For enterprise vendors, the midsize to large enterprise technology market is comprised of tens of thousands of potential customers. Indeed, while the precise figure depends significantly on the definition selected, there are roughly 60,000 enterprises globally that have annual revenues/operating budgets of over $10m. In one sense, this presents a significant opportunity, providing a rich and diverse potential addressable market; however, given that vendors do not have unlimited sales and marketing resources, it also creates a significant challenge – which enterprises should vendors target to get the best return on their sales and marketing efforts?
Ovum recently updated one of its core data sets that helps vendors with this challenge, its ICT Spending Predictor data tool. Based on large-scale primary research programs, where we work with enterprises to understand their ICT expenditure, Ovum has developed a unique algorithm that allows us to accurately model enterprise-specific ICT spend based on financial, demographic, and operational metrics. The tool analyses ICT spend for 60,000 enterprises globally, not only providing 2017 and 2018 overall ICT budgets, but breaking this down into more than 30 technology spend categories.
Looking at the overall enterprise demographics from the April update, a number of key findings are worth highlighting. Firstly, while these 60,000 enterprises represent a total ICT market spend of over $2.7tn, ICT spending is dominated by the larger enterprises. Ranking enterprises by their technology spend, the top 100 enterprises had expenditure of over $450m in 2017, representing 17% of the overall market. The top 500 account for around 35% of overall ICT expenditure, and the top 1,000 for around 45%, while the top 10,000 account for 79% of this $2.7tn market.
Secondly, enterprise ICT spending is also concentrated by industry. Financial services institutions (including those across banking, insurance, and financial markets) account for close to 35% of overall large/midsize enterprise ICT spend, with retail banking the single biggest vertical (17%). Manufacturing and professional services enterprises are the next key verticals, comprising 15% and 11%, respectively, with other verticals accounting for a much smaller proportion based on their aggregated ICT expenditure. While most enterprise vendors do tend to focus on financial services first when creating industry-led sales and marketing alignment, the composition of the market should clearly be considered when looking at other industries.
Thirdly, enterprise ICT spending is also concentrated by geography. Unsurprisingly, this relates strongly to relative country economic size, with the US representing by far the largest market (40%), followed by Japan, China, Germany, and the UK. However, while emerging markets such as Brazil, Russia, and India get significant attention from many vendors due to their growth potential, based on global expenditure of companies headquartered in these locations, the Netherlands, South Korea, Australia, and Switzerland are larger markets.
From a sales and marketing strategy perspective, enterprise vendors should obviously look to align the addressable market with their own geographic presence and client experience; however, identifying and prioritizing targets within this should be a key step for both short- and long-term strategy formulation.
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