1.
The 2014 Strategy&
Global ICT 50 study
Battle for
the cloud

2.
2 Strategy&
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This is the third annual edition of the Strategy& Global Information, Communications, and
Technology 50 study. For previous years’ studies, published by Strategy& and our magazine,
strategy+business, see strategyand.pwc.com/global/home/what-we-think/digitization/suppliers.

3.
Strategy& 3
Olaf Acker is a partner with Strategy& based in the firm’s Frankfurt
and Dubai offices. He focuses on business technology strategy and
operating model transformation programs for global companies in the
telecommunications, media, and technology industries.
Germar Schröder is a partner in Strategy&’s Frankfurt office. He
focuses on communications clients and ICT service providers, and has
led several initiatives for product development, go-to-market, and
operating model design, specifically for the cloud.
Florian Gröne is a principal with Strategy& based in New York
and Berlin. He works with communications, media, and technology
companies on new customer experiences, products, and services,
and building operating and technology models for the digital age.
Florian Muhss is a senior associate with Strategy& based in Düsseldorf.
He focuses on business technology strategy and transformation topics
for ICT service providers and communications clients.
Strategy& associate Markus Weiss also contributed to this report.
About the authors

4.
4 Strategy&
Executive summary
In companies around the world, the transition to an almost fully
digitized business environment is happening with remarkable
speed. Virtually every large corporation is gathering huge amounts
of data on key elements of its operations — customers, financial
performance, manufacturing, retailing, and supply chains, among
others — and crunching that data with advanced analytical
software. Digital fabrication is transforming manufacturing
processes, and the “Internet of things” is connecting sensors
that monitor everything from toothbrushes and thermostats to
giant industrial turbines. The companies at the forefront of these
technology industry trends have already gained a competitive
edge over their slower rivals.
A key factor has been the move to cloud computing. Virtually every
large organization is using interconnected, shared infrastructure —
comprising servers, software, connections, and information — in a
utility-like fashion, connected over the Internet. The power and ubiquity
of cloud computing–based services can be found in both public clouds
(shared by customers) and private clouds (dedicated to one company).
Without the cloud, it would be far more difficult for companies to
gather, store, analyze, and use the mountains of data so critical to
success today. And as cloud computing becomes ubiquitous, it is also
transforming how companies build and manage the information
technology they need to run their businesses.
This transition affects just about every aspect of the information and
communications technology (ICT) industry, the industry that makes
business digitization possible. Current technology industry trends are
lowering the prices of IT services and software, generally changing
the business model to one of flexible subscriptions rather than outright
purchases. In the short run, this may dramatically push down IT
revenues for the suppliers of digitization, but it could also lock in
customer relationships, enable speedier customization of products and
services, and intensify innovation and global expansion. The net effect
could be to concentrate business further around the top few technology

5.
Strategy& 5
industry players, which will all offer cloud-based platforms at a
massive global scale.
These trends are evident in this year’s Strategy& ICT 50. We analyze
and rank the influence and demonstrated business success of the
50 largest publicly held companies that supply digitization-related
products, services, and infrastructure to enterprises, governments,
and other organizations around the world. Our goal is twofold: First,
we seek to provide the industry itself with a view of the relative position
and potential of its strongest companies. Second, we hope to help the
large companies that use ICT products and services gain a better
understanding of their technological options, especially in building
their own distinctive capabilities.
The ICT 50 rankings are based on a carefully weighted formula
that takes four critical criteria into account: financial performance,
portfolio strength, go-to-market footprint, and innovation and
branding (see Methodology, page 31). Together, these criteria determine
the influence that companies have as providers of digitization-related
products and services. The results reveal several widespread changes
in the industry this year. The market for hardware, software, and
services is becoming more difficult; customers are more sophisticated;
software is migrating to subscription-based revenue forms; and broader
geographic footprints appear to be more important. Finally, as activity
migrates to online interconnected computer resources, a battle for the
cloud is brewing. Companies need to establish a distinctive position in
the converging digital field, with less regard than in the past for which
sector they occupy.

6.
6 Strategy&
Introduction
The influence of digitization is moving quickly through every company.
Digitization is not just the adoption of new technologies, but the
resulting transformation of life and work. Today’s new technologies,
such as the cloud, big data, and the “Internet of things,” are rapidly
being woven into the fabric of business, as other technologies were
before them. This is having a more dramatic effect than many people
realize — not just on their customers, but on the industry that supplies
these tools.
In this, our third annual Strategy& Global Information, Communications,
and Technology (ICT) 50 study, we examine the top technology and
communications suppliers in order to gauge more carefully just how fast
these changes are taking place. As in the past, we divided the ICT 50
companies into six sectors and subsectors: hardware (formerly called
“hardware and infrastructure”), software (formerly called “software
and Internet”), IT services (which we broke down further into the
global, offshore, and regional players), and telecom (see “How the sectors
are defined,” next page). We then looked at them across four critical
criteria: financial performance, portfolio strength, go-to-market
footprint, and innovation and branding. This year, IBM again took
the top spot in the rankings, followed by Microsoft, SAP, Oracle, and
Cisco Systems.
In 2013, we added a new section in which we analyzed the “puretone”
ways to play that these companies take in their approach to their
markets. There are six generic archetypes that describe how the ICT 50
companies can create value for their customers. This year, we analyzed
how the puretones correspond to market success for the ICT 50
(see “The winners’ puretones,” page 28).
We also looked more closely at how the top five companies are
incorporating their distinct puretones into their efforts to build
and scale up their cloud business. So far, a consolidator strategy —
using acquisitions to gain the capabilities and scale needed to dominate
a category — appears to be the puretone of choice among all five,
although each has its own variation on that strategy, all in hopes of

7.
Strategy& 7
How the sectors are defined
Even though many of the companies
making up the ICT 50 get revenues from
more than one sector — especially large
ones like Apple and IBM — we place
them in the sector from which they
generate the most revenue.
Hardware. This sector includes the
companies — Apple, Cisco, HP, and
Xerox, among others — that make the
PCs, smartphones, tablets, routers, and
telecom and networking infrastructure
equipment that underpin our digital
world. Yet as hardware becomes
more commoditized — or simply less
important — they are diversifying into
software, services, and other businesses.
Software. This sector, including
companies like Google, Microsoft,
Oracle, and SAP, makes the software
on which both companies and
consumers depend. Software companies
increasingly provide their wares
as cloud-based services using an
increasingly commoditized connectivity
layer. These services are becoming
known as “over-the-top” (OTT)
services. Some of the software and
OTT companies are also moving into
other sectors — notably hardware
and, in the case of Google Fiber,
telecom — in hopes of reinforcing
their core software businesses.
IT services. The firms in this sector
provide the critical IT services,
including network hosting, managing
enterprise-level business applications,
and integrating hardware and software.
It is a large group, and we divide it
further into three subgroups. The
global companies, the largest subgroup,
continue to lead the sector; they include
Accenture, CSC, and IBM. The regional
service providers continue to struggle
to define their position and gain market
share; this year’s list changed almost
entirely from last year’s — only France’s
Atos remained. Finally, the offshore IT
service providers, all of which are based
in India, including HCL, Infosys, and
Wipro, keep growing strongly, as they
try to expand into new developed and
developing markets.
Telecom. These companies offer a wide
variety of communications services,
including fixed and mobile voice
and broadband, and even television.
Though growth in the sector remains
weak, M&A activity has been on the
rise. Following SoftBank’s acquisition
of Sprint, speculation has surrounded
possible suitors for Deutsche Telekom’s
U.S. wireless operations. In Europe,
Vodafone recently acquired cable
providers Kabel Deutschland and Ono
in Spain, and Telefónica’s German O2
subsidiary is merging with KPN’s former
E-Plus wireless operation. These deals
are intended to increase reach, scale, and
synergies for operators that have been
struggling to move beyond providing
commoditized connectivity service.
winning the battle for the cloud (see the profiles of IBM on page 15,
Microsoft on page 18, SAP on page 21, Oracle on page 24, and Cisco
on page 27).

8.
8 Strategy&
Shifting priorities
The major change we see this year is the growing importance of
cloud computing, a subject that no longer needs to be introduced with
caveats about “the hype.” The cloud is real, and virtually every large
organization is using it in some form or another — private, public, or
hybrid — to help gather, store, analyze, and use the mountains of data
so critical to success today. Indeed, the question most often asked about
the cloud has shifted from “How do we build one?” to “What can we
do now that we have one?” And as cloud computing becomes ubiquitous,
it is transforming how companies build and manage the information
technology they need to run their businesses.
The shift to the cloud has had a particularly significant impact on the
companies that provide the software, services, and communications
technologies all businesses need if they are to take advantage of
digitization. In some respects, the ICT supplier space has remained
stable; 13 of the top 15 companies from 2013 remained in the top
15 this year. But the rest of the list has changed dramatically, and one
group of companies — software providers — is increasingly dominant.
That’s largely a result of the growing impact of cloud computing. There
are no service or telecommunications providers in the top eight, and
this suggests that the battle for the cloud is just beginning.
As the ICT industry consolidates around the cloud, two tiers of
competitors are coming to the fore. The top tier includes just a few
massive, dominant enterprises; they are staking claims to build, run,
and own major parts of the cloud-based ICT ecosystem. Then there
is the second tier of companies, which must find sustainable niches
within that system. Some are struggling to do so. Their challenges
include the commoditization of many IT services, less favorable
economics as competition intensifies, and the lower-margin reselling
of top-tier clouds (often by telecom and IT service providers, under
the rubric of “preferred partners” or “licensed resellers”).
One group
of companies —
software
providers — is
increasingly
dominant.

9.
Strategy& 9
Who’s who in the ICT 50
The list of the top 50 companies in the ICT space, all of which
are publicly traded, is determined on the basis of revenues in the
most recent fiscal year. We then divide up the companies into
the appropriate sectors, and score them depending on how they
performed on four criteria:
• Financial performance: Companies that are most likely to
maintain the growth and profitability needed to continue
to invest in the technologies that will help them win in their
increasingly competitive markets.
• Portfolio strength: Companies that have a coherent mix of
business-to-business products and services — strength of
individual products and services as well as differentiation,
breadth, and integration — required to meet the demands
of digitization.
• Go-to-market footprint: Companies that offer the production,
delivery, and sales presence in the markets — both developed
and developing — for ICT products and services.
• Innovation and branding: Companies that have both the
prowess in innovation and the brand recognition needed to
attract new customers and fresh talent to maintain their
competitive position.
As in years past, these companies are assessed in the context of their
business-to-business offerings: what they do for enterprise customers,
not consumers. This explains why well-known consumer-oriented
companies, including Apple and Google, rank lower on this list than
they would on some others.
The list of companies making the ICT 50 this year is quite different
from last year’s (see Exhibit 1, next page). Though the telecom companies
among the top 50 have not changed at all, the list of IT service firms is
considerably different. Six regional firms dropped off the list this year —

10.
10 Strategy&
Exhibit 1
The 2014 Global ICT 50
Source: Strategy& analysis
*Entered ICT 50
Accenture (global)
Atos (regional)
Capgemini (global)
Cognizant (offshore)
CSC (global)
HCL (offshore)
IBM (global)
Infosys (offshore)
TCS (offshore)
Wipro (offshore)
*ADP
*Capita
*CGI
*Fidelity National
*Fiserv
Alcatel-Lucent
Apple
Cisco Systems
Ericsson
EMC
Fujitsu
Hitachi
Hewlett-Packard
NEC
Ricoh
Samsung
Toshiba
Xerox
*Intel
*Lenovo
*Qualcomm
Amazon
Google
Microsoft
Oracle
SAP
*Amdocs
*Sage
*Symantec
AT&T
BT
China Mobile
Deutsche Telekom
KDDI
KPN
NTT
Orange / France Télécom
Telefónica
Verizon
Vodafone
Hardware Software IT services Telecom
primarily because their revenues simply couldn’t keep up with growth
in the broader ICT space — while five new ones joined the sector. And
three new software companies overtook three companies from last
year’s list.
As we said, the top 15 firms among the ICT 50 showed little change
this year (see Exhibit 2, next page). Only two firms moved out of the
top 15. Atos, a service firm based in Europe, lost ground to companies
with broader geographic markets, and Adobe dropped off the list
completely, because of a steep (but expected and planned for)
one-time decline in revenue following its abrupt shift from a licensing
to a subscription software model. Based on the plausible assumption
that revenues will rebound, we placed Adobe on this year’s watch list.
Replacing the companies that dropped out of the top 15 were EMC,
an American provider of storage technology, cloud-based services, and
other services (and the fastest-growing among the top 15), and HCL, an
offshore IT service firm, which is also rapidly moving into cloud-based
services. Finally, one company from last year’s watch list — Lenovo —
made it onto the main ICT 50 list (see “The up-and-comers,” page 12).

11.
Strategy& 11
Exhibit 2
The top 15 ICT companies, 2013–14
Source: Strategy& analysis
See Rank Rank
page 2014 2013 Company Sector
15 1 1 IBM IT services, global
18 2 3 Microsoft Software
21 3 4 SAP Software
24 4 2 Oracle Software
27 5 5 Cisco Hardware
6 6 Apple Hardware
7 10 Samsung Hardware
8 8 Google Software
9 7 Hewlett-Packard Hardware
10 9 Accenture IT services, global
11 11 TCS IT services, offshore
12 13 Amazon Software
13 21 EMC Hardware
14 12 Infosys IT services, offshore
15 18 HCL IT services, offshore

12.
12 Strategy&
The up-and-comers
Five of the nine companies on this
year’s watch list are telecom companies,
including two new additions from
China: China Telecom and China
Unicom. Their success suggests that
rapid growth in the telecom industry
in China will continue.
Two of the other telecom companies on
the watch list are from the United States.
They are Windstream and CenturyLink,
which are reinventing themselves as
providers of cloud and hosting services
for B2B customers. Finally, SoftBank is
a Japanese telecom company that has
jumped across the Pacific to acquire
Sprint in the United States. This gives it
the distinction of being the only wireless
carrier to cover the world’s top two
established ICT markets.
Two hardware companies from China
are on the watch list: Huawei and ZTE.
Finally, there are two American software
companies. As we explain on page 10,
Adobe is managing a temporary revenue
shortfall after a switch to subscription
revenue models, and it is expected to
return to the main ICT 50 list next year.
Salesforce.com, a fast-growing maker of
cloud-based enterprise software, made
its second appearance on the watch list,
while Yahoo dropped off the ICT 50
list without landing on the watch list,
because of a decline in revenue in 2013
(see Exhibit A).
Exhibit A
Watch list: Nine companies that could soon join the ICT 50
Source: Strategy& analysis
Company Industry
Adobe Software
CenturyLink Telecom
China Telecom Telecom
China Unicom Telecom
Huawei Hardware
Salesforce.com Software
SoftBank Hardware
Windstream Telecom
ZTE Telecom

13.
Strategy& 13
Financials: A maturing market
Overall, the 50 companies that make up this year’s ICT 50 posted
US$2.22 trillion in revenue, 2 percent more than they did the year before.
Meanwhile, the companies’ average profit margin stayed stable, at 15.5
percent. These results suggest that the market for hardware, software,
and services is maturing. Most of the ascending products and services,
such as cloud computing and other subscription-based services, don’t
produce the level of earnings that license-based services have in the past.
Nonetheless, the subscription-based software business model is here to
stay, along with other factors that could slow down revenue growth, such
as more competition from companies in emerging markets, and the
natural commoditization of many services over time.
The consolidation across categories is also a factor. When Hewlett-
Packard confirmed in October 2014 that it would split into two
companies one selling hardware and the other services, this was a
clear example of a general trend. Many technology companies are
quietly struggling to find a sweet spot in the new environment,
with the right mix of hardware, software, and services.
In general, software companies continue to perform strongly, with
revenue up 11 percent, to $284 billion. They still boast the strongest
margin, at 22.5 percent of revenue, but that’s down from the
25 percent margin they posted last year (see Exhibit 3, next page).
The hardware sector experienced respectable growth in revenue this
year to $858 billion, up 3 percent from the prior year, although margins
overall have not improved at all. Two hardware makers — RIM
(BlackBerry) and Dell — fell off the list entirely, the former due to
significant loss of revenue and the latter because it is no longer a public
company. And though the boom in smartphones and tablets and in
building out fixed and mobile networks helped revenues, competition is
intense for many of these companies. Very few were able to generate
significant profitable growth in what is increasingly becoming a
commodity business. Apple alone captured two-thirds of the profit in
smartphones and tablets, while most of its direct competitors made no
money at all in this business.
The subscription-based
software
business model is
here to stay.

14.
14 Strategy&
Exhibit 3
ICT 50 revenue and earnings growth by sector, 2009–13
Note: Financial
performance not adjusted
for M&A. Historical data is
for companies in the 2014
ICT 50.
Source: Bloomberg;
Strategy& analysis
0
5
10
15
20
25
% 30
2009 2010 2011 2012 2013
90
100
110
120
130
140
150
160
170
180
US$ 190
2009 2010 2011 2012 2013
Watch list
IT services,
offshore
Software
Hardware
IT services,
regional
IT services,
global
Telecom
18%
16%
16%
10%
10%
2%
1%
Normalized US$ revenue
(2009=100)
5-year CAGR EBIT margin
22
18
16
14
12
10

15.
Strategy& 15
IBM: Everything as a service
Dating back to its On Demand
technology solution offerings of the early
2000s, IBM, the top-ranked company
in the ICT 50, has been a pioneer in
enterprise-level cloud computing.
Its combined consolidator/solutions
provider strategy and its long-standing
prominent position have kept it high
in the rankings. In the criteria, IBM is
number one in product portfolio diversity
and in sales and delivery footprint, and
fourth in innovation. It has filed more
than 1,500 cloud-related patents since
2000, and has made at least 15 cloud-related
acquisitions valued at more than
$7 billion. In 2013, it took in $4.4 billion
in cloud-based revenue, up fully 69
percent from the prior year. It has set a
target of $7 billion in 2015 revenue.
IBM introduced its first full-blown
cloud strategy in 2007, a combination
of its software, hardware, and service
offerings called Blue Cloud, and then
SmartCloud. These were criticized for
lacking simplicity and flexibility. Then
in 2013, IBM acquired SoftLayer for $2
billion. This company, founded in 2005,
provides cloud computing infrastructure
with an accessible, easy-to-use approach
to do-it-yourself implementation.
IBM has since developed a public
infrastructure-as-a-service (IaaS)
offering, and is moving SmartCloud
customers there.
IBM also offers cloud-based application
development infrastructure under its
Bluemix brand, known generically as
platform-as-a-service (PaaS) offerings.
It is seeking to spur growth in this arena
by adopting open architecture standards
and embracing a broader community
of software developers. In addition, it
has established more than 100 business
applications delivered as cloud-based
services in a software-as-a-service
(SaaS) approach.
So far, IBM is the only company with
a combined IaaS/PaaS/SaaS cloud
offering. This is one of the company’s
three main strategic imperatives.
The others are big data and analytics,
and enterprise mobility. The cloud is
particularly critical to the company’s
entire strategy, because it provides the
underpinning fabric that is essential
in making the other two imperatives
possible.

16.
16 Strategy&
Of all the sectors, IT services appears to be the most affected by this
change. Though the group as a whole displayed relatively strong
revenue growth (see Exhibit 4, next page), much of it appears to have
been driven by mergers and acquisitions. In particular, regional players
are consolidating to gain scale. For example, Atos bought SBS and CGI
bought Logica. Unfortunately, in most cases when two regional service
providers combine, they still won’t have the scale to gain the capabilities
they need to fully differentiate themselves or to compete with global
giants like IBM and Accenture. One sign of the churn in this subsector is
the fact that six of the regional players on the 2013 list have dropped
off, to be replaced by six new ones. Most of these new entrants are
focused on specialized, high-growth services to particular enterprise
functions, such as HR, or to vertical sectors, such as financial services.
Meanwhile, revenues among the global firms have declined slightly but
their positions seem more stable than they did a year before.
The offshore IT service players keep growing strongly, but their
margins have declined slightly. This is a function of their growing
presence in mature markets, the legacy technologies and high cost
structures that go with being there, and their aggressive investment
in market share. They have sometimes accepted less favorable
outsourcing terms in exchange for a beachhead on new markets
or a prominent showcase client.
It is still not fully clear how well the services offered by these three
subsectors can keep up with the changes demanded by the market,
particularly the move to the cloud. As companies standardize their
IT on the cloud, it could be very disruptive to more traditional
outsourcing providers.
By contrast, the telecom companies seem relatively unaffected —
at least at first glance. To be sure, they saw their revenues decline
by 2 percent this year, but their profit margin as a group rose by
3 percentage points, to 18 percent in 2014. In their case, these results
are probably due to several successful restructuring efforts designed
to cut costs, and to the industry’s ongoing consolidation. If you are a
telecom company leader, this is not a time for complacency.

17.
Strategy& 17
Exhibit 4
Revenue growth and profitability among IT service providers, 2014
Note: In general not
adjusted for M&A. CGI
includes acquisition of
Logica; for 2011–12,
combined revenues.
Source: Bloomberg;
Strategy& analysis
15%
2011–13
revenue CAGR
30%
35%
25%
20%
10%
5%
0%
-5%
2013 EBIT
0% 5% 10% 15% 20% 25%
Wipro
TCS
Infosys
IBM
HCL
Fidelity Fiserv
National
CSC
Cognizant
CGI
Capita
Capgemini
ADP
Atos
Accenture
Offshore
Regional
Global
Regional IT
service providers
Offshore IT
service providers
Global IT
service providers

18.
18 Strategy&
Microsoft: Productivity in the cloud
Microsoft is rapidly migrating its formula
for success to the next generation, by
moving its enterprise and application
software to the cloud. Despite the
challenges Microsoft has encountered
on the consumer-facing side of its
business — including its efforts to gain a
foothold in the mobile hardware market,
create a third mobile ecosystem to rival
those of Apple and Google/Android, and
boost its stagnating legacy Windows
licensing business — its enterprise-facing
profile is strong.
The enterprise division, which comprises
the servers, cloud computing, and
programming tools businesses, brought
in $42 billion in the 2013–14 fiscal
year. This represented almost half of
Microsoft’s total revenue, and almost
two-thirds of its $60 billion in gross
earnings. Those results put the company
among the top 10 in financial strength
among the ICT 50.
The enterprise side of the business is
likely to grow even more important
as the firm continues to reinvent its
prominent client-server products, such as
Exchange (messaging) and SharePoint
(intranet and content management),
in the cloud. The goal: to expand its
cloud-based SaaS business, which has
consistently had double-digit annual
growth or better, and which currently
has more than $1 billion in annual
revenue.
The cloud-based Office 365 product
has also generated more than double
the revenue it did last year, making
it a natural successor to Microsoft’s
personal computer–based productivity
applications. The company has
positioned its Dynamics customer
relationship management (CRM)
product to compete directly with CRM
leader Salesforce.com. These offerings
are complemented by Azure, a cloud-based
enterprise infrastructure and
platform service business, which is
competing strongly with Amazon’s
Web Services product. The company
has made targeted acquisitions to
enhance this cloud platform, including
StorSimple, a cloud storage appliance,
and MetricsHub, which monitors
activities in the cloud.
Microsoft’s moves in the cloud have
given it a reasonably well-rounded
product lineup. Though it does not
provide solutions for core systems
such as ERP, supply chain, and
manufacturing, it is ranked ninth in
portfolio strength this year. Its other
strengths include an extremely large
installed base of enterprise users, and a
well-established capability for providing
IT professionals with services and
training — including migration tool
kits to help them move operations to
the cloud. Microsoft’s global footprint
of sales, distribution, and production
resources also contributed to its high
ranking, and despite its challenges
on the consumer side, its brand is still
ranked fifth worldwide. Last but not
least, it currently has more than $80
billion in cash to help it fight the battle
for the cloud.
Microsoft remains the leader in the
competition to provide productivity
software to enterprises in the cloud. It
continues to stand by its original formula
for success: providing the common
denominator for user-oriented business
software. It is now shifting that formula
to the cloud, in hopes of perpetuating the
strengths that made it dominant in the
on-premises markets of the past.

19.
Strategy& 19
Portfolios: Coherence matters
As in the past, we analyzed the portfolio strength of the companies in
the ICT 50 to determine which sectors are leading the race to provide
what their customers need. The relative performance of sectors in this
category depends on several factors: expertise, strategic ambition,
differentiation, and ability to execute — all evaluated according to
the judgment of independent industry analysts.
In our view, there is no one formula for a successful portfolio strategy.
Breadth can be a positive, since firms with broad portfolios can provide
virtually everything their clients need and benefit from strong long-term
relationships with them, while generating greater revenues. A
narrow focus can also work, particularly when accompanied by
differentiation and excellence in products and services. Leading-edge
technological prowess can also help, especially given the increasing
demand for offerings, such as cloud computing, that can further
digitization efforts. Probably the most important factor is a coherent,
well-integrated portfolio — one that, whether broad or narrow, draws
on the same advanced and differentiated capabilities. This can provide
a real advantage in the struggle for customers.
The global IT service providers have a considerable lead in the portfolio
rankings, ahead of the offshore service providers and the telecom
companies, while the hardware companies and the software players are in
a close race for fourth place. These rankings reflect the fact that hardware
players have, in many areas, become more like commodity businesses (see
Exhibit 5, next page). The increasing importance of the cloud favors the
global IT service players, while only a few companies in each of the other
categories have embraced it enough to affect their portfolio ratings.
Despite the sheer size of many of the telecom operators, they have not
developed strong portfolios beyond their traditional core businesses.
Many of them are working to build out various IT service and cloud
offerings. The regional IT service players remain the weakest in this area,
even though all but one of them — Atos — were replaced by new ones
this year. As a group, they still don’t have the portfolio breadth and depth
to compete effectively with their global and offshore cousins. Those that
focus on traditional outsourcing services are lagging even more.
Telecom
operators have
not developed
strong portfolios
beyond their
traditional core
businesses.

20.
20 Strategy&
Exhibit 5
ICT 50 portfolio strength, by sector
Source: Strategy& analysis
0 1 2 3 4
1.7
2.0
2.0
1.2
2.7
1.8
Software companies
Telecom operators
Offshore IT service providers
Regional IT service providers
Global IT service providers
Hardware companies
Scored 0–4

21.
Strategy& 21
SAP: Rapid cloud migration
Like several other large software
firms, SAP has only recently begun the
transition to the cloud. But its migration
is moving forward quickly. Thanks
in part to the breadth of cloud-based
platforms and services it now offers, it
is ranked third in the portfolio breadth
category among the ICT 50.
SAP’s strategy is straightforward:
to use the cloud to offer traditional
IT services, from basic enterprise
computing infrastructure to key vertical
software platforms. SAP customers can
choose to stay with its traditional suite
of business applications, including its
HANA data analytics platform, or switch
to the cloud, which includes HANA as
well as additional offerings, such as
infrastructure services, all supported
by SAP’s PaaS. In theory, the cloud
model offers customers a relatively low
total cost of ownership, since the cloud
platform scales easily, and customers
can either buy computing power under
the aegis of their current licenses or buy
subscriptions to SAP’s cloud services,
which it offers in both public and private
configurations.
In carrying out its cloud strategy, SAP
has so far followed a consolidator model,
buying up companies in order to expand
its portfolio. It began the transition
around 2012, in part with the acquisition
of the human capital software company
SuccessFactors. That acquisition was
widely seen as driven more by a desire
to learn about the cloud business than
to build out SAP’s HR software offering.
Two recent acquisitions — human
resources software provider Fieldglass,
and Hybris, which makes omnichannel
retailing software — have expanded the
company’s range in cloud services. SAP
is expected to continue following this
strategy, making more acquisitions to
further expand its cloud offerings.
At the same time, the company is
striving to improve its innovation
efforts. It ranked average in innovation
in the 2014 study, primarily because it
has traditionally been slow to develop
new core products, and has more
recently turned to acquisitions rather
than in-house R&D. But its current
offerings, and future plans, suggest
that it could improve significantly in
this area. SAP recently announced
the creation of a new business unit, in
collaboration with Accenture, devoted
to cloud-based products for vertical
industries, including services for
machine-to-machine and Internet of
things communications, e-health, and
others. This could be a critical move
in extending the firm’s cloud service
portfolio.
SAP’s move into the cloud is projected
to total almost 36 percent of its revenue
over the next four years, up from a
current 20 percent, even as the company
plans to maintain its higher-margin
non-cloud business. As such, SAP hopes
to continue to improve its EBIT margin
to 37 percent in the next four years, and
increase revenue 6 percent annually over
the period. It is currently ranked third
in its subsector in financial health, and
its continued health may depend on how
well its combined cloud and non-cloud
strategy works out.

22.
22 Strategy&
Footprints: Global or local
How and where ICT 50 companies produce their products and services
and then bring them to market is instrumental in their ability to boost
growth and profitability. Though virtually all of the large global service
players, hardware companies, and software firms are well established
in the top five developed markets, they’re less entrenched in the BRIC
countries — Brazil, Russia, India, and China. There, the market
footprints of these companies have not improved since last year,
perhaps because overall growth there has slowed considerably,
especially in Brazil and Russia. Still, the top three companies in each
sector are significantly outperforming their smaller rivals throughout
the world (see Exhibit 6, next page).
This suggests that size matters when trying to operate globally. Perhaps
that’s why leading companies in each of the sectors and subsectors are
trying to broaden their footprint. The global IT service providers remain
dominant in many regions, thanks in part to their ability to scale up
around the world, applying the same capabilities to everything they do.
The top hardware companies also maintain strong positions by having a
global production footprint. The offshore IT service players are moving
onshore, broadening their footprint by aggressively building their
presence and buying up market share in local markets. In some cases,
they are accepting unattractive outsourcing terms — even losses —
to do so. Still, their footprints remain small, well behind those of the
global giants. The regional players are still the weakest, simply because
they are regional, and they continue to struggle to broaden their
footprints. Finally, the telecom operators remain bound to their home
markets to some extent. Though many operate businesses outside their
home countries (for example, Telefónica in Latin America, SoftBank in
the U.S.), the operators are also tied to their physical networks, in which
they have invested heavily and which are constrained to a large extent
by national and local boundaries.

23.
Strategy& 23
Exhibit 6
Larger global footprints correlate with top three companies in each sector
Source: Strategy& analysis
Hardware
IT services, global
IT services, regional
IT services, offshore
Software
Telecom
0 1 2 3 4
Scored 0–4
(Figures in parentheses show the rating of the top three companies in each sector)
3.3 (4.0)
1.3 (2.3)
1.4 (2.7)
4.0 (4.0)
2.6 (3.1)
0.5 (0.9)
1.2 (1.9)
3.2 (3/3)
1.3 (1.4)
1.5 (1.6)
3.3 (4.0)
1.2 (2.5)
1.3 (2.0)
1.5 (3.0)
0.4 (0.8)
Go-to-market
top five
(U.S., U.K., Japan,
Germany, France)
Go-to-market
BRIC
(Brazil, Russia,
India, China)
Global
production
2.8 (3.0)
2.8 (3.3)
0.8 (1.9)

24.
24 Strategy&
Oracle: A reluctant enterprise app store
Unlike some of its rivals, Oracle
moved relatively early to offer some
of its enterprise software in the
cloud. Though its success has largely
depended on providing database and
CRM software through an on-premises
model, the company first introduced
its CRM On Demand offering in 2006.
Since then, it has moved more of its
services to the cloud. The 2014 ICT 50
study ranked Oracle number one in
portfolio strength, and its cloud service
offerings are increasingly responsible
for this.
However, Oracle continues to take a
relatively cautious approach to the cloud.
Its on-premises products still bring in
the vast majority of its revenues and
earnings — thanks in part to its number
two ranking among software firms in
sales and delivery footprint, behind only
SAP. There may be concern within the
company that subscription-based cloud
services will not equal the same revenues
and margins of its ongoing on-premises
offerings. Indeed, Oracle is pursuing a
“path to the cloud” strategy — turning
virtually all of its portfolio of enterprise
software into what is, in effect, an
app store, and thus putting together
among the most comprehensive cloud
products available. That lets customers
decide whether to go the cloud route or
maintain the system behind its corporate
firewalls.
Meanwhile, Oracle is transforming
the technology it got though its 2010
purchase of Sun Microsystems into
a range of hardware and software
offerings designed to be the building
blocks of large corporations’ private and
hybrid clouds. And it will soon launch
its own cloud-based database platform
to compete with similar offerings from
Amazon and others. Neither strategy,
however, has produced stellar results
yet. Indeed, both its on-premises and
cloud-based software offerings are
growing relatively slowly; the company
lags behind competitor Salesforce.com
in CRM offerings in the cloud, behind
SAP in other SaaS applications, and
behind Microsoft in delivering office
productivity solutions. Just 3 percent of
Oracle’s annual revenue is derived from
software licenses and subscriptions
from its cloud offerings in 2013.
Following a long list of high-profile
acquisitions — not just Sun but
also PeopleSoft, J.D. Edwards, and
others — Oracle continues to follow a
consolidator strategy, even if it hasn’t
always fully integrated its purchases
into its enterprise solutions. Last year it
bought Responsys, a provider of cloud-based
B2C marketing software, and in
June 2014, it purchased Micros Systems,
a provider of software to the retail
and hospitality industries. Whether it
decides to more tightly integrate all of
its acquisitions into a full-service cloud
offering for enterprises remains to be
seen. But the portfolio is strong, and the
company has a war chest of almost $40
billion to fund the effort. Oracle should
be in a strong position to keep fighting
the battle for the cloud.

25.
Strategy& 25
Innovation and brand value
The final component in our ranking of the ICT 50 companies involves
the relative strength of their innovation efforts and the value of their
global brands. Here, the results have not changed a great deal from last
year. The six companies that scored highest in this regard last year
again appeared among the top 10 most innovative companies in the
2013 Strategy& Global Innovation 1000 study. And this year, six of the
top 10 in the ICT 50 also ranked among the top 10 on Interbrand’s 2014
list of the most valuable global brands, and 13 made it onto the list of
the top 100 brands (see Exhibit 7, next page).
Innovation is critical to all the ICT 50 companies, even if the results
of their R&D efforts are uneven. And as the world becomes ever more
digital, there appears to be a growing correlation between the ability
to innovate and brand strength. The fact that the list of the top
10 global brands is dominated by highly innovative technology
companies speaks volumes about the impact of innovation on a
company’s value proposition. Indeed, it is telling that Coca-Cola,
for decades the most valuable brand in the world, dropped to third
place in Interbrand’s ranking. Meanwhile, less innovative companies
like the telecom operators continue to lag in terms of brand value —
none made either the innovation or the branding list — and only one
IT service provider made the branding list — Accenture, at number 41.

26.
26 Strategy&
Exhibit 7
Correlation with innovation and brand value
Source: Interbrand’s Best
Global Brands 2014;
Strategy&’s 2014 Global
Innovation 1000 study
Global ICT 50
rank Company Industry rank
1 Apple Computing and electronics 6
2 Google Software and Internet 8
3 Amazon Software and Internet 12
4 Samsung Computing and electronics 7
5 Tesla Motors Auto —
6 3M Industrials —
7 GE Industrials —
8 Microsoft Software and Internet 2
9 IBM Computing and electronics 1
10 P&G Consumer products —
Global ICT 50
rank Company rank
1 Apple 6
2 Google 8
3 Coca-Cola —
4 IBM 1
5 Microsoft 2
7 Samsung 7
12 Intel 21
14 Cisco 5
15 Amazon 12
16 Oracle 4
17 HP 9
25 SAP 3
44 Accenture 10
62 Xerox 35
Global Innovation 1000:
Most innovative companies, 2014
Interbrand:
Best global brands, 2014
Part of the Global ICT 50
company set

27.
Strategy& 27
Cisco: Infrastructure and platforms
Given Cisco’s long and very successful
history of supplying networking
hardware and solutions to enterprises,
it will come as no surprise that its
approach to cloud computing is
somewhat different from that of its four
big competitors. Rather than focusing
on offering cloud services directly to
enterprise end-users, the company is
leveraging its networking expertise to
offer the infrastructure and platforms
needed to build computing clouds
themselves. Cisco isn’t the first entrant
into this market, but according to
some industry analysts, the company
already sells more of the hardware on
which the cloud is based than any other
player, thus capitalizing on its strong
position as the company that supplies
the Internet’s “smart plumbing”:
the technologies that enable its
infrastructure to work.
For example, Cisco’s Unified Data Center
and UCS IaaS products unite computing,
networking, storage, management,
and virtualization into a single cloud-based
platform designed to increase
and simplify operating efficiencies and
provide business agility. Many major
corporations are embracing the two as
the infrastructure layer they use to build
their private clouds. Even commercial
cloud providers like Terremark, owned
by Verizon, and NTT Data use Cisco
technology as the “bricks” with which
their own offerings are built.
But Cisco is also thinking about the
cloud much more broadly. The company
is still one of the most innovative forces
in shaping an interconnected world
operating on a “network of networks” —
connecting the growing number of
public, private, and hybrid clouds so
they can operate together and enable
the emerging Internet of things. As
such, Cisco ranked seventh this year
in portfolio breadth, and third among
all hardware providers.
Given Cisco’s determination to sell the
cloud’s essential underlying components,
it is only natural that it is pursuing
an open, standards-based approach.
The goal is to give cloud providers
and enterprises a full ecosystem of
platform technologies that keeps them
from being locked into a single vendor
or platform — as long as they rely on
Cisco, of course, for a good share of the
technology. Cisco is also pushing hard to
provide the computing capacity and data
processing speed needed for the Internet
of things. That’s happening not only
in the global Web’s central data center
hubs, but increasingly on the Web’s
edges, bringing processing power closer
to the sensors and computing devices
that are intended to make sense of the
world we live in.
Cisco has a long history of supercharging
its innovation puretone way to play
through strategic acquisitions. It made its
first such deal in 1993, and since then it
has acquired more than 170 companies.
Over the next two years, Cisco plans to
invest more than $1 billion to build its
expanded cloud business. Thanks to its
strong cash position — Cisco is third in
financial health among the 16 hardware
providers we tracked in 2014 — the
company can afford to keep buying —
and likely taking the same approach in
building a portfolio of technologies and
services underpinning the Internet of
things as well.

28.
28 Strategy&
The winners’ puretones
Last year, we analyzed the companies included in the ICT 50 in terms
of their “ways to play” — the distinctive value propositions that, when
closely aligned with their most important capabilities, the products
and services they offer, and the markets in which they operate, can
give them a clear advantage in their competition with rivals.
These ways to play can be classified in broad groups that we call
“puretones” — generic archetypes that describe how companies create
value for their customers. Companies in the ICT 50 tend to fall into at
least one — and often two or three — of these value propositions:
• Network and infrastructure platform player: These companies
make their revenues from developing, maintaining, and managing
a stable shared resource, through which other parties can connect
their wares to customer needs.
• Consolidator: These companies try to dominate one or several
categories in their industry through acquisitions, with the goal of
providing either value to consumers or access to a platform with
products and services they would not otherwise be able to provide.
• Innovator: These companies rely on their expertise in pursuing
innovation and developing their global brands to generate highly
targeted portfolios of products and services, rather than trying to
be all things to all customers.
• Next-generation digitization player: This group moves quickly to
provide customers with the most up-to-date products and services,
embracing unmet needs around digital experiences, mobility, or
big-data analytics.
• Solutions provider: These companies have the implementation
capabilities necessary to provide business services to their customers,
carefully integrating and adapting their offerings depending on the
needs of their clients, in any industry.

29.
Strategy& 29
• Global sourcing value player: These companies, primarily offshore
IT service firms, leverage their low-cost workforces, sourced around
the world, to sell business services in the largest global markets.
This year, we looked more closely at the five companies at the top of
the ICT 50 — IBM, Microsoft, SAP, Oracle, and Cisco — in terms of
their efforts to gain traction in the cloud computing space, a critical
market for many technology companies as clients look to make their
IT functions more effective and save money.
As we demonstrated last year, the six puretone ways to play perform
differently in the market over the course of time. Interestingly, all five
of the top-ranked companies have three puretones in common: They are
all innovators, consolidators, and next-generation digitization players.
In other words, they are all investing heavily in both R&D and M&A to
build comprehensive cloud-based businesses. Their rankings suggest
that this comprehensive forward-looking approach will be the most
effective way to reach prominence in the ICT sectors of the next decade.

30.
30 Strategy&
Consolidation and competition
This year’s ICT 50 study, and our closer look at the top five providers of
cloud services, shows just how competitive the world of technology and
communications services has become. The competition for a share of the
cloud service market is particularly fierce, but the same can be said for
providers of big data and analytics, social media, and, increasingly, the
Internet of things. Size matters, too, especially when selling to large
corporations — as IBM’s top spot in the rankings this year demonstrates.
And the fact that all five of the cloud providers we analyzed this year
are following, in whole or in part, a consolidator strategy suggests the
importance of building complete portfolios quickly.
But few if any companies can be all things to all enterprises, and
there are certainly plenty of profitable niches to be found in the
market. Success will come to those who put together the combination
of capabilities and product portfolios that best enable them to pursue
their chosen strategy.
The greatest opportunity in this story is for the technology users:
the companies that need to distinguish themselves in industries like
consumer packaged goods, energy, transportation, and financial
services. For the first time since the dawn of the ICT industry, small
companies have the same access to high-tech services as their larger
competitors. Enterprises can use cloud-based services in new ways,
building on modular designs to create unique capabilities that fulfill
their own strategies, without having to replicate the functions, or the
best practices, of their competitors. Technology can now more easily be
a vehicle for strategic choice: a guide in determining what a company
does best. The ICT industry providers that realize this, and make it
more feasible through their offerings, will be the leaders of the ICT 50
for many years to come.

31.
Strategy& 31
Methodology
For this study, we analyzed the
50 largest publicly traded companies
in the ICT supplier industries on
four measures: financial performance,
portfolio strength, go-to-market
footprint, and innovation and
branding. Our analysis was based
on a combination of publicly
available financial data and a
qualitative assessment of the
capabilities of each player,
conducted by a panel of Strategy&
ICT sector experts.
In making this assessment, we used
clearly defined criteria to investigate
the relative strength and strategic
positioning of each company in each
of the four dimensions. Exhibit B,
below, shows the weighting used in the
formula. Consolidated scores for each
company were determined on a scale
from 0 to 4. Events that became public
knowledge after April 2014 occurred
after we collected the data for the 2014
Global ICT 50 study and are thus not
reflected in the results.
Exhibit B
Components of the ICT 50 score
Source: Strategy& analysis
The ICT 50 rankings were based on four equally weighted primary qualities,
each made up of several key measures drawn from publicly available information.
Strong innovation spending 12.5%
Growth in BRIC markets 7.5%
Presence in new market segments 5%
Classic products and services 10%
Next-generation products
and services 5%
Horizontal digitization capabilities 5%
Vertical digitization capabilities 5%
Go-to-market footprint
Capabilities in top
mature markets 12.5%
Offshore capacity 7.5%
Follow-the-sun capability 5%
Portfolio strength
Innovation and branding
Financial performance
Profitability 12.5%
Growth (CAGR) 7.5%
Investment capability 5%

32.
© 2014 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. Disclaimer: This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
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