Frost & Sullivan

2014 ICT Market Outlook

February 2014

2

Agenda

Global Telecom Trends for 2014

Global IT Trends for 2014

Conclusions & Q&A

3

Agenda

Global Telecom Trends for 2014

Global IT Trends for 2014

Conclusions & Q&A

4

Top Ten Transformational Telecom Trends for 2014

Smart Devices

Mobile OS

HTML5

5G Infrastructure

IoT/Wearables

Big Data

Analytics

OTT Dominance

New Investment Strategy

Mobile Gaming

5

Trend #1: Smart Devices S

mart

phone U

ser

Penetr

ation(%

) Selected Smartphone User Penetration Metrics, 2013E

Smartphone ownership stands at roughly 60% in most Western and Developed

Asian markets, with Japan being roughly 55% in 2013.

Smartphone migration will be the key revenue driver in the Japanese market in

2014.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Source: Frost & Sullivan.

6

Trend #1: Smart Devices (continued) Table

t P

enetr

ation (

%)

Tablet Penetration in Selected Markets, 2013E

Tablet ownership is still under 50% in all major markets and will continue to grow at

the expense of the PC market.

Tablet content ARPUs are four times that of smartphone content ARPUs.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Source: Frost & Sullivan.

7

Trend #2: Mobile OS Tota

l S

mart

phone U

sers

(m

)

Global Smartphone Users by OS, 2007-2017E

Android will continue to be the most popular global mobile OS over the next five

years although Apple will also grow steadily.

Windows will not emerge as a major platform until it becomes more open.

CAGR

2013-2017

Others

+7.5%

Windows

+40.1%

iOS

+13.2%

Android

+13.5%

0

500

1000

1500

2000

2500

3000

3500

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Android iOS Microsoft Others Source: Frost & Sullivan.

8

Trend #2: Mobile OS (continued)

iOS Users by Version, November 2013

Despite the massive growth in Android, the OS remains heavily fragmented

compared to iOS due to the large number of devices.

iOS still accounts for 66% of global mobile application revenue.

iOS 7, 80%

iOS 6, 19%

Previous Versions, 1%

2.2, 9%

2.3, 10%

3.2, 13%

4, 16% 4.1, 17%

4.2, 17%

4.3, 18%

Android Users by Version, November 2013

Source: Frost & Sullivan.

9

Trend #2: Mobile OS (continued)

Web-based OS Update, February 2014

Firefox OS has the most industry support among new web-based operating

systems and despite setbacks Samsung is releasing smart devices using Tizen.

Source: Frost & Sullivan.

OS Vendor Support Carrier Support

Firefox Mobile

Alcatel, LG, ZTE and

Foxconn. Panasonic also

announced plans to

introduce Firefox OS-

based smart TVs.

As of 2013, Firefox OS-based devices were available in 14 countries in Europe

and Central and South Americas. They initially targeted entry-level smartphone

segments, or emerging markets where there was a transition from feature

phones to smartphones, avoiding markets already dominated by iOS and

Android.

Tizen

Samsung recently

announced that its Galaxy

Gear 2 Smart Watch will

use Tizen instead of

Android.

Some major global carriers have recently exited the Tizen Association such as

Telefonica and France Telecom, while NTT DoCoMo has indefinitely delayed

releasing a smartphone using the OS.

Ubuntu

BQ and Meizu have both

announced Ubuntu

smartphones for 2014.

Vodafone, Three, China Unicom, EE, Deutsche Telekom, Korea Telecom,

Verizon, and Telstra are among the carriers in the Ubuntu advisory group.

Sailfish OS

Smartphones can be

ordered directly from Jolla

online in the EU with India

to follow in 2014.

Sailfish currently has no direct carrier support, employing a B2C strategy while

it will start encouraging Android users to migrate later in 2014.

10

Trend #3 HTML5

Native vs. HTML5 Application Comparison HTML5 Hardware Readiness

HTML5 apps hold great promise in terms of supporting cross-platform support and

lowering costs associated with enterprise application use and development.

Source: NTT.

Source: iCapps. Source: visual.ly

11

Trend #4: 5G Infrastructure

While LTE networks are being deployed in most countries, most subscribers are

found in Japan, South Korea and the USA.

Source: Ericsson.

Global Mobile Subscribers by Technology, 2009-2018

12

Trend #4: 5G Infrastructure (continued)

Although 5G networks are not anticipated until 2020 at the earliest, several vendors

have already launched initiatives. Small cells will be a major part of deployments.

Source: Tektelic.

Vendor 5G Initiative

Samsung is looking

to be a first mover in

5G, and claims to

have transmitted

1Gbps over a

distance of 2km using

a trial network.

Huawei has

announced US$600m

in 5G investments

between 2014 and

2018. It aims to

transmit a peek

speed of10Gbps.

Major 5G Initiatives Mobile Network Evolution

13

Trend #5 IoT/Wearables

Physical Storage Capacity in Hardware

Extreme innovations in the wearable technology space will expedite the need for

cloud storage.

Source: Frost & Sullivan. 0 100 200 300 400 500 600

Samsung Galaxy Gear

Google Glass

iPhone 5S

iPad Air

Lenovo Thinkpad X240

HP Compaq 6305 Pro

Electronic Tattoo

14

Trend #6: Big Data

F&S APAC Invoiced Sales, 2008-2012 CAGR

Saturation of fixed broadband, smartphones and tablets coupled with IoT devices

will cause an exponential growth in Internet traffic.

Giving enterprises a huge amount of data which can be utilized.

Source: NTT.

15

Trend #7: Analytics

Verizon Wireless is using big data and analytics to offer consumer data to a variety

of B2C businesses.

Source: Verizon Wireless.

16

Trend #7: Analytics (continued)

Web 2.0 companies are also starting to use analytics, notably in order for predictive

analyses which result in better-targeted e-commerce offerings.

Source: Facebook.

Amazon “Anticipatory Shipping” Patent Facebook Predictive Analysis Example

Source: Amazon.

17

Trend #8 OTT Dominance

Japanese users are the least likely in the world to share most personal data online.

18

Trend #8 OTT Dominance (continued) Tota

l M

inute

s o

f U

se

NTT DoCoMo Blended MOU, 6/09-12/13

NTT DoCoMo’s MOU has contracted by 40% in the last two years.

Mobile MOU could decline to extremely low levels in the next five years.

LINE

Introduced

Source: NTT DoCoMo.

100

105

110

115

120

125

130

135

140

19

Trend #8: OTT Dominance (continued) Tota

l M

obile

AR

PU

(JP

Y)

NTT DoCoMo Blended ARPU, 6/09-12/13

In Japan the rise of LINE has caused a massive drop in NTT DoCoMo’s voice

ARPU as users opt for free calling.

NTT DoCoMo now reports a “Smart ARPU” to counterbalance voice declines.

CAGR Since

LINE Introduction LINE introduced

Smart ARPU

+6.1%

Data ARPU

0.0%

Voice ARPU

-4.7%

Source: Frost & Sullivan.

0

1,000

2,000

3,000

4,000

5,000

6,000

Voice ARPU (¥) Data ARPU (¥) Smart ARPU (¥)

20

Trend #9: New Investment Strategy N

TT

DoC

oM

o S

trate

gic

Roadm

ap

NTT DoCoMo Blended MOU, 6/09-9/13

In response NTT DoCoMo has recently made many non-traditional investments to

counterbalance falling voice revenue.

Source: NTT DoCoMo.

21

Trend #10: Mobile Gaming

Mobile Game Spending Rates, 2013

Applications both monetize stronger and with greater frequency in Japan more than

anywhere else, making the market very attractive for developers.

Mobile Game ARPUs, 2013

Source: Industry Interviews.

0

5

10

15

20

25

30

Japan South Korea

UK USA China

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

Japan South Korea

USA UK China

Mobile

Ga

me S

pendin

g R

ate

(%)

Mobile

Gam

e A

RP

U(U

S$)

22

Global Smartphone Users by OS, 2007-2017E

Japan ranks third globally in app usage and first in paid app usage.

Source: Google.

Average Mobile App Usage by Country, 2013

Tota

l M

obile

Applic

atio

ns p

er

Phone

Trend #10: Mobile Gaming (continued)

23

Japan Top Grossing Mobile Apps, November 2013

Japan is dominated by Puzzle & Dragons and LINE games, making it difficult for

other app companies to gain traction in the market.

Mark

et R

evenue S

hare

(%

)

Source: Appannie, Industry Interviews.

0% 10% 20% 30% 40% 50% 60%

Puzzle & Dragons

Quiz Wiz

LINE Pokopang

Colopl Baseball

Chain Chronicle

LINE

LINE Wind Runner

Keri Hime Quest

Clash of Clans

Love Live

Next 990 Top Grossing Apps

Trend #10: Mobile Gaming (continued)

24

Extreme competition for market share has lead to very high Cost per Install (CPI) in

Japan. Japan is also the only country in the world where mobile apps are

aggressively promoted on TV, print, outdoor signage and celebrity endorsements.

Source: AdParlor.

This means that it is very expensive for developers to gain users and they

desperately need a more effective way of increasing app downloads.

Mobile App CPI in Selected Markets, 2013E Japan Mobile Game Advertisements Subway Billboard

Television Celebrity

Japan CPI Ranges from US$15-US$20!

Trend #10: Mobile Gaming (continued)

25

Agenda

Global Telecom Trends for 2014

Global IT Trends for 2014

Conclusions & Q&A

26

Global IT Spending Market Overview

Overall IT spending surpassed US$4 Trillion in 2013. IT budgets are again rising in

most industries, and many new technologies are offering potential cost savings.

Source: Frost & Sullivan.

Global IT Spending 2013 - US$4 Trillion

Datacenters 4%

Software 8%

Hardware 18%

IT Services 25%

Connectivity 45%

IT Spending Technology Drivers

SegmentDatacenters Iaas, Intelligent DCs

Software Saas, Paas

Hardware BYOD, Bundling

IT Services Outsourcing, Analytics

Connectivity NaaS, SDN

Inte

rnet o

f Thin

gs

Big

Data

Technology Drivers

27

Top Ten Transformational IT Trends for 2014

BYOD

Intelligent Data Centers

Converged Infrastructure

Software Defined Networking

Cloud Computing Evolution

5G Wi-Fi

3D Printing

Smart Contact Centers

Security

IT Department Transformation

28

Trend #1 BYOD

BYOD is becoming increasingly adopted, as 70% of enterprises offer at least some

form of the service. Mobility budgets have been significantly cut in many cases.

BYOD Adoption Survey, July 2013

Source: Aruba Networks.

29

Trend #1 BYOD (continued)

Global Android Market Share by Device, July 2013

Fragmentation and security are the major inhibitors to the BYOD market. A 2013

survey found more than 12,000 Android devices in existence.

Source: OpenSignal.

30

Trend #2 Intelligent Data Centers

In 2014 the focus in the data center space will be efficiency, as enterprises

look towards consolidation and intelligent data centers to reduce costs.

4%

4%

5%

3%

5%

3%

4%

8%

6%

7%

23%

19%

20%

17%

20%

14%

23%

23%

25%

19%

39%

41%

37%

42%

29%

27%

32%

34%

37%

33%

27%

28%

29%

28%

35%

32%

30%

27%

22%

32%

6%

9%

10%

10%

12%

24%

11%

9%

9%

9%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Dearth of IT manpower

Lack of visibility into datacenter assets & performance

Managing the virtual infrastructure

Implementing Virtualization

Network Latency

Securing the applications & data

Running out of storage

Running out of rackspace

Poor Cooling

High Energy Consumption

Least Critical Less Critical Neutral Critical Most Critical

Survey done with IT Managers and CIOs in Australia, Hong Kong, China, India, Singapore and Malaysia in Q2 2013.

31

Trend #2 Intelligent Data Centers (continued)

In an SDDC, not only are all infrastructure components (servers, storage, network)

virtualized, but they are orchestrated through a powerful platform that ensures the

components work together.

Source: EMC.

32

Trend #3 Converged Infrastructure

Converged Infrastructure Network Elements

Converged Infrastructure will become more popular as large IT vendors start to

support CI, despite interests in legacy products.

Converged Infrastructure Spending

Source: HP.

33

Trend #4 Software Defined Networking

Asynchronous Data Traffic Example SDN Network Architecture

Software Defined Networking will gain momentum in 2014 as big data creates a

need for centralized and hence more cost-effective traffic shaping.

Source: Dell.

34

Trend #5 Cloud Evolution

F&S Cloud Computing Adoption Survey

Hybrid clouds will come to the forefront of the CC market in 2014 but private clouds

will still be the most commonly deployed solution.

Source: Frost & Sullivan.

41.6%

31.6%

12.6%

14.2%

Private Cloud Services Usage

Currently Uses

Plan to use within 2 years

Plan to use but not within 2 years

Does not plan to use it

32.3%

26.8%

12.3%

28.7%

Public Cloud Services Usage

Currently Uses

Plan to use within two years

Plan to use but not within 2 years

Does not plan to use

22.3%

40.0%

12.6%

25.2%

Hybrid Cloud Services Usage

Currently Uses

Plan to use within 2 years

Plan to use but not within 2 years

Does not plan to use it

• A large percentage (41.6 per cent) of enterprises mention

that they use private cloud services.

• At a regional level, more than half of the enterprises in UK

and US point out their current involvement with private

cloud services.

• The public cloud services model has the highest percentage

of enterprises who do not plan to use it in the future.

• This is largely because of the security and performance

concerns attached to the public cloud service model.

• 52.0 per cent of the enterprises in the US currently use this

model, which is the largest proportion of users among all

the other countries.

• 22.3 per cent of the enterprises are currently using the

hybrid cloud service model. This points to the low

prevalence of true hybrid cloud offerings in the market.

35

Trend #5 Cloud Evolution (continued)

Public Cloud vs. Private Cloud Adoption

Security, SLA requirements and legacy infrastructure will spur the private cloud, but

cost and utility pricing will also fuel hybrid cloud growth.

Source: Dell. Source: Frost & Sullivan.

Hybrid Cloud Architecture

36

Trend #6 The Wireless Enterprise

802.11x Standard Evolution “The Wireless Enterprise”

802.11ad is “5G Wi-Fi” is being deployed with peak throughputs of 6GB. This will

allow offices to truly become wireless for the first time.

Source: NTT.

Source: Cisco. Source: Wireless Gigabit Alliance.

37

Trend #7: 3D Printing

3D Printing Market Readiness Matrix 3D Printed Items

3D will radically transform a variety of industries as hardware becomes cheaper

this year, and will change the IT structure of the modern enterprise.

Handgun

Prosthetic

Ear

Pizza

38

APAC markets are the source of most of the world’s DDOS attacks. Attack

volumes are increasing significantly in size.

Source: Akamai.

Indonesia, 38%

China, 33%

United States, 6.90%

Taiwan, 2.50%

Turkey, 2.40%

India, 2.00%

Russia, 1.70%

Brazil, 1.40%

Romania, 1.00%

South Korea, 0.90%

Other, 11%

Global Internet Attack Traffic

by Country of Origin, 2Q 2013

Trend #8: Security

Global Internet Attack Traffic by

Peak Attack Size, 2010-2013

39

Trend #9: Smart Contact Centers

Japan Contact Center Market by

Business Model, 2013

Contact Center Applications Market: Adoption

Trends by Technology, Japan, 2012–2019

Offshoring has not been viable in Japan due to language needs, therefore we

foresee voice apps being a major driver in the local contact center market.

78.0%

0.1%

0.2%

21.7%

21.9%

In-house Captive

Offshore Outsourced Domestic Outsourced

ACD

CM

CTI

IVR

Multimedia

Outbound

Speech Apps

WFM

ACD CM CTI IVR Multimedia Outbound Speech Apps

WFM

Contribution 2012 (%) 21.1 17.1 30.9 9.2 2.3 8.4 1.7 9.3

Contribution 2019 (%) 15.1 20.6 24.2 10.1 3.0 9.6 2.2 15.0

% CAGR (2012-2019) 1.7 10.9 3.2 9.2 12.9 10.0 12.8 16.4

78.0%

0.1%

0.2%

21.7% 21.9%

In-house Captive

Offshore Outsourced Domestic Outsourced

Outsourced

40

Trend #10: The Changing Role of the IT Department

Traditional Approach to IT

Cloud services are changing IT Departments to become proactive instead of

reactive by offering scalable, real-time and cost-effective services.

Source: Frost & Sullivan.

Problem

Build own

solution

Purchase

solution

Implementation

New Approach to IT

PaaS IaaS SaaS

Implementation

Problem

41

Trend #10: The Changing Role of the IT Department

(continued)

Cloud Confidence Percentages

Confidence in the Cloud is growing, and IT executives expect to have full

confidence in the cloud by 2020. This will fundamentally change how IT is viewed.

Source: Enterprise CIO Forum.

New Approach to IT

IT Departments will manage the

value chain of cloud vendors instead

of just “keeping the lights on”

Employees who can analyze IT risk,

manage large data sets and analyze

processes will be highly valued

The IT Department will be seen as a

business innovators instead of

business enablers

42

Agenda

Global Telecom Trends for 2014

Global IT Trends for 2014

Conclusions & Q&A

43

Summary

Telecom Trends –

Smart device ownership is increasing rapidly and mobile OS is

evolving to include web-based alternatives.

The amount of data is growing exponentially, creating congestion

but also opportunities with big data & analytics.

OTT Services are destroying the voice market which means

operators will have to find alternative investment avenues.

Enterprise Trends –

BYOD, CI can reduce CAPEX, Intelligent DCs can reduce OPEX

Hybrid Clouds, SDN will see further adoption in 2014

Cloud services will fundamentally change the role of the IT

department to hold a more strategic role in the organization.

Thank you!

January 2014