Summary for Top Industry Predicts 2012

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Analysis
This is a summary review of the Gartner top predictions from the Gartner Predicts 2012 Special Report.
As users take more control of the devices they will use, business managers are taking more control of
the budgets IT organizations have watched shift over the past few years. Loss of control echoes through
several predictions in this report. This comes with the necessary result of more focus on certifications
and a relentless attention to security in a changing world. As the world of IT moves forward, it is finding
that it must coordinate activities in a much wider scope than it once controlled.

Gartner's top predictions for 2012 showcase the trends and events that will change the nature of
business today and beyond.

Selected from across our research areas as the most compelling and critical predictions, the full report
features the trends and topics in 2012 which speak to the reduction of control IT has over the forces
that affect it.

This report is a summary of a more comprehensive research document available only to Gartner’s
clients. The full report includes:

 The Top 11 end user-specific predictions

 Key findings that led our analysts to develop their predictions
 The full range of market implications
 Actionable recommendations for industry IT leaders
 Related research to help you tackle your key initiatives in 2012

To learn how to gain access to this and other research that can help you achieve your goals, contact your
account executive or email thoughtleadership@gartner.com .

Top End-User Predictions for 2012

 In 2013, the investment bubble will burst for consumer social networks, and for enterprise social
software companies in 2014.
 By 2014, 20% of Asia-sourced finished goods and assemblies consumed in the U.S. will shift to
the Americas.
 By 2015, mobile application development (AD) projects targeting smartphones and tablets will
outnumber native PC projects by a ratio of 4-to-1.
 By 2015, 35% of enterprise IT expenditures for most organizations will be managed outside the
IT department's budget.

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  Through 2016, the financial impact of cybercrime will grow 10% per year, due to the continuing
discovery of new vulnerabilities.
 By 2015, the prices for 80% of cloud services will include a global energy surcharge.
 Through 2015, more than 85% of Fortune 500 organizations will fail to effectively exploit big
data for competitive advantage.
 By 2015, low-cost cloud services will cannibalize up to 15% of top outsourcing players' revenue.
 By 2016, at least 50% of enterprise email users will rely primarily on a browser, tablet or mobile
client, instead of a desktop client.
 By 2016, 40% of enterprises will make proof of independent security testing a precondition for
using any type of cloud service.
 At YE16, more than 50% of Global 1000 companies will have stored customer-sensitive data in
the public cloud.

Market Implications:
ILCS offerings will reset the ITO market price in the next five years. We expect to see marketing
messages like "We manage your SAP infrastructure for less than $10 per user per month. Why are you
spending more?" to increasingly fuel CFOs' and CEOs' interest, further pushing IT spending as an
operating expense externally delivered and no longer a capital expense internally managed.

This sort of benchmark will accelerate the transition toward industrialized, cloud-based services, and will
heavily impact the renewal of ITO contracts in the next five years. Clients will either migrate toward new
providers or ask their traditional outsourcers to deliver these services at the right service quality and
price points.

In 2013, the investment bubble will burst for consumer social networks, and for enterprise social
software companies in 2014.

Market Implications:
Social networking is one of the top activities on the Internet. The overall number of users continues to
rise, but the overall growth rate will slow over the next two years as the number of unaffiliated
consumer declines. New entrants, therefore, will have a much smaller pool of consumers to target,
making the staggering growth rates of established networks difficult to reproduce.

Penetration rates for social networking in the enterprise are still low, so there is substantial room for
growth. But the delta between best-of-breed independent vendors and mega vendors has diminished
substantially over the past two years, and will continue to erode, making it difficult for organizations to
justify an investment with a small supplier.

By 2016, at least 50% of enterprise email users will rely primarily on a browser, tablet or mobile client,
instead of a desktop client.

Market Implications:
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We expect mobile device manufacturers — Apple, Nokia, Samsung, LG, Motorola, etc. — to enter a new
phase of competition to offer rich email clients to maintain rough parity and to establish competitive
differential. Email system vendors — Microsoft, IBM, VMware and Google — are also likely to build
mobile clients for diverse set of devices for the same reason.

Market opportunities for mobile device management platform vendors will soar. Increased pressure will
be on those suppliers to accommodate an increasing portfolio of collaboration services, including IM,
Web conferencing, social networking and shared workspaces.

By 2015, mobile AD projects targeting smartphones and tablets will outnumber native PC projects by
a ratio of 4-to-1.

Market Implications:
Smartphones and tablets represent over 90% of the net-new growth in device adoption for the coming
four years, and the increasing application platform capability across all classes of mobile phones is
spurring a new frontier of innovation, particularly where mobile capabilities can be integrated with
location, presence and social information to enhance usefulness.

Web enablement, especially with the advent of HTML5, is a key part of mobile application strategy,
native or rich mobile AD demands are being triggered in all three areas—B2C, B2E, B2B (see full report
for more detailed analysis)

By 2016, 40% of enterprises will make proof of independent security testing a precondition for using
any type of cloud service.

Market Implications:
Cloud providers of all kinds — including providers of application operations, data management,
infrastructure management and security — will become top targets for hackers from all over the world.
This is because cloud providers store critical data from a large number of cloud clients, which, from the
hackers' viewpoint, is worth stealing, and run applications that are worth abusing. For this reason, while
enterprises are evaluating the potential cloud benefits in terms of management simplicity, economies of
scale and workforce optimization, it is equally critical that they carefully evaluate cloud services for their
ability to resist security threats and attacks.

Enterprises will be unable to test cloud providers' systems themselves for a number of reasons. The
applications the cloud provider uses to service its clients are its most valuable intellectual property, and
the provider will likely be reluctant to grant access to them for inspection purposes. Moreover, even
when inspection is authorized by the cloud provider, most enterprises do not have the necessary skills
or resources to conduct such security testing. For this reason, many enterprises will use cloud services
brokerages as the inspecting agency.

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At YE16, more than 50% of Global 1000 companies will have stored customer-sensitive data in the
public cloud.

Market Implications:
As global organizations commence a progressive journey to the public cloud, their primary objectives to
consistently delight patriotic and new customers, as well as improve business performance, will
continue to remain a priority. In so doing, organizations will reduce operational costs, gain efficiency,
increase business agility and attain regulatory compliance. This journey to the public cloud will take
organizations to the next level to fulfill these objectives; however, it will inevitably prove to be one with
its fair set of challenges.

Organizations will recognize the need to re-engineer their business processes and governance/data
retention policies as they embark on the public cloud. The growth of organizational roles such as legal
counsel, infrastructure planning engineers, and network and security specialists will be in much greater
demand.

By 2015, 35% of enterprise IT expenditures for most organizations will be managed outside the IT
department's budget.

Market Implications:
A constant refrain from CIOs has been the desire to drive greater alignment between the IT organization
and the rest of the business. Underlying this wish was the hope that the business would better
understand the inherent potential of IT. That wish is rapidly coming true, but not necessarily in the way
most in the IT profession would have imagined. Rather than seeking IT professionals help to apply
established IT products within established IT practices, non-IT professionals are understanding the
transformative potential of digitization and are applying these ideas in their own way.

The modern marketing organization is a perfect example. As recently as 15 years ago, marketing was
dominated by creative thinkers who obsessed over ephemeral brand messages, while taking great pride
in a 5% response rate on direct mail campaigns. Today's marketing profession is obsessed with gathering
and analyzing information. They have an increasingly nuanced understanding of social media borne from
constant trial and error.

By 2014, 20% of Asia-sourced finished goods and assemblies consumed in the U.S. will shift to the
Americas.

Market Implications:
Customer demand for service excellence and increased product choice at competitive prices are driving
brand owners to reassess the value delivered by their supply networks. Sacrificing lead time for reduced
unit costs will be insufficient to satisfy this customer requirement.

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Enterprises must analyze their supply chain networks. They need capabilities to perform supply chain
segmentation and a more comprehensive cost-to-serve analysis that includes agility and risks, such as
excess or obsolete inventory, quality problems and intellectual property theft, in addition to per-unit
costs.

Through 2016, the financial impact of cybercrime will grow 10% per year, due to the continuing
discovery of new vulnerabilities.

Market Implications:
At every major change in the way IT gets delivered (going from mainframe to client/server, client/server
to Web, etc.), software development and IT operations management processes break, and new forms of
vulnerabilities are introduced and exploited by attackers. In the 2011 to 2016 time frame, IT delivery is
changing to add the use of cloud-based services and support the use of employee-owned laptops,
smartphones and tablets.

At the same time, cyber-attacks have moved from simple vandalism to targeted, financially motivated
attacks that use sophisticated techniques to evade detection and steal sensitive business and customer
data. These methods are often used later by politically motivated attackers (such as Anonymous), as
well as nation-launched attacks, often called advanced persistent threats.

By 2015, the prices for 80% of cloud services will include a global energy surcharge.

Market Implications:
With the increasing scale of cloud-oriented data centers, allied with growing transaction volumes and
increased computing efficiency, the actual cost breakdown of a single transaction is steadily evolving.
Hardware, software and facility costs are all declining as a result of scale, Moore's law and increasing
volume. As a result, energy costs (both to power the hardware and to dissipate the resultant heat) are
steadily increasing as a percentage of overall transaction costs.

While cloud operators can make strategic decisions about locations, tax subsidies are no long-term
answer to managing costs, and investments in renewable-energy sources remain costly. Cloud
operators, therefore, face a future in which an increasing element of their cost structure is externally
influenced and controlled, highly volatile and under significant upward pressure due to sustainability
issues. Some cloud data center operators already include an energy surcharge in their pricing package,
and we believe this trend will rapidly escalate to include the majority of operators — driven by
competitive pressures and a "me too" approach.

Through 2015, more than 85% of Fortune 500 organizations will fail to effectively exploit big data for
competitive advantage.

Market Implications:

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As the number and diversity of smart devices grows, so does the volume of data they generate.
Increasing storage of data in the cloud and enhanced public access to this amplifies the issue. New types
of data — location, time, state of sensors, for example, together with increased volumes of rich media
— serve to further increase the avalanche of data facing organizations.

As a result, most organizations will face the challenge of addressing the issues of big data. It is
unfortunate that this popular term focuses the attention on the volume of data alone. While volume is
an issue, the complementary aspects of velocity (the speed with which data is being presented), variety
(the broad range of data types being presented) and complexity (especially around the growing volume
of unstructured data from social networks and elsewhere) are equally challenging. Hence, big data is
actually better thought of as a popular term for the extreme information management issues that arise
when accessible data starts to overwhelm the existing information management infrastructure.