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TBR
TECHNOLOGY BUSINESS RESEARCH, INC.
How IT vendors can capture opportunity
July 24, 2013
Where Public Sector Agencies Are HeadedTBR SourceIT℠ Reports
TBR
TBR SourceITSM Series | 7.24.13 | www.tbri.com | ©2013 Technology Business Research Inc.
Where Public Sector Agencies Are Headed
2
Stuart Williams Director, TBR’s Software and Cloud [email protected]@s2_williams
TBR
TBR SourceITSM Series | 7.24.13 | www.tbri.com | ©2013 Technology Business Research Inc.
Despite changes, challenges and constraints, public sector IT departments are spending to improve effective Mission support
3
Outline FUD bullet points (Fear, Uncertainty, Doubt)
• Fear: Budgets are under increasing pressure
• Uncertainty: Populations being served are changing
• Doubt: Public sector entities are afraid , just afraid
“In the current atmosphere of dwindling budgets and increased service expectations, we are trying for improved services, better resolutions with greater transparency and accountability at all levels of the workflow.”
— IT Director Changing Demographics
Constrained Budgets
New Regulations and Mandates
Where Public Sector Agencies Are Headed
$38.1 billion in ‘14 vendor addressable IT spend
TBR
TBR SourceITSM Series | 7.24.13 | www.tbri.com | ©2013 Technology Business Research Inc.
IT vendors can win business by helping large public sector entities modernize for mission effectiveness
4
Public sector entities are investing in application modernization, data center consolidation and cloud-based applications.
IT is driving a long-term revolution in how public sector entities use technology to address their missions.
While vendors cannot ignore the highly structured purchasing process, key initiatives have executive sponsorship outside standard procurement processes.
Where Public Sector Agencies Are Headed
TBR
TBR SourceITSM Series | 7.24.13 | www.tbri.com | ©2013 Technology Business Research Inc.
Cloud, mobile, big data and Web technology adoption is reshaping how public sector entities serve and achieve their missions
5
“Technology presents many opportunities for us to deliver better services to our citizens. More and more, people want an immediate, specific, casual and personalized service experience. People are looking to technology to find that experience. We, as a government entity, are left trying to understand the demands of a Web 2.0.”
— IT Manager, Public Sector, Large Enterprise, N. America
Where Public Sector Agencies Are Headed
TBR
TBR SourceITSM Series | 7.24.13 | www.tbri.com | ©2013 Technology Business Research Inc.
Public sector IT wants to enable, rather than hinder, missions
Business Summary What Respondents Reported
• Economic concerns and recession recovery
• Demographic changes• Budgetary restrictions • Growing security concerns• Emerging IT trends in data
center consolidation and cloud adoption
External forces:
Public sector entities are reacting to economic and budgetary factors by investing in mission-critical solutions and data center consolidation to improve internal efficiency and effectiveness.
How public sector entities react:
What public sector entities see:
• Growing need for internal efficiency and effectiveness while containing costs
• Emerging risks surrounding security as solutions move to nontraditional cloud deployments
“The current infrastructure is unnecessarily complex and should be simplified to reduce costs and assist the sustainability of IT operations. IT is somewhat fragmented into multiple databases, stand-alone applications and technology projects. We are doing these projects to have a more integrated approach and IT governance within the municipality that should be centralized and empowered to enforce policy.”
— IT Manager, Public Sector, Large Enterprise, N. America
SOURCE: TBR N. AMERICA, LARGE ENTERPRISE PUBLIC SECTOR REPORT, SUMMER 2013
Where Public Sector Agencies Are Headed
6
TBR
TBR SourceITSM Series | 7.24.13 | www.tbri.com | ©2013 Technology Business Research Inc.
Business Applications
26%
Industry Applications
9%
Productivity17%
BI and Analytics16%
Database and Middleware
15%
Systems Management
16%
Overall IT Project Priorities, by Workload Category (Total % Mentioned)
SOURCE: TBR LARGE N. AMERICAN PUBLIC SECTOR SOURCEIT STUDY; N = 256
Multiyear project timelines require vendors become involved early in the process to best capture opportunity
While public sector applications only make up the smallest share of opportunity, those that are adopting have higher budgets relative to other categories.
SOURCE: TBR N. AMERICA, LARGE ENTERPRISE PUBLIC SECTOR REPORT, SUMMER 2013
“Priorities were set last year and most project timelines are due for completion within 18 months, so we are just now starting to review for 2015 and beyond.”
— IT Manager, Public Sector, N. America
Respondents: Workload Priorities for Discretionary IT Spending
Where Public Sector Agencies Are Headed
7
TBR
TBR SourceITSM Series | 7.24.13 | www.tbri.com | ©2013 Technology Business Research Inc.
5.0% cc
95.0%
While the IT spending agenda is shaped by the largest units, the majority of spending happens in smaller public entities Respondents: Planned 2014 IT Budgets
$22M 0.8% $1.76M
$2.5M2.2%$55K
Entities with 10,000+
employees
Entities with 1,000 to 9,999
employees
Average 2014 YTY Increase
Average 2014 Total IT Budget
Average 2014 IT Budget: All Entities
$14.3M
Percentage of 3,500 in Segment
SOURCE: TBR N. AMERICA, LARGE ENTERPRISE PUBLIC SECTOR REPORT, SUMMER 2013
68% of IT spending
Total IT budgets include:• Business Applications• Industry Applications• Productivity Applications
• BI and Analytics• Database and Middleware• Systems Management
• IT Infrastructure • IT Professional Services• IT Overhead and Personnel
NISTFedRamp
FISMACode of Federal RegulationsFederal Agency Standards
Where Public Sector Agencies Are Headed
8
TBR
TBR SourceITSM Series | 7.24.13 | www.tbri.com | ©2013 Technology Business Research Inc.
IT vendors can win business by helping large public sector entities modernize for mission effectiveness
9
Public sector entities are investing in application modernization, data center consolidation and cloud-based applications.
IT is driving a long-term revolution in how public sector entities use technology to address their missions.
While vendors cannot ignore the highly structured purchasing process, key initiatives have executive sponsorship outside standard procurement processes.
Where Public Sector Agencies Are Headed
TBR
TBR SourceITSM Series | 7.24.13 | www.tbri.com | ©2013 Technology Business Research Inc.
Public sector IT priorities for mission-specific applications and data center consolidation are shaping investment 2014 TBR SourceIT Large N. American Public Sector Model — IT Spending and Key Priorities
What vendors need to know:1. Though efficiency and
effectiveness are driving IT investments, balancing cost control and security are major considerations for public sector IT purchases.
2. Back-office solutions (such as BPM, accounting and finance) are leading workloads considered by public sector agencies.
3. In addition to traditional IT investments, public sector budget allocation is growing for mission-specific initiatives and applications.
Optimize IT:• Accounting and Finance• Business Process
Management• Security• Information
Management and Database
Key Priorities:• Mission-specific Custom
Applications• Tax/Revenue Systems• Citizen/Business Self-
service• Electronic
Benefits/Payment Systems
Total IT Spend:$49.1 billion
Vendor Addressable Spend: 77.6%,$38.1 billion
Personnel and Overhead:22.4%,$11 billion
Where Public Sector Agencies Are Headed
10
TBR
TBR SourceITSM Series | 7.24.13 | www.tbri.com | ©2013 Technology Business Research Inc.
Business Applications, $5.6 billion
Industry Applications, $3.5 billion
Productivity Applications, $3.8 billion
BI and Analytics, $7.9 billion
Database and Middleware, $5.8 billion
Systems Management,
$4.3 billion
Infrastructure, $6.3 billion
Professional Services, $7 billion
Public Sector: IT Spending in 2014
SOURCE: TBR LARGE N. AMERICAN PUBLIC SECTOR SOURCEIT STUDY; N = 256
15%
9%
10%
5%
15%11%
16%
18%
Long planning cycles increase the importance of capturing the front-end, exploratory work that shapes road maps for vendors 2014 Vendor Addressable Opportunity Breakdown
Discretionary Spend in 2014 is$14.2 billion
Fixed Spend in 2014 is $23.9 billion Vendor Addressable Opportunity is $38.1 billion
“Being a part of government, we have everything planned and have budgets decided for everything one year in advance, so we do more fixed spending than discretionary spending.”
— Director, Public Sector, N. America
WorkloadsDiscretionary IT
Spending in 2014Business Applications $2.1 billionIndustry Applications $1.4 billion
Productivity Applications $1.5 billionBI/Analytics $0.7 billion
Database and Middleware $2.1 billionSystems Management $1.5 billion
Infrastructure $2.4 billionProfessional Services $2.4 billion
+1.5% YTY
+0.4% YTY
+1% YTY
+3.3% YTY
+1.9% YTY
+0.7% YTY-0.2% YTY
0% YTY
Where Public Sector Agencies Are Headed
11
TBR
TBR SourceITSM Series | 7.24.13 | www.tbri.com | ©2013 Technology Business Research Inc.
$14,194
$14,356
-$4 $15
$5 $0 $17
$40
$35
$14 $6 $17$17
$14,100
$14,150
$14,200
$14,250
$14,300
$14,350
$14,400
2013
Busi
ness
Appl
icati
ons
Indu
stry
Appl
icati
ons
Prod
uctiv
ityAp
plic
ation
s
BI/A
naly
tics
Dat
abas
e an
dM
iddl
ewar
e
Syst
ems
Man
agem
ent
Infr
astr
uctu
re
Prof
essi
onal
Serv
ices
IT S
ervi
ces
IT P
erso
nnel
Ove
rhea
d
2014
IT S
pend
(in th
ousa
nds)
Projected Average Change in IT Spending for Public Sector 2013–2014 TBR
SOURCE: TBR LARGE N. AMERICAN PUBLIC SECTOR SOURCEIT STUDY; N = 256
Respondents: 2013-2014 Bridge: IT Spending Growth by CategoryAverage 2014 IT Budget: $14.4 million
Infrastructure, systems management and investments in public-sector-specific applications lead the way for vendor opportunity
SOURCE: TBR N. AMERICA, LARGE ENTERPRISE PUBLIC SECTOR REPORT, SUMMER 2013
Where Public Sector Agencies Are Headed
12
TBR
TBR SourceITSM Series | 7.24.13 | www.tbri.com | ©2013 Technology Business Research Inc.
Demonstrating the ability to help agencies evolve their delivery and execution models helps vendors win key workload projects Respondents: Hotspots and Top-of-mind Software Vendors
Top Targeted Workloads: Broadly Driven Largest Budgeted Workloads: Driven by IT
Area Average 2014 Project Budget
Top-of-mind Vendors
Area Average 2014 Project Budget
Top-of-mind Vendors
Mission-specific Custom Applications
$1,318,000 Microsoft, Oracle, IBM, Adobe
Productivity Applications
$1,782,000 Microsoft, Citrix
Tax/Revenue Systems
$460,000 SAP, Microsoft, IBM
Email and Messaging
$1,451,000 Microsoft, IBM, Oracle
Citizen/Business Self-service
$419,000 Adobe, Microsoft, HP
PC Operating Systems
$1,359,000 Microsoft
Electronic Benefits/Payment Systems
$593,000 SAP, Microsoft, IBM
Mission-specific Custom Applications
$1,318,000 Microsoft, Oracle, IBM, Adobe
Top Priority Workloads Largest Core IT Workloads
Where Public Sector Agencies Are Headed
13
TBR
TBR SourceITSM Series | 7.24.13 | www.tbri.com | ©2013 Technology Business Research Inc.
IT vendors can win business by helping large public sector entities modernize for mission effectiveness
14
Public sector entities are investing in application modernization, data center consolidation and cloud-based applications.
IT is driving a long-term revolution in how public sector entities use technology to address their missions.
While vendors cannot ignore the highly structured purchasing process, key initiatives have executive sponsorship outside standard procurement processes.
Where Public Sector Agencies Are Headed
TBR
TBR SourceITSM Series | 7.24.13 | www.tbri.com | ©2013 Technology Business Research Inc.
Vendors that can help public sector entities improve processes without sacrificing cost and security are best positionedRespondents: IT Spending Transitions
“Public sector organizations are increasingly driven to improve operational efficiency, share information and integrate processes across operational and jurisdictional boundaries while maintaining control over costs. We are also focusing on establishing a secured communication network between our system, and this change will be regarded as the highest priority to provide required benefits for the citizens.”
— Director, Public Sector, Large Enterprise, N. America
Key Investment Drivers• Integrating and consolidating electronic
information• Improving internal operation efficiency• Reconfiguring IT to take advantage of cloud
and mobility
Key Consideration Factors• Cost control• Security • Budgeting• Legacy system upgrade/replacement
+1.1% YTY vendor addressable market growth
Investment Areas• Mission-specific applications• Information management • Systems management• Security
Where Public Sector Agencies Are Headed
15
TBR
TBR SourceITSM Series | 7.24.13 | www.tbri.com | ©2013 Technology Business Research Inc.
Respondents: IT Budgets by Customer Character
4% 48%
45% 4%
Aggr
essi
ve
Highly Centralized with IT
IT A
dopti
on A
ggre
ssiv
enes
s
Centralization of IT Spending
Highly Distributed Across IT and LOBs
Late
Ado
pter
Structured Go-getters
Laissez-faireBureaucrats
Empowered
Empowered public sector entities include companies that are highly aggressive adopters and highly distributed across IT spending.Structured go-getters include companies that are highly aggressive adopters and have a highly centralized approach for IT spending.Laissez-faire public sector organizations are late adopters of technology, and their IT spending is highly distributed.Bureaucrats include companies that are late adopters and have a highly centralized IT spending approach.
Average 2013 IT Spend:
$14.8 million
Average 2013 IT Spend:
$9.5 million
Average 2013 IT Spend:
$15.8 million
Average 2013 IT Spend:
$12.9 million
There is a strong correlation between IT adoption and centralization of spending in the public sector; late adopters tend to have highly centralized spending while aggressive adopters have distributed spending.
Distribution of Respondents by Character
The largest opportunity in the public sector space is with aggressive IT adopters with decentralized IT spending behavior
Where Public Sector Agencies Are Headed
16
TBR
TBR SourceITSM Series | 7.24.13 | www.tbri.com | ©2013 Technology Business Research Inc.
Path to Purchasing: Key Decision Makers
C-Suite and municipality leaders oversee final purchase decisions, with greater middle management influence in Empowered types
Purchasing Scenarios Buying Criteria Purchase PlansKey Decision Makers Top-of-mind Vendors
“The IT department or the IT administrative office works on the decision making, but the whole thing starts from the departmental level. First there is a requirement, then it is put forward to the IT team, which further analyzes how the issue can be addressed.”
— IT Specialist, Public Sector, Large Enterprise, N. America
Key Decision Makers
Board of Directors,C-Suite
Federal/MunicipalityLeaders
Search Relevant Solutions/Vendors
(IT)
Identification of Problem
(Department Level)
Short-listing and Solution Evaluation
(IT Department)
Bureaucrats
Empowered
Bureaucrats’ IT purchase decisions are more structured and top-down driven than Empowered purchases.
Though budgetary decisions are ultimately made in the C-Suite, Empowered purchase decisions are heavily influenced by lower levels of organization.
Where Public Sector Agencies Are Headed
17
TBR
TBR SourceITSM Series | 7.24.13 | www.tbri.com | ©2013 Technology Business Research Inc.
IT vendors can win business by helping large public sector entities modernize for mission effectiveness
18
Public sector entities are investing in application modernization, data center consolidation and cloud-based applications.
IT is driving a long-term revolution in how public sector entities use technology to address their missions.
While vendors cannot ignore the highly structured purchasing process, key initiatives have executive sponsorship outside standard procurement processes.
Where Public Sector Agencies Are Headed
TBR
TBR SourceITSM Series | 7.24.13 | www.tbri.com | ©2013 Technology Business Research Inc. 19
Stuart Williams Director, TBR’s Software and Cloud [email protected]@s2_williams
Where Public Sector Agencies Are Headed
Questions?
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Where Public Sector Agencies Are Headed
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SourceIT℠ ReportsImprove go-to-market returns by understanding a segment’s opportunity and the unique needs of buyersOverview
CY2013
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SourceITSM Reports are opportunity playbooks on customer segments that help clients improve go-to-market returns
TBR SourceITSM Reports
SourceIT is a syndicated report program, offering clients the benefit of deep primary research at a fraction of the price of custom research.
SourceIT Reports use a structured and repeatable research and report framework that enables client organizations to easily consume, compare and leverage the insights across multiple customer segments.
Enable faster and more efficient go to market by understanding a segment’s sourcing and investment decisions.
Compare segments across multiple industries
Understand opportunity by following the money
Leverage a syndicated program
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TBR’s SourceIT Reports enable clients to more effectively capture business across specific customer segments
1. Understand and capture opportunityby comprehending buyer behavior in specific segments.
2. Improve GTM effectivenessby improving sales and marketing investment effectiveness.
3. Improve positioningby effectively targeting customer needs and managing competition.
SourceIT℠ ReportValue
Identify opportunities
Understand key business and IT strategy opportunity
drivers
Capture sourcing and budgeting opportunities
across the stack
Target decision makers
Understand purchasing scenarios
Target key decision makers
Improve positioning
See your position in a competitive landscape
Manage positioning; Relationships vs.
opportunity
SOURCE: TBR
SourceIT Reports help vendors better capture opportunity with their large enterprise buyers
Available Now: • Retail• Banking & Services• Federal & Public Sector• Telco & Service Providers• Healthcare Payers &
Providers• Publishing 2H13• Manufacturing• Energy & Utilities• Transport & Logistics
23
TBR SourceITSM Reports
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TBR: SourceIT Public Sector Report | 2013 ©2013 Technology Business Research, Inc.
24
Table of ContentsTBR SourceIT Report
3 SourceIT Methodology and Coverage
8 Executive Summary• Opportunity• Public Sector Organizational Behavior• Vendor Selection
17 Market Opportunity• Total Market Opportunity• Average IT Budgets in 2013• Fixed Spending Priorities• Discretionary Spending Priorities
25 Discretionary Spending Across Workloads• Workload Priorities• Opportunity by Workload
51 Public Sector IT Purchasing Behavior• Investment Drivers• Paths to Purchasing for Key Priorities
67 Key Workload Case Studies• Mission-specific Custom Applications• Tax/Revenue Systems• Citizen/Business Self-Service• Electronic Benefits/Payment Systems• Opportunity Mapping
88 Competitive Landscape• Purchasing Relationships• Vendor Footprint by Workload Category
for Fixed Spend• Vendor Footprint by Workload Category
for Discretionary Spend• Footprint by Workload
91 Appendix
100 About TBR
Large N. American Public Sector Segment
TBR
TBR SourceITSM Series | 7.24.13 | www.tbri.com | ©2013 Technology Business Research Inc.
Public Healthcare
32%
Federal or State Agencies
36%
DOD Services5%
Public Transportation
5%
Public/Private Education
19%
Professional Association
2%Other
1%
Respondents by Public Sector Type
SOURCE: TBR LARGE N. AMERICAN PUBLIC SECTOR SOURCEIT STUDY; N = 256
The 256 large N. American public sector entities are large federal or state agencies, education and public healthcare providers
SourceIT Large N. America Public Sector Research Demographics and 2013 IT Spending
Public Sector Entities>950 employees or >$1 million in total IT budget
Does not include DOD combat and warfare systems
Large N. American Public Sector Definitions (Qualifications for Study)Included Industry Subsegments Excluded Industry Subsegments Size Definitions
Federal & State Agencies, Services, DOD Services, Public Transportation, Public &
Private EducationDOD Combat/Warfare Systems;
Aerospace>950 employees or
>$1 million in total IT budget
Where Public Sector Agencies Are Headed
25
TBR
TECHNOLOGY BUSINESS RESEARCH, INC.
About TBR
Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, telecom and enterprise network vendors, and operators.
Serving a global clientele, TBR provides timely and actionable market research and business intelligence in formats that are tailored to clients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis.
TBR has been empowering corporate decision makers since 1996.
To learn how our analysts can address your unique business needs, please visit our website or contact us today.
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