

3 Market Implications: It is increasingly evident for governments, central and local, that technology adoption is imperative in the development process. What is not entirely clear for many of them today is how to really articulate it around the multiple needs, vertical markets and city demands, like energy, transportation, health and citizens' safety. Many of the city markets today are facing growing problems in multiple sectors. There is the understanding that cities are indeed the key to economic growth, as they allow economies to focus human capital on creation of economic value. These city markets are using technology in a scattered way. There is no realization that an articulate system for them is addressing specific vertical needs through the intelligent and organized use of technology. We envision two important aspects. It is at the beginning stage in most BRIMC cities outside selected Chinese and Indian regions, and Rio de Janeiro in Brazil, but the ICT smart city concept has moved from embryonic to formative and is now gaining form as a methodology and ecosystem for sustainability over time and for efficiency of city development. Cities near top emerging markets will capture that information and adapt it to their specific needs. We believe we are at the very beginning of what will be an explosive adoption of the smart city concept in top emerging-market cities, with direct effects on citizens, development, technology demand and sales, creation of technology teams working for the adopting cities, smart city budgets being created, and effective new ways of problem solving in these markets. Smart cities not only allow for faster, efficient and sustainable-over-time technology adoption; they essentially drive urbanization at greater scale, accelerating economic development, which is quite important to both governments and markets. Recommendations: Provide solutions for smart cities that are adaptable to the needs of different cities. Bring end results to life in the eyes of decision makers and city officials in these top country cities through case studies of successful implementations. Make cities realize that the only way to build efficiency is through the intelligent implementation of technology around verticals, persuading them that this is a proven way to succeed with a long-term perspective. Secure funding from central and local governments, and also get international financial institutions involved in your initiatives with cities. Most local governments will be agreeable with this approach. Related Research: "Agenda for Emerging Markets, 2012" "Emerging Market Analysis: Bases for a Solid 2012 Market Growth Strategy" "Market Insight: 'Smarter Cities' Event in Shanghai Reveals IT Vendor Opportunities for Intelligent Urbanization" Gartner, Inc. G Page 3 of 11

4 "Market Trends: Smart Cities Are the New Revenue Frontier for Technology Providers, 2011" "Market Insight: 'Smart Cities' in Emerging Markets" Strategic Planning Assumption: By 2016, the next major ecosystem for consumer electronics (smartphones and tablets) will evolve in an emerging market. Analysis by: Alfonso Velosa Key Findings: Many companies in emerging markets are investing resources in experiments to develop their own ecosystem platforms. We are amid a revolution in mobile computing platforms. More and more people around the world have started to use smartphones and tablets for computing requirements; in some cases, a smartphone or tablet may be their only computing device. These two critical electronic equipment markets are expected to grow at a compound annual growth rate of 27% from 2011 to 2016, reaching 1.8 billion units. Given an increase of 1.3 billion units, we can expect continued innovation in terms of the equipment, as well as the software. This will drive new behavior in how people interact not just with electronics but also with the Internet and each other. Many companies in emerging markets are investing resources in experiments to develop their own ecosystem platforms. They hope these ecosystem platforms will help them either lock in consumer loyalty or become a critical technology platform that other companies will use and enrich. These companies cover a broad spectrum of technology areas, ranging from the carriers to electronics to software companies. They benefit from open-source software operating systems and user interfaces, as well as extensive analysis of key ecosystems from Apple, Google and Microsoft. We have already seen many companies experimenting with "horizontal" ecosystems, in which their apps work on multiple ecosystem platforms. Market Implications: Large emerging markets, such as China, India and Brazil, present a ready-made experiment platform for developing new ecosystems. This is for niche ecosystems, as well as potential new platforms. They offer interesting combinations of distinctive language and culture characteristics as well as rapid adoption trends for basic or even white-box electronics. This leads to experimentation done at a variety of levels for both the electronic equipment and the usage models. Local technology companies have the advantage of being able to learn from what works and does not work from the established American and European companies and ecosystem platforms. They have also been able to study consumer use or rejection of new ecosystems, particularly in China. This gives these local technology companies a leg up on formulating strategy and driving execution for developing new competitive differentiation based on ecosystems. Local companies may be able to keep product prices lower because they do not have to pay the tariffs of foreign firms. In addition, governments may provide incentives for consumers to purchase goods and services produced by domestic firms. Page 4 of 11 Gartner, Inc. G

5 Recommendations: CIOs in emerging markets should develop explicit BYOD policies that specify the hardware and platform types allowed to connect to their system, in order to protect the systems from flaws in emerging vertical and horizontal ecosystems. The key objective here is to ensure they can adapt flexibly and securely to a new ecosystem. Technology and service providers should dedicate a small team that, on a low cost basis, builds relationships and potential products with emerging ecosystem niche and platform players in Asia and South America. Technology and service providers should assess the variety of approaches that key companies, such as Samsung, China Mobile, Alibaba, Tencent and Facebook, have done in emerging markets to build electronics or Internet platforms. Related Research: "Competitive Landscape: Five Titans Steer the Direction of the Electronics Industry" "Marketing Essentials: A Primer for Using and Benefiting From Business Ecosystems" "Market Trends: Software Is the Semiconductor Vendor Priority for Electronics Ecosystems, Worldwide, 2012" "Vendor Focus for Apple: The Gartner View on Apple's Disruptive Strategy and Value In Your Organization" Strategic Planning Assumption: By 2016, more than 15% of consumers' digital content will be stored in the cloud in emerging markets. By 2017, that number will grow to 20%. Analysis by: Neha Gupta Key Findings: The digital cloud storage market continues to attract the attention and investments of various market players, including personal cloud providers (like Apple, Amazon, Microsoft, Google), online storage and sync providers (like Dropbox, SugarSync, Mozy, NewBay), and digital-locker service providers (like RapidShare, FileSonic). Device OEMs (like Samsung, HTC) and CSPs (like Bharti Airtel) also offer cloud storage facilities, mainly by relying on third-party providers to manage storage, backup and synchronization capabilities. These market entries and investments are either encouraged by direct revenue opportunities, as in the case of digital locker service providers, or by increased monetization opportunities, as in the case of personal cloud services providers that focus on selling content and cloud storage, synchronization and streaming as means to monetize content. Emerging markets are usually characterized by the high use of mobile devices and low PC penetration. Also, most of the connected devices (more than 49% in BRIMC countries at the end of 2011) are basic communication devices. Against this background, and given that the Gartner, Inc. G Page 5 of 11

6 storage capabilities of mobile devices are usually lower than those of PCs, it is envisaged that cloud-based storage services are becoming popular sooner than earlier anticipated. Consumers are more likely to store content in the cloud if they have purchased that content from an online store. The needs of consumers residing in urban pockets of emerging markets are similar to those in developed countries. The proliferation of personal connected devices and screens in these areas is causing a shift in how consumers store their digital content; until now they have been using multiple personal devices and online services to manage a steadily increasing amount of data and information. Consumers will demand access to content on the go and at a location of their choice, and as a result embrace digital cloud services as the platform to address this requirement, which in many cases (such as icloud, Google Drive) also allows users to sync, stream and share content at all times and from a multitude of connected devices. Market Implications: In the next three years, we will see a trend away from a PC-centric storage model to a cloud storage model. Consumers will increasingly adopt digital cloud storage services as part of their digital ecosystem to manage and store user-generated data or purchased content, such as music, pictures and, to a lesser extent, videos and e-books. Video storage/acquisition services, such as Amazon's Cloud Drive and the Apple icloud, or even video services provided by Box.net, Dropbox and SugarSync, are expected to gain traction in urban China and India, which are demographically large with a consumer digital landscape that is similar to that of developed countries. In other areas, reasonable adoption of such services will only happen over time, once the less-bandwidthconsuming applications are able to appeal to users. The quality of experience and the affordability of data plans will play an important role in determining how quickly consumers will adopt highly immersive personal clouds. Cloud storage providers will offer low-price or free (advertisement funded), simple direct-to-cloud storage experiences to the consumer. We are already seeing some such product announcements. For example, when the Galaxy S3 smartphone was launched in India, Samsung bundled 50GB of free cloud storage from Dropbox with every smartphone with a validity of two years. Most other services start with 1GB to 5GB of free space, with additional space obtainable by inviting friends or providing more personal details. Recommendations: CSPs must invest in providing ubiquitous data connections. CSPs should also consider applying network intelligence and optimize traffic to understand usage patterns and client needs. Technology and service providers in emerging markets need to focus on how they can provide agile, cost-efficient storage services that still offer an excellent user experience on low Internet speeds and lower-end handsets. Page 6 of 11 Gartner, Inc. G

7 Related Research: "Forecast: Consumer Digital Storage Needs, " "Personal Cloud in Emerging Markets" Strategic Planning Assumption: By 2016, the local CSPs and device vendors combined will have more than a 60% share of the personal cloud market in emerging markets. Analysis by: Neha Gupta Key Findings: Local CSPs and device vendors in emerging markets will have a higher probability of success than global device and apps players. Local CSPs' direct billing relationships with local subscribers is key, because they can add cloud storage as part of their data plan packages. Consumers are likely to adopt services of the company that they've heard from in emerging markets. Local CSPs have the advantage that their brands are already known to consumers to a greater extent than Apple, Amazon or Google. Device manufacturers like Nokia, ZTE, Huawei and, in particular, the makers of Android phones are also likely to find early adopters of their cloud services in emerging markets, as they already enjoy good market share and have the benefit of preinstalled cloud services on devices. However, like any other service provider, they will have to educate users about how to set up and use personal cloud services. Market Implications: In the early stages, the role of global players like Apple, Google and Amazon in emerging markets will be limited to metropolitan areas. Here they will not focus on offering device- or platformindependent storage capacity but will aim to link cloud storage facilities to their ecosystems of devices (for example, Apple icloud and Google Drive). These service providers are likely to charge for personalization and content. In contrast to the developed markets, where revenue mainly comes from user subscriptions, the prevailing revenue model in emerging markets will be advertising. There can be partnerships with device and content providers that try to bundle personal cloud with their core offerings, but the revenue model will depend on the mode of partnership and negotiation power. Specialized services that offer practical value, such as smart home or asset tracking, will be able to charge a fee. Gartner, Inc. G Page 7 of 11

8 Recommendations: Cloud storage providers should initially tie up with mobile device vendors and CSPs with strong brands, and then focus on building their own brands. Consumers will prefer to store their personal files with providers that have trusted brands. The segmentation of consumers in emerging markets is important, as there will be segments of high-value customers who can be targeted for full sync/streaming personal cloud services and whose needs will be similar to customers in mature markets. This is apart from the mainstream users who will use scaled-down, simple storage services funded by ads. Related Research: "Personal Cloud in Emerging Markets" "Competitive Landscape: Consumer Personal Cloud" Strategic Planning Assumption: By 2015, at least 25% of vendors' device sales will come from incountry online retailers in the BRIMC countries. Analysis by: Lillian Tay Key Findings: The rise in the number of middle-income consumers in BRIMC countries has coincided with a time when the Internet has become ubiquitous, helping to make them more receptive to shopping online. Issues such as credit, delivery and quality of goods are now addressed better than before. Online shopping has become a self-regulatory system in which reviewers and past shoppers have the influence and power to ensure that the retailers deliver on service and quality promised. Devices are becoming more homogeneous. There is less product differentiation, and consumers rely on product reviews and word of mouth to make their buying decisions, which can be executed easily online, supplanting advertisements and in-store salespeople. Market Implications: The BRIMC countries have challenges brought about by limited consumer protection laws and cultural shopping habits, but consumers there are getting connected to the Internet and finding that it is easier to compare prices online than to go from shop to shop and bargain. The price competitiveness, exclusive preorders and special online offerings of device models, together with the convenience of procuring and delivery, are making it attractive for consumers to buy online. In the past, consumers distrusted online retailers because of poor product quality and not knowing if the products were genuine, as well as credit fraud. However, this is changing as online retailers have realized that the online world is even more connected and reacts to bad service and product Page 8 of 11 Gartner, Inc. G

9 quality even faster. Words written and posted stay in the Internet, tarnishing the online retailer's reputation forever. Therefore, online retailers are putting efforts into improving their customer service, and customers are realizing that the online market can be reliable and trustworthy. Local payment solutions similar to PayPal, in which consumers do not need to have a credit card, are now available, facilitating money transfer between buyers and sellers. Delivery time has also improved significantly; consumers now need to wait only a few days to receive delivery, rather than weeks. Recommendations: Providers have to put a priority on a formalized channel strategy for online retailers, as the timing is opportune for growth. Providers have to be agile in adapting to the changes in local consumer online shopping patterns and invest in analytic tools to help in looking for ways to improve their sales. Providers have to make the online customer the center of their business decisions and put service as an important differentiator; traditionally in emerging markets, the focus was more on price. Related Research: "Three Best Practices for Defining Your Mobile Marketing Strategy" "Survey Analysis: Chinese Channels Believe New IT Consumers Value Brand and Customer Care More Than Price" "Survey Analysis: Brazilian Channels Believe Technology Providers Don't Understand New Consumers" "Market Trends: India, Unveiling and Understanding IT Consumer Sub-Segments" A Look Back In response to your requests, we are taking a look back at some key predictions from previous years. We have intentionally selected predictions from opposite ends of the scale one where we were wholly or largely on target, as well as one we missed. This topic area is too new to have on-target or missed predictions. Recommended Reading Some documents may not be available as part of your current Gartner subscription. "Emerging Market Analysis: IT, Brazil, 2012 and Beyond" Gartner, Inc. G Page 9 of 11

10 "Emerging Market Analysis, IT, Russia, 2012 and Beyond" "Emerging Market Analysis, IT, India 2012 and Beyond" "Emerging Market Analysis, IT, Mexico 2012 and Beyond" "Emerging Market Analysis, IT, China 2012 and Beyond" Acronym Key and Glossary Terms BRIMC Brazil, Russia, India, Mexico, China BYOD CSP ICT bring your own device communications service provider information and communication technology Page 10 of 11 Gartner, Inc. G

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