United states information technology report q1 2012

Q1 2012 www.businessmonitor.com UNIteD StateS information technology Report INCLUDES BMI'S FORECASTS ISSN 2041-7101 Published by Business Monitor International Ltd. UNITED STATES INFORMATION TECHNOLOGY REPORT Q1 2012 INCLUDES 5-YEAR FORECASTS TO 2016 Part of BMI's Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: January 2012 Business Monitor International 85 Queen Victoria Street London EC4V 4AB UK Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 email: subs@businessmonitor.com web: http://www.businessmonitor.com © 2012 Business Monitor International. All rights reserved. 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All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained. United States Information Technology Report Q1 2012 © Business Monitor International Ltd Page United States Information Technology Report Q1 2012 CONTENTS Executive Summary . SWOT Analysis . United States IT Sector SWOT . United States Political SWOT . United States Economic SWOT United States Business Environment SWOT . IT Business Environment Ratings 10 Table: Regional IT Business Environment Ratings 13 Markets Overview . 14 Americas . 14 Market Overview – United States 22 Government Authorities . 22 Hardware . 25 Drivers . 26 Tablet Notebooks . 28 Software . 29 Services 32 Industry Developments 34 Industry Forecast Scenario . 37 Market Trends 37 Drivers . 38 Table: United States' IT Sector – Historical Data & Forecasts (US$mn Unless Otherwise Stated) 39 Internet . 40 Table: Telecoms Sector – Internet – Historical Data & Forecasts 40 Macroeconomic Forecast 42 Table: United States – GDP Contribution To Growth . 45 Competitive Landscape . 46 Hardware . 46 Software . 49 Company Profiles . 55 HP 55 Dell 57 Microsoft 59 IBM 61 Country Snapshot: US Demographic Data 62 Section 1: Population . 62 Table: Demographic Indicators, 2005-2030 62 Table: Rural/Urban Breakdown, 2005-2030 . 63 Section 2: Education And Healthcare 63 Table: Education, 2002-2005 63 Table: Vital Statistics, 2005-2030 63 Section 3: Labour Market And Spending Power 64 Table: Employment Indicators, 2001-2006 64 © Business Monitor International Ltd Page United States Information Technology Report Q1 2012 Table: Consumer Expenditure, 2000-2012 (US$) 64 Table: Average Annual Wages, 2000-2012 (US$) . 65 BMI Methodology . 66 How We Generate Our Industry Forecasts 66 Transport Industry . 66 Sources . 67 © Business Monitor International Ltd Page United States Information Technology Report Q1 2012 Executive Summary Market Overview ƒ US spending on IT products and services is forecast to reach US$669bn by 2016. US spending on IT products and services is forecast to reach US$551bn in 2012. BMI has downwardly revised its forecast after PC sales were flat in Q311, after a sharp annualised contraction in H111. In 2012, IT vendors will be considered when it comes to the effect of the ongoing US federal deficit issue, and the failure of politicians to agree on a deficit reduction programme. If automatic federal spending cuts kick in during the next fiscal year, this could hit IT projects. A major demand driver will be private and public sector organisations looking for help to utilise efficiencies from cloud computing models such as Software-as-a-Service and Infrastructure-as-a-Service. 2010 saw a number of government agencies at federal and local level launch cloud strategies and pilot programmes. Other key market drivers are expected to include: ƒ Growing fixed and mobile broadband penetration. ƒ Data centre consolidation and virtualisation ƒ Product innovation such as tablets, e-readers and feature-rich netbooks. ƒ Technology innovation such as GPS and services. ƒ Economic recovery. Industry Developments GSA first federal agency to move all email to a cloud-based system The first 2013 federal budget proposals are expected in February 2012 and may provide an indication about how cuts may impact federal IT spending. The government has to cut US$1.2trn over ten years from federal spending according to a process called "Sequestration." In 2011, more than 50 tech companies wrote a letter to the Super Committee urging it to reach a solution and avoid "the sequestration trigger." Despite a drive to cut expenses across government, in 2011 many public sector organisations appeared willing to continue to spend on IT. The Obama administration has called on federal agencies to develop strategies to simplify and where possible combine often sprawling IT operations so as to reduce costs. © Business Monitor International Ltd Page United States Information Technology Report Q1 2012 Guidelines published in 2010 by the Office of Management and Budget called for agencies to initiate data centre consolidation programmes to help cut US$3bn from the federal budget. Competitive Landscape ƒ The US PC competitive landscape is dominated by two large domestic vendors, Dell and HP, which together account for at least 50% of the US market. In H111 several vendors suffered from the sharp slowdown in the US market, which was caused by lacklustre consumer demand. Acer, whose traditional strength is in the consumer segment, was hit the hardest by the market contraction. HP was another major loser, with negative sales growth in the region of 10%, but the company's market share grew in Q311. Meanwhile Apple's PC market share of around 11% was driven by the success of its iPad, as tablets took away share of traditional PC sales. Computer Sales ƒ The US addressable market for PCs and accessories is estimated by BMI at US$145.8bn in 2012, with single-digit growth compared with 2011. BMI forecasts that the US computer and accessories market value will grow around 2.5% in 2012, with similar single-digit growth compared with 2011. We downwardly revised our figures after PC sales remained contracted in H111 y-o-y, and remained flat in Q311. The computer hardware market's 2012-2016 CAGR is projected at 3.1% and market value could reach US$165bn by 2016. One additional driver of increased sales and lower prices is the move of telecoms operators into the PC retail space. Notebooks are the fastest-growing PC market segment but face competition from other formats such as tablets, which appear to have growing traction in the enterprise segment. Software ƒ The US software market is estimated at US$159.9bn in 2012, with single-digit growth from 2011. Software CAGR for 2012-2016 is projected at around 5.9%, as the addressable market reaches around US$201.1bn. A combination of enterprise objectives such as cost reduction and greater efficiency should combine to encourage the adoption of cloud services in 2011. Drivers of demand for enterprise software include increasing operational efficiency, coordinating global supply chains and modernising logistics and warehouse functions. More investment can be expected to be in utility software and serviced-oriented architectures rather than traditionally packaged PC software. © Business Monitor International Ltd Page United States Information Technology Report Q1 2012 IT Services ƒ The US IT services market is forecast at US$245bn in 2012, with demand restrained by fiscal austerity and political and economic uncertainty. IT services spending is expected to grow about 2% in 2012, building on a stabilisation of the market in the previous year. Spending on IT services is quite closely correlated with GDP growth, which is bad news in a recession but better news in a recovery. One opportunity will be organisations looking for help to utilise efficiencies from cloud computing such as SaaS and IaaS, as organisations look to save money on IT investments. National and local government is one vertical where strong interest in cloud services is being expressed. In H111 Microsoft's dominance with its Windows software appeared to be under threat of erosion from the surge in demand for non-Windows tablets. Analysts have long worried about Microsoft's potential over-reliance on Windows to drive its revenue, and the vendor's Q111 sales of Windows fell short of expectations. However, Microsoft's overall revenue actually rose 13% in Q311, thanks mainly to strong sales of Microsoft Office © Business Monitor International Ltd Page United States Information Technology Report Q1 2012 SWOT Analysis United States IT Sector SWOT Strengths ƒ ƒ The largest IT market in the world, with spending forecast to pass US$529bn in 2011. Despite the challenging trading conditions, overall IT spending is still expected to remain in positive growth territory. Weaknesses ƒ During the recession in 2009, customers postponed projects and reduced short-term spending, particularly in areas such as consulting and software development. Opportunities ƒ Demand for new IT strategies to take advantage of innovations such as virtualisation, data centre consolidation, and cloud computing As economic woes ease, IT vendors should see more growth from traditional bigspending sectors such as banks, financial services, retail and manufacturing. The growing popularity of mobile broadband networks is driving netbook sales. New business models such as SaaS and virtualisation will continue to make progress. ƒ ƒ ƒ Threats ƒ ƒ There is a risk that recovery could be anaemic in 2011, in which case spending on technology could have another hard year. A large federal budget deficit could lead to pressures on public sector IT spending. United States Political SWOT Strengths ƒ The US is an undisputed superpower, and therefore occupies centre stage in most international diplomacy. Long-standing democracy with vigorous and open political debate; the US continues to attract large numbers of immigrants committed to citizenship and self-advancement. Weaknesses ƒ Political debate between Republicans and Democrats has historically been polarised and divisive. As today's superpower, the US attracts the enmity of a wide range of political groups opposed to the current international status quo. Opportunities ƒ The changing political mood (as evidenced by the popularity of unconventional candidates in the 2008 presidential election, including President Barack Obama's), and the widespread dissatisfaction of the voting public, may encourage both major parties to experiment with more consensual approaches to certain policy areas. Though we are not optimistic, the ongoing budget debates will provide a pertinent test of the degree to which bipartisan cooperation is possible. Threats ƒ The perception of inflexibility and bias in US foreign policy, particularly in the Middle East, may stiffen opposition and at worst provide fertile recruiting ground for radical anti-US groups such as al-Qaeda. Partly as a reaction to foreign policy difficulties, US public opinion may return to isolationist and protectionist modes. © Business Monitor International Ltd Page United States Information Technology Report Q1 2012 United States Economic SWOT Strengths ƒ The world's largest economy with an impressive record of entrepreneurial dynamism, innovation and a high research and development spend. Despite some threats to its reserve status, the US dollar is treated as an international currency, meaning that investors around the world are prepared to hold US debt. Because of this, the US is uniquely able to run large fiscal and current account deficits. Weaknesses ƒ Despite the dollar's role as an international currency, excessive US debt levels are a risk. A decision by Japanese and Chinese central banks to reduce their larger dollar holdings could cause sharp falls in the value of the US currency. Low savings rate by US households on a historic basis, although this has begun to reverse. Opportunities ƒ Further liberalisation of international trade through the WTO, coupled with a more competitive dollar exchange rate, could boost export growth and help restore balance to the US's external imbalances. Threats ƒ Intensified competition from China and other low-wage economies could accelerate the loss of manufacturing jobs. Large growth in public spending, coupled with tax cuts, will worsen the fiscal deficit, eventually forcing more restrictive monetary policy and slower growth. United States Business Environment SWOT Strengths ƒ ƒ Weaknesses ƒ ƒ Opportunities ƒ ƒ Threats ƒ The US boasts the world's largest single internal consumer market, which presents tremendous opportunities for businesses of all types and sizes. Few countries offer better environments for entrepreneurial activity, with a highly flexible labour force, a legal system that is friendly to business, and significant centres of technological innovation (such as California's Silicon Valley). Much of the country's physical infrastructure is in need of improvement, with congested roads and airways. US corporate tax is, on average, among the highest in the OECD. The Obama administration is committed to improving the nation's infrastructure, with stimulus package funds being dedicated to that purpose. The US has often been the origin of new drivers of economic growth booms, and sectors ranging from biotechnology to alternative energy are being discussed as possible catalysts. Government intervention in the economy puts the country's reputation for free enterprise at risk. © Business Monitor International Ltd Page ods as a basis for analysis and forecasting. It must be remembered that human intervention plays a necessary and desirable part in all of our industry forecasting techniques. Intimate knowledge of the data and industry ensures we spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not. IT Industry Forecasts There are a number of criteria that drive our forecasts for each IT variable. IT forecasting is complicated due to the fragmented nature of the market, with little transparency of vendor data and low apparent agreement between many sets of figures in terms of market definition, base and © Business Monitor International Page 80 United States Information Technology Report Q1 2013 methodology. In addition, forecasts are naturally affected by consideration of a variety of internal and external political and economic factors. Within best-practice techniques of time-series modelling, BMI's quarterly updated forecasts are improved substantially by intimate knowledge of the prevailing features of each local market. Individual variables taken into account in creating each forecast include: ■ Overall economic context, and GDP and demographic trends; ■ Underlying 'information society' trends; ■ Projected GDP share of industry; ■ Maturity of market structure; ■ Regulatory developments and government policies; ■ Developments in key client sectors such as telecommunications, banking and e-government; ■ Technological developments, and diffusion rates; ■ Exogenous events. Estimates are calculated using BMI's own macroeconomic and demographic forecasts. IT Ratings - Methodology Our approach in BMI's IT Business Environment Ratings is threefold. First, we seek accurately to capture the operational dangers to companies operating in this industry globally. Second, we attempt, where possible, t United States Information Technology Report Q1 2012 The global economic crisis gave what may prove to be a significant boost to the SaaS model, with vendors such as Google and Salesforce.com reporting continued growth. In its fiscal 2010, Salesforce.com reported revenue of US$1.66bn, up 27% from fiscal 2009. Meanwhile in H111, IBM unveiled new financing programmes for cloud application providers that wish to offer IBM software. Two financing and pricing programmes were available to help IBM business partners build their own cloud applications with IBM technology. IBM offered a range of low-rate financing and deferred payment terms to qualifying partners. IT Services The US IT services market is relatively fragmented with potential for consolidation. IT services vendors such as Accenture reported new revenue momentum in 2010 after a sharp deceleration in the previous year. Accenture reported growth in both consulting and outsourcing across a broad base of clients and industries. Consulting revenue, which had been most affected by the recession, bounced back in 2010, with companies looking for IT strategies based on datacentre consolidation, virtualisation and cloud computing, that could help them to reduce costs. Most IT vendors expected improved revenue in 2010 as clients ramped up spending. HP reported Q110 revenue for the Americas region of US$13.6bn, up 9% on the same period of 2009. In H209, the market had picked up, and HP reported solid fiscal Q409 results on the back of its services business. The company said that services had generated revenue of US$8.9bn for the quarter, up 8% on the same period of the previous year. Meanwhile, European IT services giant Cap Gemini reported 4% growth for its operations in North America in 2010. This was despite the fact that outsourcing, which comprises 43% of the company's local business, was down 20%, due in part to reductions of scope on many contracts. Cap Gemini remained optimistic, describing cyclical activities as very good and showing the rebound of the market. The global financial crisis had a sharp impact on IT services vendors in 2009. However, the impact seemed to have been relatively greater on Indian vendors such as Infosys and Tata Consulting Services (TCS), due to their generally greater proportionate exposure to the US financial services industry. The fall of Lehman Brothers and Merrill Lynch was ominous for Indian outsourcers that were highly exposed to the US market and financial services. Share of these companies had fallen by more than half by mid2009. US segment leaders such as Accenture and IBM generally saw revenue down between 10-15% in the first half of the year compared with 2008. The industry was looking to diversify away from financial services into more focus on opportunities in other sectors such as telecoms, healthcare, utilities and manufacturing. Globally, financial services accounts for about 20% of IT services spending, ahead of government, which is about 18%, and similar to manufacturing at around 22% according to market research firm IDC. © Business Monitor International Ltd Page 53 United States Information Technology Report Q1 2012 In the last few years there have been a number of acquisitions and merger deals. According to IDC there were about 230 such deals globally in 2007 in the software and IT services space. In October 2009, a computer hardware leader Dell made a US$3.9bn purchase of Perot Systems, while Xerox followed later in the month with its US$6.4bn acquisition of Affiliated Computer Services. One year into its Perot acquisition, Dell claimed that the arrangement was going well, with Dell's overall strength complementing Perot's specialisation in particular verticals. Key vertical targets for the combined business include healthcare, where Perot had 15 years of experience. The acquisition has resulted in Dell becoming one of the biggest global providers of healthcare IT, and Dell has subsequently moved to consolidate this position with some additive acquisitions. Dell is also targeting Education, where it sees strong growth potential, and in February 2011 the company reported an outsourcing deal with the Keller Independent School District. Meanwhile, HP has announced plans to divest all or part of its PC unit, in order to scale up its competition with IBM in software and technology services. After subtracting US$40.7bn in PC sales during 2010, HP reported revenue of US$85bn from its other segments in that year. This compared with US$99bn for IBM, but would have ranked HP above such rivals as Dell, which had US$61.5bn, and Oracle, with US$35.6bn. In its most recent quarter, HP reported US$9bn in revenue from its services division, almost as much as the PC division's US$9.6bn. Despite HP's ambitions, the services business has struggled to grow. In September 2009 HP changed the name of the EDS unit to HP Enterprise Services, and following the integration of the companies, sought to cut costs by slashing 19,000 jobs. The company said that the integration was ahead of schedule. However, the basic outsourcing services that EDS specialised in, is a flat area of the market, and there have been concerns that HP is missing out to rivals like IBM and Accenture on more profitable contracts. However, In the month of the name change, HP's EDS unit won a US$30mn contract from the US Department of the Treasury's Office of the Comptroller of the Currency to provide and maintain end-user computing resources and mobility services. Another factor set to shape the IT services market over BMI's five-year forecast period is the trend for leading niche IT market players to seek to evolve into full IT service companies such as HP and IBM. Business software major Oracle and networking equipment leader Cisco are moving on separate, but parallel paths to achieve this. © Business Monitor International Ltd Page 54 United States Information Technology Report Q1 2012 Company Profiles HP Services Technology services, consulting and integration. HP is organised into three main divisions: ƒ Personal Systems Group (PSG): Business and consumer PCs, mobile computing devices and workstations. Recent Developments ƒ Printing and Imaging Devices; Inkjet, Laser Jet and commercial printing. ƒ Technology Solutions: Software and managed services, EDS, storage and servers. In August 2011, HP announced plans to sell all of part of its PC division, to focus more on higher-value services. The divestment of its PC business would result in a much smaller and rather different HP. In the event of a sale, there are question-marks about the prospects for HP's successful printer business, in which it is market leader. Printer sales are often bundled together with PC procurements. However, the objective is to compete head on with IBM in software and technology services, which are seen as strategic growth areas. Despite its ambitions for its services business, growth has been relatively slow. In September 2009 HP changed the name of its EDS unit, created following the acquisition of fellow IT services leader EDS, to HP Enterprise Services. In the same month, the EDS unit won a US$30mn contract from the US Department of the Treasury. However, In FY10 most PC vendors saw shipments increase, as consumers and businesses proceeded with purchases delayed from 2009. HP exemplified the recovery trend experienced by most vendors, with a 12% rise in revenue from its Americas region in Q310 to US$14.2bn. However HP has struggled to compete with the all conquering iPad. In 2011, the company said that it had cancelled its short-lived TouchPad tablet following disappointing sales. Future Plans The basic outsourcing services that EDS specialised in, is a flat area of the market, and there have been concerns that HP is missing out to rivals like IBM and Accenture on more profitable contracts. This explains HP plan to focus more on services. The company has said that it sees significant opportunities to invest in innovation and sales to expand its portfolio and market coverage. HP also plans to improve margins in 2010 and to increase margins by leveraging a leaner cost structure, while continuing to invest for growth. Revenue After subtracting US$40.7bn in PC sales in 2010, HP reported revenue of US$85bn from its other segments in that year. In its most recent quarter, HP reported US$9bn in revenue from its services division, almost as much as the PC division's US$9.6bn. In 2010 HP reported net revenue of US$126.3bn, up 10% on the previous year. Presence 321,000 employees worldwide by 2008. © Business Monitor International Ltd Page 55 United States Information Technology Report Q1 2012 Sectors In 2010 HP reported US$40.7bn in revenue from its PC division. Revenue from other divisions were US$85bn. © Business Monitor International Ltd Page 56 United States Information Technology Report Q1 2012 Dell Services Manufacture, marketing and sales of computer systems and services worldwide. In December 2008, Dell announced that it was reorganising itself into four global business units: Recent Developments ƒ Large Enterprise, ƒ Public, ƒ SMEs, and ƒ Consumer. In October 2009, Dell made an offer to acquire IT services company Perot Systems. Dell expected the acquisition to close in Q409. The purchase should position Dell to grow by expanding its offering of IT services and solutions. Perot Systems will in effect become Dell's IT services unit. In Q309, Dell narrowly pipped HP for the market leader position, according to market research firm Gartner, taking 26.2% of the market to HP's 25.7%. In Q209, Dell beat HP into the US PC market leader position, according to market research firm IDC, taking 26.3% of the market to HP's 26.0%. However, Dell reported disappointing profit in Q309 of US$727mn, down from US$15.2bn in the same period of the previous year as margins came under pressure. Globally Dell has suffered in the US downturn from the deep cuts in corporate spending, as well as the transition away from desktops. Dell Americas revenue from the corporate segment declined 17% in value terms (and 23% in units) in fiscal 2009. These trends have reinforced the logic of the company's largely successful global transition towards a more retail-focused approach. In Q209, IDC reported that Dell achieved negative 18.9% shipments growth in the US market, compared with just -2.3% for major domestic rival HP. Dell has mounted a strong global comeback in the past couple of years, from declining unit sales, by moving aggressively into the retail segment. The company has thus moved away from its 'direct Dell' strategy of selling direct to customers. In the US the company has done this by developing partnerships with leading retailers such as Best Buy. This strategy has provided with a fresh source of growth during a slowing market, enabling it to recover some of the market share that it had lost to HP, as well as Asian challengers such as Acer, Lenovo and Toshiba. Revenue Dell reported revenue of US$61.6bn for FY09, unchanged from 2008. Net income, however, was US$2.5bn, down 16% from US$2.9bn in the previous year. Presence 76,500 employees. © Business Monitor International Ltd Page 57 United States Information Technology Report Q1 2012 Sectors Dell's commercial business serves large corporations, public customers such as government, education, healthcare and SMEs. In Q309, Dell continued to report a slowdown in most business segments. In Q309, Dell's global consumer business reported a 10% y-o-y increase in revenue, following a 32% increase in shipments. © Business Monitor International Ltd Page 58 United States Information Technology Report Q1 2012 Microsoft Services Software licences, support and services. Microsoft has five major business divisions: Recent Developments ƒ Client, which includes the Windows product family. ƒ Server and tools, which includes software server products, services and solutions. ƒ Online business services. ƒ Microsoft Business Division, which includes Microsoft Office and Microsoft Dynamics. ƒ Entertainment and Devices, which includes the Xbox video game system. Microsoft suffered a deceleration in sales of PCs bundled with its software in H109 owing to the economic slowdown. In July 2009, Microsoft posted declines in profit and sales for Q409, blaming the weakness in global PC and server sales. However, the fourth quarter brought some significant product milestones including the release of Windows Server 2008 R2, and the search engine Bing. We believe the release of Windows will provide a boost to Microsoft. The launch of Microsoft's Windows operating system was the most significant event for Microsoft since the launch of Windows 95. Microsoft has a lot riding on the new operating release, given perceived problems with its previous operating system Windows Vista, and also because of the continuing global challenge from open source. Windows Vista ran into problems when business users found that many of their business applications could not run on the Vista operating system. Microsoft has taken a couple of steps to fix perceived problems with Vista. Regarding the compatibility problem, Microsoft has tackled this with a free extension to Windows called XP Mode. This allows users to run Windows XP applications on Windows 7. Secondly, Windows will use less processing power and memory than Windows Vista. Revenue Microsoft's Q409 revenue were down by 17% y-o-y to US$13.1bn. In the fiscal year ending June 2009, Microsoft reported net revenue of US$58.44bn, down by 3% y-o-y. Presence As of June 2009, Microsoft had 92,736 employees, with 55,843 working in the US. Sectors Microsoft dominates the operating system segment but was threatened in 2007 with the emergence of the popularity of netbook computers. Most netbook computers originally came with open source Linux operating systems due to the heavy systems requirement of Windows Vista. Netbooks were therefore seen as a threat to Microsoft's revenue. However, Microsoft has fought back by allowing netbooks to ship Windows XP, bringing its market share back up. In the enterprise software segment, Microsoft competes with its Microsoft Dynamics suite of products. In April 2009, a survey by Panorama Consulting Group ranked Microsoft third in the © Business Monitor International Ltd Page 59 United States Information Technology Report Q1 2012 manufacturing and distribution industry's ERP segment, with a market share of around 14% © Business Monitor International Ltd Page 60 United States Information Technology Report Q1 2012 IBM Services Manufacturer, distributor and provider of advanced IT solutions including hardware, software, peripherals and data processing equipment. IBM has three main business segments: Recent Developments ƒ Global Technology Services. ƒ Global Business Services. ƒ Software. In 2008, IBM reported revenue growth of 5%, despite the economic slowdown, while pre-tax income also rose. Over 90% of segment profit in 2008 came from software, services and financing. Around 65% of IBM's 2008 revenue was generated outside the US. In 2008 the company invested US$6.3bn for 15 acquisitions, 10 of them in software. IBM also invested US$6.3bn in R&D. In 2009, IBM said that it had prioritised strategic investments in service-oriented architectures, business analytics and next generation datacentres, relying on these areas to drive growth in 2010. IBM expected 2009 pre-tax income for its software segment to grow at a double-digit rate to around US$8bn. Future Plans The company's goal is earnings per share of US$10-11 in 2010. Revenues In Q210, IBM reported total revenue of US$23.7bn, up by 2% y-o-y. Revenue for the Americas region, which includes the US, was up by 3% y-o-y. Presence 410,097 employees. Sectors In 2008, IBM reported the following results by division: Technology services revenue was up by 9% (6% adjusting for currency), pre-tax income up by 30%. Global business services revenue was up by 9% (5% adjusting for currency), pre-tax income up by 30%. Software revenue was up by 11% (8% adjusting for currency), pre-tax income up by 18%. Software pre-tax profit doubled over the five years to 2008, when they were US$7bn. © Business Monitor International Ltd Page 61 United States Information Technology Report Q1 2012 Country Snapshot: US Demographic Data Section 1: Population Population By Age, 2005 And 2030 (mn, total) Population By Age, 2005 (mn) 70-74 70-74 60-64 60-64 50-54 50-54 40-44 40-44 30-34 30-34 20-24 20-24 10-14 10-14 0-4 0-4 -15.0 -10.0 -5.0 0.0 Male 5.0 10.0 15.0 -30.0 -20.0 -10.0 0.0 2030 Female 10.0 20.0 30.0 40.0 2005 Source: UN Population Division Table: Demographic Indicators, 2005-2030 2005 2010 2020f 2030f Dependent population, % of total 33.0 33.0 35.2 37.5 Dependent population, total, ‘000 97,335 101,433 120,863 137,659 Active population, % of total 67.0 66.9 64.7 62.4 Active population, total, ‘000 197,593 205,284 221,682 228,530 Youth population*, % of total 20.7 20.3 19.4 18.1 Youth population*, total, ‘000 61,255 62,348 66,606 66,599 Pensionable population, % of total 12.2 12.7 15.8 19.4 Pensionable population, total, ‘000 36,080 39,085 54,257 71,060 f = forecast. * Youth = under 15. Source: UN Population Division © Business Monitor International Ltd Page 62 United States Information Technology Report Q1 2012 Table: Rural/Urban Breakdown, 2005-2030 2005 2010 2020f 2030f Urban population, % of total 80.8 82.2 84.9 87.0 Rural population, % of total 19.2 17.8 15.1 13.0 Urban population, total, ‘000 240,831 256,822 290,729 318,454 Rural population, total, ‘000 57,382 55,431 51,818 47,733 298,213 312,253 342,547 366,187 Total population, '000 f = forecast. Source: UN Population Division Section 2: Education And Healthcare Table: Education, 2002-2005 2002/03 2004/05 Gross enrolment, primary 99 98 Gross enrolment, secondary 95 94 Gross enrolment, tertiary 82 82 Gross enrolment is the number of pupils enrolled in a given level of education regardless of age expressed as a percentage of the population in the theoretical age group for that level of education. Source: UNESCO Table: Vital Statistics, 2005-2030 2005 2010 2020f 2030f Life expectancy at birth, males (years) 74.6 75.2 76.8 77.9 Life expectancy at birth, females (years) 80.0 80.6 82.1 83.3 Life expectancy estimated at 2005. f = forecast. Source: UNESCO © Business Monitor International Ltd Page 63 United States Information Technology Report Q1 2012 Section 3: Labour Market And Spending Power Table: Employment Indicators, 2001-2006 2001 2002 2003 2004 2005 2006 141,815 144,863 146,510 147,401 149,320 151,428 0.6 2.1 1.1 0.6 1.3 1.4 49.8 50.4 50.5 50.3 50.5 50.7 Employment, '000 135,073 136,485 137,736 139,252 141,730 144,427 – % change y-o-y -0.1 1.0 0.9 1.1 1.7 1.9 – male 72,080 72,903 73,332 74,524 75,973 77,502 – female 62,992 63,582 64,404 64,728 65,757 66,925 — female, % of total 46.6 46.5 46.7 46.4 46.4 46.3 Total employment, % of labour force 95.2 94.2 94.0 94.4 94.9 95.3 Unemployment, '000 6,742 8,378 8,774 8,149 7,591 7,001 – male 3,663 4,597 4,906 4,456 4,059 3,753 – female 3,079 3,781 3,868 3,694 3,531 3,247 4.8 5.8 6.0 5.5 5.1 4.6 2000 2007 2008 2009 2010 2012f 23,888 32,357 33,389 34,759 36,121 38,841 Poorest 20%, expenditure per capita 6,450 8,736 9,015 9,385 9,753 10,487 Richest 20%, expenditure per capita 54,703 74,097 76,461 79,598 82,716 88,946 Richest 10%, expenditure per capita 71,425 96,746 99,834 103,929 108,001 116,135 Middle 60%, expenditure per capita 19,429 26,317 27,157 28,271 29,378 31,591 Economically active population, '000 – % change y-o-y – % of total population – unemployment rate, % Source: ILO Table: Consumer Expenditure, 2000-2012 (US$) Consumer expenditure per capita f = BMI forecast. Source: World Bank, Country data; BMI calculation © Business Monitor International Ltd Page 64 United States Information Technology Report Q1 2012 Table: Average Annual Wages, 2000-2012 (US$) 2000 2006 2007 2008 2009 2010 2012f Total 29,120 34,798 35,997 38,006 39,906 41,718 45,396 Manufacturing 29,786 34,944 36,591 38,634 40,565 42,407 46,146 3.9 3.8 3.4 5.5 5.0 4.5 4.3 Total wage growth, % y-o-y f = BMI forecast. Source: ILO, BMI © Business Monitor International Ltd Page 65 United States Information Technology Report Q1 2012 BMI Methodology How We Generate Our Industry Forecasts BMI’s industry forecasts are generated using the best-practice techniques of time-series modelling. The precise form of time-series model we use varies from industry to industry, in each case being determined, as per standard practice, by the prevailing features of the industry data being examined. For example, data for some industries may be particularly prone to seasonality, i.e. seasonal trends. In other industries, there may be pronounced non-linearity, whereby large recessions, for example, may occur more frequently than cyclical booms. Our approach varies from industry to industry. Common to our analysis of every industry, is the use of vector autoregressions. Vector autoregressions allow us to forecast a variable using more than the variable’s own history as explanatory information. For example, when forecasting oil prices, we can include information about oil consumption, supply and capacity. When forecasting for some of our industry sub-component variables, however, using a variable’s own history is often the most desirable method of analysis. Such single-variable analysis is called univariate modelling. We use the most common and versatile form of univariate models: the autoregressive moving average model (ARMA). In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting. It must be remembered that human intervention plays a necessary and desirable part of all our industry forecasting techniques. Intimate knowledge of the data and industry ensures we spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not. Transport Industry There are a number of principal criteria that drive our forecasts for each transport variable: GDP Growth As transport activity is heavily influenced by real GDP growth, this factor is examined to ascertain its relationship with overall trade volumes. Projected GDP growth is calculated using BMI’s own macroeconomic and demographic forecasts. Real Trade Volumes The sum of imports and exports plays a particularly important role in developing countries with a small © Business Monitor International Ltd Page 66 United States Information Technology Report Q1 2012 domestic industrial sector. In particular, the focus is on goods, as services not employ transport. The volumes are forecast based on the following criteria: ƒ Trends manifested through historical data; ƒ The impact of future step changes to the economy (such as future membership of the EU or some other regional body). Port Traffic Port traffic levels act as a ‘second opinion’ on trade volumes. However, this check needs to be used with caution as trade values and volumes not always move over time in the same way. Market Share The market share of each mode (road, rail, inland waterway, coastal shipping) for future years is based upon: ƒ Trends in historical modal split data; ƒ Evidence of government policy favouring one or more modes over others; ƒ Government and or private sector investment plans in specific modes. Sources Sources used in transport reports include local transport ministries, officially released company results and figures, established think tanks and institutes and donor agencies such as the World Bank and the Asian Development Bank. © Business Monitor International Ltd Page 67 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... Monitor International Ltd Page 20 United States Information Technology Report Q1 2012 Market Structure (% Of Total IT Market) 2011e 2015f e/f = estimate/forecast Source: BMI © Business Monitor International Ltd Page 21 United States Information Technology Report Q1 2012 Market Overview – United States Government Authorities Government Authority National Telecommunications and Information Administration (NTIA),... includes 2,000 federal data centres © Business Monitor International Ltd Page 34 United States Information Technology Report Q1 2012 Federal IT Spending (US$bn) 2009-2010 Source: US Office of E-Government and Information Technology IT Spending By Federal Agencies 2009 Source: US Office of E-Government and Information Technology In full-year 2009, total IT spending including all federal IT investment... around 50% of Mexico's large companies have conducted cloud pilots In Chile, too, vendors have reported that large companies have been the most enthusiastic early adopters of cloud solutions © Business Monitor International Ltd Page 19 United States Information Technology Report Q1 2012 Usage of the cloud for information storage appears relatively low in the US and Canada compared with some other mature... 2011, of e/f = estimate/forecast Source: BMI 42.8%, which should rise to 58.5% by 2015 Broadband penetration in the United States was estimated at 28.1% in 2010, and is forecast to reach 32.5% by 2015 © Business Monitor International Ltd Page 14 United States Information Technology Report Q1 2012 Meanwhile, in Latin American markets, broadband penetration is on course to reach as high as 23.1% in Argentina... US Treasury is in charge of tax issues affecting the US industry, including such issues as R&D tax subsidies © Business Monitor International Ltd Page 22 United States Information Technology Report Q1 2012 The Office of E-Government and Information Technology within the Office of Budget Management is responsible for monitoring federal IT spending across federal departments IT Spending – 2009 (US$bn)... mature market with high penetration rates requires product and technology innovation to drive continued growth: the average US household has 2.5 PCs © Business Monitor International Ltd Page 24 United States Information Technology Report Q1 2012 Hardware BMI forecasts that the US computer and accessories market value will grow about 2.5% in 2012, with similar single-digit growth compared with 2011 We... spending as consumers grapple with runaway © Business Monitor International Ltd Page 17 United States Information Technology Report Q1 2012 inflation and the attendant erosion of real wages Meanwhile, following the Chilean earthquake, rebuilding began apace in H210 The largest IT market in the region is, vastly, the United States, with spending estimated at US$529.3bn in 2011, while Canada is a distant second... markets The Latin American IT market outlook remains positive with most markets receiving a ratings upgrade in Q11 2 Low PC penetration means continued growth potential in a region characterised by significant © Business Monitor International Ltd Page 10 United States Information Technology Report Q1 2012 income and geographic disparities In many markets, increased penetration of credit cards and credit availability... have concerns about an apparent escalation in drug violence, which may affect channel activities in some © Business Monitor International Ltd Page 11 United States Information Technology Report Q1 2012 regions of the country and increase operating costs In 2012, growth will likely be lower than in 2011, which was boosted by a 4.1% increase in the minimum wage, the first above-inflation increase for five... markets, with some vendors reporting a sharp drop in 2010 In 2010, Canadian netbook sales were down by around 25% compared with the previous year One additional pan-regional driver both of increased notebook sales and of lower prices is the move of telecoms operators into the PC retail space © Business Monitor International Ltd Page 18 United States Information Technology Report Q1 2012 Software is estimated . deadline: January 2012 United States Information Technology Report Q1 2012 © Business Monitor International Ltd Page 2 United States Information Technology Report Q1 2012 ©. United States Information Technology Report Q1 2012 © Business Monitor International Ltd Page 4 Table: Consumer Expenditure, 2000 -2012 (US$) 64 Table: Average Annual Wages, 2000 -2012. isolationist and protectionist modes. United States Information Technology Report Q1 2012 © Business Monitor International Ltd Page 9 United States Economic SWOT Strengths  The