Written by: Cary Dym
2019 is off to a rotten start for Apple. On January 4th, Apple hit a 52-week low of $142, 39% off of its all-time high hit in October 2018. (By some estimates, Warren Buffet has suffered a $4B paper-loss on his Apple stock). While most of the attention to the fall of Apple has been focused on weak demand from China, another less-discussed factor is that people are keeping their phones longer. The average hold time for iPhones has increased from 24 months to 36 months driven by higher non-subsidized costs of new phones and very few “must have” features.
So, is this recent change in consumer purchasing behavior also representative of a broader trend in corporate IT spend? According to a recent report from Computer Economics entitled “IT Spending and Staffing Benchmarks 2018/2019”, while overall IT Budget spend in 2018 increased slightly as a percentage of revenue, capital spending as percentage of IT spending remained flat at a five-year low of 18%, off of a high of 23% in 2014. Not surprisingly, security/privacy continues to be the major spending priority. Interestingly, security is tied with another priority—cloud applications – and cloud infrastructure spend is a close third. Despite the focus—and spend—on cloud applications and infrastructure, the report goes on to state that “only 20% of companies have converted at least half of their business applications to the cloud”. This leaves a huge growth opportunity in the Cloud.
We saw a decrease in overall IT CapEx in 2018 offset by an increase in OpEx, primarily driven by Cloud consumption, but what about the third leg of the IT spending stool – staffing? On average, IT staffing budgets for most organizations stayed flat in 2018. While hiring is slowing for lower-level skills such as computer operations, scheduling, and lower-level tech support positions; higher-level skills show increasing demand. Lower-level skills are being replaced by automation, driving increased IT organizational efficiency. Meanwhile, demand for higher-skilled resources continues to outpace supply, driving up salaries and/or forcing IT organizations to look to outside organizations for skilled resources. Upskilling resources coupled with automation is a top priority.
For 2019, Gartner predicts that spending on commodity items, such as communications and data center technologies like servers, is expected to be either flat or down, while spending on IT services and software is expected to go up. They forecast an 8.3% growth for 2019 in Enterprise Software driven primarily by “Everything as a Service”. An example for this growth is AWS Aurora – Amazon’s MySQL and PostgreSQL compatible Cloud service offer – which continues to be the fasting growing service in the history of AWS. Meanwhile, Gartner suggests that the IT services market – the range of services that assist individuals and enterprises in implementing, managing, and operating the wide variety of processes, systems, software, equipment, and peripherals – will top $1 trillion in 2019.
I am personally quite excited about the projection for 2019 and the opportunities to help our clients with their IT priorities. The needs of our clients reflect the priorities predicted by Gartner and outlined above: they plan to drive automation across their build, deploy and operational workstream and continue to leverage Cloud services and cloud infrastructure as they are decreasing their investment in data center technologies. In addition, our clients look to us to augment their internal IT organization with highly skilled resources, but ultimately want coaching to help build up their expertise in house. At Risk Focus, we see a great opportunity to help our clients form and execute their plans, while coaching their internal teams to adopt new practices and work within new processes. To this end, we continue to build out our bench of skilled DevOps players and coaches in our centers of excellence in NY, Toronto, Pittsburgh, London, Amsterdam and Riga.
As for the outlook of Apple, as stated in January 5th NY Times article entitled Apple’s Biggest Problem? My Mom, “If there’s an app – maybe its Fortnite 2 – that I can’t run on my existing iPhone, a new iPhone will be on every teenage boy’s shopping list.” Platforms are ultimately only as valuable as the services they enable!
Wishing you all a Happy, Healthy and Prosperous 2019!