JEDDAH – Progressive digitization is not only changing end-consumer behavior, it is also driving significant change in the wider Information and Communications Technology (ICT) space, Booz & Company's latest global ranking of the world's 50 biggest ICT companies revealed. In the report “Global ICT 50 Study: The Battle for Market Share Continues”, it said clear role divisions have long disappeared – hardware companies, software companies, telecommunications companies and IT service providers are operating in an overlapping market. Software and hardware companies with integrated solution models are continuing to gain ground over IT service providers.” And, European companies with a regional focus are coming under strong pressure. In addition, Internet players have continued to penetrate the Middle East with high speed, while they initially only managed the broader MENA region, they are increasingly focusing on individual markets and finally understanding what is required to succeed in each country, the Global ICT 50 Study published Sunday showed. “In the Middle East, hardware makers – especially device manufacturers like Apple and Samsung – recognize the region's growing appetite for smart devices,” said Acker. “And so, they did well in the 2013 study. After all, the Middle East contributes to their bottom-lines given relatively stable price levels,” said Danny Karam, a Principal with Booz & Company. “Global ICT services providers in the Middle East are under constant pressure from value and offshore players – as the growing appetite for IT services comes with a “value for money” mentality that is stronger in the region than it is in other markets,” he added. Indeed, some market players are reaching the limit of their capacity for growth. Moreover, the major software providers are the only group to have demonstrated strong revenue growth for a fifth straight year. Conversely, the global IT service providers and telecommunications companies studied were the only groups in the survey where growth stagnated – although they did manage to stabilize their EBIT margins in 2012. “The Middle East's regional telecommunication companies – in line with their global counterparts – still struggle when it comes to more advanced services and expansion into the broader ICT space,” Karam further said. And the only group to achieve continuously-increasing margins and stable growth over the past five years were the hardware and infrastructure companies, the report said. The reason for this is their individual, integrated business models that are based on a hardware core business and supplemented with service and cloud elements. The results of the study confirm the strength of this business model. The same companies occupy the top three places, but in a different order: thanks to its broad product portfolio and global presence, IBM has moved up two places from 2012 and now leads the global ranking, followed by software giants Oracle and Microsoft. Ranked at number four, SAP is the best-placed German ICTcompany. Hardware-centric solutions providers take the following three spots – Cisco, Apple and HP. “The top 10 ranking reveals that software and hardware providers are dominating the ICT industry,” said Olaf Acker, a Partner with Booz & Company. “Software and internet businesses like SAP, Google and Amazon have also made big advances. Regional IT service providers, however, have not been able to keep pace with the market trend this year.” With their continuous expansion of service offerings and products, Samsung and Google have succeeded in achieving top 10 rankings. “A broad portfolio on its own, however, is not the key to success,” said Dr. Germar Schröder, a Principal with Booz & Company. “We are seeing that extending the portfolio often fails to go hand-in-hand with financial success – coherence wins out over breadth. Other critical factors are a global presence, innovation and branding.” In effect, six from the top 10 companies listed in the Global ICT 50 study rank among the 10 most innovative businesses in the world, as identified in a separate Booz & Company analysis. And, 13 out of the top 50 companies rank in the Top 100 Interbrand Best Global Brands 2012. While the top 50 companies in the study achieved modest growth in revenue for 2013 – up from $2.01 billion in 2011 to $2.07 billion in 2012 – these figures are not as impressive as those from earlier years. This year, Booz & Company consultants added a criterion to the four aspects of financial performance – Portfolio Breadth & Coherence, Growth Potential and Market Presence –evaluated for the study. “There are different approaches to combining essential capabilities and an individual product and service offering for a market, and these work well in different ways,” said Schröder. “For instance, the Innovator, like Apple, the Solutions Provider, like IBM, or the ‘one-stop-shop' Consolidator like Cisco, have altogether bought up to 120 companies over the past 20 years. The analysis shows that, in the market, three puretones have produced the best financial results in recent years: a focus on innovation, a focus on forward-looking digitization, and a focus on achieving a price advantage through offshoring.” — SG
