Israel IT Market: STKI “tiers” 2015 V3Dr. Jimmy SchwarzkopfResearch Fellow, STKI

http://index.stki.info/it-tiering/1

STKI is here to serve you………

2

V2 3

• Dr. Schwarzkopf has worked during the last 38 years in all areas of Computer InformationServices:

As an Industry Analyst at META Group (Israeli Research Manager) and was named a META Group Research Fellow.

As an academic researcher in Entrepreneurship Sciences; has published and presented in the Academy of Management and BabsonConferences and Editorial Board Member of the academic journal "International Journal of Opportunity, Growth and ValueCreation".

As a consultant in Arthur Andersen Consulting (USA), Booz Allen (USA) and Kesselman & Kesselman. As a systems professional inSCS Computers and the R&D Unit of the Israel Defense Forces.

As a sales and marketing professional in Digital Equipment Corporation.

Teaching in the MIS department / TelAviv Yafo Academic College and the Computer School of the IDF.

Entrepreneur founding three companies in the IT arena: STKI, store and forward mail and office information systems.

• Dr. Schwarzkopf served on the Board of Directors of Ashot Ashkelon Industries, served asPresident of the Gymnazia Herzelia Association, Co-founder of the Mashov Political Movementand was a member of the Central Committee of the Labor Party. Major (Rav-Seren) in thereserves, Israel Defense Forces (where he served in an elite unit and later in the R&D unit).Registered Engineer (IS22881), member of MENSA Israel.

• Dr. Schwarzkopf received BSE and MSE degrees (Systems Engineering) from the University ofCentral Florida. Received a MSIA (Management Information Systems) and ABD (PhDProgram) in Systems Science (received (twice) the William Larimer Mellon Scholarship/Award)from Carnegie Mellon University. His doctorate (DM-Management/ Entrepreneurship) hereceived from Case Western Reserve University.

V2 4

STKI’s goal is to help our clients make the right choices in the strategic and financialmanagement of their information technology systems.Founded in 1992, STKI is the leading market research and strategic analyst firm in Israel,

covering the IT infrastructures, IT applications and IT services industry .

Over 22 years of experience in the IT analyst sector and thousands of annual face-to-face interviews with key industry participantshave enabled us to establish solid, long-standing relationships with our customers.

Our customers include major IT organizations (government, financial institutions, telecoms, manufacturing, medical, education, etc.)and IT suppliers/vendors (infrastructure and software suppliers, consulting and professional services firms).

STKI works closely with vendor senior management (strategy, business development, and marketing).Where end users are concerned, STKI meets with IT managers as well as with all levels of IT decision making,

thereby attaining complete information of processes.

STKI's mission is to advise and analyze users of information technology as well as their suppliers while conducting original research andproviding advisory services regarding all parts of the information system puzzle.

Israel's foremost IT companies have come to rely on STKI's market-proven experience and expertise.

Our services include:Face-to-face meetings

STKI Analyst House Calls (for both users and vendors)CIO STKI "Help Desk"

InquiriesSurveys

Strategic Marketing & PositioningRound Tables for users

Vendor Discovery Series (Newsletters and workshops)In-house Workshops

CIO Annual BootcampCTO Annual Bootcamp

Brainstorming WorkshopsSTKI Annual Summit

55

6

STKI Website gives you:

12 3 4

5

Newsletters

6

7

STKI website 2

1

2

4

6

7

8

STKI website 3

8

V2 9

V2 10

V2 11

STKI Methodology: equilibrium model

The sum of all IT expenditures (from users) has to be equal toall IT sales (from vendors).

Most research firms are either a

"demand-based"

(market information based on data from users of IT)

or

"supply-based"

(market information based on data from IT vendors).

STKI is one of the only research firms using an equilibrium modeland the only one in Israel.

V2 12

› Real revenues of software licenses and maintenance.

› Real revenues of hardware sales.

› Differentiation between new projects and continuing projects. New projects count more.

› We do not include any work/ products for OEMs and military non-IT projects.

› We are learning how to account for cloud usage for IT (Israel) only

› We distinguish between work done by the vendor's employees and work outsourced toanother vendor. The revenue is transferred to the vendor actually doing the work.

› Distinguish revenues from projects done in fixed price, cost plus (SLA defined) and staffaugmentation (non SLA) projects.

› Differentiate value between work done by high level internal professionals in a projectand staff augmentation employees in the clients IT department.

Take into consideration IT department’s view/mindshare of vendor’svalue in projects/products

What our study looks at:

STKI Summit 2015Israeli IT Market

V213

V3

State of the Economy Index

13

V3

State of the Economy Index(probability of slowdown)

1998-2014

15

Over 70% is BAD

V3

State of the Economy Index (% change)*1998-2015

15

V3

State of the Economy Index (% change*)1/2013 - 1/2015

4Q2014

1Q2014

16

V3

Business Tendency Survey

18

STKI Summit 2015Israeli IT Market

V219

V3

In order to get the “IT Market” (what is bought/sold out there) :

What users bought?From whom?Why?

IT Departments IT Vendors

How much did they sell?To whom?

For how much?Competitors?

23 years ofIT market history

2013

2014

HARDWARE1,69

4,000

3.61%

1,755,20

0

SOFTWARE

1,350,20

06.72

%1,44

1,000

VALUE ADDED

SERVIC

ES

3,126,00

04.48

%3,26

6,000

TOTAL

6,172,21

34.73

%6,46

4,214

20

V3

Number of Firms in Israel 2015

Israeli"reality"

number ofemployees

number ofcompanies

(payingtaxes)

number ofcompanies

(payingtaxes)

number ofcompanies

(payingtaxes)

number ofcompanies

(payingtaxes)

& ofTOTAL

subtotals

medium companies 21-100 3,871 4,088 16,305 16,647 7.05%small companies 6-20 31,720 33,073 46,920 48,780 20.66%independents up to 5 196,802 194,683 175,925 180,445 76.42% 180,445

2/2012 2/2013 2/2014

TOTAL

number of firms paying"taxes" per worker

245,872

ACCORDING TO BITUACH LEUMI 2/2015

101-250

enterprises

big companies 2,606

2014

1.10%

250,011239,150231,844232,393

65,427

2,384

1,348

2,525

1,476

2,453

251+ 0.65%4,139

1,5331,493

201320122011

21

V32222

V3

Budgets 2012

changefrom2012

Budgets 2013

change from2013

Budgets2014

change from2014

Budgets 2015

% totalMarket

size% total industry

government $1,350 -7.41% $1,250 4.80% $1,310 3.05% $1,350 18.99%security $400 2.50% $410 2.44% $420 7.14% $450 6.33%

education $250 -8.00% $230 2.17% $235 -2.13% $230 3.23%health $300 -3.33% $290 -5.17% $275 5.45% $290 4.08%utilities $280 1.79% $285 5.26% $300 -20.00% $240 3.38%

transport $300 1.67% $305 3.28% $315 3.17% $325 4.57%banks $900 -9.44% $815 2.45% $835 1.80% $850 11.95%

insurance $350 14.29% $400 6.25% $425 1.18% $430 6.05%fin other $200 -5.00% $190 13.16% $215 13.95% $245 3.45%manuf $820 -1.22% $810 4.94% $850 2.94% $875 12.31%retail $200 -2.50% $195 7.69% $210 10.48% $232 3.26%

high tech $650 10.77% $720 4.17% $750 6.67% $800 11.25%IT local vendors $190 -21.05% $150 23.33% $185 5.41% $195 2.74%

telecomm $260 -3.85% $250 2.00% $255 -9.80% $230 3.23%media $90 11.11% $100 12.00% $112 33.93% $150 2.11%

SMB/SME $250 20.00% $300 6.00% $318 10.06% $350 4.92% $350 4.99% SMBin M USD $6,790 -1.33% $6,700 4.63% $7,010 3.31% $7,242 in M USD

IT BUDGETS (opex/capex): includes some internal expenses

manuf/retail

$2,320 33.10% public

$565 8.06%utilities/transport

industryMarket size 2015

2015

$995 14.19%high tech/

IT

$380 5.42%telecomm/

media

$1,525 21.75% financial

$1,107 15.79%

23

V32424

V32525

*

V3

Budgets2015

26

V3

Are we different ????

27

V3

Client inquiries (STKI) FY 2014

28

STKI Summit 2015Israeli IT Market

V2

2014 Israel IT Market

29

V33030

The Great Debate: explanations

Even if thegraphs “look”

different

“not worse”just smaller“boutique”

V33131

The Great Debate: explanations

Even if thegraphs “look”

different

“not worse”just smaller“boutique”

V33232

VARs or Partners: but NO double bookings

Value Added Resellers“VAR or Partners”

are incorporated intoSTKI’s “TIERS”.

Both sell into the IsraeliMarket.

V33333

IT Market in Israel

STKI Summit 2015Israeli IT Market

V2

2014 Israel Hardware Market

34

V335

Vendors: Hardware markets

35

V336

Israel: IT Hardware Total Market 2014-2016

HARDWARE

36

V337

Hardware: Servers and Clients

37

V338

Server Markets

38

V339

Market Players: Servers (manufacturers)

39

V340

Market Players: Servers (Resellers-VARs)

40

V341

Clients (B2B) Markets

41

V342

Market Players: Client Computing (manufacturers) B2B

42

V343

Market Players: Personal Computing (VARs)

43

V344

Hardware : storage, networking and security

44

V345

Storage and Networking Markets

45

V346

Market Players: “storage” (manufacturers)

46

V347

Market Players: “storage” (VARs)

47

V348

Market Players: Networking Products

48

V349

Market Players: Security Appliances

49

V350

Market Players: VoIP & other call center equipment

50

V351

Hardware: printers, monitors, self-service and data center

51

V352

Printers, Monitors, DC Equipment, Self Service Markets

52

V353

Market Players: DC equipment & enterprise printers

53

V354

Market Players: POS ,Self-Service, monitors and Video Systems

54

STKI Summit 2015Israeli IT Market

V255

V356

Vendors that sell in the Software markets

56

V357

Israel: IT Software Total Market 2014-2016

SOFTWARE

57

V358

Delivery and Development Software

58

V359

Delivery and Development Software

59

e

V360

Market Players: system software

60

V361

Market Players: Storage and Backup Software

61

V362

Market Players: Data Bases Software

62

V363

Market Players: private cloud and automation tools

63

V364

Market Players: Middleware Software

64

V365

Market Players: software

65

V366

Delivery and Development Software 2

66

V367

Market Players: BSM Software

67

V368

Market Players: Security/ Cyber Software

68

V369

Market Players: Development & ALM Software

69

V370

Market Players: Mobile APPs Development Tools

70

V371

Software: Information Management

71

V372

Software: Information Management Markets

72

V373

Market Players: KM & Productivity Software

73

V374

Market Players: Collaboration and Output Software

74

V375

Market Players: Analytics & Data Mgmt Software

75

V376

Software: Business Applications

76

V377

Software: Business Applications Markets

77

V378

Market Players: ERP Software (all sizes)

78

V379

Market Players: Vertical Application Software

79

V380

Market Players: CRM & CEM (on-premises) Software

80

V381

Market Players: HR /Talent Mgmt/ LMS Software

81

V382

Market Players: PLM, WCM and e-commerce software

82

STKI Summit 2015Israeli IT Market

V283

V384

Israel: Value Added Services Market 2011-2015

VALUE ADDED SERVICES

84

V385

Vendors that sell in the VAS markets

85

V386

The SIX categories of IT Value Added Services Offered in Israel

86

V387

VAS: IT consulting and analysis services

87

V38888

VAS: IT consulting and analysis services

V389

Market Players: IT Consulting

89

V390

Market Players: IT Consulting 2

90

V391

VAS: Hardware & Software Maintenance Services

91

V39292

VAS: Hardware & Software Maintenance Services

V393

Market Players: Hardware & Software Maintenance Services

Software Maintenance(multi-vendor)Rimini Street

93

V394

VAS: Infrastructure Projects

94

V395

VAS: Infrastructure Projects

95

2014 2015 2016Consolidation/ Virtualization/Monitoring/ BSM/ Storage/

Hardware/ Data CenterEnvironment/ Networking

Projects

-2.56% 190,000 0.53% 191,000 0.52% 192,000 1.56%

Legacy:Mainframe/AS400/VMS/etc. 1.41% 36,000 -5.56% 34,000 -5.88% 32,000 -6.25%

Software integration,middleware, SOA, BPM,

ALM, Testing toolsimplementation

12.90% 70,000 -2.86% 68,000 2.94% 70,000 2.86%

Security Projects (RiskAssessment/ Penetration

Tests MDM)12.86% 158,000 1.27% 160,000 6.25% 170,000 4.71%

Unified Communication (IM,Video, Voice) 33.33% 10,000 5.00% 10,500 14.29% 12,000 16.67%

5.45% 464,000 -0.11% 463,500 2.70% 476,000 2.73%

InfrastructureProjects

V396

Market Players: hardware integration projects

96

V397

Market Players: software integration and legacy projects

97

V398

Market Players: Security Projects

98

V399

Market Players: Unified Communication (IM,Video,Voice) projects

99

V3100

VAS: Project Management, training and “Hatmaa” services

100

V3101

VAS: Project Management, training and “Hatmaa” services

101

2014 2015 2016IT Training -4.00% 72,000 -2.78% 70,000 -2.86% 68,000 2.94%

Hatmaa 4.00% 52,000 5.77% 55,000 5.45% 58,000 12.07%

-0.80% 124,000 0.81% 125,000 0.80% 126,000 7.14%

Training &Hatmaa Mgmt

V3102

Market Players: Office of the CIO Projects

102

V3103

Market Players: ALM, Q/A & Testing Projects

103

V3104

Market Players: Training Services

104

V3105

Market Players: “Hatmaa” Projects

105

V3106

VAS: contact center & EGRC Projects

106

V3107

VAS: contact center & EGRC Projects

107

V3108

Market Players: Risk & GRC Projects

108

V3109

Market Players: VoIP- Call Center Projects

109

V3110

VAS: Business Application Implementation

110

V3111111

2014 2015 2016ERP -5.00% 190,000 -7.89% 175,000 2.86% 180,000 2.78%CRM 5.00% 168,000 1.19% 170,000 2.94% 175,000 2.86%

Knowledge Management(ECM, Portals)

3.26% 95,000 -5.26% 90,000 2.22% 92,000 3.26%

.NET based without web 4.76% 110,000 -2.73% 107,000 -1.87% 105,000 -2.86%java based without web 9.38% 35,000 -2.86% 34,000 -2.94% 33,000 -3.03%

other technologiesdevelopment without web

9.38% 35,000 -2.86% 34,000 5.88% 36,000 5.56%

Web 8.43% 90,000 2.22% 92,000 8.70% 100,000 10.00%Mobile 25.00% 45,000 11.11% 50,000 24.00% 62,000 12.90%

UX Design 28.00% 32,000 9.38% 35,000 8.57% 38,000 10.53%Data, BI, Analytics 5.88% 180,000 2.78% 185,000 3.78% 192,000 4.69%

Core Vertical PackageImplementation

2.27% 135,000 3.70% 140,000 5.71% 148,000 4.73%

Digital Output Management 10.00% 22,000 -9.09% 20,000 5.00% 21,000 9.52%Migrations 6.90% 31,000 12.90% 35,000 14.29% 40,000 12.50%

16.90% 1,168,000 3.81% 1,167,000 19.29% 1,222,000 22.02%

BusinessApplications

Implementation

VAS: Business Application Implementation

V3112

Market Players: ERP Projects

112

V3113

Market Players: Core / ERP vertical Projects

113

V3114

Market Players: CRM XRM Projects

114

V3115

Market Players: KM Projects

115

V3116

Market Players: Data Analysis Projects

116

V3117

Market Players: .NET development Projects

117

V3118

Market Players: java & others (non-.NET) development

118

V3119

Market Players: Output Management & Migration Projects

119

V3120

Market Players: Web, Internet, Social and UX Projects

120

V3121

Market Players: Mobility Projects

121

V3122

VAS: outsourcing services

122

V3123123

VAS: outsourcing services

V3124

Market Players: "off site" data center

124

V3125

Market Players: call center/help desk outsourcing

125

V3126

Market Players: application/ complete outsourcing

126

V3127

Market Players: managed infrastructure (storage, DBA, ..) services

127

V3128

VAS: Cloud Services

128

V3129129

VAS: Cloud Services

V3130

Market Players: BSaaS (many different) B2B Services

130

V3131

Market Players: PaaS & IaaS Services

131

V3132

Market Players: SaaS Services

132

V3133

Market Players: DRaaS Services

133

V3134

VAS: Staff Augmentation

134

V3135

VAS: Staff Augmentation

135

V3136

Market Players: “gulgalot”- temps- on premises augmentation

136

V3137

Market Players: “gulgalot”- temps- off premises augmentation

137

V3138

http://index.stki.info/it-tiering/