Lead Analyst: Cal Braunstein
Bellwether Cisco Systems Inc.‘s quarterly results beat expectations while CEO John Chambers opined global business was looking cautiously optimistic. In other system news, IBM Corp. made a series of hardware announcements, including new entry level Power Systems servers that offer better total cost of acquisition (TCA) and total cost of ownership (TCO) than comparable competitive Intel Corp. x86-based servers. Meanwhile, the new 2013 Dice Holdings Inc. Tech Salary Survey finds technology professionals enjoyed the biggest pay raise in a decade last year.
- Cisco reported its fiscal second quarter revenues rose five percent to $12.1 billion versus the previous year’s quarter. Net income on a GAAP basis increased 6.2 percent to $2.7 billion. The company’s data center business grew 65 percent compared with the previous year, while its wireless business and service provider video offerings gained 27 and 20 percent, respectively. However, Cisco’s core router and switching business did not fare as well, with the router business shrinking six percent and the switching revenues only climbing three percent. EMEA revenues shrank six percent year-over-year while the Americas and Asia Pacific climbed two and three percent, respectively. CEO Chambers warned the overall picture was mixed with parts of Europe remaining very challenging. However, he stated there are early signs of stabilization in government spending and also in probably a little bit over two thirds of Europe. While there is cautious optimism, there is little tangible evidence that Cisco has turned the corner.
- IBM’s Systems and Technology Group launched a number of systems and solutions across its product lines, including new PureSystems solutions, on February 5. As part of the announcement was more affordable, more powerful Power Systems servers designed to aggressively take on Dell Inc., Hewlett-Packard Co. (HP), and Oracle Corp. The upgraded servers are based upon the POWER7+ microprocessors and have a starting price as low as $5,947 for the Power Express 710. IBM stated the 710 and 730 are competitively priced against HP’s Integrity servers and Oracle’s Sparc servers while the PowerLinux 7R1 and 7R2 servers are very aggressively priced to garner market share from x86 servers.
- Dice, a job search site for engineering and technology professionals, recently released its 2013 Tech Salary Survey. Amongst its key findings was that technology salaries saw the biggest year-over-year salary jump in over a decade, with the average salary increasing 5.3 percent. Additionally, 64 percent of 15,049 surveyed in late 2012 are confident they can find favorable new positions, if desired. Scot Melland, CEO of Dice Holdings, stated companies will now have to either pay to recruit or pay to retain and today, companies are doing both for IT professionals. The top reasons for changing jobs were greater compensation (67 percent), better working conditions (47 percent) and more responsibility (36 percent). David Foote, chief analyst at Foote Partners LLC, finds IT jobs have been on a “strong and sustained growth run” since February 2012. By Foote Partners’ calculations, January IT employment showed its largest monthly increase in five years. Foote believes the momentum is so powerful that it is likely to continue barring a severe and deep falloff in the general economy or a catastrophic event. Based on Bureau of Labor Statistics (BLS) data, Foote estimates a gain of 22,100 jobs in January across four IT-related job sectors, whereas the average monthly employment gains from October to December 2012 were 9,700.
RFG POV: While the global economic outlook appears a little brighter than last year, indications are it may not last. Executives will have to carefully manage spending; however, with the need to increase salaries to retain talent this year, extra caution must be undertaken in other spending areas. IT executives should consider leasing IT equipment, software and services for all new acquisitions. This will help to preserve capital while allowing IT to move forward aggressively on innovation, enhancement and transformation projects. RFG studies find 36 to 40 month hardware and software leases are optimum and can be less expensive than purchasing or financing, even over a five year period. Moreover, IBM’s new entry level Power Systems servers are another game-changer. An RFG study found that the three-year TCA for similarly configured x86 systems handling the same workload as the POWER7+ systems can be up to 75 percent more expensive while the TCO of the x86 servers can be up to 65 percent more expensive. Furthermore, the cost advantage of the Power Systems could even be greater if one included the cost of development systems, application software and downtime impacts. IT executives should reevaluate its standards for platform selection based upon cost, performance, service levels and workload and not automatically assume that x86 servers are the IT processing answer to all business needs.
Lead Analyst: Cal Braunstein
CEO Michael Dell is coordinating a buyout of Dell Inc. for $24.4 billion in the hopes that the company can more effectively go through its transformation if it does not have to deal with reporting results quarterly to fickle investors. Michael Dell’s MSD Capital (his investment firm), has teamed with Silver Lake Partners to take the company private. Microsoft Corp. will be assisting in the buyout in the form of a $2 billion loan. If the buyout is successful – which it should be at some price – what does it portend for IT executives and commercial accounts?
To understand where Dell needs to go, one needs to first see where it is. Dell started as a low-cost PC company in the consumer market. It gradually switched to a bifurcated model – PC for consumers and PC and servers for the commercial space, primarily the public, small and medium business (SMB), and large enterprise markets. Over the past six years the company acquired 22 companies – 10 in 2012 alone – and expanded into other hardware components, software and services, including cloud services. But the company has lost its momentum. It lost PC market share and sales in 2012 faster than most of its competitors, which is disastrous for a company that derives more than half of its revenues from end-user computing solutions.
Smartphones and tablets have curtailed the growth of the traditional PC market and Dell’s commercial business has not made up for the loss in end-user revenues. In fact, in both businesses Dell is considered a low-cost commodity hardware provider and not a market or thought leader. The company has not fully integrated all of its acquisitions and is struggling to reach its strategic goal of becoming a one-stop shop. The buyout gives the company time to re-think and execute a long-term strategy, reorganize and change its culture. As CEO Meg Whitman at Hewlett-Packard Co. (HP) can attest, a turnaround is a multi-year effort and doing so in public when quarterly results can be volatile is not fun. Thus, the desire by Michael Dell to go private.
While there are a number of challenges that Dell must address, there are two that will make or break the success of the new corporate strategy. The vendor must either exit the end-user computing market or once again become a market leader. It is lacking products in the key current and future end-user markets and it cannot regain its position with just PC solutions to hawk. Secondly, Dell has not been able to transition from a culture of transaction selling to one of relationship sales. If the vendor is to become one of the top one-stop providers in the commercial space, it will have to invest in customer relationship management. This is a massive cultural change that goes to the core of the company. HP has struggled with the clash of this cultural divide since it acquired Compaq in 2002. IBM Corp. took more than 10 years to change its culture. The underlying question will be whether or not CEO Dell, by trade a transactional salesman, can lead the culture shift to succeed with its new corporate vision.
In addition to the above challenges, there are a number of other key issues to be resolved. IT executive relationships with Dell depend on how these shake out.
Assets. Dell will need to decide which assets it has today are worth keeping and which are to be shed. In strong customer relationship management organizations, people are a primary asset. Will Dell address this? Additionally, once it has its strategic vision in place, what additional acquisitions are needed to complete the puzzle? Will the new Dell have the funds to acquire the companies it needs or will the buyout end up choking the firm’s ability to compete effectively? Dell recently moved into the equipment leasing space. Will it have the wherewithal to remain?
Business Model. What will Dell’s new business model be? It will have to compete with HP, IBM and Oracle Corp. – all of whom are innovators, bring more than commodity products and services to the table, and want to own the complete business relationship with their customers. Each has a different business model. Where will the new Dell position itself?
Business Partners and Channels. Dell will have to re-evaluate how it works with business partners and uses various sales and distribution channels. Dell does have a cloud presence but can it leverage it the way Apple Inc. or Google Inc. do? Can it be a full service provider and still utilize business partners and channels effectively? Without strong business partners and channels Dell will not be able to compete effectively.
Microsoft. Microsoft did not become an owner but a lender to Dell. This will cost the company more than just money. Will it restrict the vendor from providing certain products or solutions?
Processes. Dell needs to revamp its development, operations, and sales processes to be fully integrated and customer relationship based. The customer must come first; not the products or services. This will be a long-term change, which may be agonizing at times.
Technology. Today Dell assembles some products and has the intellectual property (IP) for those products and services that the company acquired. Can it leverage the IP and become recognized as an innovator or will the IP assets wither and the talent depart? Over the past year Dell has been bringing on board the resources to take advantage of the assets. Will the new Dell continue down the same path? If Dell stays in the end-user computing space, will it be able to figure out how to do mobility and social (key components to staying competitive)? If not, will it bite the bullet and exit the business?
The company was at one time the leader in the PC arena. Then it became one of the top players. Now it wants to be a leader in the full-service enterprise space where it is not a top player and is losing momentum.
RFG POV: Dell has a long, tough transformation ahead. By going private it will no longer have to worry about the stock market price but will still have to answer to investors. RFG does not expect the company to pull out of any markets in the near term – although the printing and peripherals business is exposed – but a number of the executives and employees whose visions are out of sync with new direction will depart. In the full-service enterprise space Dell will have to be more than a low-cost provider. It must become a hardware, software, and services innovator, determine its positioning vis-à-vis competitors, make additional acquisitions to fill in the gaps, and spend time and resources building relationships that may not yield near-term revenues. Whether or not the stakeholders will allow the company to spend enough money and time to make the conversion is an open question. The fallback position may be to go back to being a low-cost or custom commodity provider to the commercial market. Moreover, Dell will have to invest in a new end-user computing model, watch its market share shrivel, or quit the space. One thing is for sure – it cannot be all things to all players and must pick its choices carefully. Dell must articulate its strategy to business partners, customers, and employees over the next three to six months or loyalty may falter. In any event, IT executives should expect Dell to provide support and a smooth transition for businesses that are divested, restructured, or sold. IT executives desirous of using Dell as a strategic provider should continue to work closely with Dell, keep abreast of its strategy and roadmaps and factor the knowledge into the corporate decision-making process. Additionally, IT executives should not be surprised or concerned to find the company fails to make the short-list of candidates. There are plenty of options these days.
Lead Analyst: Cal Braunstein
Hewlett-Packard Co. announces reorganization and write-downs and gets good news from the courts that it has won its Intel Corp. Itanium lawsuit against Oracle Corp. Oracle must now port its software to Itanium-based servers. In other news, Oracle agreed to a $306 million settlement from SAP AG over their copyright infringement suit. However, the soap opera is not over – Oracle may still push for more.
- CEO Meg Whitman, in her continued attempt to turn the company around, is writing down the value of its Enterprise Services business by $8 billion and making management changes. HP paid $13.9 billion to acquire EDS back in 2008. John Visentin, whom former HP CEO Leo Apotheker anointed to manage the Enterprise Services behemoth a year ago, is leaving the company. Mike Nefkens, who runs Enterprise Services in the EMEA region, will head the global Enterprise Services group, which is responsible for HP’s consulting, outsourcing, application hosting, business process outsourcing, and related services operations. Nefkens, who came from EDS, will report to the CEO but has been given the job on an “acting basis” so more changes lie ahead. In addition, Jean-Jacques Charhon, CFO for Enterprise Services, has been promoted to the COO position and will “focus on increasing customer satisfaction and improving service delivery efficiency, which will help drive profitable growth.” HP services sales have barely exceeded one percent growth in the previous two fiscal years. HP further states the goodwill impairment will not impact its cash or the ongoing services business. The company also said its workforce reduction plan, announced earlier this year to eliminate about 27,000 people from its 349,600-strong global workforce, was proceeding ahead of schedule. However, since more employees have accepted the severance offer than expected, HP is increasing the restructuring charge from $1.0 billion to the $1.5-1.7 billion range. On the positive front, HP raised its third-quarter earnings forecast.
- HP received excellent news from the Superior Court of the State of California when it ruled the contract between HP and Oracle required Oracle to port its software products to HP’s Itanium-based servers. HP won on five different counts: 1) Oracle was in breach of contract; 2) the Settlement and Release Agreement entered into by HP, Oracle and Mark Hurd on September 20, 2010, requires Oracle to continue to offer its product suite on HP’s Itanium-based server platforms and does not confer on Oracle the discretion to decide whether to do so or not; 3) the terms “product suite” means all Oracle software products that were offered on HP’s Itanium-based servers at the time Oracle signed the settlement agreement, including any new releases, versions or updates of those products; 4) Oracle’s obligation to continue to offer its products on HP’s Itanium-based server platforms lasts until such time as HP discontinues the sales of its Itanium-based servers; and 5) Oracle is required to port its products to HP’s Itanium-based servers without charge to HP. Oracle is expected to comply.
- Oracle said it agreed to accept damages of $306 million settlement from German rival SAP to shortcut the appeals process in the TomorrowNow copyright infringement lawsuit. Oracle sued SAP back in 2007 when it claimed SAP’s TomorrowNow subsidiary illegally downloaded Oracle software and support documents in an effort to pilfer Oracle customers. SAP eventually admitted wrongdoing and shut down the maintenance subsidiary. In November 2010, Oracle had originally won a $1.3 billion damages settlement, the largest ever awarded by a copyright jury but it was thrown out by the judge, who said Oracle could have $272 million or could ask for a retrial. To prevent another round of full-blown trial costs, the warring technology giants have agreed to the $306 million settlement plus Oracle’s legal fees of $120 million; however, Oracle can now ask the appeals court judges to reinstate the $1.3 billion award. SAP stated the settlement is reasonable and the case has dragged on long enough.
RFG POV: HP suffers from its legacy product culture and continues to struggle to integrate services into a cohesive sales strategy. The company does well with the low-level technical services such as outsourcing but has not been able to shift to the higher margin, strategic consulting services. While the asset write-down was for the EDS acquisition, HP had its own consulting services organization (C&I) that it merged with EDS and atrophied. It took IBM Corp. more than 10 years to effectively bring its products and services sales groups together (it is still a work in progress). RFG therefore thinks it will take HP even longer before it can remake its culture to bring Enterprise Services to the level Meg Whitman desires. The HP Itanium win over Oracle should remove a dark cloud from the Integrity server line but a lot of damage has already been done. HP now has an uphill battle to restore trust and build revenues. IT executives interested in HP’s Unix line combined with Oracle software should ensure that the desired software has been or will be ported by the time the enterprise needs it installed. The Oracle SAP saga just will not go away, as it is likely CEO Larry Ellison enjoys applying legal pressure to SAP (especially since the fees will be paid by the other party). It is a distraction for SAP executives but does not impair ongoing business strategies or plans. Nor will the outcome prevent other third parties from legally offering maintenance services. IT executives should not feel bound to use Oracle for maintenance of its products but should make sure the selected party is capable of providing a quality level of service and is financially sound.
Lead Analyst: Cal Braunstein
IBM Corp. announced second quarter financial results with lower revenues but improved profits while Infosys Ltd. had weaker than expected first quarter 2013 results. In other financial news, Microsoft Corp. reported mixed fourth quarter and fiscal year 2012 results.
- IBM reported second quarter revenues of $25.8 billion, a drop of three percent year-over-year. However, net income on a GAAP basis increased by six percent to $3.9 billion from the previous year’s quarter. Asia Pacific and the BRIC countries showed single digit growth while all other geographies declined. Europe/MidEast/Africa delivered the worst performance with a nine percent decline, although using a constant currency basis the revenues were flat. Similarly, the services sectors (GBS and GTS) were off four and two percent respectively from the same quarter last year. Global Financing and Software were flat while the Systems and Technology Group (STG) experienced a nine percent fall in revenues year-over-year. IBM’s Smarter Planet initiative saw its revenues increase more than 20 percent in the quarter while its Power Systems gained market share through competitive displacements. Year-to-date IBM states its growth market revenues were up nine percent year-over-year while business analytics revenues grew 13 percent and cloud revenues doubled year-over-year. The company also saw its gross profit margins climb by 1.5 percentage points.
- Infosys had less than stellar results for its first quarter 2013. While revenues grew 4.8 percent to $1.75 billion and IFRS net income climbed eight percent to $416 million year-over-year, on a sequential quarter basis, the company saw revenues drop by one percent and profits slide by more than 10 percent. Repeat business accounted for 99.1 percent of sales; the top 10 clients were responsible for 25.3 percent of the revenues. Utilization levels excluding trainees have been slowly dropping from 77.8 percent over the 12 months ending June 2011 to 71.6 percent in the current quarter. The split between onsite and offshore dropped slightly from 25.5 to 74.5 percent in the year ago quarter to 24.7 to 75.3 percent in the first quarter 2013. Attrition improved slightly to 14.9 percent. All geographic sector revenues declined with the exception of North America, which grew by 1.6 percent sequentially. As expected, Europe was the worst performer with a decline of 8.1 percent sequentially.
- Microsoft announced fourth quarter 2012 revenues of $18.1 billion, an increase of four percent from the previous year’s quarter. On a GAAP basis the company reported its first net loss of $492 million due to writing off $6.2 billion for its 2007 aQuantive acquisition. For the full fiscal year Microsoft reported revenues of $73.7 billion, a five percent jump from its fiscal year 2011 revenues. On a GAAP basis net income was $17 billion, a 26 percent decrease from the prior year. The Server and Tools business revenue grew 13 percent for the fourth quarter and 12 percent for the full year while the Business Division revenue increased 7 percent for the fourth quarter and full year reflecting continued momentum in Office 2010 sales. The Windows and Windows Live Division revenue declined 13 percent for the fourth quarter and 3 percent for the full year whereas the Online Services Division revenue advanced 8 percent for the fourth quarter and 10 percent for the full year reflecting growth in its search business. The Entertainment and Devices Division revenue jumped 20 percent for the fourth quarter and 8 percent for the full year, mostly due to the addition of Skype.
RFG POV: Most vendors note the difficulties that lie ahead over the next few quarters due to Euro zone problems, a slowdown in China, and a weak economy in North America as well as fears over oil prices and Middle East crisis. How well enterprises will do will depend upon the sector(s) they are in, the geographies they serve, and the agility and innovation of the firm. IBM, which has huge backlogs, is able to plow forward through the good times and bad. Its STG products continue to fluctuate depending upon age of the systems but overall IBM is on track to deliver against its five year growth plan. On the other hand, Infosys is failing to keep up with some of its outsourcing competitors and may be running into a management of growth problem. The drop in its utilization levels is a further indication that backlog and revenue management is not mapping to usage at the desired mix. Thus, while this is an overall corporate issue, the company still maintains tremendous customer loyalty and repeat business rate. In that the company is seeing weakness in most of its markets, IT executives should be more aggressive in negotiating blended rates and the overall deal. Microsoft marches on and continues to grow its enterprise businesses. The Windows business is impacted by the decline in PC sales (and growth in the Apple Inc. iPad market). There is the perception that enterprise business will improve when Windows 8 comes out later this year but that is unlikely. While slightly more than 50 percent of enterprises are on Windows 7, the other half are on Vista and XP. It takes years before companies migrate to new releases and the move to Windows 8, in that it is designed more for the personal world and tablets than the business world, most likely will not happen for most companies. RFG expects the majority of firms will wait for Windows 9. However, RFG does expect Skype and Yammer to be leverageable in the enterprise space but it is unclear whether or not Microsoft can leverage these cloud services to get organizations to move to its other cloud offerings. IT executives will continue to have more and more business platform alternatives available to them and therefore should not feel locked into Microsoft. Given that, IT executives should carefully analyze their business software requirements and negotiate for the best deals. Since Microsoft pricing can be complex and expensive, IT executives should consider using outside assistance (from RFG or elsewhere) to simplify the experience and obtain the best contractual prices and terms.
Lead Analyst: Cal Braunstein
IBM Corp. regained the top supercomputer ranking with the installation of its “Sequoia” BlueGene/Q beast at Lawrence Livermore National Laboratory (LLNL). According to job listing trends per Indeed.com, PHP and Python adoption is exploding. A recent Symantec Corp. study finds the expanded use of online file sharing is increasing the security risk exposures to small- and medium-sized businesses (SMBs).
- IBM took back the top slot in the supercomputer rankings with the LLNL Sequoia installation, which delivered 16.32 petaflops of sustained performance running across the 1.57 million PowerPC cores inside the box during a Linpack benchmark run. Sequoia has a peak theoretical performance of 20.1 petaflops. To deliver the 16.32 petaflops IBM claims it only consumes 7.89 megawatts. The IBM supercomputer shifted the K massively parallel Sparc64-VIIIfx machine built by Fujitsu Group for the Japanese government down to number two. The Fujitsu Sparc machine had a sustained Linpack performance of 10.5 petaflops against a peak of 11.3 petaflops but it consumed 12.7 megawatts. Sequoia is 2.5 times as energy efficient as the Sparc K. IBM now has five of the top 10 high performance computing (HPC) engines. 372 of the processors, or 74.4 per cent of those on the list, are based on Intel Corp. Xeon or Itanium processors, down slightly from the 384 HPC machines on the November list. The latest Top 500 list has 58 Power-based processors, up from 49 six months ago. There are also 63 clusters based on Advanced Micro Devices Inc.‘s (AMD’s) Opteron processors, unchanged from last year.
- According to Indeed.com companies are embracing the Web to reach customers and employees and are therefore turning to the programming languages and technology stacks made popular by companies such as Facebook Inc. and Google Inc. Current programming languages such as C++, Java, and .NET will still be the primary languages for enterprise applications but the scripting languages will dominate the Internet. The below chart produced by Indeed.com shows the variances in job growth rates. Aside from the Internet movement another key reason for the adoption of PHP and Python is the movement to open source. Python appears to be a run-away winner because of its design elegance and framework simplicity. The next most used languages are Java and then .NET.
- Symantec released the findings of its 2011 SMB File Sharing Survey of more than 1,325 SMB organizations this week. The survey results found SMB employees are increasingly adopting unmanaged, personal-use online file sharing solutions without permission from IT. These behaviors are making organizations vulnerable to potential data losses and security threats. A Symantec executive observed that a staggering 71 percent of small businesses that suffer from a cyber attack never recover. 74 percent of respondents who adopted online file sharing did so to improve their productivity. Respondents also cited risk concerns included sharing confidential information using unapproved solutions (44 percent), malware (44 percent), loss of confidential or proprietary information (43 percent), breach of confidential information (41 percent), embarrassment or damage to brand/reputation (37 percent), and violating regulatory rules (34 percent). However, only half of the respondents stated they would go to IT for help with sharing large files while only one-third expressed interest in utilizing an already existing IT solution. 14 percent now report the average shared file size is greater than 1 GB. Additionally, more and more people are remote. The survey found that about 37 percent of SMB organizations will have employees working remotely, up from 32 percent today.
RFG POV: IBM views the HPC market as only one component of the technical computing markets that it is aggressively pursuing. It has almost half of the HPC market but is in second or third place in the other sectors. With Power Systems once again proving their value at the high end, IBM will seek to differentiate itself with both Power and Intel systems in the other markets where Dell Inc. and Hewlett Packard Co. (HP) are the top competitors. Since IT executives can expect IBM and others to market and sell their solutions to end users directly as well as to IT, IT executives should be communicating with peers as to why IT should be involved in the decision-making process. The shift to PHP and Python will continue to gain steam as companies find these solutions are economical and easier to develop and maintain. This may cause religious wars in some organizations. IT executives need to keep staff focused on the business value of solutions and not on protecting legacy domains and skills. While the Symantec study only looked at the SMB organizations, there is also significant unauthorized use of file sharing amongst large enterprises as well. This is not just an IT issue…it is a corporate policy and governance issue and should be address from both angles. IT executives need to take a leadership role in driving awareness of the problem, gaining buy-in from other executives, providing internal solutions, and communicating the challenge and solutions to employees.
Lead Analyst: Cal Braunstein
IBM Corp. and PricewaterhouseCoopers, LLC released results from their global CEO surveys. For the first time the IBM study identified technology as the most important external force impacting the business. Both studies recognized the need to employ finer customer segmentation and use IT to change business processes to take advantage of new opportunities.
- IBM released results of its fifth biennial CEO survey, in which the company interviewed more than 1700 CEOs with more than six years tenure in 64 countries. One of the top findings was that technology is now driving more organizational change than any other force, including the economy. In this regard, outperformers embrace openness, excel in executing tough changes, differentiate themselves through better data access and insights which are put into action, and are more likely to partner for innovation and driving revenues from new sources. The top three sources of sustained economic value come from human capital, customer relationships and products/services innovation. Internal and external collaboration are being used as tools for creating organizational change. The second finding was that CEOs create more economic value by engaging customers as individuals. These companies are investing in getting customers to share their insights into what they value individually, and when and how they want to interact. Then they develop and execute plans to interact using social media as well as traditional face-to-face engagements. Outperformers in this category strongly differentiate themselves through better data access, insight, and translation into actions. While big data is playing a role in this dimensional change, other factors are the old fashioned way of listening and capturing what employees see and hear, and then being where the customer expects the company to be.
- The third major CEO survey finding was that CEOs create more economic value by pursuing more disruptive innovation with partners and collaborating to drive new revenue sources. In some cases they create new industries while in others they merely move into new industries. Two of the keys to more effectively meeting the partnership challenge are making the partnerships personal and breaking the traditional collaboration boundaries. In effect, these companies are themselves becoming disruptors. While CEOs have shifted to address the transformational needs of the organization, CFOs are still concerned with controlling cost and improving efficiency. In a separate IBM retail study, IBM found most customers were willing to share information if they perceived there was a benefit to doing so. The greatest areas of reluctance for data sharing were in the categories of financial and medical data.
- The PwC study of more than 160 CEOs in the U.S. identified customer demand as the primary driver of corporate strategy in 2012. While the executives are slightly less optimistic than last year, 40 percent expect their own companies will grow and approximately the same number expect to complete a cross-border merger or acquisition this year. To deliver on their strategies CEOs are reconfiguring operations in local markets, nurturing talent and addressing potential talent shortages, and encouraging the free flow of ideas and innovations. Two significant findings in the survey were a major jump in the concern about competitive threats (73 percent of the CEOs are worried) and a considerable decline in anxiety about risk exposure (a 20 point drop to 19 percent). PwC notes that with more growth opportunities arising in distant lands business leaders are acknowledging that an overly conservative attitude will put their companies at a competitive disadvantage. Lastly, PwC determined that the top CEO priorities overseas are growing the customer base followed by access to the local talent base. Additionally, the PwC study confirmed one of the IBM findings â€“ most CEOs were planning on entering into new strategic alliances or joint ventures this year.
RFG POV: CEOs are embracing the belief that true insights into customer wants and needs will generate additional revenues and loyalty, and customer needs may be better satisfied through acquisitions and partnerships than organic investment. CEOs are also recognizing technology must play a leading role in the areas of business analytics — including big data collaboration and social media, and business process management. All this is driving cultural and organizational change. However, one of the perennial inhibitors to change is the human behavioral theory “culture eats process for lunch every day.” Thus, business and IT executives must excel in executing tough cultural and process changes if they expect to convert their goals and strategies to reality. In that an Economist Intelligence Unit study found that 60 percent of executives believe their main vertical markets will be barely recognizable by 2020, it is imperative that the executives overcome their risk aversion and exposure concerns. Moreover, they must also step up to the challenge and provide the strong leadership required to transform the organization to meet the demands of tomorrow.