Gartner Industry Addressability Report - Microsoft Industry...This document including any supporting...
Transcript of Gartner Industry Addressability Report - Microsoft Industry...This document including any supporting...
This document including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other authorized recipients. This document may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates. © Gartner, Inc. and/or its affiliates. All rights reserved.
A Report for
Microsoft
Office 365 Industry Addressability Study
Gartner Consulting Report
03 July 2017
Engagement: 330043507
2 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Table of Contents 1. Introduction ........................................................................................................................................................... 3
2. Financial Services ................................................................................................................................................... 7
3. Healthcare ............................................................................................................................................................ 11
4. Manufacturing ..................................................................................................................................................... 15
5. Transportation ..................................................................................................................................................... 19
6. Retail .................................................................................................................................................................... 23
7. Government ......................................................................................................................................................... 26
8. Hospitality ............................................................................................................................................................ 31
9. Appendix .............................................................................................................................................................. 35
3 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
1. Introduction This document, which is an overview of the findings from
a study by Gartner Consulting and commissioned by
Microsoft, provides insights into trends, solutions, and
strategic areas of focus in order to accelerate Office 365
adoption and penetration globally. The report is divided
into several main sections, beginning with an overview of
the project, Office 365-related market trends, summary of
study findings, and industry deep dives. The industry deep
dives provide details on industry-specific trends,
addressable markets, IT and software spend, as well as key
solutions.
Background Microsoft engaged Gartner to identify key regions and
industries that could provide significant growth
opportunities for Office 365. In order to identify these
opportunities, Gartner started with a hypothesis:
regulated industries and firstline workers are markets
with relatively low adoption rates that could potentially
drive significant growth. Firstline workers are defined as
employees, staff, team members or the workforce itself,
that serve as the first point of contact between
companies, their customers / products / suppliers and the
market. These workers are often in roles that directly
impact the customer experience and the delivery and
development of products and services. On the other hand,
knowledge workers are involved in non-routine tasks that
require industry / solution-specific expertise. Knowledge
workers are often a dispersed workforce, thereby needing
collaboration tools in order to share knowledge and
project progress.
Methodology Using a multi-step approach, Gartner developed an
outside-in market perspective on Office 365’s
Addressability. The analysis was conducted on a regional-
level and included Asia / Pacific, Canada, Central and
Eastern Europe, France, Greater China Region, Germany,
India, Japan, Latin America, Middle East and Africa, United
Kingdom, United States, and Western Europe. The
industries included in the analysis were Government,
Healthcare, Financial Services, Manufacturing, Retail,
Hospitality, and Transportation. The regions and
industries are further defined in the Appendix. Through
the analysis the regions and industries were assessed on
four key categories – Investments and Regulatory
1 Knowledge and firstline worker definitions included in appendix
Environment, Microsoft Friendliness, Digital Maturity, and
Partner Ecosystem. The regions and industries were
scored on these categories through quantitative and
qualitative analysis in order to determine Microsoft’s
ability to address the Office 365 opportunity through
partners. In conjunction with the Microsoft Addressability
score that was developed, the total addressable markets
(TAdM) for knowledge workers (KW TAdM) and firstline
workers (FW TAdM) were determined1. The two
components of the analysis were combined and graphed
in order to arrive at strategic recommendations.
Additionally, heat maps and solution maps were created
to pinpoint bright spots within verticals for Office 365
interactions with vertical specific software and use cases.
Sources The qualitative and quantitative analysis and total
addressable market estimates were determined through
the use of published Gartner forecast data, Gartner
analyst discussions, Gartner CIO survey data, and Gartner
published research. Gartner conducted additional
qualitative analysis through secondary research to
supplement Gartner data.
Research Summary
Partner Impact Gartner views organizational-centric digital roadmaps as
an impediment to the impact of digital transformation.
Digital ecosystems, which include participants from a wide
range of industries who provide a wide range of solutions
to deliver value throughout the ecosystem, will drive
significant growth for the participants. Microsoft partners
are well-positioned to succeed in the growing Office 365
ecosystem by creating and delivering integrated solutions.
These integrated solutions have not emerged organically
but rather as a result of partner collaboration and
intervention in the Office 365 ecosystem.
High-Level Country Analysis Regional differences on digital maturity, Microsoft
friendliness, investment and regulatory environment, and
partner ecosystems are the driving force behind the
Harvey Ball ratings for Microsoft Addressability in Figure
1.1. Overall, highly-developed regions were found to be
the most aligned, while regions with developing
economies were on the lower-end of the ratings
spectrum. However, even within the lower-rated regions,
4 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
there are strategic opportunities and pockets of growth
with large addressable markets that should not be
ignored.
The output: The United States, Canada, and United
Kingdom are the regions with the highest addressability
scores, primarily driven by heavy investment in SaaS office
suites to date, and interest in continued investment in
SaaS office suites, BI / analytics, collaboration tools, and
other cloud services.
Figure 1.1: Microsoft Addressability Region Rankings, 2017
Table 1.1 provides the global Total Addressable Market for
firms with more than 100 employees.
Table 1.1: Global TAdM for 100+ Employee Firms
Source: Gartner Consulting, Estimates in Millions
High-Level Vertical Analysis The verticals, rated on the same metrics as the regions,
can be seen ranked in order of Microsoft Addressability in
Figure 1.2.
Figure 1.2: Microsoft Addressability Industry Rankings, 2017
Financial Services scored the highest primarily due to the
industry’s high digital maturity, Microsoft friendliness,
and digitalization initiatives driven by innovation.
Financial Services is followed by Healthcare,
Manufacturing, and Transportation respectively. The
Healthcare industry is investing heavily in digital
initiatives, and, like Financial Services, has high Microsoft
friendliness due to its focus on security and need to meet
stringent regulations. As globalization and cost reduction
initiatives are putting pressure on organizations to
become more efficient and deliver products and services
to customers faster, Manufacturing and Transportation
are both undergoing digital transformations in order to
remain competitive.
Retail, Government, and Hospitality lag behind the other
industries, but still have significant alignment to
Microsoft. Retail is undergoing a significant
transformation – there is a push to become more digital,
but organizational barriers and tight budgets will continue
to hinder Retailer’s efforts to help struggling brick-and-
mortar locations compete. The Government, while highly
Microsoft friendly (especially in the US due to the
dedicated Microsoft cloud services available), is slow to
adopt cloud and move away from legacy systems. Outside
the US there is hesitation to use cloud services from a
foreign entities. The Hospitality industry relies heavily on
vertical specific software (VSS). When this aspect is
combined with tight IT budgets, many Hospitality
organizations find it hard to invest in innovative / digital
solutions, however, organizations are finding it
increasingly more important to invest in technology in
United States
4
United Kingdom
4Canada
4
Latin America (LATAM)
1 Middle East & Africa (MEA)
1
India
2
Greater China Region (GCR)
2
Asia-Pacific (APAC)
3
Germany
3France
2
Western Europe (WE)
3Central & Eastern
Europe (CEE)
1
Japan
2
Workers Knowledge Firstline
APAC 31.3 71.1
Canada 3.5 1.6
CEE 36.3 30.5
France 5.0 3.1
GCR 26.5 80.2
Germany 7.5 3.5
India 34.0 31.7
Japan 8.9 5.2
LATAM 15.1 17.8
MEA 27.6 52.1
United Kingdom 7.3 3.0
United States 21.9 12.1
WE 14.8 8.4
Total 239.9 320.3
Hospitality7
Financial Services1
Healthcare2
Retail5
Government
Manufacturing
6
3Transportation
4
5 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
order to improve customer service and remain
competitive.
As demonstrated on Table 1.2, there are key solutions that
represent bright spots or target areas in which Microsoft
Office 365 could provide significant value to organizations
within specific verticals. These are detailed in the vertical
chapters, but should be considered when engaging in
discussions with organizations in each of the industries.
Table 1.2: High-Level Solutions by Industry
Table 1.3 presents the total addressable markets for
knowledge workers and firstline workers for the industries
profiled in this study.
Table 1.3: Global TAdM for 100+ Employee Firms in Key Industries
Source: Gartner Consulting, Estimates in Millions
Gartner Microsoft Office 365 Overview This section covers trends in adoption of Office 365 and
Team-Oriented Messaging Collaboration Tools.
Office 365 Adoption Office 365 adoption and plans for adoption have
continued to increase over the years. From 2014 to 2016
all organizations using or planning to use Office 365
increased from 65% to 78% as shown in Figure 1.3.
Figure 1.3: Change in Office 365 Adoption, 2014 to 2016
The biggest hesitations to adopt Office 365, as seen in
Figure 1.4, include security concerns, cost, and competive
offerings. It is important to be aware of these challenges
as they can be overcome through highlighting the right
use cases, and having appropriate meaningful
conversations about security and functionality.
Overall, while cloud adoption is growing, the top reason
for not using public cloud services is security and / or
privacy concerns. Many of these concerns may stem from
outdated perspectives based on assumptions that have
been disproven, or the gap between what providers are
delivering to address organizations’ needs. Providers need
to provide sufficient information regarding the security
record of the services in order to help customers move
beyond these general security concerns (security is listed
as the second highest cloud deployed application). With
growing regulations including the EU’s GDPR, security is
top of mind for many CIOs. Microsoft is continuously
working to address these challenges organizations are
facing (i.e. Microsoft Cloud will provide GDPR compliance)
and there are an increasing number of security and
compliance capabilities being built into Office 365 which
can provide value to many organizations.
Vertical Key Solutions
Financial Services
Case Management: Claims Processing / Underwriting Agent / Broker Portals Doc/Contract Management/Case Management/Loan
Origination (Coordination)
Healthcare Virtual Health / Remote Patient Monitoring (Telemedicine) Care Coordination Medical Data Storage
Manufacturing Product Lifecycle Management (PLM) Content Management / Document & Records Management Knowledge Management (Troubleshooting)
Transportation Mobile Technology Scheduling / Carrier Tendering Disruption Management (Irregular Operations)
Retail Workforce Management Internal Communication & Collaboration Customer Service & Support (Unified Commerce)
Government
Citizen Services (Citizen Engagement) Case Management Regulatory, Licensing, & Permitting / Planning (Community
Dev.)
Hospitality Hotel Operations Customer Service & Support Restaurant Operations
Workers Knowledge Firstline
Financial Services 22.3 23.0
Healthcare 23.7 26.7
Manufacturing 88.3 114.8
Transportation 15.0 26.3
Retail 24.2 39.8
Government 59.1 80.5
Hospitality 7.2 9.2
Total 239.9 320.3
No Plans for Office 365
35%Currently Using or Planning to Use Office 365
65%
2014
No Plans for Office 365
22%
Currently Using or Planning to Use Office 365
78%
2016
6 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Figure 1.4: Reason for “No plans for Office 365” (2016)
Email and Calendar represent the most popular Office 365
services and, consequently, Exchange Online is the tip of
the spear for Office 365 adoption. With a significant
portion of the market considering adoption, there is a
significant opportunity for partners, especially IT service
providers (Managed Service Providers, Systems
Integrators, Value Added Resellers, etc), to help end-
buyers adopt the basic workloads, as well as to upsell
advanced workloads and add-on solutions / services.
Additionally, as customers look to maximize the value of
their investments to deliver new business value and digital
workplace initiatives IT service providers figure to play a
significant role.
Figure 1.5: Enterprises Ranked Interest for Office 365, 2016 Services
Figure 1.6 shows the breakdown of public cloud email for
Microsoft compared to other public cloud services, by
industry. The industries with the highest percentage using
Microsoft cloud-deployed Office 365 Healthcare,
Pharmaceuticals and Life Sciences, IT Software and
Hardware Services, and Aerospace. The industries with
the lowest adoption include Financial Services (Banking &
Securities and Insurance) and Industrial Manufacturing;
these industries have been slower to move to the cloud
due to regulations and the desire to protect IP / keep data
on-premises.
Figure 1.6: Public Cloud Email – Public Companies Using Microsoft Office 365 vs. Other, 2016
Additionally, the industries that have been the biggest
adopters of Google’s G Suite are those that have large
numbers of firstline workers (e.g. manufacturing, retail,
transportation). Microsoft has a chance to gain
momentum and market share in these markets with its
new competitive firstline worker offering.
Team-Oriented Messaging Collaboration Tools While email will continue to be a mission-critical
application, its utilization may be partially reduced as
more organizations run team-oriented collaboration tools
(e.g., Slack, Teams, Google Hangouts Chat, etc.) in parallel.
Given the aggressive market transition to cloud delivery,
these tools will be pushed to a broad swath of the global
IT buying community. For some, the tools will just be an
added benefit, however, for select IT buyers, they will be
a value driver for acquiring a cloud office suite and a point
of differentiation.
Figure 1.7 shows that the team-oriented messaging
collaboration tool market is expected to grow to nearly
$5B worldwide by 2021, growing at an astonishing 96%
CAGR. A significant portion of the market will be due to
the inclusion of collaboration tools within bundled office
suites.
Currently Using or Planning to Use Office 365
78%
Legal or Business Concerns About
information Security5%
Cost of Licenses or Migration
4%
All Other Reasons13%
No Plans to Use Office 36522%
50%
9%
13%
8%
5%
12%
17%
27%
14%
14%
8%
23%
6%
19%
16%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Email and Calendar (Exchange Online)
OneDrive for Business
Office 365 ProPlus
Office 365 SharePoint Online
Skype for Business Online
Yammer
Power BI
Project Online or Project Pro for Office 365
Rank 1 Rank 2 Rank 3Percentage of Respondents
19%
18%
15%
11%
12%
11%
10.5%
10.5%
8%
9%
8%
10%
9.5%
8%
7%
81%
82%
85%
89%
88%
89%
90%
90%
92%
91%
92%
90%
91%
92%
93%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Pharmaceuticals and Life Sciences
Healthcare Providers
Energy (Utilities or Oil & Gas)
Travel and Hospitality
Construction Materials and Natural Resources
Transport and Logistics
Food and Beverage Processing
Retail and Wholesale Trade
Consumer Products
Chemicals
Industrial Manufacturing
Automotive
Industrial Electronics and Electrical Equipment
Insurance Services
Banking and Financial Services
Microsoft Office 365 Other (Including Private Cloud, Hybrid, and On-Premises)
7 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Figure 1.7: Team-Oriented Messaging Collaboration Tools, Worldwide, 2016 and 2021
The value proposition of this segment of collaboration
tools is they improve business team coordination and
performance — for example, by responding to RFPs faster,
rolling out corporate IT DevOps processes, requiring fewer
employees to run customer service, improving customer
satisfaction levels, enabling better decisions by including
subject matter experts, and/or reducing product
development time. Within target knowledge and firstline
worker segments, opportunities exist to address and
improve vertical specific processes such as Loan
Coordination in financial services (Knowledge) or Irregular
Operations in transportation (Firstline) As team-oriented
messaging collaboration tools are being used to address
industry-specific use-cases, there are opportunities to
increase share of wallet outside of core IT and tap into
larger budgets of established business buyers.
2. Financial Services
Overview: Innovation to serve customer needs is driving industry
digitalization initiatives. Institutions are starting to
overcome regulatory obstacles and invest more heavily in
cloud, resulting in a higher demand for collaboration and
the next wave of SaaS investment. The two main segments
within the financial services industry are Banking &
Securities and Insurance.
Figure 2.1 shows Microsoft's Addressability score plotted
against the approximate knowledge worker market and
Figure 2.2 shows Microsoft's Addressability score plotted
against the approximate addressable firstline worker
market.
While the US remains the dominant market opportunity
for Office 365 in terms of addressability, Canada, Asia-
Pacific, and Western Europe are all considered strong
opportunities. The UK also remains a strong opportunity,
however, Gartner expects some slow down as a result of
Brexit. Furthermore, Gartner forecasts a corresponding
advancement in Western Europe as Germany, France, and
Spain all try to capture opportunities as organizations exit
the UK due to market uncertainty. Australia, the emerging
economies in Greater China, India, Latin America
(specifically Brazil and Mexico) as well as South Africa lead
the way in terms of FinTech / InsureTech adoption as a
means to increase accessibility to financial services.
Helping to enable this digital / tech innovation is an
opportunity to increase Office 365 adoption. While the
FinTech market is booming in mature economies, it
represents a relatively small overall opportunity. One of
the keys to driving Office 365 addressability is through
customer success at major financial institutions (both
Banking and Insurance). As Office 365 is adopted by top
tier institutions, smaller, regional organizations will
understand that regulatory hurdles can be cleared,
thereby driving a second wave of adoption.
Figure 2.1: Microsoft Addressability vs. Knowledge Worker TAdM for Financial Services
Collaborative technologies such as content management,
secure file sharing, and communications tools are
$2,075
$160
$1,966
$10
$869
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
2016 2021
Bundled with Office Suites Stand-Alone, Special-Purpose
Bundled with UC
8 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
expected to have a positive impact on improving customer
service / responsiveness while driving down the cost to
serve for both knowledge workers and firstline workers.
These goals can be accomplished by empowering firstline
workers (tellers / agents) with additional information /
context for customer interactions and knowledge workers
with the tools for improved coordination for loan
applications / service and claims management.
Figure 2.2: Microsoft Addressability vs. Firstline Worker TAdM for Financial Services
Banking & Securities – While there is a significant amount
of hype regarding FinTech (7 out of 10 CIOs consider
digital entrants a larger threat than traditional
competitors), the impact has yet to materialize. As
organizations prepare to deal with this new reality,
“digital” to deliver business agility and innovation
becomes a matter of when and not if. In order to manage
these forces, Banking & Securities CIOs are prioritizing BI /
analytics, digitalization / digital marketing, and
Infrastructure / datacenter investments to improve
collaboration and innovation while helping to manage
digital change and improve market competitiveness.
Organizations are enthusiastic about the potential of
cloud in their industry, however, adoption remains
relatively slow. Cloud adoption is primarily driven by the
need for automation, cost-efficiency, agility, and
innovation and is most heavily utilized in ERP, HR and
service desks; “core” functions (those that link to the GL)
such as trade finance or treasury are much slower to
adopt the cloud. Additionally, Banks are increasingly
deploying security and compliance solutions in the cloud
as they struggle to keep pace with market, regulatory, and
customer expectations around fraud detection and the
management of DDoS attacks.
Insurance – Regulatory, political, and social factors exert
a strong influence on the degree of market volatility with
which Life and Property & Casualty (P&C) Insurance
companies need to cope. Seventy percent of Insurance IT
leaders consider their companies to be average at best
when it comes to embracing digital transformation. Many
business and IT leaders see the lack of digital maturity as
a growing risk and are concerned about the entrance of
new competitors such as InsureTechs or companies from
other industries. Regulation and compliance —
particularly Own Risk Solvency Assessment (ORSA) in the
US and International Financial Reporting Standards (IFRS)
4 globally — continue to drive Insurers' investment in
technology and services. As a result, digital transformation
has become a point of emphasis, however, legacy
technologies still persist. Insurance CIOs are prioritizing BI
/ analytics, cloud services / solutions, and digitalization /
digital marketing.
According to an August 2016 Gartner Survey, Insurance
technology leaders claim to have a cloud first strategy
(95% of respondents), yet cloud penetration remains low.
These lofty expectations indicate that cloud has reached a
tipping point and adoption will increase.
Total Addressable Market Segments The Financial Services Industry accounts for ~7.4% of the
total available market (TAM), 9.3% of the total knowledge
worker addressable market (KW TAdM), and 7.2% of the
total firstline worker addressable market (FW TAdM) for
organizations with over 100+ employees for the 7 verticals
analyzed. Knowledge workers engage in non-routine work
types (e.g., financial modeling, risk analysis, claims / case
management) while the firstline segment is expected to
perform client-facing tasks such as customer service and
retail banking.
9 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Table 2.1: Financial Services Knowledge Worker TAdM and Firstline Worker TAdM by Region (100+ Employee Firms)
Source: Gartner Consulting, Estimates in Millions
Spending: CIOs from Banking & Securities have demonstrated an
increasing budget for formal IT. A large portion of this
budget will go toward investing in FinTech players through
incubators and accelerators, which will increase the
growth rate of IT spending. Overall Financial Services IT
spend totals $746B, and the breakdown can be seen in
Figure 2.3. The largest category of IT spending in 2016 was
on IT services, followed by Telecom and internal services.
The fastest growing segment is software with an expected
CAGR of 7.6% through 2021 which will put it as the second
highest IT spend segment in 2021 for Financial Services.
Figure 2.3: Financial Services IT Spend by Category, 2016 to 2021
Source: Gartner Vertical IT Spend Forecast, $Millions
The financial services industry has the largest vertical specific / enterprise application spending, with organizations spending significantly more on vertical specific software (VSS) than legacy systems. Evolving business and technical requirements will lead to increased investments in risk analytics and reporting software, and risk-related managed services, contributing to continued strong growth in "other software" and outsourcing services. IFRS 4 will also drive investments in ERP systems, and therefore growth in the "ERP / SCM / CRM" category of software, and related consulting / implementation services. Within the software category (as seen in Figure 2.4),
infrastructure and VSS represent the two highest spend
categories and are forecasted to be the top through 2021.
ERP / SCM / CRM and Desktop (which includes office
suites) are the fastest two growing segments with an
11.3% and 8.1% CAGR respectively through 2021.
Workers Knowledge Firstline
APAC 2.47 5.79
Canada 0.46 0.14
CEE 2.99 1.90
France 0.41 0.14
GCR 2.05 4.71
Germany 0.93 0.29
India 3.41 3.48
Japan 0.87 0.29
LATAM 1.07 1.41
MEA 2.34 3.09
United Kingdom 0.93 0.26
United States 3.25 1.09
WE 1.17 0.44
Total 22.35 23.03
10 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Figure 2.4: Financial Services Software Spend by Segment, 2016 to 2021
Source: Gartner Vertical IT Spend Forecast, $Millions
Solutions The top three solutions for the Financial Services industry
that have high alignment to Microsoft Office 365
workloads are case management, agent / broker portals,
and Loan Coordination (Document / Contract
Management). Table 2.2 shows the key solutions in the
industry, the aligned Office 365 workloads, and the
potential interactions of these workloads with key vertical
specific software.
Table 2.2: Financial Services Key Solutions and Applicable Office 365 Workloads and VSS Interactions
Case Management: Claims Processing / Underwriting –
Organizations are trying to eliminate the manual
processes and paper-based documentation / back-office
functions involved in the claims management and
underwriting process. In order to breakdown
organizational silos, improve collaboration, and provide a
customizable document management platform to
improve the case management process improving
operational efficiency and reducing cost, organizations are
leveraging SharePoint, Skype for Business, and / or Teams.
Industry estimates suggest that automation may reduce
time to serve by as much as 90%.
Agent / Broker Portals – According to a Gartner survey
from October 2016, 73% of Insurers stated they believe
the degree of e-service adoption via portals or mobile
apps is low, and most reported that the majority (>60%)
of their business processes are still paper-based. More
than ever Insurers need to prove that they are “easy to do
business with” to drive customer loyalty. As a result, many
traditional vendors are adding portal functionality to core
modules, however, they often lack the user friendliness of
stand-alone offerings. The combination of Skype for
Business and/or SharePoint to improve agent, broker, and
customer collaboration could help fill industry gaps.
Loan Coordination (Document / Contract Management)
– The lending process remains largely paper-based and is
powered by legacy technologies that are, in some cases,
as much as 20 years old. While customers have changed
the way they search and shop for loans, the process itself
has failed to keep pace. Helping to digitize the loan
process, from digital document submission (Exchange)
and storage (SharePoint) to a more collaborative
Key SolutionsKey Microsoft Office 365
WorkloadsKey Vertical Specific Software
(VSS) Interactions
Case Management: Claims Processing / Underwriting
SharePoint Skype for Business Exchange Teams
Life Insurance Admin. Systems
P&C and Life Insurance Billing/Collection Mgmt.
Reinsurance
Agent / Broker Portals
SharePoint Skype for Business Exchange Teams
Life Insurance Admin. Systems
P&C and Life Insurance Billing/Collection Management
Reinsurance
Loan Coordination (Document / Contract Mgmt.
SharePoint Skype for Business Teams Exchange
Retail Core Banking Unified Digital Banking Islamic Core Banking
11 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
origination and servicing environment (Teams, Yammer,
Skype) has the potential to not only improve the customer
experience but generate significant cost and time savings
for both customers and loan originators.
3. Healthcare
Overview: The Healthcare industry is investing heavily in digital
workplace initiatives and analytics focused on reducing
cost to serve while providing differentiated, patient-
centric care, population health management, and
precision medicine. When all of these factors are
combined, Healthcare is a strong and growing
opportunity. The development and orchestration of
digital business / societal ecosystems are becoming critical
success factors in solving challenges related to
coordinating care delivery across settings and services
within the continually evolving landscape of Medical / Life
Sciences Discovery, Healthcare Delivery, Insurance and
Payment. Solutions and workflows will be enabled by
collaboration tools, communication tools, and increased
content management and sharing. The main two sub-
segments within Healthcare are Hospital & Integrated
Delivery Network and Physician Practice.
Figure 3.1 shows Microsoft's Addressability score plotted
against the approximate knowledge worker market and
Figure 3.2 shows Microsoft's Addressability score plotted
against the approximate addressable firstline worker
market.
In Healthcare, digital readiness is linked to electronic
health record (EHR) investment / adoption. North America
(US and Canada) and Western Europe (Denmark, Finland,
the Netherlands, France, and the UK) lead the way in
digital initiatives. In order to achieve these digital
initiatives, governments around the world have taken two
key paths to incentivize adoption: a top down,
government run approach (Canada, Australia, UK, and
France) and a regulatory requirements / incentives
approach (United States). Regardless if national EHR
guidelines are in place to drive adoption, Microsoft is well
positioned in Healthcare and the value proposition for
Office 365 improves due to its ability to handle sensitive
data and the potential to break down organizational silos
that inhibit collaboration.
The second major indicator of Microsoft’s ability to
address the healthcare vertical is the government
regulatory environment. Whereas countries like the US
present a significant opportunity, largely because of
government mandates to drive down the cost of
Healthcare, country and state privacy laws create a
complex environment in which technology vendors need
to operate. On the other hand, in the European Union,
where EHR and legally protected privacy were adopted at
the same time, the regulatory environment is much less
complex. Gartner expects the next wave of Healthcare
digitalization, and opportunity for Office 365, to come
from emerging economies focused on improving access to
Healthcare as populations skyrocket. India is increasing
public spending on Healthcare by 6x and is growing
vertical specific healthcare investments by almost 8% per
year, while China has increased spending by more than
$500B over the last decade and is expected to grow
investment in Healthcare software by more than 8%
through 2020.
Figure 3.1: Microsoft Addressability vs. Knowledge Worker TAdM for Healthcare
12 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Figure 3.2: Microsoft Addressability vs. Firstline Worker TAdM for Healthcare
Digital transformation in Healthcare is driving
addressability among knowledge and firstline workers. As
doctors, patients, and hospital administrators become
increasingly connected and collaborative, organizational
silos are broken down, enabling Healthcare organizations
to innovate. This innovation, paired with improved access
to data, facilitates the next generation of solutions such as
improved care coordination and virtual health initiatives
such as improving patient access, satisfaction and
outcomes.
Hospital / Integrated Delivery Network (IDN) – Despite
rising healthcare demands from aging populations and
new procedures, revenue is constrained by large public
and private payer controls on payment rates. Also, moves
toward value-based (instead of activity-based) funding
models keep revenue growth constrained, especially for
hospitals. IT as a percent of the total operating budget has
nearly doubled from the pre-EHR to the post-EHR
environment. The potential impacts on operating costs,
revenue capture and patient safety are substantial, but
few Healthcare Delivery Organizations (HDOs) have come
close to optimizing the system's potential.
Digitalization in Healthcare will take several years, and
many organizations have yet to fully flesh out digital
strategies beyond incumbent vendor-provided roadmaps,
however, HDOs are projected to spend 24% of overall
budget on digital initiatives by 2018 (up from 15% in
2016). In the years to come, HDOs and their physicians will
again be upended by efforts to pull the explosion of
medical discoveries into treatment faster, emphasizing
the need for IT to create an architecture and workflow
management model that permits real-time data and
decision support exchanges. Substantial efforts are
required to modernize legacy systems to postmodern ERP
suites and / or replace EHR systems that are not achieving
business outcomes.
The top technology investments include BI / analytics,
cyber / information security, and industry-specific
applications. EHR has also been called out as a top priority
by 25% of Healthcare CIOs, while many CIOs with EHRs in
place recognize this as the trigger to incorporate clinical
data into data warehouse, population health
management and real-time health systems (RTHS)
analytics plans.
Cloud adoption has been historically hindered by
regulation / compliance issues for healthcare providers
(e.g., PHI, HIPAA). However, with Healthcare-specific
cloud offerings like Microsoft Azure, Healthcare providers
understand that cloud infrastructure and applications
actually improves the providers’ ability to remain within
regulatory / compliance guidelines while also enhancing
cyber / information security. Healthcare’s recognition for
the need of real-time solutions is an indicator of the need
for more significant cloud adoption.
Other than strict regulation / compliance measures,
Healthcare CIOs face additional challenges such as funding
/ budgets for digital transformation and a lack of skills /
resources, particularly regarding health data analytics.
Total Addressable Market Segments The Healthcare Industry accounts for ~7.5% of the total
available market (TAM), 9.9% of the total knowledge
worker addressable market (KW TAdM), and 8.3% of the
total firstline worker addressable market (FW TAdM) for
organizations with over 100+ employees for the 7 verticals
analyzed. Knowledge workers engage in medical
treatment and hospital / office administrative work types,
while the firstline segment is expected to perform tasks
such as nursing, home / home healthcare nursing, and
maintenance / facilities.
13 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Table 3.1: Healthcare Industry Knowledge Worker TAdM and Firstline Worker TAdM by Region (100+ Employee Firms)
Source: Gartner Consulting, Estimates in Millions
Spending: Growth of Digital Healthcare is creating opportunities in
the traditional IT domain, such as software, services and
infrastructure. The Healthcare industry's total IT spend for
2016 was approximately $115B. As shown in Figure 3.3,
the largest spend categories were for IT services and
internal services. The software category is expected to
have the highest growth over the next 4 years with an
expected 7.9% CAGR through 2021.
Figure 3.3: Healthcare IT Spend by Category, 2016 to 2021
Source: Gartner Vertical IT Spend Forecast, $Millions
Within the Software category vertical specific software is
the largest segment and is expected to grow at an 8.5% to
approximately $14.2B in 2021. Figure 3.4 shows spending
for all of the different software categories. The segment
with the fastest expected growth is ERP / SCM / CRM with
an expected 11.2% CAGR through 2021.
Workers Knowledge Firstline
APAC 2.35 4.69
Canada 0.36 0.20
CEE 3.04 2.63
France 0.64 0.38
GCR 1.83 5.92
Germany 1.15 0.63
India 3.51 3.37
Japan 1.52 0.98
LATAM 1.42 1.57
MEA 1.08 2.10
United Kingdom 0.98 0.50
United States 4.02 2.59
WE 1.82 1.14
Total 23.73 26.71
14 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Figure 3.4: Healthcare Software Spend by Segment, 2016 to 2021
Source: Gartner Vertical IT Spend Forecast, $Millions
Solutions The top three solutions for the Healthcare Industry that
have high alignment to Microsoft Office 365 workloads
are Virtual Health / Remote Patient Monitoring, Care
Coordination, and Medical Data Storage. Table 3.2 shows
the key industry solutions, the aligned Office 365
workloads, and the potential interactions of these
workloads with key vertical specific software (VSS).
Table 3.2: Healthcare Key Solutions and Applicable Office 365 Workloads and VSS Interactions, 2016
Virtual Health / Remote Patient Monitoring
(Telemedicine) – A lack of awareness about telemedicine
and virtual care is an impediment to the wide adoption of
such systems in care processes, as is the lack of clarity on
payer payments. Solutions for HDOs need to start with
educating the buyers with a specific focus on answering
questions relevant to their roles (e.g., for IT: what
infrastructure is required to enable virtual care /
telemedicine?); for solution providers focused on the
physician practice segment, target those with high
percentages of rural patients who will adopt virtual care
to streamline the care process and ease the burden of
going to a physical office. Implementing and managing
EHRs with virtual care / telemedicine and collaboration
tools such as Skype for Business and Skype for Business
Cloud PBX / PSTN Conferencing will be major growth areas
for service and solution providers.
Care Coordination – Care coordination includes workflow
and decision support applications for the emerging care
coordinator and navigator roles HDOs operating under
population health management with payers. As care
coordinator and navigator roles increase in prominence
within HDOs, and HDOs are increasingly focused on
delivering better patient outcomes, care coordination
applications and interest in digitally enabled workflows
will grow. While CIOs in different countries and regions
operate under different payment or funding models, they
share a common need to leverage technology to support
care delivery, care coordination across agencies and the
administration of healthcare. The single most important
thing the CIO must do to make care coordination
successful is to transform from an independent physician-
centric culture to a care team and integrated health
system culture. This will be enabled through integration of
key workloads such as SharePoint (enables secure,
internal collaboration among groups), Skype for Business
& Skype for Business Cloud PBX / PSTN Conferencing
(enables communication between on-site medical staff
with firstline home care nurses to deliver improved
diagnoses and treatment management) and Teams
(enables continuum of care during shift changes).
Medical Data Storage – Medical data storage originated
as a technical response to the prodigious storage growth
associated with picture archiving and communication
systems (PACSs), and the cost and complexity of PACS
migrations, however, the value proposition has evolved to
include standards-based image access and sharing, EHR
integration, universal image viewing and support for
Key SolutionsKey Microsoft Office 365
WorkloadsKey Vertical Specific Software
(VSS) Interactions
Virtual Health / Remote Patient Monitoring (Telemedicine)
Skype for Business Skype for Business Cloud
PBX / PSTN Conferencing
Electronic Health Records Imaging Patient Engagement &
Persuasion
Care Coordination
SharePoint Skype for Business Skype for Business Cloud
PBX / PSTN Conferencing Teams
Electronic Health Records Imaging Patient Engagement &
Persuasion
Medical Data Storage
SharePoint Electronic Health Records Imaging Precision Medicine
15 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
mobile applications. With a significant portion of data
from EHRs represented as unstructured data, along with
the increased use of analytics to drive more efficient and
profitable operations and value-based care initiatives,
healthcare providers will begin to invest more aggressively
in vendor-neutral medical data storage. This trend will
create opportunities for Microsoft partners, particularly
those focused on integrating and developing solutions
based on SharePoint.
4. Manufacturing
Overview: Within the Manufacturing industry, digital initiatives are
underway in order to keep up with globalization and
competition. Large investments are expected for smart
machining, IoT, and advanced analytics. The industry’s
digital business initiatives can be enabled through the use
of collaboration tools and connecting firstline workers to
upper management in order to increase efficiency. The
main two segments within manufacturing are process
manufacturing and discrete manufacturing.
Figure 4.1 shows Microsoft's Addressability score plotted
against the approximate knowledge worker market and
Figure 4.2 shows Microsoft's Addressability score plotted
against the approximate addressable firstline worker
market. Within the knowledge worker segment, the
United States represents the best opportunity for the
Manufacturing industry. The combination of the large
economy of the US, mature digital ecosystem, and overall
Microsoft friendliness, means there are strong
opportunities with US manufacturers. The UK and Canada
follow in terms of addressability, but are much smaller
markets. Germany, APAC, and WE are the next best
aligned. Germany manufacturing is a leader in
manufacturing digitalization in Europe. In 2011 the
German government established the initiative Industrie
4.0 with the aim to secure manufacturing jobs and growth
for Germany by developing a competitive advantage
through digitalization. This has influenced other countries
to follow suite, e.g. the 2016 joint collaboration
agreement between the governments of Germany and
Japan to develop global standardization for Industrie 4.0
and IoT. Industrie 4.0 as a model for CIOs undergoing
digital transformation is now a widely accepted
framework, especially in discrete manufacturing.
Figure 4.1: Microsoft Addressability vs. Knowledge Worker TAdM for Manufacturing
Figure 4.2: Microsoft Addressability vs. Firstline Worker TAdM for Manufacturing
Microsoft products are used widely by knowledge workers
within manufacturing, from documentation and manual
data analysis through productivity suites to
communication through email. But there is an additional
opportunity to meet the needs of knowledge workers
through collaboration tools specifically to support product
lifecycle management processes (e.g. product
development and cross department collaboration). The
16 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
IoT integration for the pursuit of Industrie 4.0 opens
opportunities for the need of collaboration tools and
connecting firstline workers to upper management in
order to increase efficiency (i.e. troubleshooting).
Process Manufacturing – Although regulations in the
process manufacturing industry (e.g. natural resources /
minerals, energy resources / processing, and bulk goods
such as chemicals, paint, ink etc.) are considered more
lenient in comparison to other verticals, new, more strict,
regulations are driving the innovation and adoption of IT /
OT convergence and alignment due to the requirements
for increased visibility and traceability, accelerated time to
market, and mitigating product risk and recalls for the
industry. Another driving force for innovation is the
demand for differentiated products, which has pushed
technologies like unique device identification and track-
and-trace serialization further along the adoption curve.
Leadership is investing in cloud solutions to enable
collaboration across the organization to improve both
operational capability and performance management.
Furthermore, CIOs are prioritizing investments in BI /
analytics, ERP, cloud services and infrastructure. As the
volume of data in manufacturing operations grow, the
focus of cloud includes applications and infrastructure.
Cloud is expanding in manufacturing, with new
subscription-based cloud offerings for design, engineering
and PLM. Gartner predicts that Digital Factories will lead
IoT disruption over the next 3-8 years.
While cloud adoption is increasing, Gartner expects cloud-
based applications to take longer to reach mainstream
adoption due to the level of implementation difficulty and
perceived business disruption. Other challenges for
process manufacturers include harmonizing the PLM
platform with legacy systems (ERP, supply chain
management, and manufacturing execution systems), a
shortage of digital skills / resources and balancing
customization demands with compliance.
Discrete Manufacturing – Discrete manufacturers (e.g.
automotive, consumer goods, heavy industry, IT
hardware, etc.) are evolving to an Industrie 4.0 vision,
which involves a projection of digital business into
manufacturing. This transition impacts business
performance metrics, roles, skills, organizations, practices
and processes for designing, producing and servicing
products. This new generation of design and
manufacturing software is being built as cloud-based
"product innovation platforms" and "manufacturing
process management" platforms. The next generation of
digital manufacturing is expected to lead to increasingly
connected assets. As these connected products are
deployed, a corresponding rise in field services
opportunities is expected to emerge. Gartner expects this
to lead to additional opportunities to connect field
employees, improve workforce management, and deploy
tools that increase collaboration.
CIOs from discrete manufacturers are focused on driving
capabilities / solutions for advanced analytics, IoT and
autonomous vehicles. In order to enable these areas of
focus, investments are grounded in BI / analytics, ERP,
cloud services / solutions, and infrastructure & data
center.
Initially, cloud adoption in discrete manufacturing was
hindered due to the need to protect IP at all costs.
However, cloud adoption in discrete manufacturing is
more mature compared to process manufacturing due to
the need to demonstrate agility / nimbleness and keep up
with customer demand.
Total Addressable Market Segments The Manufacturing Industry accounts for ~42.6% of the
total available market (TAM), 36.8% of the total
knowledge worker addressable market (KW TAdM), and
35.8% of the total firstline worker addressable market (FW
TAdM) for organizations with over 100+ employees for the
seven verticals analyzed. Knowledge workers engage in
business analytics, manufacturing process design, and
engineering, while the firstline segment engages in tasks
such as field service, firstline assembly / packaging, and
machine operation / fabrication.
17 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Table 4.1: Manufacturing Industry Knowledge Worker TAdM and Firstline Worker TAdM by Region (100+ Employee Firms)
Source: Gartner Consulting, Estimates in Millions
Spending: Through 2018, the Global Manufacturing Purchasing
Managers' Index (PMI) will remain above 50, signaling an
expansion of IT purchasing in the global market. Figure 4.3
shows the overall IT spend by the Manufacturing industry,
which totaled approximately $539B in 2016. The largest
category within IT spend was IT services followed by
internal services in 2016; however in 2021 spending on
software is expected to surpass the internal services
spend due to its expected 8.5% CAGR, which is the fastest
growth among all categories.
Figure 4.3: Manufacturing IT Spend by Category, 2016 to 2021
Source: Gartner Vertical IT Spend Forecast, $Millions
With the positive index for employment and the
expansion of jobs, demand is expected to improve for
purchases of desktop and business applications including
ERP, supply chain management (SCM), CRM, mobile
devices and mobile telecommunications services. Figure
4.5 shows the segments within software. ERP / SCM / CRM
and vertical specific software are growing the fastest with
expected CAGR of 11.7% and 8.0% respectively through
2021. The focus of spend will remain on infrastructure and
ERP / SCM / CRM segments.
Workers Knowledge Firstline
APAC 12.71 23.27
Canada 0.83 0.41
CEE 10.84 7.75
France 1.15 0.60
GCR 14.34 38.63
Germany 1.73 0.86
India 17.66 13.71
Japan 2.89 1.62
LATAM 5.34 4.66
MEA 11.33 18.14
United Kingdom 0.93 0.44
United States 5.09 2.85
WE 3.42 1.87
Total 88.27 114.81
18 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Figure 4.4: Manufacturing Software Spend by Segment, 2016 to 2021
Source: Gartner Vertical IT Spend Forecast, $Millions
Solutions The top 3 solutions for the Manufacturing Industry that
have high alignment to Microsoft Office 365 workloads
are Product Lifecycle Management (PLM), Content
Management / Document & Records Management, and
Knowledge Management (Troubleshooting). Table 4.2
shows the key industry solutions, the aligned Office 365
workloads, and the potential interactions of these
workloads with key vertical specific software (VSS).
Table 4.2: Manufacturing Key Solutions and Applicable Office 365 Workloads and VSS Interactions
Product Lifecycle Management (PLM) – New product
failures heavily impact both manufacturers and retailers.
Communication between retailers and manufacturers will
be vital to take advantage of innovative data such as
image recognition for product tracking and trend analysis.
Collaboration tools that can bridge groups such as
Microsoft Teams, Yammer and OneDrive, can help teams
track trends and react swiftly to changing demands.
Additional opportunities exist for service providers and
ISVs exist to integrate the vast VSS solutions deployed by
manufacturers with PLM platforms (which are increasingly
cloud-based).
Content Management / Document & Records
Management – Gartner is expecting more than half of
ECM vendors to re-architect their offerings to cloud-based
platforms, which will create services and integration
opportunities for Exchange, SharePoint and Yammer.
Canada, India, Italy, Japan, US, and UK are all more
interested in enterprise content management tools than
other regions and may represent a greater proportion of
net new accounts or transitioning Office 365 accounts.
Knowledge Management (Troubleshooting) – IT / OT
convergence and alignment has exposed gaps in
knowledge management such as processes, standards,
and documentation. Knowledge management will be
transformed by chatbots, deep learning, natural-language
processing, all of which require cloud-based advanced
analytics. Manufacturing productivity can benefit from
Office 365, through collaboration integrated (e.g.
SharePoint, Teams, Yammer) with operational systems to
drive collaboration among suppliers, partners and
engineering teams and control of tacit knowledge
Key SolutionsKey Microsoft Office 365
WorkloadsKey Vertical Specific Software
(VSS) Interactions
Product LifecycleManagement (PLM)
SharePoint Exchange Office 365 ProPlus Skype for Business Yammer Teams
Product Lifecycle Management (PLM)
ContentManagement / Document & Records Management
SharePoint Exchange Teams
Product Lifecycle Management (PLM)
Product Data Mgmt. (PDM) Enterprise Manufacturing
Intelligence (EMI)
Knowledge Management (Troubleshooting)
SharePoint Teams Yammer
Product Data Mgmt (PDM) Enterprise Manufacturing
Intelligence (EMI) Product Lifecycle Mgmt.
(PLM)
19 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
management. In particular, the use case of
troubleshooting is extremely relevant to the
manufacturing industry; workers often find themselves
out in the field, on client sites, or on the manufacturing
floor, performing non-routine servicing of machinery and
in need of an extra set of eyes. In these cases peer-to-peer
communication through Teams and Yammer can be
valuable in order to reduce downtime and utilize internal
expertise. In the case of routine machinery servicing and
maintenance, the ability to access SharePoint and
previously documented cases, can increase productivity
through empowering workers.
5. Transportation
Overview: Transportation logistics, as well as airlines, are actively
seeking solutions and digital initiatives to help control
costs, improve customer service, and connect with sizable
firstline workforces. These forces are aligning the industry
to mobile and collaboration tools that enable
communication and workflow efficiencies. Due to a heavy
reliance on vertical specific software and proprietary /
legacy systems, opportunities in transportation for Office
365 partners are not as strong as other verticals. For the
purpose of this report, transportation is divided into two
major sub-segments: logistics and passenger travel.
Figure 5.1: Microsoft Addressability vs. Knowledge Worker TAdM for Transportation
Figure 5.2: Microsoft Addressability vs. Firstline Worker TAdM for Transportation
Figure 5.1 shows Microsoft's Addressability score plotted
against the approximate knowledge worker market and
Figure 5.2 shows Microsoft's Addressability score plotted
against the approximate addressable firstline worker
market.
Within the Transportation industry, organizations in the
United States, United Kingdom, and Canada are most
aligned to Microsoft Office 365 products. These regions,
particularly the US, are most likely to be interested in (and
have available funds for) investing in solutions for the
growing firstline workforce. Germany, Greater China
Region, Asia / Pacific, and Western Europe are the next
most aligned, followed by India, Japan, and France. India
has historically been more Google friendly than other
regions due to its preference for dispersed architectures
which helps with its connectivity issues. APAC and GCR are
both growing rapidly and increasing investment in
transportation software and technologies. Due to the
sheer volume of vehicles used in these regions, there are
a growing number of opportunities for vendors to address
through fleet services.
Logistics – According to a 2016 survey by Gartner, logistics
CIOs are pushing for organizational adoption of advanced
analytics and business algorithms to drive better business
outcomes and clearly link the value of IT to these
outcomes. Technology investments are focused on
advanced analytics, cloud services / solutions, and
20 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
infrastructure, indicating an overall need for digital
infrastructure to remain competitive. Transportation is
cloud-friendly in part due to the integration with supply
chain, which has most applications already in the cloud,
and fleet management and vehicle tracking / routing, all
of which are transitioning to the cloud.
A growing number of logistics executives are planning on
or considering closing the gap between transportation
planning and the overall supply chain planning (SCP)
landscape to synchronize end-to-end supply chain
processes and meet their supply chain goals. This will be
enabled by increasing reliance on digital ecosystems
(transportation CIOs are expected to triple digital
ecosystem partners by 2019), as well as the ability for
transportation ecosystems to expand to other sectors
such as retail, energy and utilities, insurance, smart cities,
etc.
Transportation CIOs expect to source 37% of the critical
components (e.g. IP, algorithms, platforms) from existing
partners, 22% from new partners, and build 37% in house.
This furthers the need to participate and influence a
myriad of digital ecosystems that are directly or
tangentially important to logistics CIOs.
Overall, transportation is not a highly regulated vertical
(especially compared to Financial Services and
Healthcare), however, there are specific regulations
affecting the logistics industry. For instance, European
efforts to cut carbon emissions by 40% by 2030 have made
funds available for collaboration in logistics (e.g. consortia
like NexTrust are beginning to emerge). Government
mandates regarding the installation of telematics devices
(e.g. e-log mandate in the US) are driving the adoption of
commercial telematics solutions. By collecting data
regarding driver behavior from these telematics devices,
driver communications, and logistics sensors, the logistics
industry is now able to harness the benefits of predictive
analytics.
Additional barriers to success for logistics CIOs are related
to the industry’s heavy reliance on non-digital business
practices (e.g. manual / paper-based processes) such as
workflows, certificates of analysis, bills of materials, and,
for global logistics, customs documentation. This has
created great difficulty in terms of content management /
governance.
Passenger Travel – This sub-segment includes all forms of
transportation that moves people from place-to-place,
such as the airline industry, railways, bussing systems,
passenger ships, etc. Much like logistics, the top two
technology investments are in BI / analytics and cloud
services / solutions. A major difference is passenger
travel’s expected investment in mobility and mobility
applications, which is likely due to enabling crew and
firstline workers to deliver high-caliber customer
experiences for consumers while also improving
employee satisfaction.
The airline industry is in the unique position to know
where someone will be (or supposed to be) on a given day,
however, airlines have not yet tapped into this knowledge
and the potential opportunity to empower their role
within this digital travel ecosystem with opt-in data.
Advanced analytics used in passenger data, destination
context and location, travel itineraries, reasons for travel,
passenger relations and network peers, transaction
currencies, modes of local transport, weather, and other
location-based data can alter the power dynamics and
role in this digital ecosystem. Airport authorities and
airlines have implemented beacon technology to engage
with passengers. Several rail authorities are leveraging
sensors to improve train diagnostics and drone
technology for aerial surveillance of trains and tracks.
Connected buses are informing riders with accurate bus
location / arrival times, as well as providing a fleet
management solution for bus operators.
The major challenge for CIOs in passenger travel is reliance
on legacy hardware, software and infrastructure. After
several airline network and infrastructure failures in 2016,
cloud-based solutions have become an increasingly
promising alternative to on-premises systems. Other sub-
verticals like smart transportation will require cloud-
based infrastructure and solutions to connect end-point
devices with IoT platforms.
Unlike industries like Financial Services and Government,
where regulations are considered an inhibitor to cloud
adoption, regulations for passenger travel are driving
cloud adoption. These CIOs view cloud adoption as one of
many steps toward digitalization, which will ultimately
improve efficiencies and reduce fines / further regulation
due to technology failures.
Total Addressable Market Segments The Transportation Industry accounts for ~9.0% of the
total available market (TAM), 6.3% of the total knowledge
worker addressable market (KW TAdM), and 8.2% of the
21 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
total firstline worker addressable market (FW TAdM) for
organizations with over 100+ employees for the seven
verticals analyzed. Knowledge workers engage in
management, analytics, and travel agent functions, while
the firstline segment includes freight / truck operators,
longshoreman (load / unload vessels), warehouse
employees, and client service representatives (crew
members and call center agents).
Table 5.1: Transportation Industry Knowledge Worker TAdM and Firstline Worker TAdM by Region (100+ Employee Firms)
Source: Gartner Consulting, Estimates in Millions
Spending: Through 2021 Software is expected to grow the fastest,
with a 7.8% CAGR, followed by IT Services with a 5.0%
CAGR.
Figure 5.3: Transportation IT Spend by Category, 2016 to 2021
Source: Gartner Vertical IT Spend Forecast, $Millions
While the largest spend currently is on infrastructure
followed by Vertical Specific Software (VSS), the ERP /
SCM / CRM segment is expected to grow the fastest with
an 11.3% CAGR through 2021. The next two fastest
growing segments are Desktop (which includes Office
Suites) and VSS, with CAGRs of 7.7% through 2021.
Transportation will remain heavily focused on vertical
specific software, but workflow improvements and digital
initiatives across the board are driving growth in the
additional segments.
Workers Knowledge Firstline
APAC 2.11 5.04
Canada 0.19 0.16
CEE 2.66 3.06
France 0.30 0.27
GCR 1.28 4.75
Germany 0.42 0.36
India 1.82 2.09
Japan 0.65 0.60
LATAM 0.95 1.22
MEA 2.26 6.60
United Kingdom 0.34 0.28
United States 0.97 0.91
WE 1.06 0.99
Total 15.00 26.34
22 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Figure 5.4: Transportation Software Spend by Segment, 2016 to 2021
Source: Gartner Vertical IT Spend Forecast, $Millions
Solutions The top 3 solutions for the Transportation Industry that
have high alignment to Microsoft Office 365 workloads
are Mobile Technology, Scheduling / Carrier Tendering,
and Disruption Management (Irregular Operations). Table
5.2 shows the key industry solutions, the aligned Office
365 workloads, and the potential interactions of these
workloads with key vertical specific software (VSS).
Table 5.2: Transportation Key Solutions and Applicable Office 365 Workloads and VSS Interactions, 2016
Mobile Technology – Mobility and mobile applications is
one of the top 5 technology investment priorities for CIOs
in the transportation industry. Mobile technology in
transportation logistics can improve driver
communications, driver task assignment, predictive and
driver behavior analytics, telematics, efficiencies through
improved situational awareness, productivity, and
digitalized workflows (e.g. digital logs). The
communications and collaboration workloads within
Microsoft Office 365 are the key enablers of mobility and
connectivity. Organizations can benefit from the use of
Skype for Business, Teams, Yammer, Skype for Business
Cloud PBX / PSTN Conferencing, and SharePoint to
activate firstline workers and connect them to
management. Teams and Yammer can be great tools to
use as a digital bulletin board where drivers and logistics
personnel can communicate about route complications,
weather forecasts, loading and unloading difficulties, and
any unexpected situations that could cause delays.
Scheduling / Carrier Tendering – Scheduling and carrier
tendering are highly integrated and important workflows
for transportation organizations. Driver scheduling tools,
carrier tendering, independent operator tendering, and
last mile delivery can all be improved through better
communication channels. Skype for Business can provide
quick means of communications, while Teams and
Yammer can provide a digital collaboration space to
organize for-hire carriers and private fleet carriers. Teams
and Yammer can also improve visibility into shipping
status and delays, and communicate the need for
overtime hours in the warehouse.
Disruption Management (Irregular Operations) – Across
the airline industry customer service is a top priority, and
Key SolutionsKey Microsoft Office 365
WorkloadsKey Vertical Specific Software
(VSS) Interactions
Mobile Technology
Skype for Business Teams Yammer Skype for Business Cloud
PBX / PSTN Conferencing SharePoint
Telematics Transportation
Management System Yard Management Vehicle Routing and
Scheduling
Scheduling / Carrier Tendering
Skype for Business Teams Yammer
Transportation Management System
Vehicle Routing and Scheduling
Telematics
Disruption Management (Irregular Operations)
Skype for Business Teams Yammer SharePoint
Irregular Operations Airport Operations Reservations / Ticketing Flight Operations
23 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
one of the major gaps in customer service is how airlines
approach disruption management. Disruptions (e.g.
weather delays, maintenance / repairs, etc.) create
serious headaches for passengers and airlines alike; how
fast an airline can respond to these disruptions affects an
airline’s revenue directly. There has been significant
growth in solutions to address irregular operations and
disruption management, but for many airlines it is still a
manual and painful process. The use of Skype for Business,
Teams, Yammer, and SharePoint, to increase
collaboration between air traffic control, ground
operations, crew management, and airport operations
can help improve efficiency and reaction time. These tools
can also help provide staff with up to date information in
order to increase transparency and accuracy when
communicating with customers, thus improving customer
experiences. Providing better communication and
collaboration to management will help ease interactions
with travel partners (e.g. hotels, shuttles, etc.), reduce
costs, lower brand and customer loyalty damage, and
benefit employees as well.
6. Retail
Overview: Organizations in the Retail industry are making significant
investments in transformation, both digitally and
organizationally, as retailers fight to remain competitive
with e-tailer powerhouses (e.g. Amazon); however, tight
budgets, historical underinvestment in technology /
software, and reliance on vertical specific solutions make
the industry less likely to turn to Office 365 for their
digitalization needs.
Figure 6.1 shows Microsoft's Addressability score plotted
against the approximate knowledge worker market and
Figure 6.2 shows Microsoft's Addressability score plotted
against the approximate addressable firstline worker
market.
Within the knowledge worker segment, the UK represents
the best opportunity in the Retail industry. The United
Kingdom leads the pack in addressability because of its
fast projected adoption of cloud through 2021. The United
States follows in terms of addressability, but only by a
small margin. Canada, France, and Germany are the next
highest aligned. Retail online channels are opening
opportunities for partnerships between retailers and
transportation companies. An example is the partnership
between the North American companies Walmart and
Uber to test grocery delivery using the ride-sharing
company.
Figure 6.1: Microsoft Addressability vs. Knowledge Worker TAdM for Retail
Retail corporate workers and in-store management make
up the majority of the knowledge worker opportunity in
retail. Microsoft productivity suites are widely used
among retail knowledge workers but, there is a rising
opportunity to meet the demands of firstline workers by
enabling staff with mobile devices capable of POS and
collaborative communication tools. Retailers are looking
for competitive advantages through customer
engagement. Enabling firstline workers with mobile
devices that allow faster and more knowledgeable service
could meet the desired impact.
24 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Figure 6.2: Microsoft Addressability vs. Firstline Worker TAdM for Retail
Retail – Retailers are pushing forward with unified
commerce strategies; the proliferation of customer touch
points has forced retailers to re-evaluate their
investments to support customer interactions across
multiple channels, and optimize capabilities across the
supply chain. As customer expectations change due to
connectivity and accessibility through e-tailers, Retailers
are struggling to compete through their brick-and-mortar
stores, resulting in further tightening of budgets and the
need for large, investment-heavy digitalization initiatives
in order to remain relevant in the market. Retailers are
emphasizing analytics in order to optimize operations and
to better understand and serve evolving customer needs.
Reinventing the customer experience is critical for
multichannel retailers as they transform from
multichannel to unified retail commerce to enable
exceptional customer experience. To avoid losing market
share, Retailers are redirecting resources toward activities
that differentiate the customer experience and increase
the speed of innovation.
Advanced analytics, IoT, and business algorithms were
cited as the technologies with the most potential to
change the organization. The impact of digital business
and IoT will require advanced analytics to support real-
time decision making to take advantage of momentary
business opportunities. Retailers will leverage big data,
advanced analytics and algorithms through applied AI to
enable these decisions with greater accuracy and timely
execution of customer-facing processes. Success will
require retailers to use a combination of knowledge,
innovation, speed and strategy to maintain and grow
market share in the digital economy.
Although regulations in retail have been more lenient
compared to other industries, recent data breaches have
brought greater attention / concern regarding customer
data privacy and overall security. Due to these data
privacy and security concerns, as well as the need for
network elasticity to handle spikes in demand (e.g. Black
Friday), retailers, especially those without the internal
skills to manage complex IT and regulatory environments
increasingly look to the cloud.
In the past, retailers have partnered with established
enterprises, and with the rise of online shopping they are
partnering with digital partners in order to better
compete. Reliance on service partners will continue for
the foreseeable future as retail CIOs have stated the
biggest impediment to success is the lack of skills /
resources, particularly for BI / Analytics. Additional
challenges retail CIOs face include lack of funding / budget
and communicating / implementing the broad
organizational change generated by digital workplace
initiatives (particularly in regard to the onset of hybrid,
human, and artificial work environments).
Total Addressable Market Segments The Retail Industry accounts for ~9.6% of the total
available market (TAM), 10.1% of the total knowledge
worker addressable market (KW TAdM), and 12.4% of the
total firstline worker addressable market (FW TAdM) for
organizations with over 100+ employees for the 7 verticals
analyzed. Knowledge workers engage in store /
merchandise planning, digital marketing, and warehouse
/ inventory management work types, while the firstline
segment includes roles such as sales associate, firstline
packing and shipping (digital commerce), and customer
support / call center agent.
The number of use cases for Office 365 and SaaS tools for
firstline retail workers is still limited today, but have a
promising future.
25 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Table 6.1: Retail Industry Knowledge Worker TAdM and Firstline Worker TAdM by Region (100+ Employee Firms)
Source: Gartner Consulting, Estimates in Millions
Spending: Retail CIOs are focusing technology investments to unify
the customer experience across all channels. Front-end
investments include BI / analytics, digital marketing and e-
commerce / website, while also increasing investments in
enabling technologies such as ERP / CRM / SCM and
infrastructure / datacenter to support the evolving
customer experience.
Investments are not universal across all sub-segments. For
instance, 57% of Grocers rank BI / analytics as their top
technology investment priority while only 36% of the
entire Retail industry ranks BI / analytics as number one.
Regions are also spending at different rates – Retailers
from the US, UK and India will drive increased spending on
vertical specific software, while India, the Middle East and
Africa, and Greater China are expected to drive spending
on BI tools.
The retail industry's IT spend in 2016 totaled
approximately $167B and is expected to grow to $199B in
2021 as seen in Figure 6.3. The largest spend is on IT
services and telecom services. The fastest growing
category is software which is expected to grow to
approximately 32.7B in 2021 with a CAGR of 7.9%, which
will move it into the second largest IT spend category in
2021.
Figure 6.3: Retail IT Spend by Category, 2016 to 2021
Source: Gartner Vertical IT Spend Forecast, $Millions
Within the software category, infrastructure and vertical
specific software are the highest spend segments, as seen
in Figure 6.4. ERP / SCM / CRM is expected to be the
fastest growing segment with an expected CAGR of 9.8%
through 2021.
Workers Knowledge Firstline
APAC 3.17 8.22
Canada 0.27 0.18
CEE 4.25 4.06
France 0.39 0.28
GCR 2.62 9.71
Germany 0.51 0.34
India 3.42 3.82
Japan 0.95 0.73
LATAM 2.08 2.60
MEA 2.75 6.88
United Kingdom 0.57 0.36
United States 1.92 1.48
WE 1.34 1.15
Total 24.24 39.80
26 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Figure 6.4: Retail Software Spend by Segment, 2016 to 2021
Source: Gartner Vertical IT Spend Forecast, $Millions
Solutions The top 3 solutions for the Retail Industry that have high
alignment to Microsoft Office 365 workloads are
Workforce Management (Scheduling), Internal
Communication & Collaboration, and Customer Service &
Support (Unified Commerce). Table 6.2 shows the key
industry solutions, the aligned Office 365 workloads, and
the potential interactions of these workloads with key
vertical specific software (VSS).
Table 6.2: Retail Key Solutions and Applicable Office 365 Workloads and VSS Interactions
Workforce Management (Scheduling) – Retail workforce
management includes software, services and hardware to
assist organizations with managing the operational
deployment and optimization of the in-store retail
workforce and improving the effectiveness of
management. Investments in workforce management will
be implemented / managed by trusted service providers,
who will create value-added opportunities to drive
improved analytics among workforce analytics (e.g. tools
to improve employee performance, measurement and
decision support throughout retail operations to improve
business outcomes) and ERP / CRM / SCM applications.
Key workloads include Office 365 ProPlus, Skype for
Business, Teams and StaffHub.
Internal Communication & Collaboration – In order to
understand and manage increasing customer service
demands from buyers, Retailers need to improve internal
communication and collaboration. Retailers, plagued by
legacy technology systems and heavily siloed
organizations, will rely heavily on service providers for
technology integration and change management to drive
the organizational collaboration required to provide the
desired unified customer experience. Key workloads
include SharePoint, Skype for Business, Skype for Business
Cloud PBX / PSTN Conferencing and Teams.
Customer Service & Support (Unified Commerce) –
Unified Commerce is about contextualized engagement
with consumers, as well as the execution of meeting
consumers’ needs. Consumers expect a seamless
experience across all channels / devices. This will be
facilitated by integrations for SharePoint and Skype for
Business with applications like CRM / POS, Retail
Operations, and Distributed Order Management.
7. Government
Overview: Government has two main sub-segments: Federal and
State & Local. Within the Federal Government, digital
transformation in “mature” geographies is underway. As
digital government continues to take shape, the appetite
for collaboration and productivity tools is expected to
increase, however, change within Federal Governments
usually moves at a glacial pace. Federal Government is
Microsoft Friendly and will look to Office 365 as a solution,
when budgets and initiatives align. On the other hand,
State and Local Governments (SLG) are focused on
improving constituent access / transparency by investing
Key SolutionsKey Microsoft Office 365
WorkloadsKey Vertical Specific Software
(VSS) Interactions
Workforce Management (Scheduling)
Office 365 ProPlus Skype for Business Teams StaffHub
Retail CRM Retail Operations
Internal Communication & Collaboration
SharePoint Skype for Business Skype for Business Cloud
PBX / PSTN Conferencing Teams
Retail CRM Merchandise Assortment
Management Retail Forecasting/
Replenish. Sol. Unified Price/ Promotion,
Markdown Optimization
Customer Service & Support (Unified Commerce)
SharePoint Skype for Business
Retail CRM Retail Operations Retail DOM
27 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
in cloud-based solutions to replace legacy applications /
systems. Since SLG is less regulated than Federal, has
more freedom to choose different vendors, and has
greater budgetary constraints, SLG is less likely to turn to
Office 365 compared to Federal agencies.
Figure 7.1 shows Microsoft's Addressability score plotted
against the approximate knowledge worker market and
Figure 7.2 shows Microsoft's Addressability score plotted
against the approximate addressable firstline worker
market.
Government organizations in North America (US and
Canada), Western Europe (UK, France, Germany, and the
Nordics), and APAC (Singapore, Australia, Japan, and
South Korea) are leaders in terms of digital
transformation. As countries continue to invest in
connected assets and open data initiatives, Gartner
expects to see increased digital readiness in Greater
China, Eastern Europe, and Latin America. Most countries
in Africa and the Middle East (outside of financial strong
holds and oil rich nations) are positioned well behind the
digital frontier. As digitization increases across the globe
and governments make transformational investments,
Microsoft’s addressability is expected to increase. A
secondary trend that will help to increase Office 365
addressability is adoption in established economies. Many
countries throughout Latin America look to regional
leaders (the United States in this case) to set the standard
for technology adoption. As investments to drive adoption
increase, a fast follower mentality can be expected.
Similar copycat mentalities resonate throughout Western
Europe with Germany, and APAC with Japan and Australia.
Finally, Gartner expects to see significant government
investment at all levels in India in productivity and vertical
specific solutions, ultimately signaling improved
addressability for Office 365 as a standalone solution and
as a platform.
Figure 7.1: Microsoft Addressability vs. Knowledge Worker TAdM for Government
While the knowledge worker opportunity is relatively well
understood in government (mission-based teams, citizen
engagement, and administrative tasks), emerging
opportunities for firstline workers are on the rise. Two key
opportunities include the deployment and management
of IoT in the government vertical and increasing usage of
communications and collaboration tools in law
enforcement. These two opportunities are well suited to
Office 365 and will help to increase firstline worker
addressability.
28 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Figure 7.2: Microsoft Addressability vs. Firstline Worker TAdM for Government
Government – Austerity measures continue to impact
government’s ability to effectively delivery IT. Years of
budget cuts have left IT departments struggling to deliver
innovative solutions and have reduced the focus to
“keeping the lights on.” However, rising citizen
expectations have forced a decision point for adoption of
digital government solutions. Government CIOs' at the
federal, regional, and local level must shift focus away
from infrastructure – Gartner is already seeing a
significant movement regarding data center consolidation
– and its cost burden toward quickly delivering true
mission outcome improvements. While the structure of
public service delivery in government organizations /
agencies has remained unchanged for 50 or more years,
citizen expectations have outpaced government’s ability
to address them. Modern IT can assist in rebalancing
Government accountability, responsiveness, and foresight
in setting and executing on public policy objectives to
address the increasing expectations of citizens.
To excel in a digital society, government organizations are
pursuing digital transformation strategies to increase their
responsiveness, accountability, and transparency. These
strategies must be both internal, digital workplace, and
external, digital service delivery.
In order to manage the cost of this transformation and
keep pace with an increasingly innovative market place,
government agencies are looking to the cloud.
Governments are increasingly adopting a cloud-first policy
(set by the US in 2011) and interest in public cloud and
SaaS continues to grow as security fears are increasingly
seen as being unfounded.
Adoption of SaaS based technologies required to support
digital workplace initiatives have been the first domino to
fall in the cloud adoption journey. Specifically, cloud-
based office, collaboration, and file sync and share have,
or are being adopted across all levels of government
(although Gartner predicts mainstream adoption is still
two to five years away). As investments in internal
capabilities yield process improvements and cost savings,
expect Government organizations to turn their focus
towards legacy application modernization as IT leaders
look to manage the growing cost and risk of aging
technologies. Replacement of legacy solutions will be
gradual, and Governments will focus on a strategy of
extending the capabilities of existing investments to meet
mission critical processes as well as wholesale legacy
replacement with cloud based, vertical specific COTS
solutions. Gartner expects service providers to play a
significant role not only in the sales and servicing of these
technologies, but by bringing innovative solutions /
capabilities to ensure that Government organizations are
able to reach their objectives.
Total Addressable Market Segments Government accounts for ~20.7% of the total available
market (TAM), 24.6% of the total knowledge worker
addressable market (KW TAdM), and 25.1% of the total
firstline worker addressable market (FW TAdM) for
organizations with over 100+ employees for the 7 verticals
analyzed. Knowledge workers engage Government
administration positions (e.g. politicians, appointees,
courts, citizen services), while the firstline segment
includes law enforcement and field workers.
29 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Table 7.1: Government Knowledge Worker TAdM and Firstline Worker TAdM by Region (100+ Employee Firms)
Source: Gartner Consulting, Estimates in Millions
Spending: Figure 7.3 shows the overall IT spend for 2016 and 2021
for Government. Government IT spend is expected to
increase to approximately $536B in 2021 from $470.8B in
2016. The largest category of spend was IT services in
2016 followed by telecom services and software. Software
is expected to have the largest growth and move into the
second largest category of IT spend in 2021 to
approximately $109B.
Figure 7.3: Government IT Spend by Category, 2016 to 2021
Source: Gartner Vertical IT Spend Forecast, $Millions
Within the software segment, as shown in Figure 7.4,
Infrastructure and vertical specific software have the
highest spend, and by 2021 vertical specific software is
expected to be the largest. ERP / SCM / CRM category is
expected to grow the fastest at a 9.3% CAGR to
approximately $14.7B in 2021.
Workers Knowledge Firstline
APAC 7.43 22.00
Canada 1.31 0.46
CEE 11.52 10.26
France 2.07 1.40
GCR 3.65 14.28
Germany 2.59 0.91
India 3.40 4.51
Japan 1.57 0.70
LATAM 3.83 5.88
MEA 7.17 14.08
United Kingdom 3.41 1.02
United States 5.62 2.50
WE 5.54 2.48
Total 59.12 80.50
30 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Figure 7.4: Government Software Spend by Segment, 2016 to 2021
Source: Gartner Vertical IT Spend Forecast, $Millions
Solutions The top 3 solutions for the Government that have high
alignment to Microsoft Office 365 workloads are citizen
services (citizen engagement), case management, and
regulatory, licensing, & permitting / civic planning. Table
7.2 shows the key industry solutions, the aligned Office
365 workloads, and the potential interactions of these
workloads with key vertical specific software (VSS).
Table 7.2: Government Key Solutions and Applicable Office 365 Workloads and VSS Interactions, 2016
Citizen Services (Citizen Engagement) – Digital
government initiatives are driven by citizen requirements,
one of which is increased access to city, regional, and
national services through an easy to use digital channel.
Where many government agencies largely rely on
traditional mail today, citizens’ demands for instant
question / answer is increasing. Office 365’s collaboration
technologies (specifically Yammer, Skype for Business,
and Exchange) can help provide new communication
channels and cut down on the lag associated with
traditional calling and emailing while improving customer
satisfaction.
Case Management – Aging case management systems
have reached end of life, however, budgetary concerns
have forced government agencies to leverage a strategy
to extend them beyond useful life rather than adopt new
COTS solutions. Custom built or legacy solutions can no
longer keep pace with government expectations and
Office 365 (through SharePoint and Teams) offers unique
opportunities to redesign government processes and
eliminate what is a today a paper based process with
existing investments, effectively killing two birds with one
stone.
Licensing & Permitting / Civic Planning – Licensing and
permitting in most municipalities remains a highly manual
process. While large US state and local government
agencies have begun the process of replacing these
processes with cloud based solutions, most municipalities
lack the budget for these investments. With Office 365, an
opportunity to improve collaboration and accuracy
throughout the process from submission, to departmental
review will yield higher revenues, improved constituent
Key SolutionsKey Microsoft Office 365
WorkloadsKey Vertical Specific Software
(VSS) Interactions
Citizen Services (Citizen Engagement)
Skype for Business Skype for Business Cloud
PBX / PSTN Conferencing Yammer Exchange
Citizen Engagement
Case Management
SharePoint Teams
Case Management Women, Infant, and
Children Employment
Regulatory, Licensing, & Permitting / Civic Planning (Community Dev.)
Teams SharePoint Skype for Business Skype for Business Cloud
PBX / PSTN Conferencing
Community Development
31 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
satisfaction, and elimination of a heavily paper based
system.
8. Hospitality
Overview: Hotels and restaurants have historically built systems by
piecemeal. Instead of upgrading a system to have
additional functionality, Hospitality organizations have
resorted to just purchasing a separate system for the new
function. This has led to a technology environment where
the multiple disconnected systems cannot be effectively
integrated. This problem is further complicated if different
locations have different versions of the software within
the same hotel chain or restaurant group. Like other
industries, Hospitality also suffers from disconnected
departments that act within their own silos rather than
acting like a digital entity. While Hospitality organizations
desire to integrate these disparate systems to improve /
digitize workflows, cloud migration is viewed as a
daunting task, especially in light of historically tight IT
budgets. Organizational fears regarding moving core
applications such as reservations systems has also
hindered cloud adoption in Hospitality.
Figure 8.1 shows Microsoft's Addressability score plotted
against the approximate knowledge worker market and
Figure 8.2 shows Microsoft's Addressability score plotted
against the approximate addressable firstline worker
market.
The UK, the US, Canada, Germany, and France are the
regions that are best aligned to Microsoft Addressability,
however, the delta between addressability ratings for the
top region (UK) and the lowest rated region (Central and
Eastern Europe) is relatively small in Hospitality compared
to other industries. This suggests that although there are
some regions of strong opportunities, all regions are
expected to demonstrate growth in the next few years.
CIOs in the Hospitality industry are prioritizing
investments in cloud services / solutions, BI / advanced
analytics, and digitalization / digital marketing. These
investments are aimed at breaking down organizational
and location-based silos, which have inhibited a
continuous customer experience.
Cloud services / solutions will enable integration
opportunities for partners to create the desired
unification of the disparate systems. In addition to being
the first step to being able to leverage advanced analytics
and deep business intelligence, cloud solutions enable can
be spun up or down to meet the demands created by
opening and closing of brick-and-mortar locations.
Furthermore, cloud solutions decrease system outages
caused by local natural disasters.
Investments in advanced analytics will drive insights
aimed at improving / unifying the customer experience.
Currently, data is not shared among the many disparate
systems (e.g. reservation systems, marketing databases
and workforce optimization tools), thereby creating a
situation where demand-based pricing is not possible. For
Hotels, this has created obstacles to driving revenues
while also increasing the level of difficulty in honoring
online prices. Advanced analytics will align pricing and
marketing campaigns, driving improved communication
among corporate and regional branches.
Restaurants and Hotels are looking beyond internal data
points and are applying advanced analytics to improve
digital marketing campaigns. For instance, social media
analytics are driving more targeted digital marketing
campaigns that are increasing conversion. Location
analytics are being used to understand why certain
locations are performing better than others and then
leveraged to drive improved results at these locations.
Figure 8.1: Microsoft Addressability vs. Knowledge Worker TAdM for Hospitality
32 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Figure 8.2: Microsoft Addressability vs. Firstline Worker TAdM for Hospitality
Total Addressable Market Segments The Hospitality Industry accounts for ~3.3% of the total available market (TAM), 3.0% of the total knowledge worker addressable market (KW TAdM), and 2.9% of the total firstline worker addressable market (FW TAdM) for organizations with over 100+ employees for the 7 verticals analyzed. Knowledge workers in Hospitality are usually in upper management, while the firstline segment includes servers, customer-service representatives, and food preparation staff.
Table 8.1: Hospitality Knowledge Worker TAdM and Firstline Worker TAdM by Region (100+ Employee Firms)
Source: Gartner Consulting, Estimates in Millions
Spending: The Hospitality industry has the lowest IT spend out of the
industries analyzed. Figure 8.3 shows the breakdown of
overall IT spend by category – Hospitality’s total IT spend
in 2016 was approximately $33B. The largest category of
spend included IT Services at approximately 13.6B in 2016.
The fastest growing category is software, which is
expected to grow at an 8.5% CAGR over the next 4 years
to approximately $6.7B in 2021.
Workers Knowledge Firstline
APAC 1.07 2.13
Canada 0.08 0.05
CEE 1.01 0.80
France 0.08 0.05
GCR 0.76 2.21
Germany 0.16 0.09
India 0.79 0.70
Japan 0.47 0.31
LATAM 0.45 0.46
MEA 0.64 1.23
United Kingdom 0.19 0.11
United States 1.06 0.70
WE 0.42 0.31
Total 7.17 9.15
33 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Figure 8.3: Hospitality IT Spend by Category, 2016 to 2021
Within the software category the breakdown of spend is
shown in Figure 8.4. Infrastructure and vertical specific
software are the two highest segments at $1.7 and $1.4B
respectively. Infrastructure, vertical specific software, and
ERP / SCM / CRM are expected to grow fastest at similar
rates over the next 4 years, approximately a 9% CAGR.
Desktop, which includes office suites is the smallest
segment and is expected to grow at a 6.7% CAGR over the
next 4 years to approximately $0.3B.
Figure 8.4: Hospitality Software Spend by Segment, 2016 to 2021
Solutions The top three solutions for the Hospitality industry that
have high alignment to Microsoft Office 365 workloads
are hotel operations, customer service and support, and
restaurant operations. Table 8.2 shows the key solutions
in the industry, the aligned Office 365 workloads, and the
potential interactions of these workloads with key vertical
specific software (VSS).
Table 8.2: Hospitality Key Solutions and Applicable Office 365 Workloads and VSS Interactions
Key SolutionsKey Microsoft Office 365
WorkloadsKey Vertical Specific Software
(VSS) Interactions
Hotel Operations
Office 365 ProPlus SharePoint Skype for Business Teams Yammer StaffHub
Property Management System (PMS)
Customer Service & Support
Skype for Business Teams Yammer SharePoint
Property Management System (PMS)
Reservations
Restaurant Operations
Skype for Business SharePoint Teams StaffHub
FOH / Dining Room Management
Kitchen Management Back Office Restaurant /
Product Management
34 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Hotel Operations – Hotel operations encompass the
interactions between front desk, housekeeping, and the
back office, with functions including room management,
customer service, and revenue management. Hotel
operations need to run smoothly in order to deliver
exceptional customer service. The main software used to
support these functions is a property management
system; however, workflows exist outside of this software
and streamlining communication is key to delivering
better productivity, efficiency, and a more engaged
workforce. The Core Office Suite and SharePoint offer
easy communication between back office and front desk
staff. Skype for Business can be used to check the status
on room cleaning and to quickly communicate with
management to resolve problems that arise. Teams can be
also used for communication between departments to
troubleshoot problems and bridge the gap between the
different functions. Yammer could provide hotel-wide
notifications for keeping staff informed (e.g. maintenance
actions, construction zones, new services added for
customers, etc.) in order to increase efficiencies and help
provide pro-active customer service. StaffHub is an
emerging platform designed to address pain points in
scheduling firstline workers.
Customer Service and Support – Customer service and
support is key to fulfilling customer expectations and
achieving customer loyalty. Traditionally the front desk is
the primary contact to hotel guests, but having well
informed staff across all hotel operations and providing
fast, friction-less communication channels with guests is
also desirable. As with hotel operations, Teams and
Yammer can be used to help keep employees informed
and resolve any customer problems with ease. SharePoint
can be used to share resort or hotel event schedules or
specials for the week with staff so they can easily
communicate to the customer. Skype for Business offers
both internal and external opportunities. Skype for
Business can provide quick communication between
internal departments without the customer service staff
having to leave the customer’s side. Skype for Business
could also be implemented in a way that allowed
customers to directly ask questions with front desk staff,
order room service, set a morning alarm, or ask for towels
directly from housekeeping, without having to pick up the
phone.
Restaurant Operations – Restaurant operations include
the processes that are required to run a restaurant from
back office to front of house operations. These processes
include table management, kitchen management, labor
management, and product management; while much of
the vertical specific software on the market touches many
of these functions, a lot are incomplete and leave
employees with manual tasks that can cause delays in
food service, incorrect orders, and missed opportunities.
Customer service is a key initiative for restaurants and
Microsoft Office 365 has workloads that can improve
communications, decrease delays, and thus improve
customer experience. Skype for Business can be used by
wait staff and hostesses to check on orders, inform
kitchen staff of a large influx of people so they can adjust
their break schedules, and answer customer questions
without having to leave the table or the front of house.
Giving staff access to SharePoint so that they have up-to-
date information on menu items, daily specials, or
inventory limitations would be beneficial. Teams could be
used for additional collaboration and communication
between management and the different departments in
order to enable staff. Similar to hotel operations,
scheduling of firstline workers can be improved through
the use of StaffHub
35 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
9. Appendix
Regional / Country Taxonomy Region Country / Countries
Asia / Pacific (APAC)
Australia Indonesia Korea Malaysia
New Zealand Philippines Singapore Thailand
Vietnam Rest of Emerging Asia /
Pacific
Canada Canada
Central and Eastern Europe (CEE)
Czech Republic Hungary Poland Kazakhstan
Romania Russia Slovakia Ukraine
Rest of Eastern Europe Rest of Eurasia
France France
Greater China Region (GCR) China Hong Kong Taiwan
Germany Germany
India India
Japan Japan
Latin America (LATAM) Argentina Brazil Chile
Columbia Mexico Panama
Peru Trinidad and Tobago Rest of Latin America
Middle East and Africa (MEA)
Israel Nigeria Qatar
Saudi Arabia South Africa Turkey
UAE Rest of Middle East &
Northern Africa Rest of Sub-Sahara Africa
United Kingdom (UK) England Northern Ireland Scotland
Wales
United States (US) United States
Western Europe (WE)
Austria Belgium Denmark Finland Greece
Ireland Italy Netherlands Norway Portugal
Spain Sweden Switzerland Rest of Western Europe
36 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
Vertical / Industry Taxonomy Vertical Sub-Verticals
Financial Services Banking & Securities Insurance
Government Federal & International Government Local & Regional Government
Healthcare Provider Hospital / Integrated Delivery Network (IDN) Physician Practice
Manufacturing & Natural Resources Automotive Consumer, Non-Durable Products Energy Resources & Processing Heavy Industry IT Hardware Life Sciences & Healthcare Products Natural Resources & Materials
Retail General Retailers Grocery Specialty Retailers
Hospitality Restaurants & Hotels
Transportation Air Transport Motor Freight Pipelines Rail & Water Warehousing, Couriers & Support Services
37 © Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a trademark of Gartner, Inc. or its affiliates.
IT / Markets Taxonomy Term Definition / Example
Knowledge Worker Knowledge workers are involved in non-routine tasks that require industry / solution-specific expertise.
Knowledge workers are often a dispersed workforce, thereby needing collaboration tools in order to share knowledge and project progress
Firstline Worker Firstline workers are employees, staff, team members or the workforce itself, that serve as the first point of contact between companies, their customers / products / suppliers and the market.
These workers are often in roles that directly impact the customer experience and the delivery and development of products and services.
Total Available Market (TAM) The size of the market in terms of the total number of employees regardless of designation
Total Addressable Market (TAdM) The portion of the available market that can be addressed by a given provider for a product or service
Vertical Specific Software (VSS) Software developed to address the specific needs of a given industry
Office Suites Office productivity suites are generally collections of basic
productivity applications for tasks such as word processing, spreadsheet manipulation and presentation graphics
Web Conferencing / Collaboration
Web conferencing represents one form of real-time collaboration. It consists of real-time electronic meeting and content delivery, desktop and application sharing, IM, and group document markup with electronic whiteboarding (augmented by audio, data and video), security (encrypted data transfer and password protection), and remote control (a participant can control applications of another device)
Business Intelligence (BI) An umbrella term that includes the applications, infrastructure and
tools, and best practices that enable access to and analysis of information to improve and optimize decisions and performance
Project and Portfolio Management (PPM)
PPM applications support an integrated view across the portfolio of resource effort, including both project and nonproject work. Organizational resource information can be grouped into taxonomies of roles, functions and skill sets, thus allowing for better tracking of resource assignment and utilization
Enterprise Content Management (ECM)
ECM suites consist of applications for content life cycle management that interoperate but that can also be sold and used separately. Some vendors have added extended technology components, such as digital asset management, for handling rich media, electronic forms and document composition for high-volume generation of customized documents
Digital Content Creation (DCC) Software is used for creating or altering visual digital content. The
digital content can be either computer-generated or transformed from analog means, such as photographs or videos