Monday, July 31, 2006

Top 10 Pure-Play Foundries Forecast for 2006

IC Insights: The pure-play IC foundry market is forecast to surge 22% in 2006 as compared to worldwide IC industry growth of 8% (such high growth is a key reason Samsung has decided to enter the foundry market). IC Insights defines a pure-play foundry as a company that does not offer a significant amount of IC products of its own design, but instead focuses on producing ICs for other companies.

IC Insights' forecast of the top 10 pure-play foundries for 2006 is presented in Figure 1. As shown, nine of the top 10 pure-play foundry companies listed are based in the Asia-Pacific region. European-headquartered X-Fab, which is merging with 1st Silicon this year, is the only non-Asia-Pacific company in the ranking.

The pure-play foundry market has been dominated by the Big 4 players (TSMC, UMC, Chartered, and SMIC) over the past few years. In fact, TSMC is expected to register sales of greater than $10 billion in 2006 and keep its 50% marketshare. For all of 2006, the Big 4 companies are forecast to hold an imposing 84% share of the total worldwide pure-play foundry market.

IC Insights expects Chartered to be the third-ranked foundry in 2006, one position up from its fourth place finish in 2005. Overall, Chartered has done an excellent job over the past two years in establishing important business and technology (e.g., IBM) alliances. Currently, it is ramping MPU shipments for AMD as well as increasing output of video game processors for Microsoft’s X-box machines. Moreover, Chartered is expected to begin producing high volumes of leading-edge devices for TI beginning in 2007.

As shown, there are four Chinese foundries in the top 10 ranking. Other major Chinese foundries (not in the top 10) include ASMC, Grace, and CSMC. In total, the Chinese foundries held 12.4% of the pure-play foundry market in 2005, up from only 4% in 2002. However, in 2006, IC Insights forecasts that the Chinese foundries will only slightly increase their marketshare to 12.6%. As the Chinese foundries have moved from the explosive growth of the startup phase to the more moderate growth rates typically encountered by established companies, any future total marketshare increases are forecast to be at a very moderate pace.

Figure 1

McClean Report Publ 20060803

1H06 Top 15 Semiconductor Supplier Ranking Released. TSMC jumps to fourth; Fabless supplier Qualcomm breaks into Top 15

IC Insights:1H06 ranking of the worldwide top 15 semiconductor suppliers (Figure 1). As shown, pure-play foundry TSMC, which ranked eighth in the full-year 2005 listing, moved into the fourth position in 1H06. Further illustrating the success of the foundry business model, for the first time ever a fabless semiconductor supplier (Qualcomm) moved into the top 15 ranking. In total, the top 15 semiconductor companies' sales increased only 1% in 2Q06 as compared to 1Q06.

Figure 1

Caused in part by their on-going price war, Intel and AMD registered the largest 2Q06 sequential sales declines of any of the top 15 semiconductor suppliers. It should be noted that although Intel and AMD each displayed significant 2Q06 sales declines, IC Insights expects full-year 2006/2005 semiconductor sales at Intel to be down at least 10% while AMD is on pace for a 42% surge.

As shown in Figure 1, Freescale (ranked tenth in 1H06) and Philips (ranked eleventh in 1H06) were essentially tied in 1H06 semiconductor sales with only $1 million difference between the two! However, using the 3Q06 outlooks from Freescale and Philips, in addition to IC Insights' estimates for fourth quarter revenue, Philips is expected to finish 2006 ahead of Freescale in semiconductor sales and hold the tenth position.

One of the hottest applications for semiconductors in the first half of 2006 was for cellular phones. In fact, IC Insights forecasts that worldwide cellular phone shipments in 2006 will reach about 950 million handsets, up 18% over 2005. As shown, CDMA/WCDMA semiconductor supplier Qualcomm took advantage of the strong cellular phone market to move into the 1H06 top 15 ranking. Moreover, IC Insights estimates that Qualcomm's full-year 2006 semiconductor sales will reach at least $4.5 billion, up 30% from 2005.

As compared to the full-year 2005 top 15 semiconductor supplier ranking, the top three positions are highly unlikely to change when the full-year 2006 results are posted. However, the number 4-6 positions are truly up for grabs this year. In 1H06, less than $60 million separated the fourth ranked supplier, TSMC, from the sixth ranked company, ST! As mentioned, there will also be stiff competition for the tenth spot between Freescale and Philips.

When incorporating the top 15 companies' outlooks for 3Q06, coupled with IC Insights' estimates for their 4Q06 sales, the top 15 semiconductor companies are on track to post an 8% increase in 2006/2005 semiconductor sales. This figure matches IC Insights' 8% forecast for total 2006/2005 worldwide semiconductor sales growth. 1H06 ranking of the worldwide top 15 semiconductor suppliers Publ 20060731

Carriers look to VoIP to generate new revenue

Infonetics: Threatened by falling income from traditional phone service, more and more service providers are looking to voice over IP to help them beef up revenue generation

83% of the North American, European, Asia Pacific, and Central and Latin American service providers interviewed by Infonetics rated the availability of new applications and services the highest among drivers for adopting VoIP products, confirming that new revenue is the main reason they are migrating circuit-switched voice networks to packet networks.

No longer is VoIP being offered only by specialist providers and VoIP pioneers, but by all types of providers in all regions of the worled, provider VoIP, IMS, and FMC. Next gen voice services have elevated from lab curiosity to market reality. Still, this will not be an overnight process; replacing installed legacy gear in high teledensity areas like North America and Western Europe will take at least 10 to 15 years. In these areas, many carriers are letting their legacy equipment slowly churn while using VoIP now as an augmentation or an alternative, or when more capacity or expansion to a new location is needed. Meanwhile, new entrants to the VoIP market and incumbents in regions like Eastern Europe and South East Asia that are bringing teledensity up to average levels are deploying next gen voice as their primary platform.

  • Top 3 drivers cited by service providers for deploying VoIP: new applications and services, capex savings, and opex savings

  • #1 barrier: equipment interoperability

  • Service providers expect both incoming and outgoing VoIP traffic to nearly double over the next year, with international long distance traffic growing the fastest

  • SIP is becoming the leading protocol for communication between softswitch/voice application servers and media servers, reaching 100% penetration among respondents by 2007

  • Top rated benefit to deploying IMS-compliant equipment: ease of new service creation

  • Top rated barriers to deploying IMS-compliant equipment: the complexity of multimedia services and the lack of consensus on the definition of IMS architecture

  • Top strategies for offering fixed mobile converged (FMC) services: using SIP signaling to dual-mode handsets, integrating wireline and mobile services, and using IP core to transport voice between mobile switching centers

Service Provider Plans for Next Gen Voice & IMS Publ 20060731

Saturday, July 29, 2006

There Will Be Room for Both Wireless USB and UWB Bluetooth

ABI: Certified Wireless USB and UWB Bluetooth offer differing opportunities for vendors aiming at mass markets for devices using short-range connectivity. Will they have to choose one or the other? There will be room for both. The application protocols that will run over WiMedia solutions are one of the most interesting and hotly contested areas in the short range connectivity market place today. Startups in this market are moving to all-CMOS implementations in order to drive down the cost of devices and stimulate volume growth. Unfortunately the result is that they need to realize volume shipments within a small window of time, since the margins per chip are extremely low. In essence, UWB vendors need to secure a vehicle to mass market and both Bluetooth and USB hold the key to that door in the form of cellular handsets and the PC peripheral markets, respectively. So is it really a question of one over the other? Timing and potential are the critical notions in understanding this question. W-USB is here today and commercial product launches are imminent. Bluetooth over WiMedia is still two or three years away. The Bluetooth market realized 317 million unit shipments of ICs in 2005 and is set to reach over 500 million in 2006. But the USB market realizes an installed base in the billions of ports. This pattern of size and timing clearly illustrates that things are in the balance. W-USB will enable start-up IC vendors to carve out significant niches for themselves. Broad-line IC vendors will crash in as UWB hits the handset market with a vengeance, a development which will coincide with Bluetooth ratification of the high data rate standard. There will be room for both, especially in recognition of the ability of WiMedia to support multiple application protocols on the same IC. Ultrawideband: WiMedia, DS-UWB, or CWave? Publ 20060729

Friday, July 28, 2006

NAND Market Prepares for Growth

Semico: First-Quarter Price Collapse a Mere Bump in the Road! After a phenomenal first-quarter price collapse, the NAND market is preparing itself to break all revenue records in 2006. Even though prices plummeted over 50% in the first quarter, this market's stunning growth will allow it not only to meet 2005's amazing $11 billion in sales, but will support a full 44% growth to record-breaking revenues of over $16 billion. Although many have used the Q1 price fall as an excuse to trim their forecasts to relatively modest growth rates, our data shows that the balance of 2006 will experience very strong growth. This growth will not only allow NAND to overcome the first-quarter setback, but will turbo-boost the market to higher sales than ever before! The NAND market, the fastest-growing semiconductor market in history, has enormous price elasticity: As prices drop more new applications adopt the technology. This allows NAND to displace existing forms of media, fostering accelerated growth. This not only affects existing suppliers: Samsung, Toshiba, SanDisk, Renesas, and msystems, but also the emerging suppliers: companies like Hynix, STMicroelectronics, Micron Technology, and Qimonda (Infineon's memory spin-off). Meanwhile the card suppliers: like Lexar Media, Kingston, Viking Technologies; camera companies, like Nikon, Olympus, Kodak, Canon, & Fuji Film; MP3 Player companies like Apple, Creative, and Sony, and some of their suppliers like SigmaTel, all have to wait and hold their breath trying to anticipate what the NAND business will do next. Over the course of the forecast year Semico's quarterly flash forecasts hovered within 4% of actual revenues in 2003, within 13% of actual in 2004, a year marked by a 65% NAND price collapse, and within 12% in 2005. NAND Prices Stable-Growth Ahead: Second Quarter 2006 Pricing & Forecast. Publ 20060728

Innovative Technologies to Drive Mobile Marketing in Asia-Pacific

Frost: Mobile marketing services are an emerging but fast-developing segment in Asia Pacific, driven by the introduction of numerous enabling technologies. Mobile phones are increasingly ubiquitous and the penetration rate continues to grow at a phenomenal rate across the region, making this an excellent and much sought-after marketing and promotions channel for companies.

Since mobile devices are normally switched on and connected to the communications network, they provide marketers with the opportunity to communicate spontaneously with consumers,.

When integrated into a cross-media marketing communications campaign that uses multiple channels combined with print or TV, marketers gain a flexible new medium to target consumers that is likely to be more effective than using a single medium.

Mobile phone camera-based information search services are one of the most noteworthy developments that are rapidly gaining popularity in Asian countries. These solutions provide customized content to phone users by recognizing codes or images at the mere click of the phones’ camera. One such innovation is the ColorCodeTM solution developed in South Korea which is driving the growth of these information search services.

The ColorCodeTM solution is ideal for promotional offers and discounts advertised in print and electronic (television) media. Not only does its colorful coding structure make an appealing design statement, it also serves as a sophisticated system of recognition that allows users to keep track of and access various promotions and discounts.

With ColorCode’s vibrant coding structure disguised as design and the flexibility it allows in choosing the print medium, this revolutionary solution has a large market potential, particularly in developed countries.

Another emerging and highly promising development is bCODE’s electronic ticketing solution based on standard text messaging through SMS (short message service). It allows consumers to have paperless tickets delivered to their mobile devices instantly, thereby eliminating the need to wait in queues. This solution is also supported by the majority of mobile phones available today, including personal digital assistants (PDAs), Blackberries, Palm Treos and Apple iPODs.

This gives it a strong advantage over the barcode solution which is supported by a limited number of phones and has compatibility issues on different devices, thus requiring customization of the barcode format. The bCODE solution is also far simpler to use, delivering tickets in plain text message, and works on any device that displays text messages.

We expect mobile marketing to eventually converge with other services such as mobile ticketing, resulting in a more comprehensive solution. Such integrated solution will not only capture data using mobile phone cameras and pull related content onto the phone screen, but will also be capable of sending paperless coupons or tickets to the user related to the images or color codes captured by the camera phone.

The Mobile Innovations from Asia Pacific Publ 20060728

Thursday, July 27, 2006

Quadruple play and service bundling will not work for all service providers

Visiongain : While service providers are hoping to build on their success with two-play by deploying triple and quadruple play packages, this approach will not work for all providers.

For instance, almost half of all North American households subscribed to some type of bundled service in 2005. Two-play services accounted for 40% of all households, while those subscribing to triple play accounted for only 9.5% and a mere 0.4% of all households subscribed to quadruple play services. However, competitive pressures will accelerate the uptake of triple and quadruple play from 2008 onwards.

This contrasts sharply with visiongain’s estimates of triple and quadruple play uptake in developing markets. In the Middle East and Africa, for example, only 0.3 million households will be subscribing to triple play by 2009, and only 0.1 million to quadruple play. This compares to over 96 million households that will still be without a service bundle. Service providers are increasingly looking at bundling as a means of reducing churn and increasing revenue. However, these service providers also face significant hurdles along the way.

Bundles that include IPTV are not suited to all markets and service providers should focus on adding value to their existing services before embarking on significant expenses that may not yield the expected financial rewards.. Quadruple play and service bundling strategies: 2006-2011 Publ 20060727

Home Office Households Set the Stage for U.S. Consumer VoIP Adoption

IDC: Home office households have historically been early adopters of advanced technology, and this pattern continues with VoIP communications. The number of U.S. households with income-generating or corporate home offices are more than twice as likely to implement VoIP in the next 12 months compared with households in general, a new IDC study reveals. Currently, 39.1% of corporate home offices and 23.7% of home-based businesses are interested in or using VoIP. In contrast, only 10.8% of households without home offices are VoIP aware.

Home offices will adopt VoIP communications at a faster rate than U.S. households overall. Although cost savings are important, features such as convergence with mobile phones will be increasingly important to home offices in the long run.

Among other key findings of the study are the following:

  • Although VoIP has moved beyond the very earliest adoption stage, many home office households are reluctant to use VoIP as their only telephone service, and rather add it as a second method of communication.

  • Savings on long distance continue to be the key driver of initial interest in VoIP by home offices.

IDC study, Home Office Households Set the Stage for Consumer VoIP Adoption Publ 20060726

Top 12 IT Vendors Dominate 30% of Western European Retail and Wholesale Industry IT Spending

IDC: In the Western European retail and wholesale sector competition is heating up. Estimates that the top 12 IT vendors accounted for approximately 30.2% of the total Western European retail and wholesale industry IT spending during 2005, while the market leader, IBM, achieved more than $2.9 billion in revenue in the sector.

IBM stands out as the leading IT vendor in the sector during 2005, while 2006 will prove to be an interesting year to assess the outcome of IT vendors' strategies for the Western European retail and wholesale industry. The common foundation in each IT product area is that the higher the retail vertical alignment the stronger the retail market success.

Wincor Nixdorf is at the top in terms of percentage of revenue achieved in the Western European retail and wholesale sector. SAP and Accenture stand out as the top software vendor and the top IT services vendor in the sector.

With an expected CAGR of 7.0% for software and 5.2% for IT services, for an overall IT spending CAGR of 4.8% from 2006 to 2010 for Western European retail/wholesale, competition is heating up as global IT vendors and best-of-breed retail solutions providers refine their vertical solution offerings, sales policies, marketing, and partnership strategies to capitalize on these opportunities. Growth opportunities for global and specialized hardware, software, and IT services vendors are increasing, and the overall market size is one of the most attractive from a vertical market perspective.

  • Total Western European retail and wholesale sector revenue.

  • Percentage of Western European retail and wholesale sector revenue over total Western European revenue of each vendor.

  • Vertical alignment of go-to-market approach. Vertical alignment was evaluated through the combined scoring of five elements of go-to-market strategy in the retail and wholesale sector: vertical solution offering, marketing message, partnerships, stronghold in Europe, and sales organization.

Western Europe, Retail/Wholesale Sector, 2006, Top IT Vendors Competitive Assessment Publ 20060727

Manufacturing and Foreign Investment Drive Resurgence of Czech EAS Market

IDC: After two years of relatively slow growth, the Czech market for enterprise application software (EAS) expanded by more than 24% in 2005 to surpass $105 million in license and maintenance revenue. The near doubling of foreign direct investment and a booming manufacturing sector strengthened the economy and fueled investments in EAS solutions. With large and very large enterprises already well equipped with EAS, most vendors focused on scaled-down products aimed at the small and medium-sized enterprise segment, where opportunities abound.

Vendors benefited from the thriving economy, with the top 5 enjoying revenue surges of between 15% and 60%. SAP again dominated the Czech EAS scene, capturing more than half the market. However, other top vendors managed to eat away at SAP's market share, with second-ranked Microsoft Dynamics, third-ranked LCS, and fourth-ranked QAD all outperforming SAP (and the total market) in terms of revenue growth. Fifth-ranked Oracle also experienced healthy growth. Together, the top 5 vendors accounted for nearly 78% of the market.

The rising economic tide of the Czech Republic does not lift all ships, and competition is fierce. The top 5 vendors have slightly increased their market share, leaving less for the smaller vendors. With SAP moving into the midmarket, niche and smaller vendors face tough times ahead, even as the market continues to expand.

Discrete manufacturing was the largest purchaser of EAS in the Czech Republic in 2005 and process manufacturing was second. Moreover, spending on EAS among discrete manufacturers rose year on year, with the automotive industry jumping by more than 24% and industrial machinery and equipment manufacturers soaring by almost 47%. Process manufacturers also dramatically increased their EAS investments in 2005, with the primary and fabricated metals sub-segment shooting up by 37% and the chemicals and allied products sub-segment by more than 52%. The utilities sector was the third largest vertical last year, sustained by a large installed base. Together, these three sectors accounted for 47% of spending on EAS in the Czech Republic in 2005.

In terms of EAS investments, the manufacturing sphere was the hottest show in town last year, but it was by no means the only show. The central government returned with a bang by more than doubling its EAS investments in 2005. Spending among wholesalers jumped by more than 42% and among retailers by more than 35%. Smaller vendors not present in at least some of the major verticals will face an uphill battle for customers and might consider forming an alliance with a player with a complementary portfolio or working to establish themselves as preeminent in a given vertical.

Functional spending reflected the vertical pattern of investments in the Czech Republic in 2005. While enterprise resource management (ERM) was again the largest EAS area in terms of vendor revenue, supply chain management and operations and manufacturing applications revenue expanded the fastest.

The influx of foreign capital and foreign ideas, as well as the extension of supply networks across national and regional borders, has heightened the necessity for ERM solutions to help manage or facilitate EDI communication or manufacturing practices and processes such as lean, just-in-time, and kanban. The smart vendors are working more closely with customers and industry bodies to ensure their solutions help meet vertical compliance needs, thus serving a double purpose of satisfying clients while also deepening vertical expertise, something essential for winning new business.

Czech Republic Enterprise Application Software 2006–2010 Forecast and 2005 Vendor Shares Publ 20060727

Small But Growing Band of Cable Operators Trying to Fight Fire with Fiber

ABI: Inspired—or alarmed—by the rate at which telecom operators in many global markets are deploying fiber-to-the-home networks, an increasing number of cable operators are doing the same. Selected operators in specific markets are starting to build fiber extensions to their core networks, allowing them to offer more interactive services and get around the limits of coaxial networks. On-demand environments for cable TV networks are not particularly robust compared to what the telecom operators can roll out. Looking to the future, some cable companies see fiber as a means to offer advanced video services that they are hard-pressed to provide today. Cable operators in the US and parts of Canada, Western Europe, Japan and a few other regions have core networks that are fiber-rich already. Extending the network to the home is a logical progression, but one that makes the best economic sense in new developments under construction where they would be constructing a coaxial network anyway, rather than in trying to retrofit older neighborhoods. It is also, by and large, smaller operators, with fewer homes to reach, that are choosing this path. Recent examples include City Cable Shunan, a Japanese cable TV operator in the Yamaguchi prefecture that is building its FTTU (fiber to the user) network using Alcatel equipment; Cable One, the tenth largest cable operator in the United States, that is deploying fiber in Albuquerque, New Mexico using Wave7 products; and Cable Bahamas. The Worldwide FTTH Market, and IPTV: How IP Video Will Drive BPON, EPON, GPON and Active Ethernet Deployments Publ 20060726

iTunes Could Be Apple's 'Trojan Horse' in the Home Audio-Video Market

ABI: Apple's iTunes service has the potential to outstrip its formidable iPod business and may allow it to enter the home audio and video markets ahead of its competitors. Apple released its latest earnings statements last week, and surprised the markets with the continuing depth of its iPod penetration, which exceeded most analysts' expectations. Sales of iPod accessories, both from Apple and from third parties such as Bose and JVC, are booming as well, including high-quality home docking station systems. The battle for portable devices has already been won by iPod (unless Microsoft's strategy for its Zune platform succeeds) but in the home and mobile markets, the prize is still up for grabs. iTunes could be a ‘Trojan Horse' through which Apple can enter the home market sooner than the competition. The key to this opportunity is consumers' growing interest in digital media connectivity in the home. I think we will soon see more line-powered consumer audio devices—high-end audio devices with AV receivers, and multi-room audio systems—adding support for iTunes to their current support for iPod. With over a billion files downloaded from iTunes so far, computers all over the world are brimming with music, speech and video, often organized by iTunes client software into playlists and catalogues. Leveraging all that content, which users have already paid for and want to hear on a good home audio system or watch on a digital-ready TV, creates a huge opening for consumer electronics vendors. That could happen through a standard personal computer. Or, it could be implemented through a dedicated media center PC. Apple offers this already with the combination of its Mac Mini (now Intel-based) and Front Row networking software; and now, Sistla affirms, The field is wide open for PC manufacturers and other vendors of home CE systems to capitalize on what should be a large and dynamic market. Home and Portable Audio Device Markets Publ 20060727

Telecom service provider capex hits $202 billion,revenue $1.2 trillion in 2005

Infonetics:For the third year in a row, telecom service providers worldwide increased their capital expenditures, albeit slightly, and will continue to do so for the next 3 years.

Worldwide, service provider capex topped $202 billion in 2005, and is expected to increase to over $236 billion in 2009. In that 5 year period, service providers will allocate a total of $1.1 trillion to capex.

Collectively spending over a trillion dollars in 5 years sounds like a lot of money, but it’s actually significantly less than it would be if there weren’t so much consolidation going on. The number of providers is decreasing due to mergers, which is increasing the economies of scale for the combined entities, resulting in considerable capex savings. This is why overall capex growth is slow now.

Service provider revenue is also expected to grow at a modest rate over the next 5 years: from $1.2 trillion to $1.4 trillion between 2005 and 2009, representing a 4% compound annual growth rate. Measured revenue growth like this is typical for a commoditized market.

The incumbents’ share of worldwide service provider revenue will increase over the next few years at the expense of the competitives, because mergers among incumbents are lowering price competition and customer churn, continued Téral. At the same time, they’re adding new IP-based services like IPTV, driving revenue up. Offering new media-rich bundled services like IPTV, video on demand, video telephony, and FMC is the only way to thrive in the highly competitive telecom environment. All these new services are software intensive and require only a minimum investment. Since incumbents have a large footprint, even minor revenue increases are driving up their share of the worldwide market.

  • North American service providers are expected to increase their capex by 4% between 2005 and 2006, EMEA providers 15%, Asia Pacific providers 2%, and CALA providers 22%

  • Worldwide broadband subscribers (DSL, cable modem, PON, and Ethernet FTTH subscribers combined) hit 176 million in 2005, and will grow to 350 million by 2009

  • DSL subscribers account for 71% of all broadband subscribers, cable for 26%, PON for 2%, and Ethernet FTTH for 1% in 2005

  • Asia Pacific accounts for 37% of worldwide broadband subscribers, EMEA for 30%, North America for 27%, and CALA for 5% in 2005

  • Worldwide mobile subscribers reached 1.7 billion in 2005, and will grow to 2.9 billion in 2009

  • Asia Pacific is the leading region for mobile subscribers, accounting for 45% of the worldwide total in 2005, followed by EMEA with 39%, North America with 10%, and CALA with 6%

Service Provider Capex, Revenue, and Subscribers Publ 20060727

DVR and VOD Users and Usage Continue to Grow. But on-Demand TV Still Has Minor Impact on Total TV Viewing

LRG: US. The number of Digital Video Recorder (DVR) and Video-on-Demand (VOD) users have significantly increased in recent years. Sixty percent of all digital cable subscribers have used VOD – up from 25% two years ago, and about 12% of households in the United States now have a DVR – up from 3% just two years ago.

However, the overall impact of DVRs and VOD on US television viewing remains small. LRG estimates that less than 4% of all TV viewing in the US today is of recorded DVR programs or on-Demand viewing – up from about 2% a year ago.

These findings are based on a survey of 1,350 households throughout the United States, and are part of LRG’s study, On-Demand TV 2006: A Nationwide Study on VOD and DVRs. Publ 20060727

Wednesday, July 26, 2006

Global Wireless Home Device Sales To Reach 314 Million Units By 2010. Major New Digital Device Opportunity Lures Technology Vendors

Strategy Analytics: The increasing use of broadband wireless home networks will lead to the adoption of a multitude of new wireless home devices over the next 5 years, Consumers worldwide will buy nearly 950 million wireless home devices, such as games consoles, wireless MP3 players and connected TVs, over the next five years.

Leading edge broadband users are keen to make the most of their service by connecting multiple devices to their home network. Wireless is used on the PC first, but we fully expect many other digital devices to follow the same path to wireless connectivity.

Strategy Analytics' vision of the digital home is one where a variety of digital devices use wireless home networking technologies to seamlessly interact with each other and with the available broadband and digital services. The arrival of the first wave of wireless home devices is a signal that this vision is on the way to becoming realized.

Report assesses the global market opportunity for four key wireless home devices segments: home PCs, TV devices, portable media devices and mobile phones. It also examines the forthcoming transition from current WiFi technologies to next-generation MIMO and 802.11n and provides detailed forecasts for these technologies. Annual demand for MIMO and 802.11n devices will reach 134 million units by 2010.

Undisplayed Graphic

Wireless Home Devices global Market Forecast, Publ 20060726

Substantial Market Expansion for U.S. Wireless Cellular TV and Video Content and Services

IDC: About 24 million U.S. cellular subscribers and customers will be paying for some form of TV/video content and services on their mobile devices by 2010, up from about 7 million this year. This growth presents new revenue opportunities for carriers, handset developers, and content providers. IDC expects mobile commercial video and television content and services to emerge as a key component of U.S. carrier data services if delivered and priced appropriately.

Although our research found penetration of these services isn't likely to exceed 10% of all subscribers by 2010, video/TV services are poised to become a significant contributor to carrier data ARPU while emerging as a hotbed for community-oriented interaction and interesting advertising experiments. Broadband adoption of video/TV services is emerging as the cornerstone of growth in this market.

Overall, blended cellular TV video/TV content and service ARPU is expected to settle in at about $6.50. This metric is comprised of three elements: a la carte content purchases, narrowband (i.e. 2.5G) subscriptions and broadband (i.e. 3G) subscriptions. Within this mix, broadband video/TV services should grow from less than half of all revenues last year to about 85% of the total in 2010, with a substantially above average ARPU. Survey data suggest that a mix of on-demand clips and live streaming content is the most appealing to consumers.

However, uneven operator broadband network deployments, handset limitations, business model complexities, and indirect competition will continue to hamper adoption and growth of these services. Thus, while this market is receiving an amazing amount of interest from media companies and consumer brands, it will likely be several years before the opportunity to leverage mobile video/TV services as an interactive advertising channel will emerge in a profound manner.

U.S. Wireless Cellular Television and Video 2006-2010 Forecast: Grand Visions for the Small Screen Publ 20060725

Value Added Managed Services to Drive the Overall Growth of the Market in Asia/Pacific excluding Japan

IDC: Value added managed services (VAMS) are expected to drive overall growth and unveil opportunities for vendors. VAMS, such as managed converged networks and hosted application services, are expected to grow by 18.5% in 2006 reaching US$6.4 billion. The overall enterprise managed services market is growing at a CAGR of 16.3% with an estimated value of US$17.8 billion in 2006.

Asian enterprises are faced with a twin problem of lowering cost of running an IT infrastructure and keeping abreast with ever changing technology. A well crafted managed services strategy and proper due diligence in selecting a managed service provider can go a long way in resolving these problems.

  • Emerging managed services such as managed security, managed converged networks and managed mobile solutions have gained most traction. Enterprises in Australia, Korea and Singapore are usually early adopters of such emerging services and their behavior usually predicts the future trend in the region.

  • PRC, Malaysia, India and Thailand are expected to lead growth in 2006. These emerging markets will experience high growth rates in managed networks as enterprises in these countries slowly warm to the idea of engaging an external third party to manage their networks. Moreover, these countries are turning to managed services to alleviate the growing pains brought about by increasingly complex networks as a result of the infrastructure build up over the past years.

  • Managed network services will continue to be the largest VAMS engagement in 2006. IDC expects growth in 2006 to be close to 18% reaching US$2.7 billion. Web hosting, managed application performance and hosted application management will follow with value worth US$870 million, US$565 million and US$485 million respectively.

Asia/Pacific (Excluding Japan) Managed Services Market by Country Forecast, 2006 Source: IDC, 2006

Source: IDC, 2006

Asia/Pacific (Excluding Japan) Enterprise Managed Services 2006-2010 Forecast Publ 20060726

Consumer Electronics Manufacturers’ Retail Strategies Could Be Risky

ABI: Major manufacturers of consumer electronics equipment are embarking on a strategy that will disrupt traditional CE retail networks, and may expose them to new risks, . Companies such as Sony, Dell, Bang & Olufsen, Philips, and Pioneer are establishing chains of own-brand retail stores and kiosks. Apple went down this road years ago: today it has about 125 Apple stores worldwide, which account for about 20% of the company's revenue. Dell has over 160 kiosks in malls. Sony is partnering with Zoom Systems to deploy vendor kiosks, targeting virtually all the leading malls in the US. OEM storefronts and kiosks represent a major change that will disrupt the current retail ecosystem. Bypassing their existing distributors and retailers could prove successful for some, but might present challenges for others. Their motives are clear. Most of these vendors already have significant online sales, and want fresh fields for expansion. They can provide a richer and more customized experience for shoppers than the major retail chains can. They can control and protect their brands: if consumer demand falls, an OEM can take more effective countermeasures via its own outlets, while maintaining better control of margins. And if appropriate, they can partner with other vendors to offer complementary products and accessories. But there are risks as well. For example, retailers' stock prices are partly determined by their bricks-and-mortar performance. Wall Street sets share prices using parameters such as the number of stores added or shut down, and how much revenue per consumer the stores generate. By opening their own stores, OEMs—which were previously rated on their ability to design and make innovative CE products—subject themselves to new kinds of judgment from financial markets. OEM-owned outlets represent permanent cost centers, and must perform well year-in and year-out. Stores mean ongoing operational costs as well as infrastructure, . Anybody can make money when times are good, but when economies contract, retailers are the first to be tested. Some will remain profitable, others may not. With this strategy, OEMs may be trying to 'boil the ocean.' CE OEMs Launch Disruptive Retail Strategy: Their Own Storefronts Publ 20060726

Steady Growth in Data Services Amidst Intense Price-play and Bandwidth Glut

Frost: The Asia Pacific international data services market is being driven by the region’s strong economic growth, as well as its business connectivity needs backed by a stable political environment. The establishment of regional bases by multinational corporations (MNCs) in these growing economies is further fueling the demand for international data services.

Other factors contributing to the growth of this market include the expansion of Asian enterprises beyond their home markets as well as the booming Internet and broadband sector. International private leased circuit (IPLC) services remain the most popular data offering, while fast growing IP VPN (Internet protocol virtual private network) is posing a threat to traditional services such as ATM (asynchronous transfer mode) and frame relay.

Enterprises seeking convergence of voice and data networks to run bandwidth-intensive applications are driving the demand for data services. Having overcome technological maturity and security concerns, IP VPN has managed to attract subscribers of traditional data services to migrate to this technology. In relatively developed markets such as Hong Kong, Japan, Singapore and South Korea, carriers are aggressively promoting this service and mass migration is expected within the next two years.

Despite the promising growth, the Asia Pacific data services market remains price sensitive. In the wake of growing competition in a bandwidth glut environment, some service providers are offering large discounts on pricing. Taking advantage of this, enterprise customers are able to negotiate better discounts based on the duration and value of contracts.

While the international data services market in Asia Pacific is experiencing steady growth in demand, the price war due to bandwidth glut on most international routes has persisted, explains Baidya. Enterprise customers are also demanding the bundling of more value-added services.

Service providers need to focus on differentiating themselves amidst commoditized data connectivity services. Adopting a more consultative selling approach, service providers are today offering customized end-to-end solutions in every type of service and at every level sought by customers. In an effort to create service differentiation, a handful of regional carriers have introduced international Ethernet services in late 2005, which is seen as an ideal and cost-effective choice for extending enterprise customers’ domestic Ethernet circuits to other cities in the region

Asia Pacific International Data Services Pricing Analysis 2006 Publ 20060725

Increasing Demand for Multifunctional Architecture to Seamlessly Integrate into the Retail Value Chain

Frost: As the retail market becomes increasingly competitive, there is rising pressure on retailers to differentiate themselves from the competition. With reducing profit margins, retailers are increasingly relying on information technology (IT) to deliver profitable differentiation. Retailers are likely to remain focused on replacing legacy systems with convergence, and remain vigilant about the key technologies in retail; point-of-sale (POS), handheld terminals (HHT), mobile data computers and Tablet PCs.Revenue in this industry (POS Systems) totaled $3.20 billion in 2005 can reach $4 billion in 2008.

In today's hyper-competitive retail environment, bottom line growth is increasingly dependent on retailers’ ability to leverage technology for managing complexities in customer demand, profitability and operational challenges. POS replenishment in developed economies is driven by next-gen systems capable of forward and backward integration.

Self-checkout is likely to form a part of the POS replenishment budget. In developing economies, POS systems continue to provide growth opportunities. The edge of the retail enterprise, the store, has become the focal point of technology convergence, which is driving the need for synchronous response retail enterprise.

Although collaboration of solution vendors is likely to drive the market, this has also led to increased competition among retail technology vendors, with new entrants and pure-play vendors broadening their portfolio to offer end-to-end solutions. The evolution of the HHT from supply chain form factor to the real time enabled MPOS, consumer, associate and manager productivity form factors is driving its uptake with innovative retailers.

Despite factors such as streamlining the supply chain, improving employee productivity, and customer facing applications that drive Tablet PC adoption, in the in-store space, its uptake is likely to be slow due to cost issues and lack of clarity in item level radio frequency identification (RFID) adoption, explains Krishnan. With rapidly increasing technology spending, retailers are seeking vendors who are willing to partner their risks as well as rewards – and equipping themselves to match the retailers’ requirements is a challenge for the vendors.

Technology vendors in the POS, HHT, and Tablet PC space are focusing on providing multifunctional device architectures capable of forward and backward integration into the retail value chain. By leveraging on newer RFID, smart card, and wireless fidelity (Wi-Fi) technologies, these vendors collaborate with retailers to address complexities in customer demand, profitability and operational challenges. This approach of partnership between retailers and solution vendors will provide the much needed growth driver over the long term.

World Quarterly Retail Systems Outlook on POS Systems, Handheld Terminals and Tablet PC Markets – 2Q 2005 Publ 20060726

Expansion of Carrier Ethernet Services across Europe Inevitable

Frost: Facilitated by operator network migrations, enterprise demand, new application requirements, as well as by the inherent benefits of Ethernet technology, Carrier Ethernet services are poised to expand across Europe. While some applications will take off later rather than sooner, they will nevertheless, generate a surge in demand for Ethernet services later in the product cycle. Carrier Ethernet Services in Europe earned revenues of $1.10 billion in 2005 and estimates this to reach nearly $5.00 billion in 2012.

Bandwidth intensive applications, the introduction of new services and the need to reduce cost are creating a need to move from traditional, bandwidth limited, telecom services to technologies such as Ethernet. End users are requiring services that are more flexible and scalable hence generating savings by contracting what they actually need.

Carrier Ethernet services in the metropolitan space are becoming increasingly popular as the technology evolves and becomes standardised. The deployment of services such as triple play is creating a demand for Ethernet services in the metropolitan space for aggregation of data and transport in the backbone. Furthermore, with the launch of third generation mobile services, mobile data usage is expected to surge along with wireless backhaul traffic, currently transported over connections averaging 2Mbps.

Out of a need to achieve cost efficiencies and augment service offerings, operators are migrating their networks to next generation infrastructures based on IP and Ethernet. Consequently, legacy services will be phased out and Ethernet will be replacing layer 2 services.

However, customer awareness is being affected by the limited footprint of these services. In the long haul, the offering of carrier Ethernet services is restricted. Few pan-European operators have a consistent offering across Europe, while national operators have been introducing long haul services only in the recent past.

There are still standardisation issues to overcome. The lack of interoperability testing until the end of 2005 obstructed the possibility of extending carrier Ethernet services on an end-to-end basis when several carriers were involved.

Many operators have resorted to proprietary certification processes. Furthermore, operators with a large customer base have regarded the introduction of carrier Ethernet services as cannibalising revenues from legacy services.

Generally, Carrier Ethernet services are perceived as less expensive than legacy services. To build on this advantage, it is important that service operators follow strategies that keep adding value to the service and prevent it from becoming another telecom commodity.

Carrier Ethernet Services in Europe Publ 20060726

European CRM Software Revenue Increased 9.7 Percent in 2005

Gartner: Amidst high levels of consolidation, European growth lags behind worldwide levels but individual countries show significant differences in growth. Fuelled by the renewed business focus on revenue and customer growth, total customer relationship management (CRM) software revenues (licence and maintenance) in Europe totaled $1.9 billion in 2005, an increase of 9.7 percent from 2004. While SAP and Oracle - following its acquisition of Siebel earlier this year - jointly held more than 50 percent of the total CRM software market, increasing adoption of on-demand solutions produced significant gains for SalesForce.com growing 86.4 percent in 2005. Microsoft, a recent entrant into the CRM market, experienced the fastest growth in Europe at 88.1 percent.

CRM market growth in Europe was lower than the 13.7 percent increase seen worldwide in 2005 and lower than the 15.1 percent seen in the region in 2004. However, Gartner highlighted several factors that contributed to this and stressed that despite the lower revenue growth, there is actually more CRM business in the market.

The picture in Europe is very fragmented. Our research shows that growth in spend on CRM software correlates strongly with economic growth measures such as gross domestic product (GDP). GDP growth in countries such as Italy and Germany remains lower than the rest of the world, while market growth in countries such as the UK, Sweden, Norway and Denmark has been more consistent with that in North America. This means we are seeing CRM growth rates ranging from a slight negative to more than 27 percent depending on the individual country.

Gartner also highlighted high levels of acquisitions in the CRM application market, significant price reductions and exchange rate fluctuations as major contributors to the seemingly more subdued levels of growth in 2005.

Acquisitions of major players such as Peoplesoft early in 2005 and Siebel this year by Oracle have played a key role in pushing prices down, . This encouraged more buyer activity with users ‘stocking up’ on CRM software. The net result is that we are seeing a return to more realistic and sustainable buying levels.

Table 1 Europe: CRM Total Software Revenue* Estimates for 2005 (Millions of U.S. Dollars)

Vendor

2004

2005

2004 Share

2005 Share

2005 Growth

SAP

553.9

628.5

31.4%

32.4%

13.5%

Siebel

290.6

312.1

16.5%

16.1%

7.4%

Oracle

140.3

121.6

7.9%

6.3%

-13.3%

SAS Institute

55.9

72.2

3.2%

3.7%

29.2%

Amdocs

61.2

65.0

3.5%

3.4%

6.1%

Other Vendors

664.8

738.3

38%

38%

11.1%

Total

1766.7

1937.7

100%

100%

9.7%

Source: Gartner Dataquest (July 2006) *includes licence and maintenance revenues.

SAP was the No. 1 CRM vendor in Europe based on total software revenue, with a 32.4 percent market share in 2005, up from 31.4 percent in 2004. Siebel was the second largest vendor, but was acquired by Oracle early in 2006. Oracle’s own CRM sales pipeline suffered while customers awaited affirmation of future product directions following its acquisition of Siebel. Because of the size of Oracle’s acquisition, Gartner predicts there will be a short term braking effect on CRM market growth. The fastest growing vendors in the European marketplace in 2005 were Microsoft and SalesForce.com.

The highest growth in CRM software could be seen in applications for marketing automation, which increased by 18.6 percent. This was followed by sales automation at 12.1 percent and customer service and support applications at 3.6 percent.

Businesses in Europe are focusing on new customer acquisition, expanding wallet share, process optimisation and business accountability, . This is resulting in higher demand for applications that drive revenue generation and enhance the customer experience. The functionality offered by marketing automation and analytics applications complements well the renewed focus on revenue and customer growth.

That businesses are becoming more realistic about what they can achieve with CRM and are making more mature investments above and beyond CRM software.

There is an increasing focus on getting the business process right and on concentrating on the areas of the business that stand to gain the most. This means businesses require assistance with integration or migration initiatives as well as process expertise. As a result of this more strategic approach to CRM, consulting and system integration providers are reaping greater rewards than the majority of the CRM application software vendors.

Gartner predicts continued high levels of acquisitions in the CRM software market through 2008, where one in three CRM software vendors will be involved in a merger or acquisition (M&A) each year. Despite this is not a shrinking market. This ferment of M&A activity will spark a burst of innovation in CRM application research and development from 2006 to 2010. Particularly in Europe, the market is still wide open for smaller, best of breed vendors. Additionally, both Salesforce.com and Microsoft have the resources and desire to gain scale and narrow the gap with SAP and Oracle going forward.

CRM software market Publ 20060726

Tuesday, July 25, 2006

Homeshoring is a Viable and Attractive Alternative to Offshoring in Asia/Pacific excluding Japan

IDC: The rise in Homeshoring sweeping the customer care industry in the United States that could potentially take off in Asia/Pacific Excluding Japan (APEJ) region. Homeshoring is when the customer care agent is located at his/her home, not in a onshore or offshore call center. Business Process Outsourcing (BPO) is still evolving and that enables the region to observe new innovative methods of delivery from other geographies.

Homeshoring is not a new phenomenon in APEJ. The SARS outbreak in 2003 saw the creation of processes and contingencies that allowed people to work from home, Although homeshoring has many advantages, much depends on whether it makes economic and cultural sense for the region as many employers in the region are still weary about letting employees work from home.

Homeshoring is a viable and attractive alternative to offshoring in the APEJ region, particularly for markets such as Australia, Hong Kong, New Zealand and Singapore. For economies that are more sensitive towards offshoring, homeshoring could help shave costs from the need to be located onshore.

Homeshoring enables Service Providers to mix and match their delivery options in their BPO portfolios. The implication for the customer care industry is that processes and infrastructure need to be slightly modified to support this alternative delivery model. It also requires different styles of management to ensure that objectives are still met despite call center agents being spread out. The Service Provider with the cost-competitive homeshoring model will be able to reap significant rewards by delivering more options for the end-user and more satisfied employees while contributing to the improvement of the bottom line of their customer.

  • Asia’s traffic jam woes and rising petrol prices As cities in APEJ become more crowded and congested, the commute time to work is becoming longer. In addition, many call centers in APEJ are located in faraway inaccessible tech parks. The continuous increase in petrol prices adds on the cost of commuting to work.

  • Bird flu and severe acute respiratory syndrome (SARS) phenomena This experience has encouraged businesses to put in place a contingency plan which allows employees to work outside of the office.

  • Women in the workforce APEJ is experiencing an increase in number of women joining the workforce. Consequently, as more women become working mothers, the flexibility of working from home becomes even more appealing if that choice is made available.

  • APEJ's aging population In countries such as Australia, Japan, Korea, New Zealand Singapore, and even the PRC, retirement ages are being raised to cope with labour shortages. Having homeshoring as a delivery model could be an attractive option to older workers who might not want to travel long distances.

The following factors will pose challenges to the rise of homeshoring in APEJ:

  • Conservative management culture Enterprises generally prefer employees to work in the office. General mistrust towards employees who work from home still exists.

  • Infrastructure and networks In order for homeshoring to take off, good infrastructures such as reliable power supply, Internet connections, telephone lines, networks, and other services-related functions such as courier services and transportation have to be in place.

  • Massive training required Homeshoring would not work in sub markets that require massive training, as it is harder to facilitate mass training if employees are remotely spread out.

  • Demand from employees Homeshoring would only make sense if the skills are in high demand and such workers are demanding such a lifestyle.

  • Relocation BPO companies could circumvent homeshoring by relocating to non-metropolitan areas, thus saving costs.

First There was Offshoring, Now There is Homeshoring: Will This Business Process Outsourcing Model Take Off in Asia/Pacific (Excluding Japan Publ 20060725