Surprises at IBM, Infosys and Microsoft

Lead Analyst: Cal Braunstein

IBM Corp. announced second quarter financial results with lower revenues but improved profits while Infosys Ltd. had weaker than expected first quarter 2013 results. In other financial news, Microsoft Corp. reported mixed fourth quarter and fiscal year 2012 results.

Focal Points:

• IBM reported second quarter revenues of $25.8 billion, a drop of three percent year-over-year. However, net income on a GAAP basis increased by six percent to $3.9 billion from the previous year's quarter. Asia Pacific and the BRIC countries showed single digit growth while all other geographies declined. Europe/MidEast/Africa delivered the worst performance with a nine percent decline, although using a constant currency basis the revenues were flat. Similarly, the services sectors (GBS and GTS) were off four and two percent respectively from the same quarter last year. Global Financing and Software were flat while the Systems and Technology Group (STG) experienced a nine percent fall in revenues year-over-year. IBM's Smarter Planet initiative saw its revenues increase more than 20 percent in the quarter while its Power Systems gained market share through competitive displacements. Year-to-date IBM states its growth market revenues were up nine percent year-over-year while business analytics revenues grew 13 percent and cloud revenues doubled year-over-year. The company also saw its gross profit margins climb by 1.5 percentage points.
• Infosys had less than stellar results for its first quarter 2013. While revenues grew 4.8 percent to $1.75 billion and IFRS net income climbed eight percent to $416 million year-over-year, on a sequential quarter basis, the company saw revenues drop by one percent and profits slide by more than 10 percent. Repeat business accounted for 99.1 percent of sales; the top 10 clients were responsible for 25.3 percent of the revenues. Utilization levels excluding trainees have been slowly dropping from 77.8 percent over the 12 months ending June 2011 to 71.6 percent in the current quarter. The split between onsite and offshore dropped slightly from 25.5 to 74.5 percent in the year ago quarter to 24.7 to 75.3 percent in the first quarter 2013. Attrition improved slightly to 14.9 percent. All geographic sector revenues declined with the exception of North America, which grew by 1.6 percent sequentially. As expected, Europe was the worst performer with a decline of 8.1 percent sequentially.
• Microsoft announced fourth quarter 2012 revenues of $18.1 billion, an increase of four percent from the previous year's quarter. On a GAAP basis the company reported its first net loss of $492 million due to writing off $6.2 billion for its 2007 aQuantive acquisition. For the full fiscal year Microsoft reported revenues of $73.7 billion, a five percent jump from its fiscal year 2011 revenues. On a GAAP basis net income was $17 billion, a 26 percent decrease from the prior year. The Server and Tools business revenue grew 13 percent for the fourth quarter and 12 percent for the full year while the Business Division revenue increased 7 percent for the fourth quarter and full year reflecting continued momentum in Office 2010 sales. The Windows and Windows Live Division revenue declined 13 percent for the fourth quarter and 3 percent for the full year whereas the Online Services Division revenue advanced 8 percent for the fourth quarter and 10 percent for the full year reflecting growth in its search business. The Entertainment and Devices Division revenue jumped 20 percent for the fourth quarter and 8 percent for the full year, mostly due to the addition of Skype.

RFG POV: Most vendors note the difficulties that lie ahead over the next few quarters due to Euro zone problems, a slowdown in China, and a weak economy in North America as well as fears over oil prices and Middle East crisis. How well enterprises will do will depend upon the sector(s) they are in, the geographies they serve, and the agility and innovation of the firm. IBM, which has huge backlogs, is able to plow forward through the good times and bad. Its STG products continue to fluctuate depending upon age of the systems but overall IBM is on track to deliver against its five year growth plan. On the other hand, Infosys is failing to keep up with some of its outsourcing competitors and may be running into a management of growth problem. The drop in its utilization levels is a further indication that backlog and revenue management is not mapping to usage at the desired mix. Thus, while this is an overall corporate issue, the company still maintains tremendous customer loyalty and repeat business rate. In that the company is seeing weakness in most of its markets, IT executives should be more aggressive in negotiating blended rates and the overall deal. Microsoft marches on and continues to grow its enterprise businesses. The Windows business is impacted by the decline in PC sales (and growth in the Apple Inc. iPad market). There is the perception that enterprise business will improve when Windows 8 comes out later this year but that is unlikely. While slightly more than 50 percent of enterprises are on Windows 7, the other half are on Vista and XP. It takes years before companies migrate to new releases and the move to Windows 8, in that it is designed more for the personal world and tablets than the business world, most likely will not happen for most companies. RFG expects the majority of firms will wait for Windows 9. However, RFG does expect Skype and Yammer to be leverageable in the enterprise space but it is unclear whether or not Microsoft can leverage these cloud services to get organizations to move to its other cloud offerings. IT executives will continue to have more and more business platform alternatives available to them and therefore should not feel locked into Microsoft. Given that, IT executives should carefully analyze their business software requirements and negotiate for the best deals. Since Microsoft pricing can be complex and expensive, IT executives should consider using outside assistance (from RFG or elsewhere) to simplify the experience and obtain the best contractual prices and terms.

EMC, Intel, SAP, and VMware on the Move

Lead Analyst: Cal Braunstein

Focal Points:

• EMC and VMware made surprise announcements when word leaked out that VMware CEO Paul Maritz was being replaced. Joe Tucci, EMC Chairman and CEO stated the IT industry is in the midst of an extraordinary transformation unlike anything we have seen before – a major shift to Cloud Computing, Big Data applications and delivering IT-as-a-Service.  To capitalize on this shift Pat Gelsinger, EMC President and COO of Information Infrastructure Products, has been appointed CEO of VMware while Paul Maritz is joining EMC as Chief Strategist, reporting to Tucci. Both changes are effective September 1st. David Goulden, Executive Vice President and CFO, will assume the additional roles of President and COO of EMC effective immediately. On the financial front, EMC announced preliminary second-quarter 2012 results with record second quarter consolidated revenues of approximately $5.31 billion, up 10 percent year-over-year. The company also had record second quarter non-GAAP earnings per weighted average diluted share (EPS) of $0.39, up 11 percent over the previous year's quarter. Meanwhile, VMware is projecting second quarter revenues of $1.123 billion, an increase of 22 percent from second quarter 2011.
• Intel reported second quarter revenues of $13.5 billion, up 3.6 percent year-over-year. Net income was $2.83 billion, down 4.3 percent from $2.95 billion a year earlier, as operating expenses rose faster than revenues. Consumer demand in North America and Western Europe is not recovering as fast as Intel expected, according to CEO Paul Otellini. He also stated growth in emerging markets such as China and Brazil is also slowing down. For the full fiscal year, Intel now expects sale to grow three to five percent from last year, rather than the "high single digit" level the company predicted earlier. He also noted that Ultrabooks are still relatively expensive but prices are expected to drop to $699 this fall.
• In the quarter just ending, SAP announced it had total revenues of €3.9 billion, an increase of 18 percent over the €3.3 billion booked in second quarter of 2011. The company booked €1.06 billion in new license sales, up 26 percent compared to the year-ago period when it reported €0.84 billion. Software and support revenues for the quarter came to €3.12 billion, a jump of 21 percent. On an IFRS accounting basis, operating profits only rose by 7 percent in the quarter to €920 million. The company boasted of posting its tenth consecutive quarter of double-digit growth in non-IFRS software and software-related service revenues. The company also claimed it had stellar results in SAP HANA, mobile and cloud computing in all regions.

Gray Clouds on the Horizon

Lead Analyst: Cal Braunstein

Focal Points:

• According to a new Gartner Inc. report, global IT spending percentage growth for 2012 is projected to be 3.0 percent, down from 2011 spending growth of 7.9 percent. The brightest spot in the analysis was that the telecom equipment category will grow by 10.8 percent – however that is down from 17.5 percent in the previous year. All the other categories – computer hardware, enterprise software, IT services, and telecom services – are growing slowly between 1.4 percent (telecom services) and 4.3 percent (enterprise software). The drop in spending is attributed to the global economic stresses – the eurozone crisis, weaker U.S. recovery, a slowdown in China, etc. For 2013 Gartner is projecting higher spending on hardware and software in the data center and on the desktop, better growth on telecom hardware (but down from 2012), and slightly higher spending on telecom services. In support of these projections is the latest Challenger, Gray report that shows during the first half of the year, 51,529 planned job cuts were announced across the tech sector. This represents a 260 percent increase over the 14,308 layoffs planned during the first half of 2011. Job cuts are so steep this year that the figure is 39 percent higher than all the job cuts recorded in the tech sector last year. Three tech companies are responsible for most of the job losses – Hewlett-Packard Co. (HP) announced it was slicing headcount by 30,000 and Nokia Corp. and Sony Corp. are each reducing staffing by 10,000. While the outplacement firm expected more cuts to be made over the course of the next six months, it does see bright spots in sectors of the business.
• According to Uptime Institute's recently released 2012 Data Center Industry Survey, cloud deployments have significantly increased globally over the past year. 25 percent of this year's respondents claimed they were adopting public clouds while another 30 percent said they were considering it. Additionally, 49 percent were moving to private clouds while another 37 percent were considering it. In 2011 only 16 percent of respondents stated they had deployed public clouds whereas 35 percent claimed they had deployed private clouds. 32 percent of large organizations use the public cloud, whereas 19 percent of small organizations and 10 percent of "traditional enterprises" employ public clouds. When it comes to private clouds, 65 percent of large organizations have claimed to have deployed private cloud but only 39 percent of small and mid-sized organizations were doing so. Public cloud adoption rates are 52 percent in Asia, 28 percent in Europe, and 22 percent in North America. Private cloud adoption rates are 42 percent in Asia, 52 percent in Europe, and 50 percent in the U.S. Cost savings and scalability were the top two reasons given for moving to the cloud while security was the major inhibitor for not adopting cloud computing (27 and 23 percent respectively), followed distantly by compliance and regulatory issues (64 and 27 percent respectively).
• Oracle announced the results of its big data study, in which 333 C-level executives from U.S. and Canadian enterprises were surveyed. The study examined the pain points that companies face regarding managing the deluge of data that organizations must deal with and how well they are using that information to drive profit and growth. 94 percent of respondents claimed growth with the biggest data growth areas in the areas of customer information (48 percent), operations (34 percent) and sales and marketing (33 percent).  29 percent of executives give their organization a "D" or "F" in preparedness to manage the data influx, while 93 percent of respondents believe their organization is losing revenue opportunities. The projected revenue loss for companies with revenues in excess of $1 billion is estimated to be approximately 13 percent of annual revenue from not fully leveraging the information. Most respondents are frustrated with their organizations' data gathering and distribution systems and almost all are looking to invest in improving information optimization. The communications industry is the most satisfied with its ability to deal with data – 20 percent gave their firms an "A." Executives in public sector, healthcare and utilities industries stated they were the least prepared to handle the data volumes and velocities. 41 percent of public sector executives, 40 percent of healthcare executives, and 39 percent of utilities executives rating themselves with either a "D" or "F" preparedness rating.

RBS Fiasco – A Harbinger of Things to Come?

Lead Analyst: Cal Braunstein

The Royal Bank of Scotland (RBS) group, which includes NatWest and Ulster Bank, recently experienced a massive week-long outage caused by an IT failure. Retail customers were unable to receive or make payments, thereby greatly impacting people's ability to process wages, mortgages, and other transactions; thereby damaging the bank's and people's reputations. The bank's retail customer account system utilizes CA Inc.'s CA-7 batch scheduling software. What should have been a routine procedure and straightforward upgrade fix by operations staff was unintentionally converted into a major catastrophe.

The story is that an operator running the end-of-day overnight batch cycle accidentally erased the entire scheduling queue. This error required the re-entry of the entire queue – a complex process requiring an in-depth understanding of the core system's processes and detailed knowledge of legacy software. All this had to be completed within the overnight batch processing window, which for most firms is tight and leaves little room for error correction and reruns. This proved to be impossible, especially as pent-up demand and payment instructions built up over time in the queue, causing other RBS systems, such as access to its online banking, to be out of service. Eventually RBS had to rerun the previous day's transactions before new ones could be inputted into the system. The delays and backlog of up to 100 million transactions fed upon themselves extending the outage over multiple days.

RFG notes that many observers pointed the finger at the bank's legacy mainframe systems – both the hardware and software. However, RFG believes this is not the real story. The vast majority of banks run their retail customer account systems using mainframes and legacy software every day and this is a rare event. RBS runs on System z servers, so one cannot claim it is using ancient iron that is outdated.

The real culprits are the bank's processes and personnel management. The multi-year banking crisis that RBS (and others) went through caused the firm to undertake cost cutting measures over the past few years. IT organizations were not exempt from the staffing actions and many of the IT jobs were outsourced to a team in India. Reports state that the person responsible for the error was part of this team but an RBS executive claims otherwise. Outsourced or not, two things are evident: the staff was inexperienced and not adequately trained for the task, and processes and procedures did not exist to quickly identify the problems and correct them rapidly. The issues here are not technology but people and process.

Big Buys Shifting Markets

Lead Analyst: Cal Braunstein

Focal Points:

• Microsoft pushed further into the enterprise arena by announcing its intent to purchase Yammer, a cloud services company that provides enterprise social networking, for $1.2 billion. Yammer is a San Francisco-based company with more than five million registered corporate users. Microsoft intends to fold Yammer into its Office Division but the unit will continue to report to the current CEO David Sacks. CEOs Ballmer and Sacks acknowledged Microsoft plans on integrating Yammer's technology with Office, Office 365, Dynamics (CRM) and Skype. Nonetheless, Microsoft will continue to offer Yammer as a standalone cloud service, too. Additionally, Microsoft has acquired Perceptive Pixel, a provider of large multi-touch displays for an undisclosed sum. The company sells 27-, 55-, and 82-inch LCDs and recently announced the first-ever simultaneous pen and touch technology for its devices. Microsoft has not made any statements about its plans for the unit. The New York-based company was founded in 2006 by Jeff Han, a renowned pioneer in multi-touch technology.
• Dell won the bidding war for Quest Software, a provider of access management, data archiving, database, performance and systems tools, with its bid of $2.4 billion. The purchase price was a 44 percent premium to its March 8th closing price – the date when the acquisition talks first began with Insight Venture Partners. Quest is based in Aliso Viejo, CA and, according to Dell, has 3,850 employees of which 1,279 are software engineers in its R&D organization and 1,440 are direct sales representatives. The company also brings along 4,000 channel partners, which were responsible for 40 to 45 percent of sales. Quest had revenues of $858.2 million in 2011, a year-over-year growth rate of 11.9 per cent but net income fell in half to $43.9 million. Gross margins are at 86 percent and the company has more than 100,000 customers worldwide. Once the deal closes, the Quest software should compose approximately 72 percent of Dell's software revenues.
• Ingram Micro spent $840 million for specialist wireless device and services distribution company, BrightPoint. Founded in 1989, BrightPoint had fiscal year 2011 sales of $5.2 billion, up 44 percent year-over-year. The distributor employs 4,000 people in facilities across 24 countries and claims to have 25,000 B2B customers worldwide. Company executives stated the acquisition enabled the firm to achieve its objective of expanding into the mobility market. Meanwhile, Micron acquired the bankrupt and debt-ridden Japanese DRAM manufacturer Elpida for approximately $2.5 billion. The acquisition doubles Micron's DRAM market share to 24 percent, second only to Samsung Group. With this purchase the DRAM supplier market is now limited to three main providers: SK Hynix Inc., Micron, and Samsung.

Trends: HPC, Programming, and Security

Lead Analyst: Cal Braunstein

Focal Points:

• IBM took back the top slot in the supercomputer rankings with the LLNL Sequoia installation, which delivered 16.32 petaflops of sustained performance running across the 1.57 million PowerPC cores inside the box during a Linpack benchmark run. Sequoia has a peak theoretical performance of 20.1 petaflops. To deliver the 16.32 petaflops IBM claims it only consumes 7.89 megawatts. The IBM supercomputer shifted the K massively parallel Sparc64-VIIIfx machine built by Fujitsu Group for the Japanese government down to number two. The Fujitsu Sparc machine had a sustained Linpack performance of 10.5 petaflops against a peak of 11.3 petaflops but it consumed 12.7 megawatts. Sequoia is 2.5 times as energy efficient as the Sparc K. IBM now has five of the top 10 high performance computing (HPC) engines. 372 of the processors, or 74.4 per cent of those on the list, are based on Intel Corp. Xeon or Itanium processors, down slightly from the 384 HPC machines on the November list. The latest Top 500 list has 58 Power-based processors, up from 49 six months ago. There are also 63 clusters based on Advanced Micro Devices Inc.'s (AMD's) Opteron processors, unchanged from last year.
• According to Indeed.com companies are embracing the Web to reach customers and employees and are therefore turning to the programming languages and technology stacks made popular by companies such as Facebook Inc. and Google Inc.   Current programming languages such as C++, Java, and .NET will still be the primary languages for enterprise applications but the scripting languages will dominate the Internet. The below chart produced by Indeed.com shows the variances in job growth rates. Aside from the Internet movement another key reason for the adoption of PHP and Python is the movement to open source. Python appears to be a run-away winner because of its design elegance and framework simplicity. The next most used languages are Java and then .NET.

• Symantec released the findings of its 2011 SMB File Sharing Survey of more than 1,325 SMB organizations this week. The survey results found SMB employees are increasingly adopting unmanaged, personal-use online file sharing solutions without permission from IT. These behaviors are making organizations vulnerable to potential data losses and security threats. A Symantec executive observed that a staggering 71 percent of small businesses that suffer from a cyber attack never recover. 74 percent of respondents who adopted online file sharing did so to improve their productivity. Respondents also cited risk concerns included sharing confidential information using unapproved solutions (44 percent), malware (44 percent), loss of confidential or proprietary information (43 percent), breach of confidential information (41 percent), embarrassment or damage to brand/reputation (37 percent), and violating regulatory rules (34 percent). However, only half of the respondents stated they would go to IT for help with sharing large files while only one-third expressed interest in utilizing an already existing IT solution. 14 percent now report the average shared file size is greater than 1 GB. Additionally, more and more people are remote. The survey found that about 37 percent of SMB organizations will have employees working remotely, up from 32 percent today.

On the Mobile Platform Horizon

Focal Points:

• In an announcement that came as a surprise to most observers this week, Microsoft showcased its new Surface tablet design in hardware that will be Microsoft branded. Not to be confused with a tabletop touchscreen design of the same name from the company a few years back, the tablet-sized Surface comes in two flavors running different versions of Windows 8. The mainstream Surface runs Windows 8 RT and is powered by ARM-based processors from Nvidia Corp. while the higher-end version will run Windows 8 Pro and uses Intel Corp. Ivy Bridge processors. Both devices will feature 10.6 inch screens, have built-in kickstands, magnetized screen covers that double as keyboards with a touchpad, and USB ports for connecting to peripherals.  The Surface running Windows 8 RT will come in 32 GB and 64 GB storage variants, has dimensions similar to Apple's iPad at 9.3 millimeters thick, weigh 1.5 pounds, and is priced to compete with similar tablets. The Windows 8 Pro version will weigh more and be priced higher than the Windows 8 RT offering and will offer 64 GB and 128 GB storage sizes. Though a firm launch date was not announced, availability for the ARM-based Surface should coincide with the Windows 8 launch in October and the Pro version should begin within a few months thereafter.
• Apple updated its MacBook Pro notebook this week by showcasing a slimline 0.71-inch aluminum unibody design more similar to the MacBook Air than the model it replaces. The MacBook Pro's "showstopper" is the inclusion of a 15.4-inch "retina" high resolution display similar in clarity to those on Apple's latest iPad and iPhone models. Apple has decided to drop its 17-inch display MacBook Pro and is expected to introduce a 13-inch variant with the retina display late this year. Being in the top position in the MacBook line, new models will feature quad-core Intel i7 Ivy Bridge processors, battery life lasting up to a claimed 7.5 hours, memory  configurations between 8 GB and 16 GB, solid state disk (SSD) storage in three flavors ranging from 256 GB to 768 GB.  As with most Apple hardware designs, the notebooks are not designed to be user-upgradable and require specialized tools to service or upgrade the battery, RAM, and SSD. Pricing starts at $2,199 for the model with a 2.3 gigahertz (GHz) processor, 8 GB RAM, and 256 GB of flash storage.
• Both RIM and Nokia suffered votes of "no confidence" this week as the companies struggle to survive in evolving smartphone and tablet markets. A Toronto-based equipment supplier for RIM announced that it is discontinuing manufacturing services for BlackBerry devices over the next three to six months and will take a $1 billion charge due to unsold equipment. The smartphone company's response was somewhat evasive as it noted making "changes to our supply chain as part of wider efforts to improve the efficiency and cost effectiveness." As RIM continues to prepare for the launch of forthcoming BlackBerry 10-based devices slated for release in October, the company said it will shed around 2,000 jobs – 11 percent of its workforce – to save $1 billion by its 2013 fiscal year. Similarly, Nokia detailed a series of sweeping changes that included shedding 10,000 jobs, reducing research and development efforts, and replacing some senior executives. Moody's Investors Service, Inc. slashed Nokia's credit rating to "junk" after the announcement.

RIM Slides, HP Offers DC Architecture, Security Breaches

Lead Analyst: Adam Braunstein

In the latest round of disappointing news from smartphone vendor Research in Motion, Ltd. , the company declared that it will miss quarterly projections and has solicited the advice of two banks to help it evaluate future revenue options. To improve the energy efficiency of data center operations, Hewlett-Packard, Co.'s new Net-Zero Energy Data Center architecture works to marry renewable energy supply with IT workloads. Lastly, several security breaches leaked passwords onto the Web.

Focal Points:

• Things continue to decline for troubled smartphone vendor RIM as the company announced that it will miss previous estimates for its March-June quarter and that it has hired two banking firms to help it evaluate future opportunities. The company further declared that it intends to institute "significant" staff reductions this year as it aims to shave $1 billion out of its operating costs. Sales of BlackBerries in the U.S. have fallen more than 60 percent since 2009 while its stock has plummeted 93 percent since its high in 2008; reaching its lowest level since 2003. Hoping for a marked turnaround after the release of the highly-revised BlackBerry 10 later this year, new CEO Thorsten Heins has previously declared that the company will abandon the consumer market to focus on enterprise sales. The company now claims 78 million subscribers worldwide and accounts for approximately 6.5 percent of the global smartphone market. RIM's secure, managed network and robust patent portfolio could be worth north of $8 billion. Elsewhere, RIM also announced that it is discontinuing production of the 16 GB PlayBook tablet and will concentrate production on the larger 32 GB and 64 GB models.
• HP Labs has unveiled a new data center architecture, called the HP Net-Zero Energy Data Center, designed to cut total power usage by 30 percent and dependence on grid power by more than 80 percent. The model centers around a management architecture that marries IT workload planning and energy and cooling resources using four core HP modules. A prediction module forecasts costs and availability, a planning module balances workload with processing requirements, and an execution module allows for real-time management. Lastly, a verification and reporting module helps ensure gaps are closed between predictions and real-world behaviors. The paradigm calls for matching energy supply with energy usage required by the IT workload to maximize the usage of available energy. Non-essential, batch workloads that do not require immediate processing would be scheduled during daylight hours when power from solar arrays is most plentiful, for example.
• Several high-profile breaches were reported this week including one where 6.5 million LinkedIn passwords were leaked on the Internet. While it is unclear when the hack took place, a hacker possibly based out of Russia posted the hashed passwords sans usernames to a Russian forum over three days in the last week. One leading security firm surmises that about 60 percent of the SHA-1 passwords have already been cracked. LinkedIn has said that it is contacting users whose accounts have been compromised and instructing them as to how to reset their passwords. In an unrelated attack, dating site eHarmony has also admitted that an unknown quantity of member passwords has been stolen. Presidential nominee Mitt Romney had one of his personal e-mail accounts compromised this week by an anonymous prowler who was able to execute a password reset by correctly guessing the answers to password reset security questions. This follows the method employed to obtain access to one of vice presidential candidate Sarah Palin's personal accounts nearly four years ago.

CEO Surveys

Lead Analyst: Cal Braunstein

IBM Corp. and PricewaterhouseCoopers, LLC released results from their global CEO surveys. For the first time the IBM study identified technology as the most important external force impacting the business. Both studies recognized the need to employ finer customer segmentation and use IT to change business processes to take advantage of new opportunities.

Focal Points:

• IBM released results of its fifth biennial CEO survey, in which the company interviewed more than 1700 CEOs with more than six years tenure in 64 countries. One of the top findings was that technology is now driving more organizational change than any other force, including the economy. In this regard, outperformers embrace openness, excel in executing tough changes, differentiate themselves through better data access and insights which are put into action, and are more likely to partner for innovation and driving revenues from new sources. The top three sources of sustained economic value come from human capital, customer relationships and products/services innovation. Internal and external collaboration are being used as tools for creating organizational change. The second finding was that CEOs create more economic value by engaging customers as individuals. These companies are investing in getting customers to share their insights into what they value individually, and when and how they want to interact. Then they develop and execute plans to interact using social media as well as traditional face-to-face engagements. Outperformers in this category strongly differentiate themselves through better data access, insight, and translation into actions. While big data is playing a role in this dimensional change, other factors are the old fashioned way of listening and capturing what employees see and hear, and then being where the customer expects the company to be.
• The third major CEO survey finding was that CEOs create more economic value by pursuing more disruptive innovation with partners and collaborating to drive new revenue sources. In some cases they create new industries while in others they merely move into new industries. Two of the keys to more effectively meeting the partnership challenge are making the partnerships personal and breaking the traditional collaboration boundaries. In effect, these companies are themselves becoming disruptors. While CEOs have shifted to address the transformational needs of the organization, CFOs are still concerned with controlling cost and improving efficiency. In a separate IBM retail study, IBM found most customers were willing to share information if they perceived there was a benefit to doing so. The greatest areas of reluctance for data sharing were in the categories of financial and medical data.

• The PwC study of more than 160 CEOs in the U.S. identified customer demand as the primary driver of corporate strategy in 2012. While the executives are slightly less optimistic than last year, 40 percent expect their own companies will grow and approximately the same number expect to complete a cross-border merger or acquisition this year. To deliver on their strategies CEOs are reconfiguring operations in local markets, nurturing talent and addressing potential talent shortages, and encouraging the free flow of ideas and innovations. Two significant findings in the survey were a major jump in the concern about competitive threats (73 percent of the CEOs are worried) and a considerable decline in anxiety about risk exposure (a 20 point drop to 19 percent). PwC notes that with more growth opportunities arising in distant lands business leaders are acknowledging that an overly conservative attitude will put their companies at a competitive disadvantage. Lastly, PwC determined that the top CEO priorities overseas are growing the customer base followed by access to the local talent base. Additionally, the PwC study confirmed one of the IBM findings – most CEOs were planning on entering into new strategic alliances or joint ventures this year.