Market consulting company Wikibon once stated in its 2020 enterprise technology expenditure forecast that companies will slow down technology experiments in 2020 and implement digital transformation PoC. According to data from ETR, an enterprise technology expenditure survey company, Wikibon predicts that cybersecurity companies such as Crowdstrike and Okta will surpass other companies in 2020, while the pace of cloud migration accelerates. But COVID has also made the industry surprised. For example, it is predicted that IT spending will increase by 4% in 2020, but in fact IT spending will fall by 4% to 5%. At the end of 2020, Wikibon and ETR discussed the top ten enterprise technology predictions for 2021.
Prediction 1: S&T spending will rebound to a 4% growth in 2021, possibly even higher
As Wikibon predicted earlier this year, there are many factors that support this prediction. Of course, this is also based on the latest ETR survey work.
The speed at which the vaccine is launched makes us believe that by June 2021, a relatively normal consumption environment will be restored. Of course, it is still not out of the predicament, because the fourth quarter of 2020 looks very weak, and CIOs are still cautious about the level of spending in the first quarter of 2021.
But Wikibon believes that the epidemic has forced the technology community to conduct a huge proof-of-concept and has a good prediction of which digital practices will succeed. Wikibon believes that in the coming year, companies will redouble their efforts to promote these successful experiences.
We have also seen that the move to return to the office has brought more expenditures to the company headquarters and other central locations to make up for the gap in the past 10 months and to meet the pent-up spending needs of the headquarters and other central network locations.
In addition, most organizations have mentioned the productivity improvement of remote employees, and Wikibon believes that companies will reinvest part of these benefits into the technology department.
Many trends in 2020 are showing signs of persistence. The trend of remote workers is expected to remain high in the next few months and eventually stabilize at approximately twice the pre-pandemic level. Wikibon believes that these changes will cause several trends brought about by COVID to become the new normal, especially in terms of security and cloud adoption.
Wikibon also expects collaboration software and remote tools (such as laptops and VDI) to remain strong. However, Wikibon expects that growth in these areas will start to slow in 2021 and return to normal growth rates by the end of the year. Nevertheless, the cyclical trend of the past will take on a new shape, which is a signal that is conducive to remote work spending.
Prediction 2: By the end of 2021, the proportion of remote workers will stabilize at an average of 34%-twice the amount before COVID
In the figure above, the latest COVID survey data from ETR is shown. Data shows that before the epidemic, an average of 15%-16% of employees were working remotely, and today this number is around 70% on average. We believe that this number will remain close to 60% in the first half of the year, and will stabilize at 34% by the end of 2021, more than twice the level before the pandemic.
These data have been consistent with the ETR survey over the past six months, and in most cases, have been consistent across different customer subsamples.
Prediction 3: Increased productivity will cause organizations to double their investment in success in 2020 and choose applications that are beneficial to productivity
In this trend, the winners are companies that see productivity gains. Executives want to secure the victory in 2020, but at the same time they don't want to drain their employees, so they are willing to invest to maintain this year's productivity increase. It is worth noting that ETR data shows that productivity continues to increase every quarter.
At the beginning of the epidemic, we saw "the rising tide lifted all ships". For example, traditional vendors such as Citrix have made good improvements, and have seen tools such as DocuSign being rapidly adopted. I believe this will bring permanent changes to the future. Now, no one commutes and sits in the office just to sign an order—this is not a temporary change but a change in behavior patterns.
As remote technical teams strive to automate workflows and collaborate in new ways, Smartsheet has become another beneficiary of the home office trend. According to ETR's survey, Smartsheet's data continues to be strong. Twilio is another winner showing signs of continued success. As face-to-face transactions move online, the customer experience has changed, and new ways of conducting transactions have become critical. Qualtrics is another name to watch. It has just announced an IPO and will receive approximately $14 billion in proceeds, which is only two years after being acquired by SAP for $8 billion.
Although we expect the trend of video conferencing to remain strong, we have also seen the momentum of Zoom’s spending slow. At the same time, Microsoft Teams continues to maintain a strong momentum, which is also a convenient channel for other Microsoft products to enter the market.
Prediction 4: CISO strategy changes will lead to significant changes in the share of network security
Remote work exposes us to escalating cyber attacks. Some recent cybersecurity incidents have highlighted the need for permanent change. Identity access management, cloud security, endpoint and zero-trust security have witnessed the vigorous development of rising stars Crowdstrike, Okta, Zscaler and other companies. Wikibon predicts that by 2021, these names will continue to show more than 30% to 50% revenue growth.
Wikibon has extensively discussed the valuation differences between these companies and other security companies. By 2021, Wikibon expects that this gap will narrow, but it still tends to grow.
In addition, players in certain micro market segments will usher in peaks. Similarly, big-name security vendors such as Cisco, Palo Alto, Forescout and Fortinet will also perform well. These participants have greater risk exposure in the declining business, but their security product portfolio is being transformed to cater to this wave. Wikibon has discussed the value difference between Fortinet and Palo Alto earlier in 2020, and how Palo Alto can bridge this gap with better cloud execution. Security is also a clear bright spot in Cisco's product portfolio.
Wikibon predicts that in 2021, skills shortages will continue to exist, the market will continue to be fragmented, and automation trends will become increasingly obvious to help solve the problem of talent shortages.
Prediction 5: Increasing technology spending will promote more IPOs, SPACS, mergers and acquisitions... more than the fever of 2020
In 2020, we have seen some amazing realization results, including Snowflake, Airbnb, DoorDash, Palantir, JFrog, etc. UiPath recently submitted a secret IPO application. Wikibon expects Automation Anywhere will follow up at some point, and Hashicorp will also be IPO or acquired. Despite the strong performance in 2020, Wikibon believes that 2021 will be even stronger. Currently, companies have a lot of cash on their balance sheets and interest rates are very low, and the momentum of corporate technology spending is accelerating-these three companies will stimulate more "storm events", whether it is IPOs or mergers and acquisitions.
Hashicorp is a company that Wikibon calls attention in its 2020 forecast and may be an interesting target for acquisition. Wikibon also called for attention to Snowflake last year. With its high stock price and strong balance sheet, it may become an acquirer. Wikibon believes that the observability market is ready. With the rise of Elastic and ELK, real changes have been seen. New entrants such as ChaosSearch have just raised $40 million. Incumbent companies with AppDynamics such as New Relic, Dynatrace and Cisco may conduct mergers and acquisitions in 2021.
In addition, the Internet of Things and edge technologies will begin to contribute considerable revenue to enterprise technology companies in the next few years. Wikibon expects that there will be many edge-oriented mergers and acquisitions in 2021 to prepare for the future. Wikibon believes that Akamai is a potential acquisition target, and Microsoft (or Oracle) will become a possible acquirer in order to compete more effectively with AWS in the CDN field. The important thing is that Akamai’s security business will be a real “prize”, not only CDN but also the qualification to extend zero trust security to the cloud computing field, and the acquirer will also receive the postponed 2020 Olympics traffic. income.
Prediction 6: In the 2020s, 75% of large organizations will completely restructure their big data platforms
In the next prediction, Wikibon is not talking about incremental changes in the data platform. On the contrary, Wikibon predicts that the data platform, architecture, and team organization will undergo major changes.
What Wikibon sees is a rapid shift to cloud databases, cross-cloud data sharing, and automated governance. Wikibon’s prediction is based on the view that big data methods are flawed and will not be corrected through incremental improvements in data lakes, data warehouses, and data centers; on the contrary, they will see data pipelines that are centered on business domains. With the change of ownership, the data team will be organized around data product/service builders and embedded in the business line.
In this case, the technical details will become abstract. Nowadays, super-professional data teams serving multiple business lines with different data themes will be integrated into their respective business lines. In the future, the main measurement criteria will change from the cost and output quality of the big data platform to the time required for the idea to generate revenue. This change will take 4-5 years to complete, but will officially begin in 2021.
Wikibon believes that this has created an interesting competitive situation in the industry. Players like Snowflake are trying to fundamentally change the rules of the game and create a new method of data access, sharing and governance. Compared to the path Databricks seems to be taking, its purpose is to create a better data lake. In addition, we have seen many other companies participating in this transformation, including Oracle, which is consolidating databases, and AWS, which continues to believe that different workloads require specialized databases. Of course, Microsoft and Google have firmly established their positions in the cloud database portfolio. Several credible companies such as Yellowbrick Data, Splice Machine, SingleStore, MongoDB, and Redis Labs are all eyeing the data market. Even new entrants like ChaosSearch may become players of new data architectures.
Prediction 7: Defining the battle between hybrid cloud and multi-cloud will escalate in 2021, and will produce a branch of CIO strategy
Expenditure data shows that cloud computing continues the stability of March 2020, and its share is also increasing. But the definition of cloud is constantly evolving. Just a few years ago, AWS did not talk about hybrid cloud—just like they did not talk about multi-cloud today. At the 2020 re:Invent conference, we heard AWS CEO Jassy talk about the data center is just another edge node. Traditional players have different views on this. They believe that the data center is the heart of the organization system, while the cloud is the place where non-critical business is handled, and they believe that cross-cloud services are a strategic priority for CIOs.
AWS believes that multi-cloud is a more expensive and less secure method. The data aspect is more complicated, and companies generally take one of two paths: Path 1 is to invest heavily in a major cloud service provider, and Path 2 is to adopt a more balanced approach to workload deployment. ETR data shows that less than 50% of buyers follow Path 1 (that is, combined workloads), while a similar percentage of customers follow Path 2 (that is, evenly distributed among the clouds).
CIOs must make a choice. In the end, Wikibon believes that multi-cloud will not be defined by cloud compatibility, that is, "my technology stack is also applicable to the cloud." On the contrary, Wikibon believes that the real winners of multi-cloud are companies that can abstract the complexity of the underlying cloud and create incremental service value across clouds.
Prediction 8: Cloud*, containers, AI/ML, automation will lead the pace of spending in 2021
The next prediction is a bit nuanced, and it supports Wikibon's first prediction of a rebound in technology spending next year. Wikibon sees cloud, containers, AI/ML and automation (in the form of RPA) especially as areas with the highest net score or spending momentum. Wikibon gave the cloud an "star" because it achieved a net score of 40% and is one of the industries with a high market share. However, according to the ETR survey, almost all industries, with the exception of IT outsourcing and IT consulting companies, are expected to see considerable growth in spending in 2021... And as we leave 2020, the frozen IT projects begin to unfreeze, even outsourcing And consulting companies may also recover.
Prediction 9: Automation will accelerate in 2021, UiPath and Automation Anywhere will be listed, and Microsoft will still be a threat
Automation has become mainstream. The application of simple RPA tools to achieve the benefits of daily business automation not only awakens the organization's awareness of the possibility of business automation, but also combines with COVID to make them take business automation seriously. In 2021, organizations will go far beyond deploying automated tools on a single point of business-they will use the epidemic to restructure their entire business.
Wikibon predicts that UiPath and Automation Anywhere will be listed in Prediction 5. For the IPO, the two companies may still have work to do. The CFO of Automation Anywhere has a better resume in listed companies, so it is surprising that UiPath first filed an IPO application. However, when they submitted their applications, they did use the 12-18 month time frame as a signal, so perhaps this is not a lay-out prediction.
Microsoft continues to show the advantages of RPA in ETR data. The company is ubiquitous in almost all fields, and RPA is no exception. The existence of Microsoft cannot be underestimated. Another company that Wikibon has been following is Pegasystems. The company performed well in the field of automation. Wikibon does not consider Pega to be an RPA expert. Instead, they have a broader automation agenda built on the traditional business process automation/business process management customer base.
Prediction 10: 5G drives new edge/IoT workloads and requires new system architecture
Wikibon believes that artificial intelligence and real-time reasoning require new thinking around processor and system design. Compared with today's general approach, the focus will be on specific workloads with low latency and lower cost. Alternative processor architectures from companies such as Apple, ARM, AWS, Broadcom, Fungible, Microsoft, Nvidia, and Qualcomm will dominate these new workloads in the next ten years and demonstrate superior cost performance indicators. In the next five years, they will find their way into mainstream enterprise workloads and will continue to put pressure on AMD and Intel's x86 general-purpose systems. This will be a trend that will continue for many years, and next year will show meaningful progress, with innovations and new use cases. (Text/Cloud Technology Era)
[Original link: https://wikibon.com/breaking-analysis-predictions-2021-tech-spending-rebound/]