Introduction:
In this first of two articles on the 2013 IDC Directions conference (March 5th in Santa Clara, CA) we report on the very impressive opening and closing keynote presentations. IDC Chief Analyst Frank Gens’ opening keynote presentation stressed the importance of the “3rd Platform,” examined public vs private cloud adoption, and the most likely corporate apps that would be moving to the cloud. Professor Robert Reich’s closing keynote speech provided insight and perspective about the U.S. and global economy.
Frank Gens on the Significance of the 3rd Platform (mobile, social, cloud, big data):
IDC asked IT executives and CIOs: “In 3 years, what % of your total IT delivery will be through some form of cloud (public and private)?” Survey results: 45.5% with Private Cloud at 65% and Public Cloud at 35%. The key message at this year’s IDC Directions conference was that CAGR for the 3rd Platform will be 11.7% over the next seven years (see chart below), compared to 0.8% CAGR for the 2nd platform.
Next, IDC asked: “How likely to move (any) IT workloads/apps to the cloud? (1 = not likely, 5 = very likely).” Answer: ~3.4 evenly split between public and private cloud as per the chart below which also depicts Cloud Services Spending in 2016.
Providing guidance to IT managers, Mr. Gens suggested a “Compete Checklist” for Chapter 2 of 3rd Platform deployments:
- Master the New Scale of Sales to IT CIOs and Line of Business (lOB) executives
- Build “Enterprise” Offerings on a Consumer base which should be offered first (Enterprise only IT offerings will be a niche market)
- Exploit Mobility Beyond Smartphones & Tablets, e.g. cloud connected cars, microscopes with network interfaces, other IoTs/M2M communications
- Expand Your Connections with Line of Business Executives who will be increasingly more responsible for IT purchases
- Develop an “Industry PaaS” (Platform as a Service) Cloud Strategy
- Expand Value from Silos to Mash-Up business solutions with multiple suppliers and technologies
- Prepare for the “Death” of Dedicated IT which will give way to cloud and shared IT models
- Follow (and Play a Key Role with) the Data for customers, which will result in market power
Robert Reich’s Key Points on U.S. and Global Economy:
- U.S. government sequestration (automatic government spending cuts) will continue at least till the remainder of this fiscal year (Sept 30, 2013). It’s likely to reduce U.S. GDP by ~0.5%.
- The U.S. government will shut down on March 27th (when current funding authorization ends) unless Congress agrees on new funding levels. Both parties in Congress say that they wish to avoid a government shutdown, but doing so will require cooperation that’s not occurred in a very long time.
- Austerity economics results in reduced government deficits, but also slows economic growth dramatically.
- U.S. GDP growth of only 1.5% to 2% will result in continued high unemployment.
- Median real wage is 8% lower than in 2000. As an example, the median wage of the largest U.S. company, Wal-Mart, is only $8.36 per hour.
- 8.3% of new college graduates are unemployed (higher than the overall U.S. unemployment rate of 7.6%). Many that have jobs are “underemployed” or not working full-time.
- Despite ultra-low interest rates, consumers have not been able to borrow as much as they’d like. That’s because banks don’t want to take on any more bad debt and many consumers don’t have a good credit rating.
- Housing has been buoyed by investors buying property to rent out, rather than by owners occupying the homes they’ve bought.
- No growth in Eurozone this year; most countries will be in a contraction or recession.
- Especially with new government leaders taking over, China’s economic data is probably not accurate. It probably overstates growth and other economic activities.
- (In response to a question) Corporate profits have been very high because “companies are doing more with less.” They lay off workers and cut costs to reduce expenses, but their top line is not growing very rapidly at all. Corporate profits are not likely to rise from here until GDP picks up, according to Prof. Reich
Analysis: Corporate profits cannot indefinitely grow faster than GDP growth or productivity. The theme of “doing more with less” (i.e. fewer workers doing more of the heavy lifting) is about played out. Companies won’t hire till they sense demand will improve, but that’s not likely anytime soon. As quoted in a recent New York Times article,
“There’s a fear that the economy is going to go down again, so the message you get from C.F.O.’s is to be careful about hiring someone,” said John Sullivan, a management professor at San Francisco State University who runs a human resources consulting business. “There’s this great fear of making a mistake, of wasting money in a tight economy.”
With uncertainty due to sequestration and a potential federal government shutdown on March 27th, we think U.S. companies will be very conservative in hiring as well as capital expenditures. We think profit growth will slow or even turn negative in coming quarters.
4 replies on “2013 IDC Directions-Part I: 3rd Platform, Cloud Spending & Apps, Global Economic Trends”
Thanks Alan for reporting on a conference that had quite a range of topics. Reich raises some interesting points. Try as I might, I couldn’t verify his claim about the media wage drop of 8% since 2000, other than on his web site.
Still, it feels like things are different than the past. The labor participation rate is at its lowest rate since 1981, which is at 63.5%.
https://www.virtus.com/blogs/details?story=9273§ion=265&year=2013
It seems like those who are working are working longer hours than ever and doing more tasks than ever. With the advent of always-connected technology and mobile apps (as described by the IDC data), the workday never ends for many of those who are working. The USA Today had an interesting article on this the other day [thanks Roger Bindl for pointing out this artice] and some of the implications, especially regarding how labor laws haven’t necessarily kept pace with the changes.
http://www.usatoday.com/story/news/nation/2013/03/06/mobile-workforce-all-work/1958673/
Great summary! Interesting IDC forecast on cloud spending vs in -house IT on 2nd platform. Did IDC talk about the impediments/barriers to cloud adoption? For example, lack of security (esp public cloud), no performance guarantees or QoS, availabily uptime issue (with many cloud outages in last 2 years), reliability, roaming for mobile access, etc.
Did Prof Reich talk about all those left behind by the so called economic recovery? Many workers have been displaced by machines & haven’t been able to find another job. Others have found their jobs have moved offshore. Many have dropped out of the workforce, as indicated by the labor participation rate lower now than at the bottom of the last recession! From this Sunday’s SF Chronicle:
Many left behind as Silicon Valley rebounds
http://www.sfgate.com/news/us/article/Many-left-behind-as-Silicon-Valley-rebounds-4343410.php
Yes, I agree that many displaced workers are no longer looking for jobs. We are in the 4th year of an “economic recovery” yet the labor participation rate has fallen to a 32-year low! The NY Times article I referenced stated: “Despite a slowly improving economy, many companies remain reluctant to actually hire, stringing job applicants along for weeks or months before they make a decision.” So I sympathize greatly with those that can’t find jobs & have quit looking!