US Lags Europe and Japan in Mobile Adoption

The first difference is that mobile phone penetration is significantly higher in Western Europe and Japan than the US or Canada. Mobile penetration averaged 80% in Western Europe at the end of 2002, and ranged from highs of more than 90% in Italy and Portugal to a low of approximately 65% in France, according to data from the International Telecommunication Union (ITU). Thus, mobile penetration in both Canada and the United States at the end of 2002 was lower than the lowest mobile penetration in Western Europe. Japan, at 62% parallels the low end of Western European penetration rates, but is still significantly higher than either the US or Canada.image

Spending Power of Kids and Teens in US

According to the latest report from Harris Interactive’s YouthPulse service, young people in the US, ages eight to 21, have annual incomes totaling $211 billion as of June 2003, representing an annual spending power of $172 billion.

Harris also finds that 15% of young people’s spending is done online. Specifically, young people between the ages of 13 and 19 spend at the greatest rate of any other age group in what Harris refers to as “Generation Y,” with a rate of $94.7 billion annually.

IDC bumps up PC forecast

Market researcher IDC says notebook sales and business purchasing have boosted its 2003 growth forecast for PC shipments by two points.
The company now predicts that this year’s PC shipments, which include desktops, notebooks and servers priced at less than $25,000, will grow by 8.4 percent globally and 7.2 percent in the United States. In June, IDC had predicted that global shipments would increase by 6.3 percent in 2003, compared with 2002, while U.S. shipments would increase by 5.3 percent.

The Framingham, Mass.-based firm, which released a ream of second-quarter data on PC shipments and server revenue over the past week, revised its projection for several reasons, including a large increase in notebook shipments during the second quarter and a return of business PC buying, said Roger Kay, an IDC analyst.

Notebook PC shipments jumped by 22 percent year over year during the second quarter, IDC said Tuesday.

Worldwide Cable Modem Subs Expected to Double By 2007

Cable modem broadband service is expected to grow at high speeds. In-Stat/MDR reports that total worldwide cable modem subscribers reached 27 million in mid-2003, and is expected to hit 34 million by the end of the year. By 2007, In-Stat/MDR projects that there will be 68 million worldwide cable modem subscribers.

By geographic region, North America has the most cable modem subscribers with over 14.6 million. Comparatively, Leichtman Research Group (LRG) estimates that DSL only accounted for roughly 6.8 million U.S. subscribers at the end of the first quarter of 2003.

Supporting data from the Pew Internet & American Life Project indicates that modems served as the primary way people log on using broadband. In March 2003, 67 percent of broadband users connect using cable modems ? up from 63 percent in March 2002 ? while DSL had 28 percent of the broadband market in March 2003, down from 34 percent a year earlier.

In-Stat/MDR found that the Asia-Pacific region had the second highest cable modem subscriptions at 6.6 million, followed by Europe with 3.7 million.

“With demand for high-speed Internet access increasing, many of the world’s leading cable TV operators have invested heavily to upgrade their cable infrastructure in order to provide cable modem services,” says Mike Paxton, a senior analyst with In-Stat/MDR. “These investments are starting to pay off.”

According to In-Stat/MDR, cable TV operators collected $11 billion in cable modem service revenues in 2002, and this amount is expected to increase to $15 billion in 2003. However, Ipsos-Insight expects U.S. broadband adoption to lag since many users still aren’t ready to abandon dial-up. Four-in-ten dial-up users said cost was a reason they hadn’t yet switched to high-speed Internet access, and another one-third are not convinced they need broadband at all.

Further research from Ipsos-Insight reveals that even if broadband access drops to $20 per month, only 20 percent of Americans with dial-up said they would sign up for high-speed (whether DSL or cable), leaving 80 percent of dial-up users who wouldn’t switch, even at the $20 price-point.

July Global Chip Sales Up 2.9 Percent

Global semiconductor sales totaled $12.9 billion in July, up 2.9 percent from $12.544 billion in June 2003 and up 10.5 percent from July 2002, according to the European Electronic Component Manufacturers Association (EECA) and the European Semiconductor Industry Association (ESIA), quoting figures attributed to the World Semiconductor Trade Statistics (WSTS) organization.

The WSTS figures, normally first disclosed each month by the Semiconductor Industry Association, are presented as a three-month moving average of monthly sales activity. They are compiled that way to smooth variations due to companies’ sales reporting calendars.

For the first seven months of the year the worldwide chip market grew 11.6 percent according to the figures. This is ahead of the SIA’s figure for 2003 growth over 2002 of 10.1 percent but consistent with the industry group’s optimism for the third quarter.

The July numbers show that the recovery is still being driven by Asia with the North American market falling on long-term comparisons although slightly up compared with June. The European market was up strongly in dollar terms but also down strongly based on euro currency.

Japan, which recorded sales of $3.119 billion in July, was the fastest growing region – 4.8 percent up on June and 17.2 percent compared with July 2002. Japan’s year-to-date total is up 24.5 percent on the same seven-month period in 2002.

Asia-Pacific, the largest region with July sales of $4.814 billion, grew 2.9 percent compared with June 2003 and 12.9 percent compared with July 2002. Asia-Pacific’s year-to-date total is showing 14.4 percent growth compared with the same period in 2002.

In July, the North American market reached $2.506 billion, which was up 1 percent on the previous month but down 3.5 percent compared with July 2002. The Americas region’s year-to-date total is running 5.7 percent down on the same period in 2002.

European chip sales in July totaled $2.466 billion, according to the WSTS numbers. That corresponds to a 14.4 percent increase compared to the same month last year. Year-to-date semiconductor sales increased by 13.0 percent compared to the same period last year. Monthly sequential growth was 2.3 percent, EECA said.

However, the exchange rate of the euro compared to the dollar has a significant impact on the data, EECA said.

Measured in euros, Europe’s semiconductor sales in July were 2.136 billion euros, a decline of 5.1 percent versus the same month a year ago. On a year-to-date basis, Europe’s semiconductor sales have decreased by 7.1 percent versus the same period last year. Monthly sequential growth in June was 0.9 percent.

Outsourcing Is Over-Hyped

The promise of Business Process Outsourcing (BPO) as a one-stop, lower-cost answer for complex core business processes is a myth, analyst firm Forrester Research said in a report issued Tuesday.

No single vendor is equipped to handle the range of end-to-end complexities that accompany the largest BPO requests, including human resources, finance and administration, Forrester said.

While many firms do report significant initial cost savings from outsourcing initiatives, those savings ultimately may not match vendor projections or offset additional problems that result from vendor performance, Forrester said.

That hasn’t kept BPO vendors from making those big promises, both in terms of their capabilities and cost-savings derived from outsourcing, according to Forrester analyst John McCarthy.

“Although some firms show BPO savings, vendors overstate their current offerings,” McCarthy said in a statement.

McCarthy’s research, based on surveys with 82 senior executives from both business and IT showed that despite the problems, more than half of those surveyed anticipated spending at least $1 million on outsourced processes in 2004. Forrester suggested that those expenditures might best be made in more focused fashion, particularly as the market grows more segmented.

As a result of increased BPO expenditures, accompanied by better business understanding of what can and can’t be expected of vendors, Forrester projected the overall BPO market to swell to $146 billion by 2008, but to fragment into specialty segments as it does so.

The Forrester report, “BPO’s Fragmented Future,” picked four segments as best candidates for successful and effective outsourcing, and market growth, based on areas of proven vendor strength:

* Straightforward bulk transactions, including credit card and stock transaction processing will continue to be the largest and best-mastered of BPO segments, accounting for $57 billion of annual BPO market space by 2008. Forrester pegged ACS, Fidelity Investments, Unisys and State Street as the segment’s key players.

* Only slightly behind at $57 billion, though requiring high level of understanding from vendor employees, was broad shared services outsourcing. Including finance, administration, HR and indirect procurement, the segment was expected to see further vendor subdivision, with major systems integrators dominating finance and accounting, while specialty players such as ACS and Mellon HR Solutions would concentrate on human resources outsourcing.

* Policy administration, claims, loan applications and other high volume vertical processes were projected to become a $6 billion sector by 2008, with Accenture and CSC fighting to hold market share against offshore outsource vendors, Forrester said.

* More complex and specialized vertical applications such as monitoring chemical control processes and environmental data reporting were targeted to reach $5 billion in annual sales by 2006, but increasing customer confidence was expected to kick the segment into overdrive, with Forrester projecting a vertical app BPO market of $24 billion by 2008. Key player predictions included nods at Ingenero and RMSI.

Online music services cost US$700m in CD sales

A new report from Forrester Research claims the music industry lost nearly US$700 million in CD sales last year through the proliferation of online music download and subscriptions services.

The latest report, entitled ?From Discs to Downloads?, also concludes on-demand and fee-based media services, such as the iTunes music service launched by Apple earlier this year, will overtake piracy in the near future.

?Piracy and its cure – streaming and paid downloads – will drive people to connect to entertainment, not own it,? the report stated.

With the aim of monitoring how piracy, legitimate downloads and streaming services affects the consumption of CDs and video, the Forrester report predicts 33 per cent of music sales worldwide will come from downloads and online subscriptions by 2008, rather than hard media sales.

As a result, revenues from CDs will be down 19 per cent by 2008, while DVDs and tapes will drop 8 per cent, the report states.

Adding to this view, 49 per cent of the 12- to 22-year olds surveyed by Forrester in the US who downloaded music last month said they now buy fewer CDs.

The research firm derived its US$700 million figure using estimates on the total number of CDs which would be bought by the 23 million or so ?juvenile pirates? and ?retro rippers? identified in the US by the research firm if they did not download music files from file sharing services on the Web.

Content Delivery Services Expected to Grow at a Solid Pace

US content delivery services
revenues will grow about 20%, in 2003, from the estimated level of $186
million in 2002, according to In-Stat/MDR. The
high-tech market research firm reports that growth will come from both
existing customers expanding their use of content delivery services, and
from new customers subscribing to these services. “Content delivery
services are one of the key forces shaping the next-generation Internet
and corporate Intranets,” says Henry Goldberg, a Senior Analyst with
In-Stat/MDR. “They improve the speed of Web site delivery, provide
high-quality video/audio streaming, rapidly download files, and are
beginning to extend into distributed computing of Web-based

Recently, In-Stat/MDR conducted a survey of 485 end-user organizations
on the adoption of content delivery services or in-house CDNs (where
organizations purchase and manage a CDN themselves). About 23% currently
use a content delivery itself (either by itself or as a hybrid solution
with an in-house CDN), but almost twice as many currently use an
in-house CDN. According to Goldberg, “Converting in-house CDN users to
outsourced content delivery services should be a key goal of content
delivery service providers, because this would greatly increase the
market for these services”

IT budgets to grow 2% in 2004

Information technology budgets should grow 2 percent in 2004, with programs devoted to enterprise resource planning and supply chain management increasing their share of the software spending pie, a new report says.
A survey of 500 IT executives released Tuesday by AMR Research shows budding financial optimism on the part of the survey’s participants.

“We are seeing purse strings begin to loosen up with the growing demand to replace older systems and the belief that the economy is beginning to improve,” said Jim Shepherd, an AMR senior vice president, in a statement.

Enterprise resource planning applications are expected to increase their share–already the largest–of the IT software spending pie. ERP is expected to account for 27.2 percent of IT software spending next year, up from the 26.6 percent that’s anticipated for this year.

Supply chain management software, meanwhile, should increase its share of software spending by 16.3 percent next year, compared with the 13.6 percent expected for this year, according to the report.

Console market share

Make no mistake about it — Sony is currently the runaway winner in the console wars. Its PlayStation 2 has sold nearly twice as many units in the United States as Microsoft’s and Nintendo’s consoles combined — 18.7 million compared with 5.7 million and 4.4 million. Most observers believe it may be as many as three years before the next round of consoles are released.