The High Tech and Electronics Industry was projected to experience positive growth in 2010 after two bleak years caused by the recession. As many organizations implemented cost-cutting strategies, many IT budgets were frozen. This especially affected hardware, in which the semiconductor industry saw 11.4% decline in revenue in2009. However, most analysts predicted that 2010 would be a positive year for the entire High Tech Industry, and many companies are surpassing their earnings projections. A leading headline from the Wall Street Journal on July 12, 2010 stated, “Tech Sector Defies Gravity as Web Drives Upgrades. ” Intel’s record-breaking quarterly earnings release the following day only bolstered that claim.

Intel’s somewhat shocking 34% quarterly revenue increase was the result of positive earnings across all major divisions.  Some of the trends influencing this growth include:

• Increased investments in cloud computing servers as companies providing data centers strive to meet ever-increasing Web-based services demand.
• Corporations upgrading servers and increasing laptop and PC purchases.
• Even netbook sales have increased –this is typically an incredibly low-margin division for Intel and it saw a 16% increase despite Apple’s iPad being released in the same quarter.

As emphasized in the Wall Street Journal , increasing Internet services – including everything from email to video conferencing to online gaming – and demand for them is a primary driver in the High Tech Industry’s growth. In response to the economic downturn, many organizations began adopting cloud computing initiatives primarily due to their lower cost. Ease of use, upgrade capabilities, application integration, variety of services offered, and improved security are other factors that have contributed to the increasing interest in cloud computing. Organizations are realizing the high value they can receive from implementing web-based services and are implementing the necessary technologies to support them.

In addition to the growing popularity of Internet-based upgrades, the Wall Street Journal cites additional High Tech Industry trends including:

• Apple’s record release sales of iPhone4 (topping 1.7 million sales in the first week) and stronger than predicted sales of the iPad.
• In addition to consumer interest in personal electronics as supported by Apple sales, consumer spending on home computers including both laptops and PCs has also steadily increased.
• Rising prices and key tech component shortages due to heightened demand levels (many popular semiconductors are now taking 18-20 weeks for delivery compared with the previous 10 to 12 week time.)
• Strong increase for chip-manufacturing equipment makers – Gartner predicts a 113.2% increase in spending in this sector for 2010.
• Increased stock offerings, M&A activity, and venture funding are all contributing to industry growth as some investor confidence rebounds. 

In somewhat of a contrast, the Federal Government has implemented a $3 billion Federal IT spending freeze while it evaluates many current IT projects that it believes to be ineffective or that need improvements before proceeding. According to the Wall Street Journal, this freeze may impact such leading companies as IBM, Accenture, and Oracle that currently hold many of these large contracts. The White House and Federal CIO Vivek Kundra are emphasizing the need for IT efficiency and effectiveness, noting the numerous expansive contracts currently in place that have failed to produce the desired results. Many of these include financial management systems that have simply failed to integrate all the disparate systems existing within individual agencies, precluding any inter-agency integration and collaboration. The entire Federal IT budget tops $80 billion, so there will be no cessation for the majority of IT projects and functions, but it remains a White House priority to begin reducing the cumbersome nature of these projects so that they can be implemented in more successful, localized parts. The Administration recognizes that increased transparency is vital to IT project success, although many vendors remain concerned about the current lack of transparency regarding the frozen projects.  The ideal outcome of this budget freeze is to improve IT project transparency going forward so that vendors are aware of expectations and that Government Agencies have a way to ensure their project outcomes are achieved in a timely fashion. Also, reinforcing the overall trend towards implementing cloud computing, Kundra is especially interested in implementing cloud computing initiatives in the Federal Government to reduce costs and improve efficiency.

In both the public and private sectors, high demand for Internet-based services are underscoring many major IT investments and upgrades which is very good news for the High Tech Industry as it continues its revenue growth efforts in 2010.

        

The manufacturing industry has entered what appears to be a period of sustainable growth as manufacturing activity reached a level not seen since July 2004 according to the Wall Street Journal . This has resulted from increased consumer and business spending, despite spending levels being higher than income increases. Business are finally replenishing inventories as consumers become steadily more willing to spend, which has supported much of the increased manufacturing activity.

With this recovery, the manufacturing industry is placing a renewed focus on technology investments that were previously canceled or delayed.  In the two-part blog series, “2010 Manufacturing Software State of the Industry Roundtable,” the Software Advice blog presents the views of manufacturing software industry leaders about the state of the industry – with specific emphasis on manufacturing ERP solutions.  Software Advice notes that large manufacturers are primarily focusing on replacing or updating legacy ERP that were implemented during the Y2K craze but are no longer fulfilling all manufacturers’ ERP needs.  And, for organizations that have already updated their systems, many are expanding them so that all plants (including offshore facilities) are on the same corporate ERP system to improve functionality and data accuracy.

Small and medium sized manufacturers are also embracing technology investments as technology solutions become more affordable and customizable than ever before – primarily through SaaS.  In the Software Advice Roundtable , Jonathan Gross notes that, “One of the primary drivers [in SME manufacturers’ SaaS adoption] is the fact that end-users are not required to support and maintain the software. The provider does this work... Another key driver is that no supporting infrastructure (databases, networks, etc.) is required.” With the improve functionality and lowered cost of SaaS-based ERP solutions, manufacturers of all sizes are now able to receive the benefits of ERP systems to achieve their cost cutting and revenue growth goals. Some small and medium manufacturers have actually used ERP integration solutions to provide the business value in offshoring, despite some remaining skepticism from manufacturers about data security and dependability when not hosting their data solutions on site. Increasingly the value of SaaS-based ERP solutions overrides this skepticism as SME manufacturers try to become more competitive in the industry.

Software Advice also cites the following trends in manufacturing software:

• Lower prices as software companies compete to gain customers that delayed IT investments as a result of the recession
• Increased integration of enterprise-wide information and systems including those from supply chains, offshore plants, and disparate internal reporting systems
• A slight preference towards adopting integrated ERP suites instead of best-of-breed applications – especially in new adopters. Manufacturers with legacy systems are still more likely to incorporate best-of-breed applications to enhance the functionality of existing solutions to accommodate new and changing information.  

These trends are reflected in a recent IDC Manufacturing Insights Supply Chain Survey , where 43.6% of manufacturing respondents cited “improving profit margin” as the primary business goal driving IT investments. As market activity improves and manufacturers continue to experience growth, a primary goal will be to maximize revenue. Leveraging new and existing IT resources to improve planning will be critical for manufacturers to achieve this as many have fully implemented other cost cutting measures in wake of the recession. With improved capital from increased production, the time is right for manufacturers to assess their technology needs and determine which solutions can truly add value to their organizations - especially while prices are reduced. 

        

As organizations look for new ways to increase revenue growth, customer engagement becomes more important than ever for several reasons. First, as customers - and businesses - have learned to “do more with less,” consumers of virtually all industries are spending more time researching the products and services they want to buy.  Consumers are also willing to spend more time finding a lower price. Second, as a result of the economic crisis, many organizations realized that they were not employing their data effectively resulting in not only operational inefficiencies but also greatly hindered customer service initiatives. Third, as consumers across industries receive an onslaught of digital marketing materials, marketers and customer service departments have to work even harder to ensure that their campaign stands out from their competitors.

In a recent article, The McKinsey Quarterly notes that despite increased digital marketing budgets and activities – many campaigns fail to generate more leads than when operating at their previously lower budgets.This largely results from marketers spending additional budget dollars on advertising and other paid placements of brands that already have a strong recognition resulting in increased spending with little to no increase in results. The McKinsey Quarterly says that “Most companies have now essentially become publishers, with a more complex set of cost and quality concerns, yet continue to behave like simple advertisers.” When companies in any industry do not readily adopt a flexible, dynamic model their outreach efforts often fail and simply become another piece of the noise that consumers must sort through every day.Therefore, McKinsey claims that a more effective strategy is to become an active digital marketer where less of the marketing budget is spent on advertising and more on content creation and other engagement activities that empower consumers to interact with their brands within the parameters the organization establishes. This allows consumers to access and share the information they want, while still enabling the organization to have active input into what consumers will take away from their encounters with their brand.

So, what are various industries doing to increase customer engagement to meet new revenue growth goals?

Several industries are leading in improved customer engagement programs including Banking, Telecommunications, Retail, and Consumer Goods with Energy and Manufacturing also implementing programs to better gauge consumer demand. To achieve this goal, these industries have discovered the value of fully leveraging both existing technologies and new technology applications. When organizations did not possess a complete view of their customers and the projected performance of customer-facing departments, they continuously lost cross and up-sale opportunities in addition to sometimes weakening their brand by not providing customers will all the information they needed in one location. Much of the High Tech industry has been a leader in this area – or at least when implementing their own solutions that are designed to improve enterprise visibility and improve customer engagement. When high tech organizations fail to do so, they encounter the same challenges as other industries when trying to increase revenues through improved customer engagement activities.

Therefore, as various industries continue in their efforts to better understand and interact with their customers, they need to be mindful of their methods of outreach and interaction ensuring that customers receive the same level of attention and service at each level. A vital component of this process is for customer facing staff to have the resources they need to speak knowledgeably about not only their organization’s product or service, but the industry in which their target operates. Simultaneously, organizations need to effectively monitor customer interactions – whether they be an online chat session, social media message boards about the company,customer service or sales calls, purchase orders and usage volumes, or even just website volume in addition to traditional campaign tracking – to guarantee that their marketing and sales departments are in an optimal position to convert their customer engagement activities into sales and strong revenue growth engines.

        

Information Resources, Inc. (IRI,) a leading Retail and CPG analyst group, recently published its 2009 CPG Year in Review report. The report makes some unique insights,but most importantly addresses the permanent changes retailers are going to see in consumer behavior. The McKinsey Quarterly published a study of retailers in December 2009 which also echoes this prediction in consumer behavior. McKinsey states, “Many companies with strong premium brands are anticipating a rapid rebound in consumer behavior—a return to normality, as after previous recessions. They are likely to be disappointed.”The reason being is that consumers have tried lower cost items and been satisfied. Or, if not 100% pleased, they now feel that it is not worth the extra expense to buy the higher-priced item even if they do prefer it.

IRI calls the cost-saving strategies employed by many consumers as “draconian” insofar as people have gone far out of their ways to save money on things like food and beauty products. This has resulted in an increase in the purchase of do-it-yourself home goods and has also included increases in self-subsistence projects such as gardens. IRI predicts that some of these more extreme measures will eventually be scaled back, but that a commitment to frugality and value products will remain. 

So what does this mean for Retailers and CPG manufacturers?

First of all, private label goods have cemented their position as desirable goods that actively sought after by a wide range of customers. With cost saving and frugality still being important, consumers will most likely continue to embrace private label goods indefinitely - despite some gradual return to higher-priced premium goods.

Second, many CPG categories saw price increases in 2009which are expected to continue through 2010. IRI remains somewhat doubtful that consumers will not rebel against these increases as companies turn to innovation to capture market share through creating appealing value-priced goods. According to the Wall Street Journal, there appears to be a chance of nominal rebound in premium brands as producers implement pricing and promotiona strategies such as selling larger quantities for the same price or creating a better product whose value outweighs the price. Still, retailers have a harder job than ever of convincing consumers why they should consider purchasing the higher priced item. Marketing effectiveness therefore remains of paramount concern in addition to product innovation.

Ultimately, technology providers for Retail and CPG need to understand that many of the market shifts caused by the recession will have long lasting – if not permanent – effects as consumers continue to embrace cost savings measures despite improved Retail and CPG earnings and projections for 2010. Competition will remain fierce for increasingly demanding and informed consumers who have learned to do more with less. Technology providers therefore have a unique opportunity to capitalize on organizations' needs to better understand their consumers and maintain reduced operating costs so that they can be successful under these new conditions.

        

The Retail Industry was one of the hardest hit in wake of the recession as consumers sought new ways to save... ultimately reducing the total amounts of products purchased and the price consumers were willing to pay.After drastic price-slashing in late 2008, retailers revamped their strategies to focus on leaner inventories and increased customer interaction with the goal of meeting value-driven consumer demands and returning to profitability. As a result, earnings were much better in 2009 although still significantly less than pre-recessionary levels.

Gartner focuses its prediction on the growing popularity of m-commerce (mobile commerce.) Consumers have actively embraced using mobile devices primarily for research purposes before buying or locating products. Making direct purchases on mobile – which many retailers are considering an integral component of new cross-channel sales strategies - has not yet been adopted by most consumers. As a result, Gartner predicts that “By2010, over 40% of Tier 1 retailers will pursue m-commerce. However, only 20%will be successful in effectively integrating these initiatives to enable cross-channel shopping.” Gartner notes that in order for retailers to be successful that they need to retain focus on customer preferences and cross-channel shopping experiences while trying to drive revenue through m-commerce. 

In Worldwide Retail Industry 2010 Top 10 Predictions, IDC Retail Insights cites some slow recovery efforts in the industry as retailers have implemented huge cost saving initiatives through reducing inventory levels,closing less profitable stores, halting expansion efforts, and more fully relying on IT investments to help them adjust to changing market conditions.Throughout 2010 IDC predicts that all sectors of Retail will increase external IT spending from 2009 levels with drug stores leading with a 4.5% increase and automotive dealers and gasoline service stations experiencing the least with 1.1% growth. Most of the trends IDC predicts for 2010 center around improved customer demand planning and experiences in addition to expanding the functions of IT to improve these experiences and maintain cost reductions.

Other IDC Retail Insights’ predictions for 2010 include:

• Growth strategies will focus on “same shopper sales” and first-time buyers
  
• Retailerswill fully utilize agile supply chains to improve responses to customers,suppliers, and regulations
  
  • Optimizing retail PLM will be integral to supporting agile supply chain goals
    
• Retailers will embrace mobile interaction with customers
• Retailerswill invest in IT programs to support their newly established business models,but reduce traditional IT costs that do not provide that necessary support

• Retailers will try to improve brand performance while cultivating customer loyalty

        

The Manufacturing Industry has embraced a “lean philosophy” as a result of the economy and modernization efforts. IT is essential to fulfilling this function as operational efficiency becomes a primary objective for manufacturers. The economic downturn also caused many manufactures to drastically reduce inventory levels as demand levels decreased. Group VP of Research for IDC, Bob Parker, thinks that this has caused a permanent change in manufacturing business models resulting in “the intelligent economy” as manufacturers become more adept at rapidly adjusting to market conditions. He predicts that IT investments will support these initiatives.

 

Gartner predicts that investing in operational technologies will be far more beneficial than “traditional IT and ERP” with a “10-time better return on their investment by year-end 2011.” The support for this prediction lies in the great efficiencies manufacturers can achieve by placing OT at the center for this strategy because they “almost always add value, promote lean practices, and can have a transformative impact on the business.” The ultimate reason is that many of the existing IT and ERP systems have met full functionality and will produce greater efficiencies thanare already in place. Therefore, Gartner asserts that merely investing in additional IT and ERP systems will not tangibly add enough value to warrant the cost of their implementation unlike OT systems. Gartner recommends that manufacturers need to tailor all their IT investments to support “operational needs in a value-adding way or in ways that drastically reduce cost to provide the required, but non-value-adding, services.”

 

In Worldwide Manufacturing 2010 Top 10 Predictions, IDC Manufacturing Insights agrees that manufacturers must become more “intelligent” in order to succeed. Manufacturing Insights predicts that manufacturing worldwide will grow in 2010 with IT spending increases across virtually all sectors as manufactures begin to more successfully incorporate technology into their business strategies.

 

Someof the other manufacturing predictions by IDC include:

• Transforming business models to accommodate the needs of increasingly demanding customers
• Implementing variable cost structures that can better make technology a focal point for business strategies
• Changing supply chain structures to incorporate a "variable-cost-driven value network"
  • This change will be supported by “dynamic optimization” for capability investment
• Better alignment of innovation with strategy
• Manufacturers will better use Enterprise PLM Applications
• Manufacturers will become more metric-focused by using complete business intelligence to make decisions instead of sustainability reporting

        

The Energy Industry – including the utilities and oil and gas sectors – is predicted to experience great volatility beginning in 2010 as new environmental regulations go into effect.With the continued debate of the Cap-and-Trade Bill and the ARRA grants issued to energy companies committed to creating and implementing sustainable energy initiatives energy companies, technology providers, government regulators, and consumers must all be prepared for upcoming changes in the industry.

 

Gartner’s overarching prediction is that energy costs will sky-rocket due to the costs of creating sustainable energy and updating the energy grids to smart grids. The smart grid upgrades are necessary to better regulate energy distribution and incorporate alternative and sustainable energy sources. Most traditional energy grids do not have the capability to do this. Gartner also predicts that with cap-and-trade or other means of carbon taxation consumers will face higher electricity costs. Ultimately, Gartner predicts that electricity prices will increase by an average of 30% by 2014 for OECD countries that currently rely heavily on fossil fuels. Gartner recommends that IT companies targeting the Energy Industry should position toward advanced metering infrastructures that enable price transparency and greater consumer efficiency.

 

In North American Utility Industry 2010 Top 10 Predictions, IDC Energy Insights agrees that utility prices will accelerate in 2010, but that the industry as a whole will see a massive recovery from 2009. IDC predicts that as the global economy rebounds and the industry sector receives an infusion of grant money for energy projects that the Energy Industry will have a strong 2010.Some of the other predictions include:

• North American intelligent grid ICT spending will reach $18 billion by 2013
• The first wave of electric vehicles will emerge along with the necessary car charging infrastructure
• Smart cities will emerge and test the basis for the intelligent economy
• IT spending in the Utilities Sector will greatly increase
• Renewable energy capacities – with wind power being the leading source – will exceed the number of natural gas plants built

 

For Oil & Gas, new project development remains a primary concern as “easy oil” sources are exhausted. As a result, Oil & Gas companies have to embrace new technologies – primarily digital energy investments – to assist them in better locating, extracting, and processing oil and gas sources. Climate change legislation may also have a large impact on the sector causing Oil & Gas companies to create strategies for the increased sustainability standards expected from the legislation. Overall, IDC predicts a much stronger year for the Oil & Gas sector as the economy becomes more favorable to increased demand.  

 

 

IDC Energy Insight’s Worldwide Oil and Gas Industry 2010 Top 10 Predictions also cite the following:

• An increase and improvement in the use of technology with IT budgets recovering for 2010:

o   Exploration and production information management will need to be more accessible and collaborative with improved data quality

o   Real-time information and surveillance for enhanced oil recovery projects

o   The need for IT support for energy traders will increase

o   Enterprise-wide adoption of BI

o   Improved Supply Chains will require enterprise-wide IT systems

        

Many analysts have already published or are in the processof sharing their predictions for the upcoming year. While predictions varysomewhat the underlying theme to all is how companies and industries areresponding to last year’s economic instability and promoting recovery efforts –with many recommendations on how to do so.

There are varying accounts of the condition of IT budgets,with IDC Insights predicting that global IT spending will see a 2-4% increase returning IT budgets aggregately to 2008 levels. However, Gartner is not as optimistic and thinks that many organizations will be forced to maintain IToperations at the decreased budget levels of 2009. As a result, the challengesand strategic directives cited by both differ. Gartner remains dedicated toinnovation across most if not all industries which allows them to both find creative solutions to business challenges under budget restraints and build a solid foundation for future growth once budgets finally increase. IDC Insights emphasizes recovery and more importantly transformation via increased cloud computing,mobile device integration, and a shifting focus from large enterprises to small and medium size organizations. It also notes that technology marketing budgetswill finally unfreeze creating additional opportunities within each sector to maximizerecovery and growth efforts. 

Each of the following industries will be addressed in greater depth in future entries throughout the year, but here are some basic summaries of theprimary trends that Gartner and IDC Insights note are facing the Banking, Healthcare(Provider), and Federal Government Industries.

Banking

• Garter predicts that banks remain resistant to official innovation budgets and plans that will ultimately hinder their ability to grow.
• IDC emphasizes the need for banks to strengthen relationships with customers andpartners and to employ customer-centricity measures and in a time where revenuemeans everything and unsatisfied customers have a myriad of options outside of their current banks.
• IDC also notes that banks will continue to bolster their public images in attempt to regain public trust
• IDC cites banks’ commitments to using new technologies and markets to differentiate themselves in risk management initiatives
  

Healthcare

• Electronic HealthRecords (EHR) remain a primary concern for the industry, yet Gartner predicts slow implementation of EHR in small physician practices with only 15% adopting them by 2015.
• IDC cites business intelligence as the primary IT investment for Healthcare Providers for the year including upgrading existing BI for improved real-time functionality.
• IDC differs from Gartner on EHR adoption by predicting that in addition to a natural increase in EHR adoption, that the ARRA grants and potential penalties for those who refuse will cause 25% of Americans to have EHRs in 2010 with 60% having EHRs by 2016.
  • It is important to note that Garnter places its emphasis on small physician practices (3-5 physicians) because approximately 60% of American practices are small. IDC looks at aggregate adoption which may account for some of the difference in estimated EHR adoption percentages. However, the important thing to note is that generally IDC predicts fairly successful EHR adoption while Gartner remains generally pessimistic.
    

Federal Government

• Gartner cites transparency through providing increased public data online as a primary Government IT objective for 2010
  • There is a gap between existing enterprise information management systems/efforts and the ability to incorporate external data despite external data now being a primary focus as social media and other online sources provide direct access to constituent opinions and actions. 
  • With the heighted focus on external data – regardless of its effectiveness – increases Government information risk and the need for increased information security.

• IDC notes four key areas of general Government focus for 2010:
  
  • Investment optimization through improving operations and maximizing IT investments.
    
  • Heightened expectations for Government as citizens looks to Government for guidance, improved services, increased interactions/information exchange, and solutions to challenges such as the economy.
  • Government's increasing "business" role as it assumes greater regulatory and oversight powers in attempt to stabilize and improve the economy.
  • Economic recovery is a primary objective across organizations and functions - especially those receiving stimulus money or additional budgetary funds.

Gartner and IDC again focus on different areas of Government priorities for 2010; However, general market trends validate both positions. Government is concerned about integration of information - both external and across functions and agencies - and the transparency it provides. Information security is always a top priority for all Government IT initiatives. IDC captures the Government's continuing focus on economic stability and recovery that crosses all functions as the Government's role adapts to deal with new challenges. Also, operations remain stereotypically slow and cumbersome due to entrenched bureaucracies, so implementing technology solutions to improve operations are key.