IT sector bets big on SCAM in 2014
December 22, 2013No Comments
The $110-billion technology services sector looking for new growth engines will be shouting SCAM in 2014. A trend that started a few years back, albeit in silos, social networking, cloud services, analytics and mobile computing, or SCAM, is now converging and will collectively account for 89% of new technology spending growth in 2014, says research firm IDC.
Industry experts from IT services players such as TCS, Infosys, Wipro as well as analysts see SCAM as not just another opportunity but one that fundamentally changes how computing is done. “From the mainframe era, we came to mini-computing, client-server and web. While aspects of SCAM have been around, there’s an overall shift in how users access information, work and entertain themselves. They’re now using mobile devices and companies want solutions that cut across the SCAM areas. In 2014 this will be a big focus area,” says a business head of a top-five services companies who wished not to be named because his firm is in a silent period prior to the third quarter results.
Nexus of forces
For instance, a combination of the four services was in play for the first time at this year’s US Open tennis tournament. IBM, the technology partner for the US Tennis Association for the past two decades, used analytics, cloud services, mobile and social technologies to bring the 2013 US Open to tennis fans. The IBM-enabled digital US Open offered fans, players, broadcasters and media with access — via tablets and smartphones — to a range of data insights, including player stats, videos, live scoring, and historical and real-time analysis of tennis data like, a player’s winning chances based on past performance.
Research and analyst firm Gartner calls SCAM a ‘nexus of forces’. Gartner expects SCAM business to be worth $104 billion, contributing about a fourth of business software revenue by 2017, up from about 10% at present. Says Naveen Mishra, research director, Gartner India: “Companies will rejig portfolios around SCAM. While the shift to SCAM has been happening for the past three to four years, the business opportunity is becoming real and bigger due to adoption of smartphones and mobile internet usage.”
Globally, by 2015 there will be 5 billion mobile devices, and mobile app revenues alone will be $52 billion. Social media will have 1.5 billion users globally. That alone will be a $34-billion opportunity. Mishra believes customers from Fortune 500 to even smaller global companies will outsource business to IT services players to extract value from convergence of mobile, cloud, social media, information and analytics.
On cloud nine
N Chandrasekaran, managing director and CEO at TCS, the country’s largest technology services provider, terms SCAM as “digital forces”. “Social, cloud, analytics with big data and mobile are interlinked. Mobile computing is powerful because of cloud. Without cloud, mobile will have limited storage and memory. Without cloud services, social has no meaning. Without social, big data is small data and without big data there’s less of analytics. So, we can’t say one is bigger than the other. They are all linked to each other.”
The SCAM opportunity which has been largely peripheral till now will become mainstream in 2014. According to a recent Gartner statement, “Technology providers must realize that the disruptive forces of cloud, information, mobile and social will reach mainstream status in 2014 and create new technology requirements, drive new purchasing and establish new competitive realities.”
Chandrasekaran adds that 2014-15 will be better than the current fiscal year for the technology services industry. Much of that optimism comes from new demand for services arising out of SCAM.
IDC sees mobile, cloud services, social networking, big data and analytics help drive a 5% jump in global technology spending in 2014 to $2.1 trillion. Says Mishra: “It will transform business models of IT services companies. In a bid to acquire skills in the space, services providers will be looking for buyouts.”
For instance, Wipro acquired a stake in data analytics firm Opera Solutions in May this year. He adds: “Large companies like Wipro, Tech Mahindra and TCS are in a better position to seize the opportunity. The small companies are too focussed on old models. They can look at partnerships with analytics or cloud firms to tap into the opportunity.”
New vs old
However, large companies are not giving up on their existing models. Explains Chandrasekaran: “Why should one give up a successful model? New opportunities like the digital forces will run parallel to existing business.”
Adds Sanjay Purohit, global head, products, platforms and solutions, Infosys: “Enterprise cloud will gather speed. We see a 10% increase in the number of enterprises using at least one cloud platform, while analytics will progress beyond establishing obvious relationships among data to uncover new and unexpected correlations. On the mobility front, enterprises must consider mobile application management as well.”
According to Ankita Somani, IT analyst at Angel Broking, for large services providers like TCS, the SCAM portfolio accounts for less than 5% of the total business at present but “2014 demand looks good in these areas. A focus on SCAM will help improve both volume growth and margins.”
While global companies — from banks to pizza outlets — seek to strengthen SCAM services to know better what the customer wants, IT companies see it not only as a new business opportunity but one that de-risks dependence on traditional backoffice maintenance and systems integration services.