Anatomy of the ICT 50
In early 2012, a group of Booz & Company researchers evaluated the 50 largest publicly traded global suppliers of information and communications technology products and services to enterprise: the “Global ICT 50.” We assessed how well they are doing now and how prepared they are for the changes that lie ahead, and then we ranked them according to their enterprise relevance: their potential importance to company value chains, in the present and the near future. Four qualities come together to make up this score:
• Financial performance: Which companies can best sustain the profitability needed to make the investments that will help them win the digitization race?
• Portfolio strength: Which companies possess the best mix of business-to-business products and services, given the demands of digitization?
• Go-to-market footprint: Which companies have established sales and delivery capabilities in the top markets for ICT?
• Growth potential: Which companies have the three factors needed today for expansion in this industry: prowess in innovation, presence in emerging economies, and the ability to attract new customers?
With assessments of these four qualities based on publicly available information, we ranked the trajectory of performance for the leading companies in the four main sectors in this industry.
1. Hardware and infrastructure companies. This sector, which includes Apple, Hewlett-Packard, Dell, Cisco Systems, and Xerox, has traditionally been the core of the technology industry. Although their hardware systems have often been complementary (Cisco produces the routers that connect HP’s printers to Apple’s tablets and Dell’s computers), these companies have long been perceived as being in the same business. Now they are striving to build more differentiated businesses, branching out into software and services, while retaining core businesses built around ever more powerful and affordable equipment.
2. Software and Internet companies. This sector includes Microsoft, Google, Oracle, and SAP, and it is positioned to do well in a highly digitized world. Some of these companies are very large, giving them the strength to compete successfully in digitization (and in many cases, as with Microsoft and Google, to branch out into hardware). Others are smaller, but focused and capitalized enough to lead the industry. The small players’ products tend to be specialized or distinctive, giving them relatively protected platforms from which to expand.
3. IT service providers. Having established themselves over the past 30 years as technology concierges to large- and medium-scale enterprises, these companies offer a variety of services: hosting computers and networks, managing computer applications such as databases, and integrating hardware and software. This sector has three subgroups, each with its own business dynamic. The first is global companies, such as IBM, Accenture, and CSC. They have parlayed their scale into industry leadership positions. Second is regional service providers, such as Atos in France, Logica in the U.K., and Unisys in the U.S., which face a more challenging future. Some are using M&A to increase their scale and market share; for example, Atos bought Siemens IT Solutions and Services in 2011, to create what the announcement called a “European IT champion.” The third subgroup consists of offshore IT service providers based in India, including HCL, Infosys, and Wipro. Starting from a relatively low base, these companies have shown the strongest growth of all the ICT 50 in recent years — more than 15 percent annually, even through the global economic downturn.
4. Telecom operators. Hundreds of companies bring telecommunications — a combination of mobile, landline, Internet, and television — to homes and offices around the world. The most prominent include NTT, Telefónica/O2, and Verizon. This sector faces the largest challenge of the four: Many companies still have significant amounts of cash on hand, but much of it is being consumed by ongoing investments in network infrastructure and in dividend commitments. And not all of them are funneling investment into innovation and new capabilities, such as IT services.