Defining the Third IT Platform: Key 2014 Trends Identified by IDC

by Chris Preimesberger

Worldwide IT spending will reach $2.14 trillion, up 5.1 percent from 2013 levels, almost one point higher than 2013’s growth rate. Smartphones and tablets (13 percent) will lead 2014 growth, accounting for more than 60 percent of total IT market growth. Excluding mobile devices, IT growth will be only 2.4 percent. Beyond mobile devices, there will be growth in all major sectors—servers, storage, networks, software, services—except PCs (-6 percent).

The Third Platform will dominate growth. It will be up by 15 percent in 2014, driving 29 percent of 2014 IT spending and 89 percent of growth. It will cannibalize the Second Platform: 40 to 50 percent of Third Platform growth in 2014 will come at the expense of the Second Platform. Value is migrating within the Third Platform: up the stack, toward customers’ competitive advantage. Vendors are also shifting, with Amazon driving higher up in innovation.

Emerging markets will shape much of the Third Platform IT marketplace. In 2014, the number of smart connected devices shipped in emerging markets will be almost double that shipped in developed markets. Over the next seven years, cloud spending in emerging markets will grow sevenfold, versus threefold in developed markets. Emerging markets will account for more than 40 percent of the digital universe in 2014, and exceed 60 percent by 2020. This will make emerging markets a hotbed of Internet of things market development.

In the battle of PCs versus tablets and smartphones, the onslaught continues. In 2014, sales of smartphones and tablets will exceed PCs by 2.5-to-1. The PC slide will continue (-6 percent). The Android volume versus iOS value battle also continues. The Android app ecosystem will narrow the ecosystem value gap, while Apple fights for volume. It’s a do-or-die Year 2 for Microsoft: The clock is ticking as Microsoft needs to double mobile developers’ interest in Windows.

Cloud spending will exceed $100 billion, growing by 25 percent and skewing toward public (shared) cloud services. Escalation sets the stage for infrastructure-as-a-service (IaaS) consolidation. Amazon and competitors dramatically escalate cloud deployments. We’ll see a dizzying increase in the variety of workload-specialized IaaS services and an increased battle for developers in the cloud. There will be lots of platform-as-a-service (PaaS) rollouts in 2014, and by 2017, more than 80 percent of new cloud apps will be hosted on the top six PaaS platforms. We’ll see a tenfold explosion of new cloud software-as-a-service (SaaS) apps in next four years, driven by a tripling of developers and contributors.

Big data spending will explode in 2014, growing by 30 percent to more than $14 billion. Growth shifts to analytic tools and apps. Data-optimized cloud platforms are the table stakes. More than 80 percent of the new “killer apps” on the Third Platform will be “data intensive,” with explosive growth in big data analytics services. Spending in this area will exceed $4.5 billion, growing 21 percent.

Social networks are the standard foundation for customer engagement and marketing. By 2017, 80 percent of Fortune 500 companies will have an active customer community, up from 30 percent today. Social invades, and disrupts, product and service development. By 2016, 60 percent of the Fortune 500 will deploy social-enabled innovation management solutions. Enterprise social platforms meet cloud PaaS platforms. In 2014-2015, social platforms will merge with cloud (PaaS) platforms, and stand-alone enterprise social networks will become marginalized.

Integrated/converged systems will comprise nearly 10 percent of general-purpose enterprise IT infrastructure spending in 2014 and growing to almost 20 percent by 2020. Cloud service providers—and their type of data center—will drive big changes. Between 25 to 30 percent of server shipments (including shipments from ODMs) will go to service providers’ data centers, growing to 43 percent by 2017. OpenStack and other vendor- and architecture-neutral platforms are a top priority for data center software players. Cloud-first hardware strategy becomes pervasive.

By 2018, one-third of market share leaders in virtually all industries will be “Amazoned” by new and incumbent Third Platform players. Industry-focused innovation will happen in platforms and ecosystems. The launch of platforms as a new base of competitive advantage will accelerate in 2014. IT buyer profile will continue to shift to business executives. In 2014, and through 2017, IT spending by groups outside of IT departments will grow at more than 6 percent per year.

Internet of things (IoT) promises to be game changer for almost every major IT vendor, as 30 billion autonomously connected endpoints will be built and $8.9 trillion in revenue will pour into the sector by 2020. IoT partnerships will emerge among disparate vendor ecosystems. Partnership-building will prevail among IT vendors, service providers and semiconductor vendors as well as with the top innovators/newcomers in the consumer world. China will be a key player in IoT. Planning for the average Chinese home in 2030 will include 40 to 50 intelligent devices/sensors.