The UK ICT market analysis

Didier Andrieu, May 2015

United Kingdom ICT Spend overview

Business Accelerator: Client Buying Power Solution

Acquire DevelopRetain

Trivia Marketing International has developed a great knowledge and expertise to determine the companies’ IT buying powers in more than 35 countries in the world. In the case of the United Kingdom (UK), we conducted a survey from 2014, with more than 4,500 IT decision makers covering every type of industry and company employee size.

We propose to return to you some of the results of our research embellished with some historical and economic data on this large developed country.

We hope to give you food for thought. We remain at your disposal for any further information.

Enjoy the reading!

Trivia Marketing’s team.

Trivia Marketing International ©20152

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7. Insights of the UK 8. Some Gross Financial Indicators 9. Measuring UK Economic Efficiency 10. Largest Cities 11. ICT Spend Insights

11. UK ICT Market 12. The UK is on the 2nd position in the ranking of ICT Spend 13. Hardware 14. Software and Services 15. Telecommunications 16. Mobile Applications Market 17. Cybersecurity Market 18. Annual Buying Power in regions 19. Total Annual ICT Spend by city

20. Trivia Marketing Geographical Expertise 21. Benefits from the Trivia Marketing CBP Solution

A quick tour of the United Kingdom in 13 slides

Agenda


Insights of the UK

Geography: The United Kingdom or Britain, is a sovereign state in Europe. Lying off the north-western coast of the European mainland, the country includes the island of Great Britain, the north-eastern part of the island of Ireland and many smaller islands. Northern Ireland is the only part of the UK that shares a land border with another state (the Republic of Ireland). The UK has an area of 243,000 km2, making it the 80th-largest sovereign state in the world and the 11th-largest in Europe. The UK consists of four countries: England, Scotland, Wales, and Northern Ireland. Population: The Uk is the 22nd-most populous country, with an estimated 64.5 million inhabitants. Its capital city is London, an important global city and financial centre with an urban population of 10,310,000, the fourth-largest in Europe and second-largest in the European Union. Language: The UK's de facto official language is English. It is estimated that 95% of the UK's population are monolingual English speakers. 5.5% of the population are estimated to speak languages brought to the UK as a result of relatively recent immigration. It is compulsory for pupils to study a second language, French and German are the two most commonly taught second languages in England and Scotland. History: The relationships among the countries of the UK have changed over time. Wales was annexed by the Kingdom of England under the Acts of Union of 1536 and 1543. A treaty between England and Scotland resulted in 1707 in a unified Kingdom of Great Britain, which merged in 1801 with the Kingdom of Ireland to form the United Kingdom of Great Britain and Ireland. In 1922, five-sixths of Ireland seceded from the country, leaving the present formulation of the United Kingdom of Great Britain and Northern Ireland. The UK has fourteen Overseas Territories. These are the remnants of the British Empire which, at its height in the 1920s, encompassed almost a quarter of the world's land mass and was the largest empire in history. British influence can be observed in the language, culture, and legal systems of many of its former colonies.


The UK is a developed country and has the world's fifth-largest economy by nominal GDP ($2,853 billions*) and ninth-largest economy by purchasing power parity*. The UK is considered to have a high-income economy and is categorised as very high in the Human Development Index, currently ranking 14th in the world.

The UK economy comprises (in descending order of size) the economies of England, Scotland, Wales and Northern Ireland. In 2013 the UK was the fourth-largest exporter in

* IMF World Economic Outlook, April 2015

Some Gross Financial Indicators

the world and the fourth largest importer, and had the second largest stock of inward foreign direct investment and the second-largest stock of outward foreign direct investment. The UK is one of the world's most globalised economies.

The UK service sector makes up around 78% of GDP.

London is one of the three "command centres" of the global economy (alongside New York City and Tokyo), it is the world's largest financial centre alongside New York, and it has the largest city GDP in Europe.

The currency of the UK is the pound sterling, which is also the world's third-largest reserve currency after the US dollar and the euro, and also the fourth-most-valued currency in the world, behind the Kuwaiti Dinar, Bahraini Dinar, and Omani Rial, and the most valued currency outside the Middle East.

The UK is a member of the Commonwealth of Nations, the European Union, the G7, the G8, the G20, the International Monetary Fund, the Organisation for Economic Co-operation and Development, the World Bank, the World Trade Organisation, Asian Infrastructure Investment Bank and the United Nations.

Economic Indicators Last Reference

Unemployment Rate 5.6% Feb/2015

Long Term Unemployment Rate 1.9% Nov/2014

Food Inflation - 3.00% Mar/2015

Inflation Rate 0.0% Mar/2015

GDP per capita $37,955 Dec/2013


DB 2015 Rank

DB 2014 Rank

Change in Rank

UNITED KINGDOM DB RANK 8 9 up 1

Starting a Business 45 50 up 5

Dealing with Construction 17 16 down 1

Getting Electricity 70 66 down 4

Registering Property 68 67 down 1

Getting Credit 17 14 down 3

Protecting Minority Investors 4 4 no change

Paying Taxes 16 15 down 1

Trading Across Borders 15 17 up 2

Enforcing Contracts 36 37 up 1

Resolving Insolvency 13 13 no change

Measuring UK Economic Efficiency

The United Kingdom has become an easier place to do business over the past year with reforms to tax registration and reducing corporate income tax, moving it from ninth to eighth in the World Bank’s annual Doing Business survey.

Over the past decade, as Companies House has increased its data transparency, electronic procedures and free resources for business founders, the number of registered companies in the United Kingdom has doubled.

The UK is welcoming to overseas companies with an active programme of inward investment attraction and many major UK companies are now foreign owned, with the ICT sector especially dominated by overseas companies. Software and Computer Services has been the leading sector for UK inward investment in recent years.


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France

LONDON

Belgium

Ireland

BIRMINGHAM

LEEDS

GLASGOW

MANCHESTER

LIVERPOOL

EDINBURGH

BRISTOL

SHEFFIELD

LEICESTER

France

United KingdomLargest Cities

WW ICT market 2012 by country/region*: 2.55 Trillion €

ICT Spend InsightsUK ICT Market

According to the European Information Technology Observatory (EITO), the UK ICT market, excluding Consumer Electronics and Business Process Outsourcing, is the largest in Europe and was worth around 114 billion € in 2012. The UK ICT market has gained in relative size compared to both Germany and France.

In June 2013, the UK Government announced its Information Economy Strategy, following consultations with industry and others. The majority of respondents agreed that the five growth opportunities (cloud computing; big data; e-commerce, internet of things, smart cities) were the right areas on which to focus. Cloud computing was commonly cited as the most important of the five because effort spent in this area would drive the other areas, facilitate access to data, reduce costs and improve efficiency.


Rest of the world 21.7%

Rest of EU** 7.7%

BRIC*** 18.6%

USA 26.9%

Spain 1.7%

Japan 8.8%

Italy 2.2%

France 3.7%

Germany 4.4%

UK 4.5%

*EITO in collaboration with IDC; excluding Business Process Outsourcing and Consumer Electronics **EU without Malta, Cyprus ***BRIC: Brazil, Russia, India and China

Enterprises in the UK are currently proving fairly optimistic with regards to their ICT investments, primarily driven by the gradually improving UK economy and growing consumer demand. According to a recent Kable survey of 162 UK enterprises, 37% of respondents planned to increase their ICT budgets in 2014, which is an increase of 15% compared to the situation in 2013. More importantly, the percentage of UK enterprises planning to reduce their ICT budgets is set to decline from 29% in 2013 to 24% in 2014. Overall, Kable’s survey finds that UK enterprises are positive with regards to their ICT spending, and are making decent investments in their core ICT categories of hardware, software, and IT services.

ICT Spend InsightsThe UK is on the 2nd place in the ranking of ICT Spend per head

According to Bitkom/EITO the UK has the largest consumer expenditure per head in Europe. The UK is a strong market for new technology and design with a sophisticated consumer base. UK consumers are early adopters of new technologies and design.


ICT Spend InsightsHardware

The UK sees a marked drop in sales of tablet devices in 2014, according to a report from CCS Insight. In its annual tablet forecast, the analyst house said it expects sales to decline from 17 million in 2013 to less than 14 million in 2014, as the demand for such devices finally reaches a tipping point. The firm believes that over 43% of the population now owns a tablet, up from just 6% two years ago, and that this number will almost double by 2017, when the UK tablet market will be worth £2.2 billion. In the next two years however, the market will cool somewhat as growth eases off slightly, before returning more sharply in 2016. By 2017, when the lives of many users’ first devices will be coming to an end, CCS Insight is forecasting total UK tablet sales of around 20 million.

The UK will have a higher penetration rate of tablet users among its total population than any other country in the EU-5 till 2016. By 2015, one in three people in the UK will use a tablet. Compared to Italy and Spain, where tablets are more likely to be used outside the home, eMarketer believes tablet usage is more akin to PC usage in the UK and Germany, where the devices are often used at home.


10

20

30

40

40

80

120

160

2012 2013 2014 2015 2016 2017

Tablet users, M % of changes

9%13%15%23%42%

165%35 M

32 M28 M

25 M20 M

14 M

165%

42%23% 15% 13% 9%

UK Tablet Users, 2012-2017*

*eMarketer, Oct 2013

ICT Spend InsightsSoftware and Services

In general the UK Software industry is in growth. During 2013, software demand increased, driven by new technologies such as cloud computing, big data and social/collaborative applications. Growth is expected moving forward with analysts suggesting an annual growth rate of 3% through to 2019 compared to a UK GDP growth of 1% over the same period.

According to UK Trade & Investment, the UK Cloud Computing annual market value is predicted to grow from GBP2.4bn to GBP6.1bn by 2014. Currently 18% of UK SME businesses use cloud solutions but a further 30% plan implementations within the next year. By 2015 half of all new IT spending by the public sector is predicted to be on public cloud services.

The UK data centre market is the largest in Western Europe and the growth in the amount of data and new services is creating new sources of demand. In May 2013 the UK was ranked as the lowest-risk destination in Europe for businesses to locate their datacentres, according to the Data Centre Risk Index 2013 report by global consultancies Cushman & Wakefield. This was the second year running that the UK was ranked as the highest-placed European country for building a data centre facility.

The UK’s high scores are a result of international internet bandwidth for datacentre resilience and ease of doing business, which helped it maintain the lead, according to the consultancies. “The UK remains the safest location for a datacentre in Europe, Middle East & Africa (EMEA) and consequently continues to see a reasonable level of activity supported by its status as a major economic global hub,” said Keith Inglis, partner in the EMEA Data Centre Advisory Group at Cushman & Wakefield.


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ICT Spend InsightsTelecommunications

The UK telecoms market is mature with a high penetration of all services, and a good roll-out of next generation services. As a result of its maturity the UK market has diminished opportunities for subscription growth, and operator strategies reflect this by increasingly focusing on value generation from subscriptions.

Key trends of the UK telecommunications sector:

UK fixed voice services generated £2.1bn in revenue in Q1 2014, £65M (3.0%) less than they had done in Q1 2013. This fall was as a result of declining call revenues, as line rental revenue increased over this period.

Estimated retail revenues generated by mobile telephony services fell by £176M (4.4%) to £3.8bn in the year to Q1 2014.

In Q313, mobile subscription was 77.269M with a penetration of 122.4%. This represents a 0.5% increase over the previous quarter.

Smartphone penetration has continued to rise, with operator data showing it reached around 50% in mid-2013, as the wider availability of high-spec low-cost Android handsets drives proliferation of ownership.

Total SMS and MMS message volumes fell by 4.8 billion messages (13.9%) to 29.9 billion messages in the year to Q1 2014.

The number of active mobile subscribers increased by 120,000 (0.2%) to 83.2 million compared to the previous quarter.


Mobile Applications Market ICT Spend Insights

The UK is one of the most advanced mobile markets in the world, and is often viewed as a test bed for mobile services for the rest of Europe by overseas companies, especially North American. The UK was the first European market to launch BlackBerry services and one of the first to launch the iPhone and Android handsets. Penetration rates exceed population, suggesting that ownership of multiple devices is common. Often this has been a result of “locked-down” corporate devices spurring the purchase of advanced personal smartphones to run a variety of mobile applications.

The UK mobile applications market was worth GBP447M by the end of 2012, according to the App Market Monitor report from Research2Guidance. It is by far the largest market in Europe, surpassing all of its neighbours by revenue generated from application downloads and in-application advertising, as well as volume of downloads and number of users.

The UK’s traditional strengths in the video, music and games industries are the dominant content on mobile devices. The rise of the mobile application has created an attractive and compelling platform for users, content providers and advertisers to create, access and monetise content. Big brands have been early adopters of mobile applications to engage their customers and create loyalty, with mobile advertising becoming a key part of their traditional digital media strategies.

The growing popularity of smartphones and tablets and a huge rise in the use of applications caused mobile advertising in 2012 to almost triple to over GBP500M, as total UK digital advertising spend hit GBP5bn for the first time. UK mobile advertising grew a staggering 148% year-on-year in 2012 to GBP526M, up from GBP203M in 2011, with growth continuing to accelerate in the second half of 2013. The revolution in handheld devices – almost two-thirds of the UK population owns a smartphone – has had a massive effect on the advertising market.


ICT Spend InsightsCybersecurity Market

According to Kaspersky’s report, “The evolution of phishing attacks 2011-2013 ” the UK remains one of the most attractive targets for phishing, as in 2012 it saw a threefold jump in attacks on people and businesses based in the country. Approximately 3,000 individuals were targeted by a phishing attack every day in 2012, compared to 1,000 the year before, according to a Kaspersky analysis on 50 million of its users.

The UK is a very important market for cybersecurity products and services and it is one of the fastest growing sub-sectors of the ICT market. The internet-related market in the UK is now estimated to be worth GBP82 billion a year and British businesses earn 20% of their revenues from the internet. Protecting this level of revenue is becoming increasingly important.

In November 2011, the UK Government committed GBP650M over four years to a National Cyber-Security Strategy and established the Office of Cyber Security and Information Assurance (OCSIA) within the Cabinet Office. The strategy outlined a vision for the UK by 2015 to derive huge economic and social value from a vibrant, resilient and secure cyberspace. Objective 1 of the strategy’s implementation plan recognised that cyberspace is an important and expanding part of the UK’s economy. It set out the approach for tackling cybercrime and making the UK one of the most secure places in the world to do business. It is estimated by industry sources that the UK derives around 9.7% of GDP from the digital economy and therefore maintaining the UK as a safe place to conduct online business is a high priority.

In addition, in May 2013 it was announced that Oxford University and Royal Holloway College, University of London would receive GBP7.5M in government funding for cyber security research. This funding aims to address the UK’s shortage of cyber security experts and boost the number of doctoral graduates with relevant skills.


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South West 9,843 M $

South East 17,307 M $

West Midlands 7,200 M $WALES

4,888 M $

East 11,195 M $

East Midlands 9,377 M $

London 13,179 M $

SCOTLAND 8,472 M $

North East 2,915 M $

NORTHERN IRELAND 3,207 M $

North West 11,742 M $

More than 10,000 M $

From 5,000 M $ to 9,999 M $

From 2,000 M $ to 4,999 M $

ICT spend budgets by region shown on this slide are calculated through Trivia Marketing solution adding each ICT company spend per region.

More than $109 billions of ICT Spend in 2014Annual ICT Spend: Sum of (Hardware, Software, Services, Telecom) spend

Yorkshire and the Humber 8,581 M $

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LONDON

BIRMINGHAM

GLASGOW

MANCHESTER

BRISTOL

LEICESTER

Total Annual ICT Spend by cityTOP 5 cities accounts for 16% of total spend

ICT spend budgets by city shown on this slide are calculated through Trivia Marketing solution adding each ICT company spend per city.

More than 1,200 M $

From 700 M $ to 1,299M $

From 500 M $ to 699 M $

From 450 M $ to 499 M $


Trivia Marketing Geographical Expertise… More than 125 million companies for which we know their ICT Spend…

Done Work in Progress – Q2 2015


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Data & Analytics

The UK ICT market analysis