IDC Confirms Slower Growth All Around in the Worldwide Services Market

A new study from IDC forecasts that worldwide services spending will grow 5.2% year over year in 2009, down 1.5 percentage points from the previous forecast. IDC estimates that the remaining years in the forecast period, through 2012, will also grow slower than predicted earlier. The study also highlights changes in worldwide services spending growth rates by macromarket, including the following:

Project-oriented: Growth rates are forecast to slow to less than 3% in 2009, but then increase by the end of the forecast period.

Outsourcing: The business process outsourcing services market is the largest portion of the services market overall and will be the major driver in growth rate changes. Even with the decrease in growth rate for the hosted application management market, it still remains the fastest-growing market opportunity.

Support and training: Growth rates are forecast to remain below 3% for the remainder of the forecast period. Smaller spending increases are expected in both the hardware and software deployment and support markets.

More information on the service and support industry can be found at www.SupportIndustry.com

Customer Service, Not Price, Remains Top Cause of Customer Churn

Service again ranked above price as a global driver of customer churn, according to Accenture’s fourth annual study on customer service satisfaction, titled “High Performance in the Age of Customer Centricity.”

In total, two-thirds (67 percent) of respondents reported moving their business to other companies as a result of poor service in a variety of industry sectors, up from 59 percent of respondents in last year’s survey. Underscoring the sharp increase in consumers switching business providers is an overall erosion of customer loyalty. Half (50 percent) of respondents in this year’s survey reported that they switched providers in multiple industry sectors during the year, taking an average of $4,000 worth of business with them, by their own estimate, each time they took business elsewhere.

For the fourth straight year, the Accenture study also found that the number of consumers who left because of poor customer experience was significantly higher than the number of those who left a business because they found a lower price elsewhere -- 68 percent versus 53 percent. Among respondents in the United States, the discrepancy was even greater, with 73 percent of respondents saying they switched service providers due to poor service, compared with 47 percent who switched providers because of lower prices.

The findings also revealed that consumer expectations continued to increase. Nearly one-third (31 percent) of those surveyed described their service expectations as higher now than one year ago, and 52 percent described them as higher now than they were five years ago. Expectations were even higher in the developing markets of China, India and Brazil, where many companies now look to for growth. Significantly more than half (60 percent) of respondents in those countries said that their expectations are higher now than they were a year ago, and 84 percent said their expectations are higher now than five years ago.

Additionally, Accenture found that consumers are becoming less forgiving of companies that fail to satisfy their expectations. Twenty percent of respondents reported that they would immediately leave a company because of a poor service experience, up from 13 percent in last year’s survey.

Among the survey’s other findings:

*Consumers were most likely to switch providers when they were dissatisfied with four key aspects of customer service, including:

- whether service representatives were polite and friendly;
- whether their issues were resolved in a timely manner;
- whether service representatives took ownership for resolving the customer’s issue; and
- whether customer service was available at convenient times.

Additionally, consumers were most likely to switch companies when they became frustrated by being forced to wait for a response after requesting customer service or when they encountered business policies that impeded the ability of customer

*Consumer expectations were met least often in the emerging markets. In China, there was a particularly notable decline in companies’ ability to meet consumer expectations, with only 32 percent of Chinese respondents in this year’s survey saying that their expectations were met frequently or always, down from 70 percent in 2007.

*Consumers in emerging markets were most likely to say that the increased use of technology has improved customer service. Nearly nine in 10 respondents (87 percent) in emerging markets said technology has improved customer service, compared with only 44 percent in mature markets.

*Consumer use of the full range of service channels has increased in the past year. While the vast majority of consumers still prefer to use the telephone to seek assistance (selected by 85 percent of respondents), use of other service channels — including e-mail, speaking with representatives at places of business, corporate Web sites, sending a letter and online chats — has increased across the board. However, satisfaction with service declined across most channels, with the exception being live online chat -- 43 percent of consumers reported that they were satisfied with chat services, up from 30 percent a year earlier. Even so, satisfaction remained highest when service was delivered on premise, with the largest number of respondents – 55 percent – expressing satisfaction with on-premise customer service.

More information on the service and support industry can be found at http://www.supportindustry.com/

Thirty Percent of New Customer Service and Support Application Investments Will Be Through the SaaS Model by 2012

Organizations are experiencing project savings of 25 to 40 percent by deploying CRM applications in a software as a service (SaaS) model, according to Gartner Inc. Gartner said that its clients were making these savings from reduced application expense and lower implementation costs.

Much of the savings that organizations are making is a result of a lesser dependence on large external service providers (ESPs), which typically help businesses improve customer processes as part of the CRM engagement but which play less of a role when SaaS is involved. Among the top 100 SaaS deployments in 2007 and 2008, fewer than 10 percent involved a large system integrator or an external enterprise business consulting team. This would indicate that the role of ESPs in designing, measuring and driving CRM process improvements will diminish at enterprises deploying SaaS solutions for CRM through 2012.

Gartner expects a similar drop in customer experience scores from midsize businesses. They're a stronger target for SaaS offerings, and they rarely use ESPs for business consulting skills.

Gartner said that many projects that involve complex customer service contact centers are reported to be "on hold" until better references are available from the large enterprise application vendors that are in the process of releasing a new generation of their products. However, SaaS is the deployment model of choice for an increasing number of projects.

Gartner predicts that all forms of SaaS-delivered customer service applications in the call center will grow by more than 20 percent per year through 2012, and this will deliver significant savings. By 2012, 30 percent of new customer service and support application investments will be through the SaaS model.

Because SaaS applications lack sophistication in BPM and process design, and due to the absence of ESPs offering business process advice, the growing spread of SaaS CRM applications threatens CRM efforts.

More information on the service and support industry can be found at www.Supportindustry.com

EMEA IT Market Poised for Slowdown in 2009

IDC's latest update on information technology (IT) spending in Europe, the Middle East, and Africa reveals a bleaker outlook for the near term in the wake of the worldwide financial crisis. Growth of just under 3% is now expected for the EMEA IT market in 2009, which represents a 1.5-point drop compared to IDC's previous, pre-crisis forecast.

The downturn in the world economy is affecting demand for IT in both mature and emerging markets in EMEA, albeit somewhat differently. While IT spending in Western Europe will fall to just 1.2%, reflecting a sharp decline in capital investment with a contraction in GDP, the regions of Central and Eastern Europe and Middle East/Africa will continue to illustrate relatively healthy growth rates.

In terms of technology sectors and demand, IDC expects discretionary spending on IT hardware to be the main focus of cutbacks in 2009. PC refresh cycles will be delayed while new planned projects will be postponed or scaled back and, as business growth is projected downward, demand for storage and servers will be weak. Sharply falling ASPs will also affect revenues. Growth of -2% is expected here for next year, with positive growth only resuming in 2011.

Similarly, the growth rate for expenditure on software has been almost halved to 4.1% for 2009, reflecting IDC's expectation that major business software upgrades will be delayed, particularly in the infrastructure space. The IT services market will also feel the recession as demand for project-oriented services are affected, and pressure may abound to renegotiate existing outsourcing contracts.

Despite the troublesome short-term picture, there are a few silver linings:

--Although the hardware market will have a hard time, some segments like IP phones and smart handhelds will continue to show double-digit growth rates.

--Open source software will get an extra boost as a means for organizations to cut back on license fees.

--The development of the software-as-a-service business model will gain momentum as its pay-per-use promise becomes a serious alternative for the current licensing model.

--The outsourcing market will get an extra boost, reflecting efforts to further reduce non-discretionary IT expenditure.

--Green IT and virtualization are measures to improve datacenter efficiencies that will enable companies to drive infrastructure costs down.

--Business continuity and IT security will require attention and investment regardless of the economic climate.

--The credit crisis will eventually bring on more regulation and associated compliancy efforts, which is an opportunity for the IT sector in terms of required storage, software, and data management investment.

More information on the IT market can be found at http://www.supportindustry.com/

Worldwide IT Spending Growth to Slow Significantly, But Remain Positive, in 2009

Worldwide spending on information technology will slow significantly in 2009 as a direct result of the global financial crisis that began in September 2008. According to a newly revised forecast from IDC, worldwide IT spending will grow 2.6% year over year in 2009, down from IDC's pre-crisis forecast of 5.9% growth. In the United States, IT spending is expected to decline to 0.9% in 2009, much lower than the 4.2% growth forecast in August.

On a regional basis, spending growth in Japan, Western Europe, and the United States will hover around 1% in 2009. In contrast, the emerging economies of Central and Eastern Europe, the Middle East and Africa, and Latin America will continue to experience healthy growth, but at levels notably lower than the double-digit gains previously forecast. On a sector basis, software and services will enjoy solid growth while hardware spending, with the exception of storage, is expected to decline in 2009.

Looking beyond 2009, IDC expects IT spending to make a full recovery by the end of the forecast period with growth rates approaching 6.0% in 2012. Despite these gains, IDC estimates that more than $300 billion in industry revenues will have been lost due to slower spending over the next four years.

In light of the uncertainties associated with the ongoing financial crisis, IDC also developed a downside scenario to help executives plan for a situation where the impact of the crisis is more pronounced. In this scenario, IDC lowered the forecast for worldwide GDP growth in 2009 to 0.3%, which is 1.5% lower than the current forecast and worse than any year since World War II. This produced a forecast of 0.1% growth in worldwide IT spending in 2009 with negative growth in the United States, Western Europe, and Japan.

More information on the IT industry can be found at www.supportindustry.com

IT Slashes Budgets, Starts Layoffs: Exclusive CIO Survey

The results of CIO's most recent survey on IT budgets, fielded between October 17 and 22, couldn't be more striking compared to results from our two surveys done earlier in 2008. As unfavorable economic conditions continue, more CIOs say they must shave IT budgets, according to our exclusive October survey of 243 IT executives.

Three quarters of IT heads surveyed say their IT budget will stay the same or decrease in the coming year. Notably, forty percent of CIOs plan to decrease their IT budget, up from 17 percent and 26 percent, in similar surveys conducted earlier this year. 34 percent say their IT budget will remain the same, up from 20 percent in March and 26 percent in July. The number of respondents in mid-size and large companies reporting plans to cut IT budgets rose sharply from 4 months ago.

Overall, respondents report average expenditures of -3%, down from +3% in July and +7% in March. More than one-third of CIOs say they expect to decrease spending for software (37 percent), hardware (36 percent) and outsourced IT services (33 percent).

CIOs Put Discretionary IT Projects on Hold, Freeze IT Hiring

Seventy-two percent of IT heads surveyed have postponed (49 percent) or are planning to postpone (23 percent) discretionary IT projects.

Forty-six percent, respectively, have renegotiated IT vendor contracts and instituted an IT hiring freeze in the past 6 months, while 45 percent have begun restricting IT travel and 44 percent have cut spending on IT contractors and consultants.

Large company IT chiefs have taken more action to contain costs than their mid-market counterparts. The survey finds a higher percentage of large company IT heads reducing spending on IT contractors and consultants (63 percent), postponing discretionary IT projects (59 percent) and restricting IT travel (56 percent), as compared to survey respondents on the whole.

As for salaries and staffing, nearly one in five CIOs (18 percent) report that their IT compensation costs will decrease in the coming months. Forty-six percent of CIOs have put a freeze on IT hiring in response to tough economic conditions, while 23 percent have begun to reduce IT headcount in the past 6 months.

More than three quarters of CIOs (77 percent) have a contingency plan in place or are planning to implement one in the event of IT budget cuts; that's up from 68 percent in July. Among CIOs with a contingency plan, 35 percent are currently implementing it while 17 percent plan to implement in the next 6 months.

Unfavorable Financing Climate Delays Purchases

Nearly one quarter of IT heads (23 percent) have delayed and 35 percent plan to delay technology purchases as a result of unfavorable financing terms or conditions from a vendor or lending institution. Fourteen percent have cancelled technology purchases while 10 percent plan to cancel purchases as a result of poor lending conditions.

More than one-third of CIOs (35 percent) believe current economic conditions will cause IT purchase decisions to be pushed higher within their IT organization.

More information on the IT industry can be found at www.supportindustry.com

Customer Satisfaction Tops List of Reasons to Train Customers

Expertus, a provider of services that optimize the business impact of learning, and Training Industry, Inc., an objective and trusted expert on the marketplace for learning, recently announced the findings from their joint study, Optimizing Customer Training. The results revealed that customer satisfaction is the leading reason that organizations implement and maintain customer training.

The vast majority of respondents both expected and attained improved customer satisfaction from their customer training programs. 82% of respondents expected improved customer satisfaction from their customer training. 93% reported results in this area; 53% realized strong benefits and 40% realized moderate benefits.

There were only two other areas where over one-third of survey respondents reported a strong benefit - increases in customer retention and increases in training revenue. 88% reported increases in customer retention, with 36% reporting a strong impact in this area.

Higher training revenue was also reported as a strong benefit, particularly among the 58% of respondents who operate their customer training as profit centers. 88% of those in profit centers reported increased training revenue – with 63% reporting a strong increase.

--48% of survey respondents believed that customer training budgets would rise in 2009, compared with 32% of respondents who believed that employee training budgets would increase next year. Further, 41% believe customer training budgets would grow by over 10%, with as many as 19% expecting it to increase by over 20%.

--The vast majority of companies use website and email marketing to market training to their customers, which many also considered to be the most effective way to market their programs.

--Webinar technology is used most frequently to deliver customer training.

--The two top challenges in customer training relate to a lack of resources – in staffing and marketing expertise or budget.

More information on customer service and support can be found at www.supportindustry.com

The Number of Organizations Planning to Adopt SOA for the First Time Is Falling Dramatically

The majority of large organizations are moving ahead with service-oriented architecture (SOA), but a growing number are deferring plans, according to a survey by Gartner, Inc. Fifty-three percent of the respondents were already using SOA in some part of their organizations. Another 25 percent were not using it but had plans to do so in the next 12 months; and 16 percent had no plans to use SOA at all. Approximately 20 percent were building event-driven architectures (EDAs), and 20 percent were planning to do so in the next 12 months.

Since the beginning of 2008, there has been a dramatic fall in the number of organizations that are planning to adopt SOA for the first time. In 2008, this was cut by more than one-half, down to 25 percent from 53 percent in 2007, while the number of organizations with no plans to adopt SOA more than doubled from 6 percent in 2007 to 16 percent in 2008.

The number of organizations that are already pursuing SOA shows a massive change in the future perception of SOA, from something that is essentially inevitable for all organizations in a short time to a situation where many organizations have evaluated SOA and have chosen not to spend time and effort on it.

Gartner found that the significant minority that is not planning to adopt any SOA is a diverse group. The highest concentrations of organizations not pursuing SOA and having no plans to do so are in process manufacturing and agriculture and mining.

Overall, the two major reasons that organizations choose for not pursuing SOA are a lack of skills and expertise, and no viable business case. If the business case has been tested and is not viable, then there is no reason to do it. However, conversations with many Gartner clients have shown that there is a great deal of confusion about how to construct a business case for SOA. Even if a valid business case exists, then the required skills are often unavailable in-house, and the costs and effort to develop in-house skills and acquire outside expertise are often daunting.

The survey also found that the adoption of SOA and the plans for adoption vary widely by region. Overall, SOA adoption in Europe is nearly universal, moderate in North America and lagging in Asia. In Europe, current adoption rates are very high, and only a tiny percentage of organizations having no plans for adoption in the future. In North America, the adoption rate is high, but a low number of organizations have committed to adopt SOA in the next 12 months, and a fairly high proportion has no plans to pursue SOA. The picture in Asia is quite different, where adoption is less than half of that in other regions, and where the majority of organizations are not planning to pursue SOA within the next 12 months.

More information on the service and support industry can be found at www.SupportIndustry.com