11/11/14
The world’s top technology companies compete to win “The battle for the cloud”: Strategy& releases third annual Global ICT 50 study

London, November 11, 2014 – Competition is intensifying among the world’s top technology companies as the move to cloud computing transforms the way businesses think about their IT needs. Global management consulting firm Strategy&, a member of the PwC network of firms, today released its third annual ranking of the world’s top 50 information and communications technology (ICT) companies—a study of the 50 largest publicly held companies that supply digitization-related products, services, and infrastructure to enterprises, governments, and other organizations around the world. IBM took the top spot in the rankings, as it did last year, followed by Microsoft, SAP, Oracle, and Cisco Systems.

These five companies—all of which are moving their product and service portfolios more into the cloud—have sat atop the rankings for two years in a row. Elsewhere on the ICT 50, companies with an enterprise and cloud orientation are moving up, while slower rivals across the hardware, software, IT services, and telecom sectors are moving down or dropping off the list completely. No telecoms or IT service providers cracked the top eight, and more than 20 percent of the 2014 ICT 50 list differs from the 2013 list.

“This year’s study suggests that competition is even more difficult than it was a year ago,” said John Miles, Principal and telecoms expert at Strategy&. “As the top five companies lead a heated race toward cloud innovation domination, those that are missing the boat—like telecoms and classic IT providers—are being forced to rely on consolidation and restructuring to remain economically viable.”

In addition to assessing financial performance, portfolio strength, go-to-market footprint, and innovation and branding for ICT companies, the 2014 rankings took a close look at how the top five companies are creating value for their customers. Strategy&’s analysis clearly shows that value is being driven by investment in enterprise-related infrastructure and services that will help these companies build a cloud-based future.

“A major change we saw in this year’s ICT 50 study compared with previous years was the increasing importance of the cloud,” said James Walker, Partner and demand analytics expert at Strategy&. “The dialogue about the cloud has shifted from ‘how do we build one?’ to ‘what can we do now that we have one?’ This has made the competition for a share of the cloud services market particularly fierce.”

The 2014 ICT 50 shows that although the battle for the cloud is just beginning, a clear two-class system is emerging. The companies that strive for innovation using a dominant enterprise cloud platform will lead the way, and those left with second-tier commodity components or services will continue to fade in relevance.

Key findings

  • This year’s ICT 50 companies took in total revenues of US$2.22 trillion, a 2 percent increase over the prior year’s $2.18 trillion, which represented a slight slowdown in growth compared with the previous year. Average margins remained steady at 15.5 percent.
  • Revenues for software and Internet companies (e.g., Google, Microsoft, SAP) are up 11 percent, to $284 billion, but margins declined slightly, to 22.5 percent from 25 percent, suggesting that cloud computing and other subscription-based services don’t produce earnings at the same level as previous license-based models.
  • Adobe dropped off the ICT 50 owing to a one-time decline in revenue following its shift from a licensing to a subscription model, but it is expected to return to the top 50 once this transition is complete.
  • The hardware sector experienced respectable growth in revenues this year to $858 billion, up 3 percent from the prior year, but margins have not improved at all. Blackberry and Dell fell off the ICT 50 list entirely, the former owing to significant revenue loss and the latter because it is no longer a public company.
  • While telecom revenues declined slightly, profit margins rose by 3 percentage points to 18 percent. This was likely driven by consolidation and cost-oriented restructuring.
  • The IT service provider segment showed relatively strong revenue growth as a whole, driven by the continued healthy growth of offshore-based providers, consolidation among regional IT service providers in their quest for scale, and a shift toward higher-growth industry-specific outsourcing and BPO services in mature markets.
  • EMC and HCL were the only newcomers to the top 15 firms among the ICT 50; Atos, meanwhile, dropped out of the top 15 as a result of the stronger growth of the overall ICT market.
  • There are nine companies on this year’s watch list of potential future ICT 50 members:
    • Prospective SaaS cloud champions Adobe and Salesforce.com
    • Wireless carriers Softbank, China Telecom, and China Unicom, all of which are playing key roles in providing the data networks that are vital to digital business growth in the world’s largest and most dynamic ICT markets (the U.S., China, and Japan)
    • U.S. telecom companies Centurylink and Windstream, which are reinventing their business around B2B cloud services
    • China-based Huawei and ZTE, two high-growth, lower-cost challengers to incumbent network infrastructure OEMs

Read the full study here >

Methodology
For the Global ICT 50 Study, Strategy& examined the four sectors that participate in the digital provider market: (1) hardware, (2) software, (3) IT services (which we broke down further into global, regional, and offshore IT services), and (4) telecommunications. The results of the study and the Global ICT 50 rankings are based on an analysis of publicly available data sources for financial performance, product and services portfolio, go-to-market footprint, and strength of innovation and brand. These core areas were then evaluated using both quantitative and qualitative criteria to produce a consolidated point score for each company, which we used to generate the results.


About Strategy&

Strategy& is a global team of practical strategists committed to helping you seize essential advantage. We do that by working alongside you to solve your toughest problems and helping you capture your greatest opportunities. We bring 100 years of strategy consulting experience and the unrivaled industry and functional capabilities of the PwC network to the task. We are part of the PwC network of firms in 157 countries with more than 208,000 people committed to delivering quality in assurance, tax, and advisory services.

Contact Deirdre Flynn
UK Marketing Manager
Strategy&
Telephone: +44 207 393 3279
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