Global Applications Stores 2012 – Big growth led by iTunes & Android Apps stores

The mobile applications market has survived the volatile economic conditions and crises since July 2008 when Apple launched its App Store, a digital application distribution platform for iOS, as an update to iTunes Store through which iOS users (iPhone, Mac, iPad, iPod) can browse and download applications. Following Apple App Store success Google launched its own App Store, Android market place (currently known as Google Play) in October 2008. According to ABI estimates revenue from mobile app store purchases could increase from $8.5billion in 2011 to $46billion by 2016 dominated by iPhone App Store, Google Play, Blackberry RIM ( presently not doing well), and Windows 8 Apps (aggressive push from Microsoft). As per a report by IHS, formerly called iSuppli, downloads in both stores combined will cross 85 billion by the year 2016. The app revenue generated in 2012 is $1.68 billion for Google Play, and $2.53 billion for the App Store.

Apple's App Store currently contains about 700,000 apps, for iPhone, iPad, or both and more than 35 billion downloads till to date. According to Telecom Lead America, Apple App Store revenue is expected to increase to $4.9 billion in 2012, up from $2.9 billion in 2011 and commands about 65 percent share of the global application store market in 2012. Apple has said it has more than 435 million active accounts with credit cards and that it had paid out a total of $6.5 billion to developers as of October 2012, up from $4 billion in January. Apple takes a 30 percent cut of transactions made in its App store. According to ABI, Apple's strengths include a powerful development environment, a curated App Store promoting quality apps, and smooth commerce integration with iTunes accounts and credit cards. But off late Apple App Store revenues are seeing slight slowdown.

In March 2012, Google redesigned its app store, Android Market Place and re-branded it Google Play, with a new look and increased content including digital music, movies, games and apps all available on Google Play and recently it crossed more than 700,000 applications equal to Apple App Store. Google has significantly improved its app store but it still suffers from weak commerce tools or monetization issues, as most of the apps are free on Play. That has an impact on app revenue, as Android apps only earn 24 cents per active user for every $1 earned on iOS according to ABI research. Recently Google announced the downloading of the 25 billion applications. Google mobile revenues rose to $8 billion in 2012, a significant increase over the company’s $2.5 billion in mobile ads revenue reported in 2011. Google’s Sr.VP and CFO Patrick Pichette pointed out that the $8 billion in revenue includes mobile ads and sales of Google Play mobile content and spending on Play apps. Google Play revenue includes app purchases, in-app purchases, eBooks, movie and TV purchases, and more. As of 19 October 2012, developers in 32 countries were able to distribute paid applications on Google Play and developers pay $25 for registration to distribute on the Android Market.

Windows Phone Store (formerly Windows Phone Marketplace till August 2012) is a service by Microsoft for its Windows Phone platform that allows users to browse and download applications that have been developed by third-parties which also features "Metro UI", the UI is presented in a "panoramic view" where the user can browse categories and titles, see featured items, and get details with ratings, reviews, screen shots, and pricing information, according to Wikipedia. The Windows Store now has 120,000 apps, accessible in 191 countries and the company highlights the fact that 46 of top 50 smartphone apps are available on Windows phone Store. Microsoft’s has launched a revamped Windows Phone Store to go hand-in-hand with the official arrival of Windows Phone 8.

Nokia Ovi Store was launched worldwide in May 2009 and customers can download mobile games, applications, videos, images, and ringing tones to their Nokia devices. In May 2011, Nokia announced plans to rebrand its Ovi product line under the Nokia brand and Ovi Store was renamed Nokia Store in October 2011. Globally, there more than 150 million registered Nokia Store customers and Store offers more than 120,000 apps, and currently sees more than 17 million downloads per day, with 50%+ coming from Series 40 phones.  To date, Nokia Store has driven more than 6 billion downloads and offers operator billing supported by 145 operators, across 52 markets. 80% of Nokia Store traffic converts to a download, and apps are No. 1 among paid-for and free downloads. Nokia Store is available in 190+ countries, of which 90% are served in their local language. 505 developers have achieved more than 1M downloads through Nokia Store, while 63 have achieved 10M or more, 41 with 25M or more, 13 with 50M or more, and 3 developers have now passed the 100M downloads milestone according to Nokia Developer site.

At BlackBerry Jam in September 2012, RIM announced that App World had more than 105,000 apps. Based on Vision Mobile data, BlackBerry developers generate an average of 4 percent more revenue per app a month than those on iOS. BlackBerry App World is an application distribution service and application by Research In Motion (RIM) for a majority of BlackBerry devices. The service provides BlackBerry users with an environment to browse, download, and update third-party applications. The service went live on April 1, 2009 according to Wikipedia. App World recently crossed 3 billion downloads since the store launch.

Michael Walkley, a Canaccord Genuity analyst estimated that Samsung would be able to sell 303.6 million handsets in 2013 while the American iPhone-maker is likely to sell 194 million iPhones and 102 million iPad units. Smartphones powered by Microsoft’s Windows Phone 8 software also posted a boost in the third quarter, increasing the company’s market share by 2 percent. Blackberry is also expected to launch its new smart phones based on BB10 OS in January 2013. App Store Industry is expected to continue its growth in near future as more and more apps are developed by developers and store access is extended to other countries which do not have access right now. All the App Stores are investing in further developing the platforms and devices, monetizing and revenue sharing with developers and encouraging developers by investing millions of dollars. 

A look at Verticalization strategy adoption by Indian Outsourcing Vendors 2012

Indian outsourcing vendors have adopted verticalization strategy since 2008 and they have restructured their organizations based on specific industry verticals like Banking Financial Services & Insurance (BFSI), Pharmaceutical, Manufacturing, Retail, etc. and have appointed business heads for each vertical with significant responsibility and accountability in terms of revenue maximization, profit & loss, developing specific domain skills and expertise that includes acquiring the required human resources for this purpose and train them accordingly.  All the Indian Outsourcing vendors like TCS, Infosys, Wipro, HCL Technologies and even BPO players like Genpact, WNS, Aditya Birla Minacs, etc. have all adopted the verticalization strategy and invested significant amounts in developing the domain skills, products, platforms, and intellectual property and also used M&A strategy to acquire companies/players with specific domain skills.  According to NASSCOM, the Indian BPO industry is moving from efficiency to effectiveness while focusing on re-engineering themselves in order to deliver transformational impact to customers. The industry is developing future-ready solutions by following a verticalized approach by developing in-depth capabilities across verticals and creating customer impact through service delivery excellence.

Indian Outsourcing industry that included IT and Business Process vendors both are experiencing slower growth rates since past five years where the slowdown is because of the Global Financial Crisis and European Sovereign debt crisis. Outsourcing clients are constantly demanding lower prices for the work, increasingly rationalizing their portfolio, looking to do more work with fewer Vendors and are also demanding the Indian Outsourcing Vendors bring more value to their relationships by providing them services that will have significant impact on the clients businesses. These are some of the reasons that have forced the Indian Vendors to adopt Verticalization strategy and Verticalization is one of the ways providers are seeking to deal with this changing industry and looking to create more value to their clients. According to Peter Bendor-Samuel, Chief Executive Officer, Everest Group, the move to verticalization is a reflection of a maturing services industry and secular pressures on the provider community. Large Indian IT Vendors like TCS, Cognizant Technologies, Infosys, Wipro, and HCL Technologies have realized and adopted the vertical strategy for the past five years and have reaped significant benefits from this strategy.

Verticalization strategy helps the vendors to focus on key verticals and since organizations are aligned according to key verticals, accountability and responsibility at the account level and enterprise level will help in increasing revenues and also enable sharing domain specific knowledge and expertise across accounts thereby enhancing vertical group’s ability to engage with existing clients and potential clients in the specific industry verticals. Products and Platforms based on reusable IP can be developed based on the domain specific offerings of the existing accounts/clients, thereby increasing the nonlinear revenues of the vendors as the Indian vendors are aggressively looking to increase nonlinear revenues. Biggest challenges for the Indian vendors are recruiting the domain specific skilled talent and training the existing talent to enable them offer innovative and client requirement based offerings and also vendors have to invest millions of dollars for developing the products, platforms and Intellectual property. Acquisitions is another way Indian Vendors are looking to build industry vertical expertise where in TCS acquisition of Citi Bank back office in India and its acquisition of Diligenta, insurance outsourcing specialist which got the US$ 2.2 billion Friends Life deal, Infosys acquisition of Lodestone Consulting and sourcing & procurement vendor Portland Group and Infosys 3.0 strategy emphasizes the vertical specific focus, HCL Tech acquisition of Axon and Wipro acquisition of Promax and it also kept a budget of US$ 1 bn for M&A. Vertical strategy is key for the nonlinear revenue growth that all the major Indian Outsourcing vendors are focusing on for future revenue growth.

Discussion Points : 
1.Is the present verticalization strategy adopted by Indian Outsourcing vendors is effective?
2.What factors forced the Indian Outsourcing Vendors to adopt the Verticalization Strategy?
3.What are the advantages of the Verticalization strategy particularly for Indian Outsourcing Vendors?