2011scenario ITIndustry 209949

Research
Publication Date: 20 January 2011 ID Number: G00209949
The 2011 Gartner Scenario: Current States and Future Directions of the IT Industry
Ken McGee
It is clear that, in 2011, the pace of economic recovery from the Great Recession will vary on a region by region basis. North America and Western Europe will experience very modest rates of growth this year, while Latin America and especially Asia/Pacific will enjoy far more robust rates of economic and business expansion. Therefore, as a new decade unfolds in this vastly globalized world, how will CIOs and their staffs actually navigate this era of multispeed recovery? Will they simply return to conducting the same duties they performed prior to the recession, or will they modify their missions to take on new responsibilities? The post-global-recession era will present a vast array of new, IT-enabled growth opportunities for enterprises and new career opportunities for IT practitioners. However, these new growth and career opportunities will unfold for IT practitioners only if they commit to balancing information with information technology. Key Findings
The economies of Asia/Pacific and Latin America will grow at rates two to three times that of most of North America and Europe. Seven IT-enabled initiatives can favorably improve the financial condition of an enterprise. Never have there been as many IT-enabled initiatives capable of increasing revenue as there are now.
Recommendations
Identify your enterprise's 20 largest revenue-generating products or services. Master your knowledge of the channels by which each of the top 20 products is sold. Build individual cases specifying how context-aware offerings, pattern recognition and social networks will sell in a way that leads customers to buy. Devote 50% of your R&D and training budgets toward funding social-science-based education for staff.
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TABLE OF CONTENTS
Strategic Planning Assumptions ................................................................................................... 4 Analysis ....................................................................................................................................... 4 The Current State of the IT Industry ................................................................................. 4 IT Vendor Revenue ............................................................................................. 4 Worldwide IT Spending ....................................................................................... 6 Changes in CIO Budgets ..................................................................................... 8 The Future Directions of the IT Industry ........................................................................... 9 Economic Environment........................................................................................ 9 Enterprise Executives Expect Business Growth in 2011..................................... 10 2008 to 2011: The Most Important Years for the Rest of Your Career ................ 10 CIOs Have a Choice ...................................................................................................... 11 The Money-Making CIO .................................................................................... 11 The Six Styles of the Money-Making CIO........................................................... 12 A Closer Look at the Revenue-Generating CIO.................................................. 13 Which IT Initiatives Will Yield the Best Return on Investment? ........................................ 14 Where Has All the IT Money Gone?................................................................... 14 Money-Making Initiatives Big Ideas ............................................................... 15 Context-Aware Computing Revenue Generator ............................................. 16 New Realities of IT Revenue Generator ........................................................ 17 The New Realities of Innovation and Growth ......................................... 18 The New Realities of Cost and Value Optimization ................................ 19 The New Realities of Risk Management ................................................ 19 The New Realities of Governance ......................................................... 19 Pattern-Based Strategies Revenue Generator ............................................... 20 Business Gets Social Revenue Generator..................................................... 21 Cloud Computing Cost Saving ...................................................................... 23 IT and OT Alignment Cost Saving ................................................................. 25 Sustainability Cost Saving ............................................................................. 25 Gartner IT Demand Outlook ........................................................................................... 27 Examples of Applying Human Demand to Determine Which Emerging Trends Will Become $1 Billion Markets .......................................................................... 29 Wireless Power ..................................................................................... 29 Human Augmentation ........................................................................... 29 Final Thoughts ............................................................................................................... 30 Message to IT Practitioners in 2011: Don't Miss the New Revenue-Generating Opportunities This Time .................................................................................... 30 Recommended Reading ............................................................................................................. 30
LIST OF FIGURES
Figure 1. Revenue Performance of Selected IT Vendors (4Q08 to 3Q10)...................................... 5 Figure 2. Revenue Performance of Selected IT Vendors (4Q08 to 3Q10)...................................... 6 Figure 3. Worldwide IT Spending Levels in 2009 and 2010 and Projected for 2011 ....................... 6 Figure 4. Changes in CIO Budgets Over Previous Year, 1998 to 2010 (Worldwide and by Percentage) ................................................................................................................................. 8
Publication Date: 20 January 2011/ID Number: G00209949 2011 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
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Figure 5. World Real GDP Growth in 2011 (Percent Change From a Year Earlier) ...................... 10 Figure 6. The Six Styles of the Money-Making CIO ..................................................................... 13 Figure 7. Where IT Money Has Been Spent During the Past 50 Years ........................................ 15 Figure 8. Big Ideas to Consider During the Next Three Years ..................................................... 16 Figure 9. Cloud Computing's Growth Among Global 2000 Companies ........................................ 23 Figure 10. Gartner Model of Sustainability and Business Value................................................... 26 Figure 11. Future $1 Billion Candidates From the Hype Cycle for Emerging Technologies, 2010 28
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STRATEGIC PLANNING ASSUMPTIONS

By 2016, new revenue created each year by IT will determine the incentive portion of annual compensation for most new Global 2000 CIOs. By 2011, the worldwide IT spending levels reached in 2008 will finally be surpassed. During the 2011 through 2016 time frame, North American and European CIO budget growth will average less than 3%. During the 2011 through 2016 time frame, Latin American and Asia/Pacific CIO budget growth will average more than 7%. Fifty to 100 CIOs will become Global 2000 CEOs this decade. By 2016, one-third of worldwide mobile consumer marketing will be context-awareness-based. By 2016, innovation accomplishments will be among the top three selection criteria for new CIOs. Through 2015, pattern-seeking technology will be the fastest-growing intelligence investment among the most successful Global 2000 companies. Through 2015, 80% of enterprises will lack a coherent approach to dealing with information from the collective. By 2016, all Global 2000 companies will use public cloud services. By 2013, inadequate software management of operational technology (OT) systems will result in a major business failure of a top Global 100 company. By 2016, sustainability will be the fastest-growing enterprise compliance expense worldwide. Through 2016, economic, market and stakeholder pressures, more than regulation, will drive improved sustainability performance and transparency. By 2020, cumulative sales from wireless power products will surpass $1 billion. By 2025, cumulative sales from human augmentation products will surpass $1 billion.
ANALYSIS
This document was revised on 3 February 2011. For more information, see the Corrections page on gartner.com. Additional research contribution and review: Susan Landry, William Clark, Kathy Harris, Yvonne Genovese, Daryl Plummer, Kristian Steenstrup, Stephen Stokes, Richard Gordon
The Current State of the IT Industry

Strategic Planning Assumption: By 2011, the worldwide IT spending levels reached in 2008 will finally be surpassed.
IT Vendor Revenue
Figures 1 and 2 depict the revenue performance of major IT vendors between the calendar fourth quarter of 2008 and the calendar third quarter of 2010. (Note: The financial reports as of 3Q10 are the latest reports available as of this writing.)
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The purpose of displaying only the revenue performance of these vendors is to contrast the harmful effects experienced from reduced IT demand during the worst parts of the global recession, with the hopeful signs of growth that appear to be emerging more recently. Nine of the 10 vendors depicted reported revenues in 3Q10 that are higher than realized during the same period a year earlier. An example of increased demand was evident at Microsoft, which reported mostly robust revenue growth in its Windows, server, online, business, and entertainment and devices business segments in 3Q10 versus 3Q09. Figure 1. Revenue Performance of Selected IT Vendors (4Q08 to 3Q10)
Source: Gartner (January 2011)
Similarly, Cisco reported strong, double-digit increases in revenue in all four of its geographic regions (United States and Canada, Europe, emerging markets, and Asia/Pacific). While some vendor revenue increases during calendar 4Q08 to 3Q10 are due to the additive effects of recently acquired companies (and, thus, the recognition of their individual revenues) or reductions in revenue due to businesses exited by these vendors, most vendors have shown appreciable increases in demand via their revenue performance results during the recession-to-postrecession time frame.
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Figure 2. Revenue Performance of Selected IT Vendors (4Q08 to 3Q10)
Worldwide IT Spending
Figure 3 shows the worldwide IT spending levels in 2009 to 2010 and projected for 2011, for each of the four IT market segments. Amounts are in billions of U.S. dollars. Figure 3. Worldwide IT Spending Levels in 2009 and 2010 and Projected for 2011
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On 4 January 2011, Gartner issued "Forecast Alert: IT Spending, Worldwide, 2008-2014, 4Q10 Update" and stated: "Gartner's global IT spending forecast growth, in U.S. dollars, has been revised upward overall, from 3.2% to 5.4% for 2010 and from 3.5% to 5.1% in 2011." The main reasons for the upward revision are as follows: Currency exchange rate fluctuations have continued to affect our U.S. dollardenominated forecast. Of the 2.2 percentage point increase in IT spending growth in 2010, 1.6% is attributable to the recent devaluation of the U.S. dollar against other currencies. However, in constant dollars (that is, stripping out the effect of currency exchange rate movements), IT spending growth in 2010 has been revised up from 3.2% to 4% as upward revisions in telecommunications spending have more than compensated for downward revisions to our forecast for client computing spending. In both relative and absolute terms, the most significant changes in the telecom forecast have been made in the mobile services and mobile device segments: In relative terms, the most significant change occurred in the mobile device forecast. Strong sales of mobile devices in 3Q10, driven by smartphones in mature markets and white-box devices in emerging markets, as well as stronger local currencies, resulted in an upward revision of our forecast for 2010 through 2014. The compound annual growth rate (CAGR) for global mobile device revenue from 2009 through 2014 has been increased to 14.3%, up from 12.1% in the 3Q10 forecast. In absolute terms, the most significant change occurred in the mobile services forecast. A combination of updated connection data, increased average revenue per unit (ARPU) in certain countries and stronger local currencies resulted in an upward revision of our mobile services forecast for 2010 through 2014. The CAGR for global mobile services revenue from 2009 through 2014 has been increased to 7%, up from 5.3% in the 3Q10 forecast. The reductions in the client computing forecast for 2010 reflect concerns about U.S. and Western European PC growth, given weak 3Q10 results and a still highly uncertain economic outlook for both markets. The reductions also reflect assumptions about the displacement of PCs by media tablets in these markets although the reductions on this account are relatively small, as media tablet displacement is seen as a much bigger problem for the long term. The reduction in the Western European forecast also reflects more aggressive assumptions about average selling price (ASP) declines in the region, which are expected to come about as the U.S. dollar continues to decline and constant U.S. dollar ASPs in Western Europe converge toward those of their U.S. counterparts. For 2011, currency exchange rate fluctuations actually have masked a downward revision to the underlying spending forecast. The 1.6 percentage point increase in U.S. dollar-denominated spending growth is assisted by a 2% gain because of U.S. dollar devaluation. To look at this another way, in constant dollars, we have reduced the forecast for spending growth in 2011 from 4.7% to 4.3%, which is a 0.4% drop. The reduction in the overall IT spending forecast for 2011 is almost entirely the result of the reduction in the PC forecast, again concentrated in the U.S. and Western Europe, with reductions to the Asia/Pacific forecast contributing some additional downward pressure. Here again, the reductions to the U.S. and Western European PC forecasts
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reflect concern for PC growth, given the likely weak economic growth in 1H11. Media tablets also are expected to take a somewhat bigger bite out of PC growth in 2011. The reduction to the Asia/Pacific forecast for PC spending reflects concern that the region's strong growth in 2010 likely pulled some growth from 2011, precipitating a write-down in 2011. It also incorporates some effect of the expected slowdown in Chinese economic growth on China's PC growth. The reductions in the Western European and Asia/Pacific PC spending forecasts also reflect the assumption of slightly faster constant U.S. dollar ASP declines, fueled by further declines in the U.S. dollar. Longer term, the forecast for annual growth in global IT spending in U.S. dollars for 2012, 2013 and 2014 is virtually unchanged at about 4.5%, although the upward revisions for 2010 and 2011 have had the effect of increasing the five-year CAGR through 2014 to 4.8% from 4% during the past quarter.
Changes in CIO Budgets

On a worldwide average basis, we expect 2011 CIO budgets to change very little from 2009 and 2010 spending levels. However, the real story regarding CIO budget funding trends will be based on the geographic region being analyzed (see Figure 4). Figure 4. Changes in CIO Budgets Over Previous Year, 1998 to 2010 (Worldwide and by Percentage)
Strategic Planning Assumption: During the 2011 through 2016 time frame, North American and European CIO budget growth will average less than 3%. Strategic Planning Assumption: During the 2011 through 2016 time frame, Latin American and Asia/Pacific CIO budget growth will average more than 7%. The above Strategic Planning Assumptions presume:
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Economic growth during 2011 will be extremely modest in North America (excluding Mexico) and in Europe. Latin America and Asia/Pacific will enjoy growth rates in 2011 well above the expected worldwide growth average of 3.3%.
The Future Directions of the IT Industry

Economic Environment
As with each year's Gartner Scenario, we begin our view of the future of the IT industry for 2011 and beyond by first establishing some of the critical underlying economic and business assumptions on which our IT views are based. According to the economic research firm IHS Global Insight, the world economy is expected to grow at a reasonably healthy pace of 3.7% during 2011. As in the case of 2010, the fastest rates of growth in 2011 are expected to take place in emerging and developing nations, led by China with 9.5% growth expected and India at 8.3% (see Figure 5). On the slow side of the growth spectrum will be Europe, which is expected to grow only 1.7% in 2011. Mid-2010 concerns about sovereign debt and sustained high unemployment rates were among the key reasons the aggregate market capitalization of more than 45,000 companies traded on 52 exchanges around the world fell more than $7.5 trillion between May and July 2010. Because there are few signs that these same prevailing concerns will dramatically improve during 2011, in July 2010, we recommended to clients that they prepare a contingency 2011 budget that assumes the arrival of a second recession. In its most recent World Economic Outlook report in October 2010, the International Monetary Fund (IMF) took a slightly more optimistic view about the prospects for near-term economic growth, projecting that, in 2011, the world economy would expand at a rate of 4.2% over 2010 levels. The IMF also concluded the fastest rate of growth would occur in Asia/Pacific, but was slightly less optimistic about European growth and called for only a 1.5% increase in GDP growth for that region in 2011.
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Figure 5. World Real GDP Growth in 2011 (Percent Change From a Year Earlier)
Source: IHS Global Insight (January 2011)
Enterprise Executives Expect Business Growth in 2011

According to a growing number of senior executive surveys, executives finally feel it is time to shift from some of their recession strategies, such as retaining existing customers, minimizing market share losses and hoarding cash, to seeking business growth. Money making, especially generating new revenue, has finally replaced cost saving as a common top priority in many geographies of the world, especially in Europe and much of North America. The latest example of CEO sentiment expecting new revenue in the near-term future appears in the Business Roundtable's 4Q10 CEO Economic Outlook Survey. CEOs were asked, "How do you expect your company's sales to change in the next six months?" About 80% stated they were expecting sales to increase, compared with 66% in 3Q10 and 51% in 3Q09.
2008 to 2011: The Most Important Years for the Rest of Your Career
Even while the worldwide recession was raging throughout 2009, we maintained in the 2009 Gartner Scenario that CIOs and other senior IT executives were entering an extremely unique period in their careers. Why? First, by highlighting the very small number of worldwide economic downturns during the past 30 years, we illustrated how IT managers simply do not have much experience leading staff and managing IT before, during and, especially, after a recession. Next, throughout 2008 to 2010, we continually asked clients how they would most accurately describe the aggregate level of activity among their project staffs. The choices we offered clients were: (1) not very busy; (2) busy; or (3) very busy. Throughout this entire time frame, more than 95% of clients responded their project staffs were very busy during the worst recession in eight decades! Finally, in early 2010, we started asking clients what their first steps most likely would be as their enterprises' senior executives (especially in North America and Europe) sought ways to return to sustained business growth. Because the decisions clients had to make before and during the recession were so profoundly important, and due to the long-lasting nature of the decisions they
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must make during 2011, when they look back on this era in 2015 or 2018, clients will conclude that the years 2008 to 2011 were the most important years for the rest of their careers. Among the key decisions clients must make in 2011 is to declare in which direction they will lead their staffs. With cost-saving initiatives less critical now than in 2009, will CIOs simply have their staffs return to the legacy mission they always pursued prior to the recession? Alternatively, will CIOs seize this time to pursue a different kind of IT mission? Time is running out for CIOs to conclude whether they will resume a legacy path for their IT mission, or if a distinctly new path should be pursued. If client staffs were very busy during the recession, clearly, they will have little, if any, opportunity to substantially change the mission of their staffs when sustained business growth once again becomes the norm. As clients ponder 2011 and beyond, a new candidate for a new IT direction and mission is emerging.
CIOs Have a Choice

CIOs are now faced with a choice: (1) They can return their staffs to conducting the same duties they performed prior to the recession; or (2) they can take on an altogether new definition of their IT mission. For those contemplating such a reinvention of their IT mission, we invite them to first consider how some macroevents and IT initiatives are forcing CIOs to challenge the wisdom of blindly following the IT missions of the past.
The Money-Making CIO

As each quarterly earnings season passes by during this postrecession era, it is clear that capital markets are more inclined to reward companies that report organic growth in revenue rather than companies that meet or surpass earnings expectations via cost cutting. While maintaining an operation at the lowest possible levels of cost is still imperative, enterprise executives well understand that, without revenue growth from increased customer demand, returning to a sustained period of economic recovery will be impossible. Meanwhile, during 2007 to 2010, as clients around the world were meeting the challenges presented by the worst global recession in 80 years, certain IT-enabled initiatives continued to evolve. Now, as senior enterprise executives around the world, especially those in nations hardest hit by the recession, search for ways to regain and sustain business levels prevailing before the recession, CIOs and other IT practitioners within those enterprises are weighing their options on how they will contribute to a return to sustained business growth. Other factors weighing on CIOs: Overall, projected sales for 2011 in many major industry verticals will still not have returned to prerecession levels, especially in much of North America and in Europe. During the postrecession recovery period, enterprise executives will prioritize growth initiatives. CIOs seeking to deliver maximum value to their enterprises during the postrecession recovery period should: Continue cutting costs Seek ways to help increase enterprise revenues (for private- and public-sector organizations)
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To determine which IT-enabled initiatives could deliver the most favorable impacts on enterprise growth and, therefore, would be most worthy of client consideration, we weighed a number of potential IT initiatives against a hypothetical enterprise income statement. As a result of this analysis, we found that seven IT initiatives actually passed this theoretical test. Furthermore, four of the seven possess the typical attributes of helping reduce enterprise cost and increase productivity, and stand ready to increase enterprise revenues: Context-aware computing This is on a trajectory toward becoming more sophisticated than simply relying on rudimentary search, location and physical presence features. Pattern-Based Strategies The arrival of two recessions within one decade in a number of developed economies increased awareness of patterns of behavior and thus their ability to be detected. Social networks The global recession did not stop the ever-expanding reach of social networks. Evidence continues to mount, highlighting there are few forces more powerful than the influence that friends or peers have on consumer buying decisions. New realities of IT IT staff innovation can be channeled toward enterprises' new product development. During the recovery period in North America and Europe, or the ongoing expansion period in Latin America and Asia/Pacific, the greatest business contribution CIOs will be able to deliver to their enterprises during this decade will be to help increase enterprise revenue growth. Welcome to the era of the money-making CIO.
The Six Styles of the Money-Making CIO

Information- and knowledge-based initiatives currently evolving today will open a galaxy of new business expansion possibilities during this decade. As CIOs agree to lead their staffs toward creating and capitalizing on the new business models that will unfold between 2011 and 2020, at least six distinctly different styles of the money-making CIO will likely evolve. Following is a brief summary of each style: 1. The entrepreneurial CIO This model will involve the CIO being responsible for generating sales from, for example, intellectual property their staffs may have initially developed for internal purposes but whose revenue-generating potential via external sales will be far too compelling to ignore. Such CIOs will still have the responsibility of overseeing traditional IT planning, design, implementation and operations. 2. The cost optimization CIO These CIOs consistently help enterprises to reach or surpass quarterly earnings targets by continually improving IT procurement, operations and decommissioning methods. They will always be welcome members to enterprise strategic planning committees. 3. The revenue-generating CIO This type of CIO will identify and guide enterprises toward exploiting IT technologies, products and services that will measurably increase enterprise revenue (the subject of the remainder of this report). 4. The business innovation CIO A CIO adopting this style of leadership will place IT staff members within the product or service development areas of the enterprise. 5. The business development CIO Perhaps the most controversial style, this completely transfers all IT operational responsibilities to another senior enterprise
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executive (for example, the COO). Similar to a cross between a building architectural firm and a construction general contractor, these CIOs will retain and enhance their ITbusiness planning, designing and implementation responsibilities. Over a short period of time, such a CIO will cease reporting directly to a CFO and begin reporting directly to the head of business development. 6. The public-serving CIO The opportunities to become a money-making CIO are not restricted to the private sector. Public-sector money-making CIOs will capitalize on the time value of money by significantly shortening each tax-receipt-related government process with the public (see Figure 6). Figure 6. The Six Styles of the Money-Making CIO
A Closer Look at the Revenue-Generating CIO

Here are some facts for 2011 to consider: The world's population is expected to surpass 7 billion. All consumers on Earth are expected to spend more than $20 trillion on personal consumption expenditures. Nearly 1.2 billion PCs will be operating around the world. More than 5 billion mobile phones will be operating around the world. There will be more than 1.8 billion unique Internet users in the world. Advances have been made and are anticipated in: (1) context-aware computing; (2) social networks; (3) pattern-detecting capabilities; and (4) the seemingly never-ending build-out,
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geographic reach and anticipated traffic growth of the Internet. These suggest the world of personal- and business-based commerce is ripe for a new phase of transition. The economic and business impact of that transition during the next decade will have the potential of easily surpassing the cumulative economic and business value already achieved to date since the arrival of the World Wide Web. As the next generation of IT-enabling and consumer-oriented solutions continues to evolve and develop, at least two CIO-hiring scenarios are likely to evolve by 2016: CIOs already skilled at generating revenues via IT will be enticed to join companies with an incentive compensation plan based on how much revenue the CIO's efforts yield. CIOs heedful of the revenue-generating potential of IT will offer to place the entire incentive portion of their total compensation at risk in return for being rewarded according to how much new revenue their guidance, vision, creativity and leadership create. For this reason, we make the following Strategic Planning Assumption: By 2016, new revenue created each year by IT will determine the incentive portion of annual compensation for most new Global 2000 CIOs.
Which IT Initiatives Will Yield the Best Return on Investment?

These are historic times in business, as much of the world continues to recover from the worst economic recession in 80 years. The actions taken or not taken by executives during this ongoing period of business and economic recovery will be studied for decades to come. Such historic times present thought-leading executives with unparalleled opportunities to break out from traditional roles to deliver unprecedented value to an organization's growth pursuits. During our interview with GM's new CIO, Terry Kline, he said his IT organization's top priority was to be able to answer, "What are we, IT, doing to help GM sell cars?" From the moment we heard that quote, we have been wondering how many CIOs will seize this moment and lead their staffs toward becoming directly involved in helping develop their enterprises' own products and services and helping their enterprises realize specific growth goals. The CIO of GM indicated that members of his staff recommended and developed smartphone applications aimed at significantly speeding the car leasing or buying process. Also, other staff members initiated efforts to contact customers who may not have had favorable experiences with GM in an effort to retain their potential interest in future GM purchases. The CIO of Xerox, John McDermott, wants to connect the millions of Xerox copiers and other devices it maintains to detect when service is required before the customer is negatively affected by a device outage. Such "untraditional" efforts will enable IT organizations to make meaningful cost-cutting and unprecedented revenue-generating contributions to their enterprises.
Where Has All the IT Money Gone?

If the major activities of most money-making enterprises were hugely simplified, we find they are involved in three major phases: They try to sell stuff; they sell stuff; and they fulfill because they sold stuff. The overwhelming majority of unknown trillions of money spent on IT during the past 50 years has been spent on IT-enabling and executing business processes in the "after the sale" (aka the back office) business cycle phase (see Figure 7).
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Figure 7. Where IT Money Has Been Spent During the Past 50 Years
Most IT practitioners in the private sector have spent most of their careers in planning, designing, implementing and operating IT systems that help fulfill the delivery of purchased products and services. Indeed, during the past few decades, huge IT vendor empires and megafortunes have been built on satisfying user needs to automate the enterprise supply chain, accounting, order entry, inventory control and related business processes. Each of these and a galaxy of other business process needs become activated (and IT-enabled) after products and services are sold. Meanwhile, the pie chart in Figure 7 depicting IT money spent during the past five decades on after the sale activities versus IT money spent on the moment of the sale or especially before the sale renders the latter two phases so insignificant in size as to be almost unreadable. Although the general ledger, order entry, inventory, accounts payable and other systems may need enhancements and upgrades in the future (with the emphasis on "may"), CIOs wishing to target a new and favorable impact on business in preparation for this return-to-growth period should direct most new funding toward the before-the-sale phase, in which IT has been and continues to be most silent.
Money-Making Initiatives Big Ideas

Strategic Planning Assumption: Fifty to 100 CIOs will become Global 2000 CEOs this decade. Gartner has identified at least seven issues that warrant client attention or action during the next three years (see Figure 8): 1. Context-aware computing 2. New realities of IT balancing cost and innovation with risk and governance
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3. Pattern-Based Strategy 4. Business gets social 5. Cloud computing 6. IT and OT alignment 7. Sustainability We categorize these seven ideas as revenue generators or as cost savers. Figure 8. Big Ideas to Consider During the Next Three Years
Context-Aware Computing Revenue Generator

Strategic Planning Assumption: By 2016, one-third of worldwide mobile consumer marketing will be context-awareness-based. Definition: Context-enriched services use information about end users to anticipate their immediate needs and proactively offer more sophisticated, situation-aware and usable functions and experiences. Compound context-enriched services use multiple information sources from four categories: process, environment, community and end-user identity. For example, simple instances of such services might use just location to personalize the user experience. Analysis: Context-aware computing addresses user experience as a science by linking the science presenting context-aware content and user experience with business goals. The overarching goal of context-aware computing, as described by the Context-Aware Computing Group at MIT, is: "Demonstrating the possibilities for controlling systems with interpreted human intention. The goal is to demonstrate how 'context,' such as who we are, what we are doing, where we are doing it, why we might be doing it, and when it should be done, can simplify our ability to control systems." Mobile and network service providers are already investing significantly in context-aware computing, and Type A (technology-aggressive) organizations in financial services, healthcare and retail are already beginning to leverage context for revenue opportunities and productivity increases. The disruptions caused by context-aware computing will include major shifts in users,
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technology and business, as well as changes in model-driven security, application programming, and the interest of governments in regulating contextual information access and control. Context allows experience designers to link physical, electronic and mobile commerce for commercial gain and to enhance knowledge work productivity. In general, today's consumers do not expect a cross-channel experience, and business applications are focused on portal access. Practices include optimizing individual experiences and interaction channels. However, by 2015, advances in augmented-reality browsers and display technologies, and a focus by software, device and service providers on context-aware user experience cross-app, cross-session, cross-channel and cross-platform will lay the groundwork for enterprises to redefine user expectations. By 2015, personalization will be expected by consumers, and for targeted users and use cases, enterprises will find business advantage in pushing the highly personalized content on the right channel at the right time. Retailers, financial services (notably, banks), telecom providers, and entertainment and software firms are, in general, making the types of technology and business model adjustments to capitalize on context-aware-computing principles for business gain. Transportation, utilities, energy and healthcare firms stand to gain considerable efficiency from context-aware computing, with notable use cases and case studies emanating from location- and presence-enhanced apps. These impacts are substantial. In retail, the assumption is $85 billion by 2015; in telecom and software, $12 billion by 2012, growing to $18 billion by 2015. Financial services, media, entertainment and software will face major impacts from context-aware computing. Even if the aggregate adoption across the industries in the moderate and high category is 10% of the adoption in financial services, and if direct manufacturer sales is half that of retailers, the worldwide economic effect of context-aware computing will exceed $140 billion per year by 2015. In light of these statements, how can such a vast labyrinth of IT infrastructure and capabilities be channeled in a way that allows commercial exploitation? Enterprises can add the means by which consumers may proactively opt in to navigate and pursue an altogether different type of consumer experience. Such consumers will migrate away from buying goods and services within a mass-marketingbased economy and enter a world of meeting consumer needs based on virtual agents solving buying quandaries via context-based solutions. Recommendations: Look in areas such as mobile, rich presence, search and security for context-aware-computing success stories, and then build a strategy around where context is already making an impact. Prepare to take advantage of technology breakthroughs in user experience, such as those in augmented reality and ensemble programming. Hire or train user experience designers, and use analytics to create specific context-enriched services. Staging context-aware experiences will reshape IT infrastructure. Identify current shortfalls in user experience delivery.
New Realities of IT Revenue Generator

Strategic Planning Assumption: By 2016, innovation accomplishments will be among the top three selection criteria for new CIOs. Definition: Because of the recent global recession and the evolution of IT that continued despite the recession, public- and private-sector enterprise executives must learn how to operate in a new world in which what was considered normal in 2007 might not continue being so in 2011 and beyond.
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Analysis: In the aftermath of almost any major disruptive or even destructive event, it is almost impossible for life to automatically return to the same conditions prevailing just prior to the upheaval. So it is with the recent global recession. Consider the following: As of November 2010, more than 23.2 million people within the 27 European Union nations were out of work. In the U.S., the number of people unemployed by December 2010 was nearly 14.5 million. The value of market capitalization of more than 46,000 public companies listed on 52 of the world's stock exchanges has still not returned to the levels reached in 2007. Throughout the world, tax receipts to government entities are down from prerecession levels, thus adding tremendous pressures on the ability of governments to provide public services. Consumer spending (usually two-thirds of spending in most advanced economies) in these and other regions remains below prerecession levels. The new realities of IT are driven by disruptions on two levels: External to the enterprise: Emerging from the Great Recession will require changes in every business and industry through 2014. Even if an organization is not directly affected by a change, the actions of peers and competitors may demand a significant response. Internal to the enterprise: The postrecession changes will blur internal organizational boundaries as services, relationships and processes change. At the same time, IT is increasingly important to every business change, signaling erasure of the line that has long separated IT from the rest of the business. A new framework of the new realities of IT will evolve within IT in direct response to the urgent need of returning to growth in the aftermath of the Great Recession of 2008 and 2009. Further, those new realities will emerge, molded by four major forces: innovation and growth, value optimization, risk management, and governance.
The New Realities of Innovation and Growth

Innovation is aimed at growing the business, optimizing costs and creating new forms of value, such as social and collective capital. Innovation aims to drive cost optimization, value and growth. Innovation is open and collaborative The enterprise engages its partners, customers and the Web collective in innovation. Innovation is distributed and nurtured at the edges of the organization It is part of the work of every business and organization unit. IT innovation is about managing emerging trends and technologies for the business, participating in business innovation, and taking entrepreneurial attitudes and actions. Innovation is about leadership that includes R&D, as well as intentional application of best practices and lessons learned from other innovators.
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The New Realities of Cost and Value Optimization

On-time and on-budget are no longer valid measures of success. Business outcomes set the criteria for project success. The probability of delivering value determines whether projects are kept alive. Investment decisions are optimized around enabling innovation and managing costs. Still, a great deal of attention will be paid to risk. Incremental budgeting is ill-suited to aligning IT spending to business priorities. New budgeting techniques such as transforming the IT budget into a rolling forecast or zero-based budgeting will be required. Benchmarks will continue to be important in demonstrating IT's efficiency. However, IT success will be measured by the organization's ability to deliver the capabilities that the business is seeking, in the time frame that the business needs them and at a price the business can bear. CIOs and business leaders require detailed IT cost information to make solid investment and divestment decisions.
The New Realities of Risk Management

Transparency and defensibility of risky decisions are more critical than ever. Risk must be measured and addressed as part of the business process. All managers and leaders need basic skills in risk management. Risk management is an investment decision tool. Eliminating all risk is not possible or desirable. Risk treatment options include mitigation, contingency planning, transfer and acceptance. Risk and the accountability for risk are, and should be, owned by the business units creating and managing those risks. Risk management is an ongoing effort. Risk assessments are valid for a point in time, because risk factors evolve over time. Risk management must be baked into the thinking of decision makers and into the governance of the enterprise. Risk decisions are more complex and impactful than in the past. With instant communication and processes, organizations must act quickly and knowledgeably to threats and opportunities. Continuous monitoring and reporting of risk are becoming critical business processes.
The New Realities of Governance

Governance is an enterprise capability integrating all disciplines associated with business change. If governance is practiced only for IT investments, the enterprise is not governing the full scope of changing its business. Fractured funding models, decision making and execution are no longer optimal. There is an assumption that most investments are connected independent decisions on investments are the exception, not the rule. In approaching governance design, enterprises will mainly consider what governance is required to enable the organization to successfully execute its strategies and achieve its strategic goals.
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Supply-side governance domain definitions and policies are centrally coordinated and controlled. They encompass policies and controls for all change-related disciplines in a holistic manner. Highly effective business change governance can be a sustainable competitive differentiator. As people pursue CIO opportunities in the middle of the decade, prospective employers will seek to determine how the potential CIO candidates excelled under the reign of the new realities and employed innovative methods and ideas to help their enterprises recover from the devastating effects of the global recession. Recommendations: CIOs should seek approval to assign innovative staff members who are capable of contributing value to product development teams and departments. Further, CIOs should assume leadership roles in helping develop new rules for governance and risk management, while continuing to take aggressive steps in IT cost and value optimization. Portions of this section were obtained from "The New Realities of IT."
Pattern-Based Strategies Revenue Generator

Strategic Planning Assumption: Through 2015, pattern-seeking technology will be the fastest-growing intelligence investment among the most successful Global 2000 companies. Definition: A Pattern-Based Strategy provides a framework to proactively seek, model and adapt to patterns that may have a positive or negative impact on the enterprise's strategy or operations. Analysis: During the past two decades, IT practitioners have succeeded in significantly improving customer- and supplier-oriented processes, which has enabled enterprise employees to perform an array of activities and obtain insights about the products and services that customers bought with unprecedented efficiency and certainty. However, such productivity gains and insights tended only to improve one's comprehension of events and decisions that have occurred in the past. After researching Global 500 company quarterly and year-end earnings transcripts and executive surveys, and with so many public- and private-sector executives blindsided by the global recession, we saw that executives want greater predictability about the future. We believe among the ways that effective insights into future performance can take place will be to detect patterns of business-relevant activities and to adjust the enterprise's business directions accordingly. Pattern-Based Strategies enable business leaders to actively seek, amplify, examine and exploit patterns of change that indicate an opportunity or risk. Exploiting patterns will require new disciplines and technologies that enable an organization to establish a consistent and repeatable response (focused on results) to patterns of change. Leading organizations will invest more resources (people, processes and information) to seek patterns of change. These firms will also evaluate the ways in which patterns of change can disrupt current plans. They can then propose specific courses of action to protect against or exploit these new patterns, and open up enterprise management processes to be sensitive to the value of exploiting the new patterns (rather than burying them inside orthodoxy as "normal noise"). To achieve this, organizations will need to change the way in which business performance is managed from a rearview mirror perspective focused on financial measures, to a perspective that uses leading performance indicators and weak signals to actively seek and act on patterns. This approach will fundamentally change strategic planning processes and the execution of
Publication Date: 20 January 2011/ID Number: G00209949 2011 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Page 20 of 31
strategy. Successful organizations will create a performance-driven culture in which business strategy will change with the emergence of new business patterns, and this will drive changes in the operational behaviors of managers and employees. Few organizations have implemented a performance-driven culture. However, those that show attributes of a performance-driven culture have realized clear business benefits. Academic studies show that the use of leading indicators delivers real benefits, but many organizations will be challenged to shift from the traditional rearview mirror financial metrics. Technology and, therefore, CIOs and IT professionals will play a key role in supporting the move to a performance-driven culture. A new category of business applications has emerged performance management applications. This unique class of analytic application is focused on management processes (for example, from planning to performance), and has a heavy analytic application content with limited transaction-processing capabilities. Performance management is an increasingly important area, and the range of applications that support different applications is growing fast. Corporate performance management is the most mature of these applications, but other areas of performance management are emerging that support the performance management needs of other domains and departments, such as sales, marketing, product management and HR. Even IT operations has specialized performance management applications for its infrastructure. Thus, organizations will have to implement and align a portfolio of analytic applications to support an end-to-end view of performance. Recommendations: Business and IT leaders should focus on disciplines and technologies that enable the following four elements of Pattern-Based Strategy: pattern seeking, operational tempo (how to enable consistent and repeatable organizational change in response to changing patterns), performance-driven culture, and transparency. Further, enterprises should engage business managers across the organization to understand performance management needs and to identify what analytic applications may be required to support an end-to-end approach to performance management. Portions of this section were obtained from Yvonne Genovese's "From Patterns to Practice: Using Pattern-Based Strategy to Demonstrate Competitive Advantage via Technology" presented at Gartner Symposium/ITxpo, October 2010.
Business Gets Social Revenue Generator

Strategic Planning Assumption: Through 2015, 80% of enterprises will lack a coherent approach to dealing with information from the collective. Definition: In their research paper "Social Network Sites: Definition, History and Scholarship," authors Danah Boyd and Nicole Ellison define "social network sites" as "Web-based services that allow individuals to: (1) construct a public or semipublic profile within a bounded system; (2) articulate a list of other users with whom they share a connection; and (3) view and traverse their 1 list of connections and those made by others within the system." In a recent Gartner Executive Programs report "Delivering Enterprise Value From Social Computing," Gartner defined: "Social computing" an approach to IT whereby individuals tailor information-based and collaborative technologies to support the way they work. "Social networking" the use of online services such as Facebook to share information and interact with others. It is a subset of social computing.
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Analysis: The following is a partial list of Key Findings from "Delivering Enterprise Value From Social Computing." Key Findings: Social systems emerge from the people, processes, tools, organizations, relationships, skills and information of a group. In enterprises, business systems and processes define how work should be done. Social systems reflect how work actually happens, taking into account individual experience, context, knowledge and relationships. Social computing by the enterprise is reaching far beyond the mere use of external social media changing how employees view IT and what they expect of IT. Social computing solves problems and creates opportunities by extending the reach and depth of human interactions. It also supports the unstructured data and informal processes of these interactions (which traditional enterprise IT ordinarily struggles to do). To drive value from social computing, the CIO must be an active practitioner. CIOs must also select and deploy technologies to satisfy individuals and groups with common needs or interests. Classifying social systems by their intended outcome and membership criteria reveals four system styles: achieve, engage, explore and connect. In "The Business Impact of Social Computing, 2008," we stated, "Externally, social computing supports deeper, more mutually supportive enterprise relationships by involving customers and suppliers in similar ways at every stage of a business life cycle from design, through development and production, to marketing and sales, to customer service and support. As businesses increasingly seek to strengthen their level of engagement with prospects and customers, understanding the power of communities, the multiple personas of their members, their expectations, their aspirations and how to interact with them will become essential skills for business in the 21st century. Stronger customer relationships increase loyalty and brand recognition and, ultimately, drive enhanced revenue." One of the major business opportunities presented by social networks is captured in the survey results described in a 2009 Nielsen study, which concluded: "Recommendations by personal acquaintances and opinions posted by consumers online are the most trusted forms of advertising globally." With consumer spending constituting about two-thirds the total value of most developed economies, IT and other business professionals will spend vast sums of money and enormous amounts of time during this decade and beyond to discover how best to capitalize 1 on the growing spread, power and influence of social networks. Earlier in this report, we identified the value of annual consumer spending worldwide to be approximately $20 trillion. Research also shows there are few forces more powerful or pertinent to a consumer than the opinions of people he or she knows or deems to be peers. Enterprises spend on advertising their products and services a combined annual worldwide amount of nearly $500 billion. Therefore, enterprises are urged to decide when to plunge into the primordial pool occupied by others seeking to crack the code of translating social networking into new revenue. Finally, in a very recent Gartner report, we stated, "Socially driven processes are disrupting traditional approaches to business. Social technologies allow people to connect, interact and rally together with unprecedented speed and ease, yet there is still confusion about the value that social technologies deliver. Savvy business and IT leaders are not content to watch from the
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sidelines as these changes unfold. They are getting smart about social and serious about exploring, and possibly exploiting, the opportunities these new relationship dynamics promise." (See "Business Gets Social.") Recommendations: Identify insights and/or recommendations about the external information sources your enterprise will rely on most for revenue generation. During 2011, finalize your position on what, if any, leadership role the enterprise IT group should assume in exploiting social networking to create new revenue streams.
Cloud Computing Cost Saving

Strategic Planning Assumption: By 2016, all Global 2000 companies will use public cloud services. Figure 9 shows cloud computing's anticipated growth among Global 2000 companies. Figure 9. Cloud Computing's Growth Among Global 2000 Companies
Definition: Cloud computing is a style of computing in which scalable and elastic IT-related capabilities are provided as a service to customers using Internet technologies. Analysis: Unlike most outsourcing arrangements, in which specific and highly customized solutions are delivered, cloud services will tend to deliver commonly used and decidedly uncustomized services. Cloud computing represents a shift in the relationship between the providers and consumers of IT-based solutions. Key among the major shifts in this changing relationship is the migration away from having to buy new hardware and software and toward "subscribing" to IT services.
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Although such a technical shift will end the accounting advantages derived from buying equipment and software, the savings in operational expenses resulting from using cloud services and the economies of scale that should be reflected in the cloud service's rates should offset any IT amortization benefits. Consequently, chargeback of in-house-provided IT services and the processes involved in creating such a chargeback mechanism can be replaced by direct cloud service fees based on an entire enterprise's or individual business unit's utilization. The "cloud market" (made up of public and private services) was $58.6 billion at the end of 2009, and it could reach $148.8 billion by 2014 (CAGR of 20.5%). How will cloud computing be defined and evolve? For software as a service (SaaS), the basic scenario represented in Gartner's forecast remains in place application functionality delivered as a cloud service is establishing itself as the new norm for the software industry (see "Forecast: Public Cloud Services, Worldwide and Regions, Industry Sectors, 2009-2014"). The forecast growth rate has been reduced marginally from last year's report to reflect slightly more sluggish spending on all aspects of IT during the next few years. However, the scale of application deployments is growing; multithousand-seat deals are increasingly common. One of the largest SaaS sales if not the largest was a 420,000-seat deal SuccessFactors won with Siemens. IT managers are beginning to think strategically; this was highly unusual a year ago. For platform as a service (PaaS), the application infrastructure consists of two types of offerings application platform as a service (aPaaS) and infrastructure as a service (IaaS). Platform infrastructure is an increasingly high-profile area, rapidly assuming a central role in the broader conversation about cloud computing. Salesforce.com, VMware and Microsoft are adding credibility and clout; however, it is still an early-stage market. IaaS is gaining traction witness the IBM acquisition of Cast Iron Systems. For IaaS, Gartner has increased its sizing and forecast for cloud-computing services, reflecting greater interest among our client base than had been expected. We expect the 2013 IaaS market to be worth $8 billion (up from the $6.8 billion forecast last year), and the 2014 market to be worth $10 billion. Starting in 2012, enterprises will see building new applications on a cloud-computing infrastructure as the de facto norm. The migration to cloud computing will begin with capabilities that have low value in building a company's competitive edge. Infrastructure services will be rapidly adopted through the cloud, as cloud platform providers take advantage of the paradigm. At the same time, information services are already growing on the Internet, and they will migrate to cloud services. Next, entertainmentoriented services (such as video on demand), simple business services (such as customer authentication or identity management for example, Windows Live ID and emerging standards like OpenID are efforts to federate identity to service providers), and contextual services (such as location or mapping services) are well-positioned to become cloud-delivered. Services with higher competitive value, such as core corporate processes and transactional services, will take longer to reach the cloud and the mainstream. The reason for a longer uptake into the cloud for pointed business-oriented services is that these will require a high degree of trust between the providers of these services and their potential business customers. These services will also require a certain degree of security and robustness that is just now becoming viable for Internet-based computing. Recommendation: To obtain the most accurate determination of cloud computing's financial suitability for an enterprise, begin by identifying the enterprise's or business unit's precise level of IT spending. Portions of this section were obtained from the Gartner Symposium/ITxpo presentation in October 2010, "The Cloud-Computing Scenario," by Daryl Plummer and David Mitchell Smith.
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IT and OT Alignment Cost Saving

Strategic Planning Assumption: By 2013, inadequate software management of OT systems will result in a major business failure of a top Global 100 company. Definition: Devices, sensors and software monitor, or control, physical assets and processes in real time to maintain system integrity. Analysis: During the past 10 years, the technical characteristics of the control systems used by asset-intensive enterprises have been undergoing a vast transformation. These proprietary control systems have evolved into commercialized software-based solutions. Among the consequences of this evolution has been an awareness by operations managers that they must operate and maintain these new control systems in the same way that their IT personnel colleagues have long maintained accounting, HR, supply chain and other "traditional" IT systems. As operational technology vendors, such as Schneider Electric, ABB and Siemens, develop their products on familiar IT platforms, Microsoft operating systems, Oracle databases, IP addresses and so on, executives are realizing there are cost savings and management efficiencies to be gained by integrating the IT and OT groups together. Although efforts to integrate groups are challenging, benefits from streamlined budgets, coordinated planning, consistent technology architectural decisions and maximized technology purchasing power make for extremely compelling cases for IT and OT group integration. Integration also achieves a faster response time to physical events and changes, and creates a more agile, interconnected business. Recommendations: Develop an integrated view of IT-OT standards, and establish integrated ITOT governance. Thus, an automated, integrated, intelligent, transformed real-time enterprise can be designed.
Sustainability Cost Saving

Strategic Planning Assumption: By 2016, sustainability will be the fastest-growing enterprise compliance expense worldwide. Strategic Planning Assumption: Through 2016, economic, market and stakeholder pressures, more than regulation, will drive improved sustainability performance and transparency. Definition: The U.S. Environmental Protection Agency states that "sustainability" refers to "policies and strategies that meet society's present needs without compromising the ability of future generations to meet their own needs." Analysis: While variously defined in terms of the connections between economic, social, ecological and other systems, for the enterprise organization, sustainability is increasingly about the business value achieved through information-enabled efficiency, transparency, compliance and reputational enhancement (see Figure 10 for the Gartner Model of Sustainability and Business Value). With recent data indicating that 80% of CEOs believe the sustainability imperative increased during the recession, and three out of five CEOs indicating that they are variously preparing for the impacts of climate change, sustainability is growing in significance. 2 Pursuing an integrated and information-enabled sustainability strategy protects organizations from current and future regulatory requirements and solidifies a positive reputation. It also provides access to substantial savings through, among other things, technology-enabled 3 efficiency gains and access to socially responsible investment (SRI) capital. The Social Investment Forum estimates that, in 2010, SRI will have exceeded $3 trillion, or around 12% of the $25.2 trillion U.S. investment market.
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Figure 10. Gartner Model of Sustainability and Business Value
CSR = corporate social responsibility; EH&S = environmental, health and safety; LCIA = life cycle impact assessment; PLM = product life cycle management Source: Gartner (January 2011)
The business environment is one of increasing environmental compliance and associated risk, in which the environmental and social performance of corporations and their products is both increasingly expected and rewarded, and where an efficiency imperative is coupled with concerns about energy prices and price volatility. Thus, sustainability has become a key priority for CEOs. They, in turn, are placing expectations on senior executives and CIOs to deliver sustainability business outcomes. In the context of an organization, sustainability can be viewed as a cost center of reporting, compliance and regulatory control, or as a vehicle for product and process innovation, a new business opportunity, and a mechanism for organizational transformation. Either way, sustainability has emerged as an important competency. For a growing number of organizations, sustainability has moved well beyond issues of compliance or philanthropy. Sustainability is emerging as a mainstream issue that drives innovation, growth and profit, and that transition will develop rapidly during the next five years. In particular, operational sustainability is, to a large degree, synonymous with energy use and
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resource efficiency, and it is a powerful vehicle for focused innovation and organizational transformation. Energy costs are expected to increase 30% by 2012. Consequently, enterprises should anticipate significant increases in the direct and indirect cost of energy and other resources, which are expected to track well ahead of base inflation. As energy and resource usage shifts from a supporting technical process to a managing strategic process, enterprises need to invest in systems that deliver the necessary, granular, high-cadence visibility of such consumption inside their organizations. Recommendations: Ensure that the CIO's office has a voice in the development of sustainability strategies. The CIO will rarely singularly "own" sustainability as a responsibility, but like it or not, the IT department will play a crucial role in the collection and coordination of an evolved or new system or record for sustainability data. Think beyond green IT. Sustainability and savings for the sake of IT were good starting points for the IT organization to engage with efficiency and sustainability, but the pressing challenge for the future is the leveraging of IT to assist in the delivery of sustainability outcomes across the organization. Improve energy efficiency as a highly quantifiable strategy for cost and emission reduction, increased efficiency, and reduction in the overall materials impact of the organization. Prior to reinvestment in new capital projects, recognize that energy savings are widespread in the data center and elsewhere, and are frequently readily enabled once granulated and preferably real-time profiles of consumption are generated. Don't wait for regulation mandating the reporting of greenhouse gas emissions or other environmental or sustainability parameters. Start building the business processes, workflows and capabilities to capture efficiency and sustainability performance data. In particular, there is often a need to ensure that typical supporting technical business processes (such as facilities and energy and compliance management) are recognized as both key operational and strategic sustainability business processes, which commonly require promotion to higher-level IT and organizational planning.
Gartner IT Demand Outlook

It would take until the 20th century before the world would produce its first billionaire, John D. Rockefeller, Sr. In the Fortune 500 list's first year of publication in 1955, only 21 companies reported revenue greater than $1 billion. In 2010, all Fortune 500 companies reported revenue greater than $1 billion. In 1963, McDonald's sold its 1 billionth hamburger. The first movie to generate worldwide box office receipts of more than $1 billion was "Titanic," released in 1997. On 3 May 2010, Apple announced it had sold its 1 millionth iPad, just 28 days after the introduction of the device on 3 April. This meant the iPad reached the $1 billion sales mark within two months of its launch and, thus, became the consumer product to reach that milestone the fastest. Reaching $1 billion in sales for any endeavor is a major accomplishment, of course, but which products, services, companies and so on will be the next to join the $1 billion club? How could anyone know? We considered this question while pondering the future for each of the emerging technologies found on Gartner's "Hype Cycle for Emerging Technologies, 2010," and arrived at a qualitative methodology for compiling our own list of future $1 billion candidates. By evaluating each technology against an array of known or anticipated human demands likely to unfold in the future, we combined emerging technologies with emerging demands to yield our first attempt at
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building a Gartner demand outlook to identify the next technology candidates most likely to join the $1 billion club. We selected from technologies that are likely to become mainstream in five to 10 years, and beyond 10 years (see Figure 11). Figure 11. Future $1 Billion Candidates From the Hype Cycle for Emerging Technologies, 2010
It should also be noted that we sought to test our demand outlook concept with emerging technologies that seemed furthest from the Hype Cycle's Plateau of Productivity phase. Therefore, we evaluated only the technologies occupying the space between the Technology Trigger and the Peak of Inflated Expectations on the 2010 Hype Cycle for Emerging Technologies and have obscured the rest. Also, the examples discussed in the next section are not meant to depict the extent of our demand-driven analysis. Instead, we wish to offer only a sample of how we will approach this analysis in the future.
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Examples of Applying Human Demand to Determine Which Emerging Trends Will Become $1 Billion Markets
Wireless Power
Strategic Planning Assumption: By 2020, cumulative sales from wireless power products will surpass $1 billion. In 1900, inventor Nikola Tesla wrote in his paper "The Transmission of Electrical Energy Without Wires": "Towards the close of 1898, a systematic research, carried on for a number of years with the object of perfecting a method of transmission of electrical energy through the natural medium, led me to recognize three important necessities: First, to develop a transmitter of great power; second, to perfect means for individualizing and isolating the energy transmitted; and, third, to ascertain the laws of propagation of currents through the earth and the atmosphere." From his Tesla coil (a device that steps up electricity to extremely high voltage levels) in Colorado, Tesla was able to light 200 light bulbs 25 miles away without wires. Today, with so many portable computing and communications devices powered by batteries, many people would find it highly desirable to have their batteries charged remotely or powered via Tesla-like devices, bypassing the use of batteries altogether. In a paper published in July 2007, a number of MIT scientists wrote, "Using self-resonant coils in a strongly coupled regime, we experimentally demonstrated efficient nonradiative power transfer over distances up to eight times the radius of the coils. We were able to transfer 60 watts with ~40% efficiency over distances in excess of two meters." A key to the MIT group's discovery was identified in the paper "Wireless Power Transfer via Strongly Coupled Magnetic Resonances," "It is essential that the coils be on resonance for the power transfer to be practical." Origins of demand: By 2011, more than 1 billion PCs and 5 billion mobile phones will be in use in the world, resulting in at least 6 billion actively used power adapters.
Human Augmentation
Strategic Planning Assumption: By 2025, cumulative sales from human augmentation products will surpass $1 billion. In April 2010, the first Augmented Human International Conference convened. The literature sent out to solicit participation identified one of the goals of the conference as follows, "The AH International Conference focuses on scientific contributions towards augmenting human capabilities through technology for increased well-being and enjoyable human experience." Conference organizers selected "World's First Wearable Humanoid Robot That Augments Our Emotions" by Dzmitry Tsetserukou of Toyohashi University of Technology as the best paper of the conference. The paper's opening comments clearly indicate its content is vastly different from content most familiar to traditional IT professionals: "In the paper, we are proposing a conceptually novel approach to reinforcing (intensifying) own feelings and reproducing (simulating) the emotions felt by the partner during online communication through wearable humanoid robot. The core component, Affect Analysis Model, automatically recognizes nine emotions from text. The detected emotion is stimulated by innovative haptic devices integrated into the robot. The implemented system can considerably enhance the emotionally immersive experience of real-time messaging. Users can not only exchange messages but also emotionally and physically feel the presence of the communication partner (e.g., family member, friend or beloved person)." Origins of demand: The World Health Organization estimates there are more than 750 million disabled people in the world. PricewaterhouseCoopers estimates the video game, filmed
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entertainment and the television network business markets are already at $46.5 billion, $104 billion and $227 billion, respectively. Given the medical and entertainment opportunities to enhance people's lives through human augmentation, human augmentation will easily reach and surpass the $1 billion mark during the next decade.
Final Thoughts
Message to IT Practitioners in 2011: Don't Miss the New RevenueGenerating Opportunities This Time
Recommendations: Use 2011 to determine the applicability of the seven initiatives in generating revenue and/or lowering costs within your enterprise. Identify how to extend your business model to source, federate and monetize context information. Analyze and recommend appropriate actions based on one heretofore-undiscovered business pattern. Identify the key changes required to balance the four imperatives of IT investment. Complete a review of how your company is perceived by the end of 1Q11. Regarding cloud computing, buy what you want to get done (a service) and not the technologies to do it. Establish integrated IT-OT governance. Complete a sustainability strategy by the end of 2Q11.
RECOMMENDED READING
Some documents may not be available as part of your current Gartner subscription. "Context-Aware Computing: A Looming Disruption" "Introducing Pattern-Based Strategy" "The New Realities of IT" "The Business Impact of Social Computing, 2008" "Five Refining Attributes of Public and Private Cloud Computing" "The Value of IT and OT Integration" "Key Issues for Sustainability Strategies, 2010"
Evidence
1
"Social Network Sites: Definition, History and Scholarship," by Danah Boyd and Nicole Ellison, published in the Journal of Computer-Mediated Communication, 2007 (http://jcmc.indiana.edu/vol13/issue1/boyd.ellison.html)
2
"A New Era of Sustainability: U.N. Global Compact-Accenture CEO Study 2010"
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Eurosif's European SRI Study 2010
This research is part of a set of related research pieces. See "The CIO's Role in Making the New Realities Real" for an overview.
REGIONAL HEADQUARTERS
Corporate Headquarters 56 Top Gallant Road Stamford, CT 06902-7700 U.S.A. +1 203 964 0096 European Headquarters Tamesis The Glanty Egham Surrey, TW20 9AW UNITED KINGDOM +44 1784 431611 Asia/Pacific Headquarters Gartner Australasia Pty. Ltd. Level 9, 141 Walker Street North Sydney New South Wales 2060 AUSTRALIA +61 2 9459 4600 Japan Headquarters Gartner Japan Ltd. Aobadai Hills, 6F 7-7, Aobadai, 4-chome Meguro-ku, Tokyo 153-0042 JAPAN +81 3 3481 3670 Latin America Headquarters Gartner do Brazil Av. das Naes Unidas, 12551 9 andarWorld Trade Center 04578-903So Paulo SP BRAZIL +55 11 3443 1509
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Publication Date: 20 January 2011 ID Number: G00209949

STRATEGIC PLANNING ASSUMPTIONS

The Current State of the IT Industry

Source: Gartner (January 2011)

Figure 2. Revenue Performance of Selected IT Vendors (4Q08 to 3Q10)

Source: Gartner (January 2011)

Source: Gartner (January 2011)

Changes in CIO Budgets

Source: Gartner (January 2011)

The Future Directions of the IT Industry

Source: IHS Global Insight (January 2011)

Enterprise Executives Expect Business Growth in 2011

CIOs Have a Choice

The Money-Making CIO

The Six Styles of the Money-Making CIO

Source: Gartner (January 2011)

A Closer Look at the Revenue-Generating CIO

Which IT Initiatives Will Yield the Best Return on Investment?

Where Has All the IT Money Gone?

Source: Gartner (January 2011)

Money-Making Initiatives Big Ideas

Source: Gartner (January 2011)

Context-Aware Computing Revenue Generator

New Realities of IT Revenue Generator

The New Realities of Innovation and Growth

The New Realities of Cost and Value Optimization

The New Realities of Risk Management

The New Realities of Governance

Pattern-Based Strategies Revenue Generator

Business Gets Social Revenue Generator

Cloud Computing Cost Saving

Source: Gartner (January 2011)

IT and OT Alignment Cost Saving

Sustainability Cost Saving

Figure 10. Gartner Model of Sustainability and Business Value

Gartner IT Demand Outlook

Source: Gartner (January 2011)

Eurosif's European SRI Study 2010

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