Wednesday, 11 April 2012

Overview
Market Share: IT Services, 2011 Search Analytics Trends: BPM Maintains Its Appeal Market Share Alert: Semiconductor Assembly and Test Services in 2011

Overnight Research
Sales Commentary appears in italics.

Market Share: IT Services, 2011 (contact sandra.notardonato@gartner.com) Kathryn Hale, Dean Blackmore This is our first take on the new 2011 IT services market share data. A more granular analysis by sector will follow. Ripe for consolidation, the IT services industry remains the most fragmented of the technology industries. Company Impact: Accenture, Capgemini, Cognizant, CSC, HCL, HPQ, IBM, Infosys, TCS, Wipro. In 2011, the overall IT services market increased 7.7% in U.S. dollar terms to $844.5 billion from $783.9 billion in 2010. The market is very fragmented. IBM remains the largest player, with 7.1% market share. IBM's revenue growth underperformed the broader market, resulting in a 10-basis-point decline in market share to 7.1%. The next largest player is HP Enterprise Services, with 4.2% market share. HP also underperformed the broader market, resulting in a 30-basis-point decline in market share to 4.2%. In the top 10, Japan-based NTT Data increased from No. 8 to No. 6, boosted by its acquisition of Caritor. Capgemini also increased by two positions, from No. 9 to No. 7, while Lockheed Martin and Xerox moved down two positions to No. 8 and No. 9, respectively. Accenture maintained its No. 4 position, but gained 30 basis points of share. Based on its current growth trajectory, it could surpass Fujitsu and move into the No. 3 position in 2012. Of note, IT services sold by Oracle increased 15% last year, pushing it into the top 10 a first for the industry. The most notable movement in the top 20 was TCS moving from the No. 21 position in 2010 to the No. 16 position. Conversely, government-specific providers, such as SAIC and Northrop Grumman, moved down in their rankings from No. 10 to No. 13 and from No. 16 to No. 21, respectively. Collectively, the leading government IT services providers saw revenue decline 4.3% in 2011. The leading India-based companies saw a market share increase from 3.1% in 2010 to 3.5% in 2011. This is still a very small percentage of the total market, but the group continues to gain share at the expense of the leading traditional vendors. Of the five largest offshore providers, Cognizant saw the highest growth, which pushed it to No. 26 from No. 33 in 2010, while Wipro was the only company in this group that saw its market position reverse. Notably, this was the first year that Infosys did not see any change in its market share position, holding at No. 27.

Assuming a 23% revenue growth rate on Cognizant and a 15% growth rate on Infosys, Cognizant would surpass Infosys in 2012, moving into the No. 2 position of the offshore IT services providers, unless Infosys makes an acquisition to boost the top line. (Infosys will provide revenue guidance for FY13 on Friday, 13 April 2012.) What to Watch o In 1Q12, Gartner revised its 2012 forecast for ITO spending from 3.4% to 3.1%, representing a market size of $316.9 billion, down from $323.9 billion. (In U.S. dollars, the forecast declined from 2.9% growth in 2012 to 1.1%.) Our research shows that many organizations took longer to set this year's budgets, which will slightly compress the ITO market growth potential compared with our prior forecast. o In our opinion, the leading vendors that are poised to outperform Gartner's forecast in 2012 include Accenture, while IBM and Capgemini are likely to perform in line. HP and CSC are likely to underperform, dictating market share movement. o The industry remains ripe for consolidation, particularly by the companies that are maintaining or losing share. Targets include BPO, geographic-specific and offshore providers. We also see Infosys as more likely to do a larger deal to protect its No. 2 position of the India-based providers.

Search Analytics Trends: BPM Maintains Its Appeal (contact john.rizzuto@gartner.com) Fabrizio Biscotti, Teresa Jones, Janelle B. Hill BPM and related terms remain popular searches within the software and service research area. In this document, we analyze the search behavior of end-user clients on their searches related to BPM on gartner.com. Company Impact: IBM, MSFT, ORCL, OTEX, PEGA, SAP. BPM is a management discipline that can be supported by enabling technologies, including BPM suites (BPMSs), business rule engines, business process analysis tools and simulation products. BPMSs are anticipated to grow 8% during 2012 and at a compound annual growth rate of 10% from 2011 through 2016. BPM is relatively impervious to economic cycles. In down times, organizations need to cut costs, and in good times, they want to increase the capacity to grow. As a result, the number of searches related to BPM has been mostly constant during the past two years. Gartner clients take advantage of updates to well-known Gartner publications, with interest in BPM increasing after the release of new Magic Quadrants, Hype Cycles, Predicts and Cool Vendors reports. Such documents provide up-to-date information on vendor strategies and market trends, enabling more informed decision making.

Figure 1. Number of End-User Searches for "BPM" (Indexed) on Gartner.com, January 2010 Through December 2011
Number of Searches 140 120 100 80 60

40
20 0

Source: Gartner (April 2012)

Many clients who search our website are in the early stages of BPM projects, evidenced by the popularity of terms such as "getting started." There were also a lot of searches on "business intelligence" (or "BI") and "analytics." This reflects the emerging interest in the concept of intelligent business operations.

Table 1. Vendors Mentioned in Searches for "BPM," January 2010 Through December 2011
Relative Frequency (%) IBM SAP Microsoft Oracle Pegasystems Tibco Lombardi Software Software AG Metastorm Others 15.8 15.3 13.1 12.9 6.2 5.4 5.3 4.8 2.9 18.4

Source: Gartner (April 2012)

What to Watch o Further industry consolidation and market share shifts, particularly as cloud adoption accelerates.

Market Share Alert: Semiconductor Assembly and Test Services in 2011 (contact tim.mahon@gartner.com) Jim Walker Although it was a tough year because of overcapacity, the semiconductor assembly and test services (SATS) outgrew the overall semiconductor industry by about 20 basis points in 2011. Company Impact: AMKR, ASX, IMOS, Powertech Technology, SPIL, STATS ChipPAC. The good news for the SATS industry over the next few years is that, now that the recovery of the semiconductor industry appears under way, with capex for the SATS industry expected to decline by 5.2% in 2012 (after declining in 2011,) utilization rates for the industry should begin to increase. Gartner is expecting an above-average quarterly sequential growth rate for the semiconductor industry in 2Q12, and recent announcements by TSMC and SMIC on 1Q12 revenue results may be an early indication that our call will play out. Gartner is forecasting SATS utilization rates to increase to the high 80% range over the course of 2012, up from approximately 85% in 2011. There were no changes in our 2011 rankings for the top six players in the market. However, ASE, the market share leader in the space, increased its lead against the second- and third-ranked players, Amkor and SPIL. No. 4-ranked STATS ChipPAC saw no change to its market share, while No.5, No. 6 and No.7 and No. 8 players Powertech, UTAC, ChipMOS and Jiangsu Chanhjiang Electronics, respectively all experienced slight gains in the 10- to 20-basis-point range. The SATS industry remains a relatively fragmented market, with the top 10 companies comprising 63% of the revenue and the top 20 companies comprising 77% of the revenue.

Table 1. Top 10 Companies' Sales Revenue From Shipments of IC Packages to the World, 2011 (Millions of Dollars)
2010 Market Share (%) 16.5 12.5 8.9 7.1 5.0 3.9 2.5 2.3 2.5 1.8 63.0 37.0 100.0 2011 Market Share (%) 17.7 11.6 8.4 7.1 5.2 4.1 2.6 2.5 2.4 1.8 63.4 36.6 100.0

2011 Rank 1 2 3 4 5 6 7 8 9 10

2010 Rank 1 2 3 4 5 6 8 9 7 12 ASE

Company

Region Taiwan United States Taiwan Singapore Taiwan Singapore Taiwan China Japan Taiwan

2010 Revenue 3,903 2,939 2,104 1,678 1,173 925 591 531 600 431 14,874 8,718 23,593

2011 Revenue 4,252 2,776 2,024 1,707 1,252 981 620 611 565 441 15,228 8,796 24,024

Change (%) 2010-2011 9.0 -5.5 -3.8 1.7 6.7 6.0 4.9 15.0 -5.8 2.3 2.4 0.9 1.8

Amkor Technology SPIL STATS ChipPAC Powertech Technology UTAC ChipMOS Technologies Jiangsu Changjiang Electronics Technology J-Devices Chipbond Technology Top 10 Total Other Companies Total Market

Source: Gartner (April 2012)

What to Watch o Gartner is forecasting the SATS market to grow 5.1% in 2012, 12.4% in 2013 and 5.3% in 2014. This is faster than our forecast for overall semiconductor industry growth of 4.0%, 9.4% and 4.5%, respectively.
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