Nine remaining vertical markets

Analysis of the data within each of the 11 IDC vertical market segments produced an enormous volume of results. In order to present a comprehensive overview of the total market by vertical segment, following is a brief rundown of the results from each category.

Insurance/Other Financial

Some of the specific industries included in this category were hard hit by the recession (real estate and nondepository credit institutions), some were relatively if not completely insulated (life insurance), while others had a roller coaster ride (security and commodity brokers and dealers).

To further complicate generalizations, it includes both industries still known for their exceptional commitment to IBM and mainframes, and others that have been increasingly focused on distributed computing on workstations.

* Overall, the insurance/other financial sector

was an average performer in 1991, although

it expects to do somewhat better in 1992. This

is significant because the average site budget

is the second highest in the survey base, at

around $3 million. * Insurance/other financial had the highest proportion

(14.0%, compared to an average of 8.5%)

willing to buck the trend towards downsizing by

moving applications prototyped on distributed

systems onto larger, centralized host resources. * Insurance/other financial reported the lowest

percentage pursuing or considering a Unix-oriented

strategy (20%), and is second only to banking

in its disbelief in the proposition that Unix

workstations are becoming a realistic option in

place of PCs.

Industrial Equipment Manufacturing

The competitive pressures on U.S. manufacturing were exacerbated in 1991 by the performance of two components of the industrial equipment manufacturing group, the automotive and computer industries. However, the obsession with quality (read: foreign, typically Japanese competition) often leads to a countervailing plus for IS in this sector.

* As far as IS budgets are concerned, 1991 found

industrial equipment manufacturing slightly

below the average, and 1992 is expected to follow

suit.

* Industrial equipment manufacturing registered

the highest proportion (44%, compared to 30%

overall) currently pursuing a Unix-oriented strategy.

* Industrial equipment manufacturing had, at 15.0%

compared to an average of 6.5%, marginally the

highest proportion of workstations in its mix of

single-user systems (compared to IBM-compatible

PCs, Macintoshes, etc.), while a comparatively

high 18.0% expect to change the mix in favor of

workstations.

* Industrial equipment manufacturing leads in the

relative extent and degree of penetration of 11 new

products and services. Workstations, EDI, and

CASE have a particularly strong appeal.

Other Durable Manufacturing

The industries in this sector, including chemicals, plastics, and refining, were less affected by the recession, although the oil industry had its own problems in the first quarter of 1991.

* Budgets in other durable manufacturing did better

than industrial equipment manufacturing in

1991, with the survey base indicating 7% growth

last year. Unfortunately, the sector does not anticipate

maintaining this above-average pace in 1992.

* A survey-high 47% (compared to 38% overall) of

the other durable manufacturing base stated that

they were essentially saturated with PCs and

workstations and were now in an upgrade or

replacement mode.

Nondurable Manufacturing

Although many industries in this sector, which includes food and tobacco processing, textiles, apparel, and furniture, have seen growth rates fall from the 1980s, they apparently did not have a sharp short-run downturn due to the recession. However, belt-tightening is also obvious here.

* Nondurable manufacturing reported a relatively

exuberant 9% IS budget growth in 1991. Nonetheless,

it is one of two industry groupings expecting

budgets to be flat to down in 1992.

* EDI, workstations, CASE, and object-oriented

technology are the most attractive new products

and services for nondurable manufacturing.

* In the 44% of the nondurable manufacturing base

pursuing an open systems strategy (somewhat

below the average of 50%), a survey-high 59% are

implementing it through a standardized operating

system (the other choices were an enterprise-wide

communications system and common development

tools, languages, and database software).

Nevertheless, the proportion pursuing a

Unix-oriented strategy was below average.

Business Services

About all that some of the services in this sector share is classification within the 73 SIC code. Some are particularly exposed to economic hard times (advertising, consumer credit, employment agencies, etc.). Others are in relatively good shape, including participants in the two U.S. IT markets with double-digit growth, computer software and professional services. The presence of professional and processing services is important to bear in mind when evaluating some of the results.

* Business services was overall an average performer

in 1991 IS budget growth, and expects to

be the same in 1992.

* Business services styles itself leading edge in its

attitude towards IS change, with a survey-high

38% (compared to a 26% average) stating that it

often adopts new technologies with the expectation

that they can dramatically improve IS productivity.

* Its relatively high ranking in the degree and

extent of penetration of new products and services

bears out this claim. Business services sites are

particularly attracted to workstations, EDI, object-oriented

databases and/or languages, and

CD/ROM.

* A high proportion of the business services base

(43%, compared to 30% overall) is pursuing a

Unix-oriented strategy.

* The proportion of workstations compared to IBM-compatible

PCs and Macintoshes in its single-user installed base is high for business services, at

14.5% compared to 6.5% overall. A higher proportion

than average expect to move towards

workstations over the next two years, while a

survey-high 35% (compared to 26% overall) agree

that Unix workstations are becoming a viable

alternative to PCs.

Miscellaneous Services

When we turn to miscellaneous services such as personal, legal, or social services or the amusement industry, we largely leave behind the traditional image of the glass house. In fact, the average annual IS site budget in this sector, around $500,000, is the lowest in the survey base, about one-eighth the size of a typical site budget in banking.

Nonetheless, the reactions of IS managers in miscellaneous services do not differ from their peers elsewhere as much as might be expected. The relative paucity of extreme highs or lows in their responses suggests the degree of convergence between miscellaneous services and other sectors, including the effect of belt tightening.

* Miscellaneous services saw flat budgets in 1991.

* An average performer in acceptance of new technologies,

miscellaneous services generally replicates

the preferences of business services, with a

somewhat better response to CD/ROM.

* When asked whether their organization needed

many more PCs and workstations and would

buy them as fast as they could afford to, miscellaneous

services had a distinctly better response

than average, with 50% agreeing in contrast to

435 overall.

* The only area where miscellaneous services

strongly differed from other vertical market

groupings was in the acquisition sources of PCs

in 1991, with a much higher willingness to turn to

department, mass merchant, or electronic stores.

Transportation/Communications/Utilities

This vertical market conglomerate includes communications, an industry group that has long been, and almost certainly will continue to be, a significant investor in IT, and transportation, a sector discovering that fast and effective collection and dissemination of information has become critical for competitive survival. The weak spot for IT currently seems to be utilities, where the recession was aggravated by the confusing transition to deregulation or reregulation.

* Average site budgets in the transportation/communications/utilities

sector were in the $2

million range, third highest in the survey base.

* Overall budget growth in 1991 was better than

average, but respondents did not expect to be

able to keep up the pace in 1992.

* When asked what their primary focus would be

in 1992, a survey-high 37% in this grouping (compared

to 28% overall) cited the need to integrate

central and end-user resources into a single enterprise

information system.

* Transportation/communications/utilities scored

above-average as an implementer of new products

and services. An exceptional element was

the high ranking given to CASE.

* The sector has a strong interest in client/server

computing; a survey-high 64% displayed a positive

attitude towards the approach, compared to

49% overall. Transportation/communications/utilities

respondents also rate training staff in

client/server applications development a more

important task than their peers elsewhere.

Retail

During a recession retail is where the rubber meets the brick wall; no sector of the economy has been battered more mercilessly during the downturn in consumer confidence and purchasing power.

The IT industry has been less affected by the bad news in retail than it might have been, but for the worst of reasons: even in flush times retail in general has not been a particularly strong believer in computer-related products. Nevertheless, the sector is investing in some areas, particularly point-of-sale terminals.

* IS budgets among retail respondents did better

on average in 1991, but are expected to be flat in

1992.

* A survey-high 30% of the retail base (compared to

15% overall) expect IS spending at their site to

decrease in 1992. A high 14% described their IS

environment as contracting, with spending flat to

down for the next few years.

* A survey-high 43% of the retail base (compared to

33% overall) cited migration from older systems

to more modern hardware and/ or software platforms

as the most critical area of focus in 1992.

Wholesale

Sites specializing in the distribution of goods are coming to recognize the importance of effective distribution of information. However, their emerging awareness is coming at a poor time for implementing it.

* Budgets in the wholesale base were flat to down

in 1991, and are expected to be only average

performers in 1992. It had a relatively low positive

attitude towards spending of 56%, compared

to the 64% survey average.

* Wholesale is a coldbed of technological change.

The fifth of the sector stating that they rarely

make more than marginal IS improvements was

a survey high, while it ranked lowest in the

extent and degree of penetration of new products

and services.

* A low 34% of wholesale (compared to 49% overall)

had a positive attitude towards client/server

computing.

* A survey-low 37.0% of wholesale (compared to

49.5% overall) stated that it was pursuing an

open systems strategy. The proportion pursuing

or considering a Unix-oriented strategy was also

below average.

* Wholesale was the most likely vertical market

grouping to display no interest at all in outsourcing

(90%, compared to 83% overall).

Additional research

Readers should be aware that the vertical market analysis presented here reflects only one view of today's US. IT marketplace. Previous IDC research examined the data from the 1,600 end-user surveys by another important factor: host environments. In addition, the survey data can be cut by customer budget size, number of site employees or other client-defined criteria.

IDC's Vertical Market Research - A Note on Methodology

The tables, figures, and discussions in this issue of the Gray Sheet have been excerpted from IDC's report U.S. IT Customer Directions and Spending Strategies - Vertical Market Usage and Plans (IDC #6335) - IDC's most comprehensive report on vertical markets.

The full report contains a wealth of information on vertical-market spending history and spending intentions. It examines how different vertical markets are basing their IS plans around gradual centralization or decentralization, Unix and open systems, distributed PCs, systems integrators, and many other categories. We have excerpted here only some of the highlights of the key findings for each industry grouping particularly where a vertical market shows a major shift from the survey mean.

The report is based upon 1,600 law in-depth end-user interviews conducted by IDC staff in late 1991. That survey provides a comprehensive view of demand-side expectations for 1992 in the United States. Similar survey work is currently being conducted in the U.K., France, Germany and Japan.

IDC intentionally placed limits on the survey design in order to achieve a manageable approach to spending research. These exclusions provide the ability to project data by host-specific environments, and have a limited impact on the industrywide inferences derivable from the resulting data. Among the boundaries established by IDC were the following:

* The research design included only sites

with existing information systems. The rate

of new site formation and, conversely, centralization

and site divestment are minor

and broadly countervailing elements in

overall growth calculations and trend

analysis.

* IDC focused on MIS management to obtain

information.

* The survey effort was designed to exclude

government and education sites in order

to assure adequate samples of key commercial

markets, which typically have different

procurement policies and issues.

* PC-only sites and supercomputer sites (i.e.,

Cray and Convex) are not included in this

analysis and will be reported on separately.

* Home spending for PCs or other consumer

spending is not represented in this survey.

The resulting design represents the most comprehensive user spending effort ever undertaken by IDC. We believe that the overall industry perspective offered by this effort provides the most reliable source of information systems trends in the United States.

If further information is required, please contact your local IDC representative.

Extent of Penetration of New Products and Technologies in Four Vertical Markets

Banking                      Industrial Equipment Mftg
Image processing             Workstations
Multimedia                   CASE
Object-oriented technology   EDI
EDI                          Object-oriented technology
Workstations                 Multiprotocol routers
AVERACE                      AVERAGE
CD/ROM                       CD/ROM
CASE                         Multimedia
RAID                         Image processing
Expert systems               Expert systems
Multiprotocol routers        FDDI cabling
FDDI cabling                 RAID
Business Services            Retail
Workstations                 EDI
EDI                          Multimedia
Object-oriented technology   Object-oriented technology
CD/ROM                       Workstations
Image processing             CASE
Multiprotocol routers        AVERAGE
AVERACE                      Multiprotocol routers
CASE                         Expert systems
Expert systems               CD/ROM
Multimedia                   RAID
RAID                         Image processing
FDDI cabling                 FDDI cabling

* Computed by averaging the totals of "exploratory" and "significant" responses for the use of the eleven products and services cited in 1992. Source: International Data Corporations, 1992

Vertical Market Classifications

Classification                        2-Digit SIC Codes
Banking                                   60
Insurance, Other Financial                61-67
Manufacturing: Industrial Equipment       35-37
Manufacturing: Other Durable              29-34,38-39
Manufacturing: nondurable                 20-28
Health Services                           80
Business Services                         73
Miscellaneous Services                    70-72,75-79,81,83,87,89

Transportation/Communications/

Utilities                                 40-49
Retail                                    52-59
Wholesale                                 50-51
Other                                     01-17,84-86; 88; 99

Not included in the survey base: Education (SIC Code 82) and Government (SIC Codes 91-93) SOURCE: Standard Industrial Clasification Manual, 1987 and International Data Corporation, 1992

COPYRIGHT 1992 International Data Corporation
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