Which Industries are Leading the Way for Adoption of Industry Collaborative Cloud?
The industry collaborative cloud (ICC) market is young, yet growing fast, with dozens of new industry collaborative clouds emerging each year across many industries. While manufacturing is among the leading industries of ICC adoption, along with healthcare and financial services, we are starting to see growing interest within retail as well.
Though the market’s tipping point is still a few years away, IDC is expecting significant growth, and believes the industry cloud market represents one of the largest vertical growth opportunities for technology vendors and professional services firms through 2025.
A market on the rise…
The acceleration of digital transformation has fueled the ICC market, which is growing rapidly throughout several industries including financial services, healthcare, life sciences, manufacturing, retail, energy, and even government. Across these industries, ICCs already represent over $1 billion in revenue, and by the end of 2020, they are expected to generate revenue exceeding $20 billion.
IDC defines the industry collaborative platform as an industry-specific, cloud-based pre-integrated, scalable set of capabilities/resources/information that complies with industry information security-level requirements, offers APIs, and is delivered as a service. At the centre of the industry cloud market resides a fast-growing sub-segment in which multiple companies in an industry collaborate toward a common goal, through a cloud-based services platform, to improve enterprise and industrywide insight and/or capability.
Industry cloud business models typically resemble one of three possible constructs: information driven, operations driven, and technology driven.
- Pooling and sharing information is one of the common drivers for ICC deployment across verticals. In such information-driven ICCs the participating parties, usually multiple companies, use the ecosystem for data aggregation to maximize transparency and thus create additional value, for example shorten new product development cycles.
- Operations-driven ICCs are used by companies with similar operational needs (such as supply chain, HR, or monitoring), with the aim of optimizing the use of pooled resources and maximizing operational benefits.
- Technology-driven ICCs are built around IT functionalities, such as datacentre or analytics.
…But at different speeds
It is no surprise that the industry collaborative cloud market is growing fast. In order to stay competitive, companies need to collaborate rather than act in isolation, and this is especially true for manufacturers and retailers that face speed-to-market and operational efficiency pressures.
The platform facilitates information exchange and processes, at scale, simplifying connectivity and ensuring a level of security and trusted business interactions. As such, consuming ICC services enables an organization to stay focused on its core competencies. But beyond that, ICC platforms offer the opportunity for companies to get involved as both buyers and suppliers in an ecosystem, which fosters new revenue and innovation generating activities.
At the moment, European manufacturers seem to be ahead of European retailers with respect to ICC adoption, suggesting that retail has yet to leverage the benefits of ICCs when compared to manufacturers. If security is what holds retailers back (with the complexity brought by GDPR compliance and increasing risks of breaches of customer data), these concerns should be overcome as soon as possible or companies risk losing out on the business benefits that lie ahead. According to the latest IDC European Digital Transformation Survey, interest in ICCs varies noticeably between the retail and manufacturing verticals. 27% of European manufacturers are already using ICCs compared to only 18% of European retailers.
In fact, ICC use in retail is among the lowest across all verticals. Furthermore, compared to the average across verticals, almost twice as many retailers do not consider ICC relevant for their business, though 30% of them are currently evaluating ICCs. The low interest in ICCs in retail is also reflected by the amount of ICC providers targeting retailers. There is a wide range of companies focusing on the manufacturing customer, such as Chainalytics, Exostar, SAP Ariba, and NOVO Optimized. On the other hand, the ICC trend has not reached the retailers to the same extent yet, with fewer companies, such as Bamboo Rose, E2Open, and SAP, offering collaborative platform solutions for retail.
Discover more about adoption of Industry Collaborative Clouds in the recently published IDC Perspective: Industry Collaborative Clouds – Creating New Business Value in Manufacturing and Retail where IDC provides an overview of the Industry Collaborative Cloud (ICC) market with a particular focus on the European manufacturing and retail verticals as adopters. The document discusses adoption trends, perceived risks and benefits, followed by two case studies highlighting the operational and strategic capabilities gained by ICC deployment.
We welcome your comments and look forward to discussing this new and exciting topic with you.
Big Endpoint Breaks the Mould
IDC has just released its latest vendor share report for the Western European security software market. There are several dynamics at play, such as the rapid growth of identity & access management (IAM) vendors and the continuing rise of non-signature based vendors. IDC will explore these broader themes in an upcoming release – watch this space!
But the most noticeable trend is strong performance from an unexpected source: the endpoint-centric giants that dominate security software market share.
Despite being a less dynamic group in recent years, these big beasts showed a return to form in 2016. The most notable performer here is McAfee, posting a larger increase in market share than any other security software vendor in the Western European market in 2016. McAfee’s share rose to 7.7%, re-enforcing its position as the third largest player behind Symantec (11.3% share in 2016) and IBM (8.1%).
While McAfee’s performance in 2016 is notable, it was not the only endpoint-centric big beast to show dynamism. Symantec returned to growth in the Western European security software market in 2016, with revenue up 2.6%. Further, its recent financial announcements point to accelerating growth in 2017. So, what is going on? How have these big beasts bucked the trend? IDC identifies three key drivers:
Platform Security
In many ways, the success of the major endpoint vendors in 2016 was down to their impact outside the endpoint space through their vision to help customers answer broader problems. This is evident in the development of unified security propositions. Here, market majors such as McAfee and Symantec are harnessing their broad portfolios and third-party integrations to play a more strategic role.
First, platform security ties together internal portfolios to offer a more unified proposition, making them easier to consume for buyers. Second, they act as a hub for integration with third party partner solutions, filling the gaps in their portfolio. The big beasts are driving business not through the technical capabilities of their products, but via their ability to simplify the management of security.
Portfolio Evolution
2016 saw the established vendors step up their game in reaction to the emergence of so-called ‘next-generation endpoint’ upstarts. The likes of Carbon Black, Crowdstrike and Cylance have addressed the market from a new angle, identifying unknown threats through techniques such as artificial intelligence (AI), machine learning, and behavioural analytics, rather than blocking known threats with signatures.
These new players forced a reaction from the established order. This resulted in the integration of non-signature-based security solutions into their portfolios. In this way, the big beasts have not just stepped up to the challenge set by the new entrants, but turned the tables on them: by incorporating next-gen endpoint into broader portfolios, they have turned the concept from a market to a feature. Linked with platform security, this is a space where the established vendors are better positioned to compete.
Acquisitions and Divestments
McAfee and Symantec are both undergoing significant M&A activity, with a significant impact on performance. In McAfee’s case, 2016 was the last full year under the Intel umbrella. Intel announced in September 2016 its plan to divest a majority share in the former Intel Security Group to private equity group TPG, creating an independent company under its original name – McAfee – in April 2017.
It is no surprise that McAfee would emphasise sales ahead of its spinout. Reading between the lines, it is likely that revenue which might otherwise be deferred until 2017 (and beyond) might now be recognised immediately, helping to maximise the company’s attractiveness to the new owner. This would explain the more subdued performance posted in the region in H1 2017.
For Symantec it is a series of acquisitions have accelerated growth. Fuelled by the $7.4bn divestment of data storage business Veritas, 2016 saw two ‘mega-acquisitions’: web gateway (and cloud security gateway) provider BlueCoat for $4.7bn and identity theft prevention provider LifeLock $2.3bn. In 2017 Symantec describes its acquisitions as being‘tuck-in’, targeting smaller vendors that fill portfolio gaps. Namely: Fireglass (web isolation), Skycure (mobile security) and SurfEasy (consumer VPN).
The impact of all these acquisitions has been twofold. First, they significantly expand Symantec’s repository of threat intelligence. Not only in the sense that the number of users and devices has expanded, but also in that the telemetry arises from a growing range of sources, resulting in ‘higher fidelity’ intelligence. Second, they serve to fuel Symantec’s platform security strategy as outlined above.
Conclusion
At the heart of McAfee and Symantec’s success is the appeal they have developed beyond their heartlands of endpoint protection. It is their scale that has allowed them to react to market developments such as the emergence of advanced analytical techniques (e.g. AI and behavioural analytics) and the secure enablement of digital transformation initiatives.
More strategically, it is this same scale that positions them as platform partners through which broader questions can be answered. Instead of engaging with customers on a technical level – proposing new point products to expand capability – it becomes a business discussion. For example, which provider can help me to migrate to the cloud securely? Who can help me embrace the mobile workforce? Who can pull together a security supply chain that prepares me for GDPR compliance?
That is not to say that these two vendors have the platform security market wrapped up. Rival endpoint-centric vendors such as Sophos and Trend Micro have their own aspirations. Meanwhile, the likes of Cisco and Fortinet approach the topic from a network-centric perspective. Further, the likes of BT and IBM highlight the benefits of platform security delivered through managed security services (MSS).
In any case, the pressure will be on McAfee and Symantec to harness the benefits of their scale to remain relevant, without becoming too unwieldy to react to future developments in the marketplace. The development of closer customer relationships and reacting to, or ideally predicting, their evolving needs will be critical to their success.
If you want to learn more about this topic and other related European Security trends, please contact Dominic Trott.
The Technology Foundation of Business Ecosystems Leveraging IoT, Robotics, and Cognitive
Business ecosystems will play a major role in future as manufacturers find it increasingly difficult to be successful on their own. Producing high-quality products or having the most efficient production processes will no longer guarantee sole competitive advantage. Global competition will bring up other manufacturers that can offer high-quality products at reasonable prices,
and the most successful manufacturers will be those that can give their customers exactly what they need and increase the value of their products. It will be all about enhancing customer experiences.
This can be achieved by delivering data-driven value-added services for products that are increasingly smart and connected or by adding products or services from other companies. Products will therefore become platforms in new business ecosystems where multiple stakeholders and partners contribute to a product platform in order to deliver the highest value to the customers. Collaborating in ecosystems will therefore become a key capability for manufacturers, as will the ability to adapt to changing market needs within a flexible reconfigurable ecosystem of partners and stakeholders.
Collaborating in ecosystems will mean that the underlying B2B processes need to be transformed accordingly. B2B processes such as supply-side and sell-side processes, as well as production processes, need to become highly flexible, scalable, and smart to adapt to changing market needs in a flexible business ecosystem.
Technologies like the Internet of Things (IoT), robotics and robotics process automation, and cognitive/AI solutions will be the major pillars of the technology foundation in such business ecosystems — and these technologies will be key to transforming B2B processes into smart processes that support the ecosystem. The combined use of these next-generation automation technologies is what IDC calls Industrial Technology (InTech). As these individual technologies mature and become more widely adopted, this will drive the transformation of B2B processes in business ecosystems toward highly flexible, scalable, and smart ecosystem processes.
The maturity of manufacturers applying next-generation automation in business ecosystems (i.e., in B2B or B2B2C processes) is low at the moment as collaboration in ecosystems is still evolving, but it will gain momentum. Current projects are in their very early stages and the automation of B2B processes in business ecosystems is focused mainly on single aspects of next-generation automation capabilities, such as automating B2B ordering processes with a direct connection to the shop floor (e.g., automatic replenishment).
Analyzing and providing guidance on manufacturers' business ecosystem strategies and how 3rd Platform technologies and innovation accelerators like IoT, robotics, and cognitive solutions will support next-generation automation of B2B processes will be central elements of IDC's new Manufacturing Insights' Business Ecosystem Strategies research advisory service.
Where Will The First Impacts Of Quantum Technology Be Felt In The Banking Industry?
Having written an introduction to Quantum computing a few months back, I plan to examine different parts of the conversation, and how it might relate to financial services in future. Big announcements about quantum keep coming.
Microsoft recently announced a quantum computing programming language which will allow developers to build programs using quantum algorithms. Google is also working on achieving "quantum supremacy" – the point when a quantum computer surpasses a conventional supercomputer, and the hope is that a machine which can demonstrate this is could be just months away. And IBM announced another breakthrough in using quantum algorithms to solve longstanding chemistry questions, leading to speculation that this could be the first commercial use of the technology.
This is not to say that the disruption from quantum computing is in any real sense underway. Governments and big technology firms have been pouring money into their research for years now, and many announcements serve mainly a marketing purpose, such that distinguishing between real advances and theoretical "nice-to-have's" will be a challenge for some years. One example of the latter may be the news that VW conducted an experiment with a quantum computer to optimize traffic flows.
“Commercial applications of robust quantum computing are still several years away”,says Nathan Shammah, a quantum researcher at RIKEN research institute in Japan and the founder of a quantum consulting company, Quantika.
The consensus, indeed, seems to be that the first areas likely to see commercial deployment of quantum technology in the financial industry are not in computing but in the security space, perhaps in a timeframe of three to five years.
Secure communications
Scientists are targeting the possibility of secure communications by leveraging the principle of quantum entanglement, whereby entangled particles are encoded with information and then separated. This relies on the principle that the act of measuring something disrupts or even, at a quantum level, destroy the object. This is known as the "measurement effect". Attaching a quantum key to information thus allows any attempt at interception or eavesdropping to be spotted. This process of separation is known as quantum key distribution.
An easier-to-comprehend version of quantum communication is based on streams of single photons. If you have a machine which can emit single photons at a time, each of which are encoded with information, the communication system can literally count the photons out and then in at the receiving end spotting immediately if there have been any disturbances. This technology is perhaps not as advanced but single photon emitting machines are being developed by the likes of France-based start-up Quandela.
Some Chinese physicists managed to communicate via entangled photons with a satellite earlier this year. This was a leap forward from previous efforts to send photons via fiber-optic cables here on Earth, which degrade the photons over a much shorter distance than the near-vacuum of space.
Considering the pressure being exerted by ever more sophisticated cyber attackers, the eventual benefits to industry generally and financial services specifically are obvious if totally secure communication systems eventually grow out of these experiments.
Quantum random number generators
A second real-world application of quantum is in the field of random number generators. There are a few bits of the financial industry that depend on the production of random numbers for security reasons. One example is tokenization, part of the process of many payment types including Apple Pay and PayPal, whereby sensitive information is replaced by unique and randomly generated transaction identifiers. User authentication often involves random numbers also. Some banks (including Barclays, Co-op Bank, Nationwide and RBS in the UK) give their customers pin code readers, which use chip and pin to generate random numbers, for example. However, conventional "random" number generators are not genuinely random, but based on complex algorithms, and as such are vulnerable to hacking. A number generator based on the randomness of quantum mechanical properties – such as nuclear decay – can be that much more secure.
Way back in 2014, some physicists proved that the camera sensor on a smartphone is sensitive enough to monitor the effects of individual photons on its pixels, and since light supplied by a conventional LED produces random numbers of photons, this can be used as a random number generator, at least up to 10118 digits, where measurement bias may set in. It is possible that we see quantum transformation based on this Next time. Eventually, we will face hackers who are empowered with quantum technology as well, at which point conventional encryption might find itself obsolete in short order. There are already companies out there, such as Canada-based ISARA, which are preparing for this eventuality.
This is a subject for another blog, though.
For more information on IDC Financial Insights' research on open banking, contact us at insightseurope@idc.com or visit our website.