Israel Information Technology Markets: STKI forecast (given during STKI Summit 2015)

1. Israel IT Market: STKI “tiers” 2015 V3
Dr. Jimmy Schwarzkopf
Research Fellow, STKI
http://index.stki.info/it-tiering/1

2. STKI is here to serve you………
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• Dr. Schwarzkopf has worked during the last 38 years in all areas of Computer Information
Services:
As an Industry Analyst at META Group (Israeli Research Manager) and was named a META Group Research Fellow.
As an academic researcher in Entrepreneurship Sciences; has published and presented in the Academy of Management and Babson
Conferences and Editorial Board Member of the academic journal "International Journal of Opportunity, Growth and Value
Creation".
As a consultant in Arthur Andersen Consulting (USA), Booz Allen (USA) and Kesselman & Kesselman. As a systems professional in
SCS Computers and the R&D Unit of the Israel Defense Forces.
As a sales and marketing professional in Digital Equipment Corporation.
Teaching in the MIS department / TelAviv Yafo Academic College and the Computer School of the IDF.
Entrepreneur founding three companies in the IT arena: STKI, store and forward mail and office information systems.
• Dr. Schwarzkopf served on the Board of Directors of Ashot Ashkelon Industries, served as
President of the Gymnazia Herzelia Association, Co-founder of the Mashov Political Movement
and was a member of the Central Committee of the Labor Party. Major (Rav-Seren) in the
reserves, Israel Defense Forces (where he served in an elite unit and later in the R&D unit).
Registered Engineer (IS22881), member of MENSA Israel.
• Dr. Schwarzkopf received BSE and MSE degrees (Systems Engineering) from the University of
Central Florida. Received a MSIA (Management Information Systems) and ABD (PhD
Program) in Systems Science (received (twice) the William Larimer Mellon Scholarship/Award)
from Carnegie Mellon University. His doctorate (DM-Management/ Entrepreneurship) he
received from Case Western Reserve University.

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STKI’s goal is to help our clients make the right choices in the strategic and financial
management of their information technology systems.
Founded in 1992, STKI is the leading market research and strategic analyst firm in Israel,
covering the IT infrastructures, IT applications and IT services industry .
Over 22 years of experience in the IT analyst sector and thousands of annual face-to-face interviews with key industry participants
have enabled us to establish solid, long-standing relationships with our customers.
Our customers include major IT organizations (government, financial institutions, telecoms, manufacturing, medical, education, etc.)
and IT suppliers/vendors (infrastructure and software suppliers, consulting and professional services firms).
STKI works closely with vendor senior management (strategy, business development, and marketing).
Where end users are concerned, STKI meets with IT managers as well as with all levels of IT decision making,
thereby attaining complete information of processes.
STKI's mission is to advise and analyze users of information technology as well as their suppliers while conducting original research and
providing advisory services regarding all parts of the information system puzzle.
Israel's foremost IT companies have come to rely on STKI's market-proven experience and expertise.
Our services include:
Face-to-face meetings
STKI Analyst House Calls (for both users and vendors)
CIO STKI "Help Desk"
Inquiries
Surveys
Strategic Marketing & Positioning
Round Tables for users
Vendor Discovery Series (Newsletters and workshops)
In-house Workshops
CIO Annual Bootcamp
CTO Annual Bootcamp
Brainstorming Workshops
STKI Annual Summit

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STKI Website gives you:
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Newsletters
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STKI website 2
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4
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STKI website 3
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STKI Methodology: equilibrium model
The sum of all IT expenditures (from users) has to be equal to
all IT sales (from vendors).
Most research firms are either a
"demand-based"
(market information based on data from users of IT)
or
"supply-based"
(market information based on data from IT vendors).
STKI is one of the only research firms using an equilibrium model
and the only one in Israel.

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› Real revenues of software licenses and maintenance.
› Real revenues of hardware sales.
› Differentiation between new projects and continuing projects. New projects count more.
› We do not include any work/ products for OEMs and military non-IT projects.
› We are learning how to account for cloud usage for IT (Israel) only
› We distinguish between work done by the vendor's employees and work outsourced to
another vendor. The revenue is transferred to the vendor actually doing the work.
› Distinguish revenues from projects done in fixed price, cost plus (SLA defined) and staff
augmentation (non SLA) projects.
› Differentiate value between work done by high level internal professionals in a project
and staff augmentation employees in the clients IT department.
Take into consideration IT department’s view/mindshare of vendor’s
value in projects/products
What our study looks at:

13. STKI Summit 2015
Israeli IT Market V213

14. V3
State of the Economy Index
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15. V3
State of the Economy Index
(probability of slowdown)
1998-2014
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Over 70% is BAD

16. V3
State of the Economy Index (% change)*
1998-2015
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17. V3
State of the Economy Index (% change*)
1/2013 - 1/2015
4Q2014
1Q2014
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18. V3
Business Tendency Survey
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19. STKI Summit 2015
Israeli IT Market V219

20. V3
In order to get the “IT Market” (what is bought/sold out there) :
What users bought?
From whom?
Why?
IT Departments IT Vendors
How much did they sell?
To whom?
For how much?
Competitors?
23 years of
IT market history
2013
2014
HARDWARE
1,694,000
3.61%
1,755,200
SOFTWARE
1,350,200
6.72%
1,441,000
VALUE ADDED
SERVICES
3,126,000
4.48%
3,266,000
TOTAL
6,172,213
4.73%
6,464,214
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21. V3
Number of Firms in Israel 2015
Israeli
"reality"
number of
employees
number of
companies
(paying
taxes)
number of
companies
(paying
taxes)
number of
companies
(paying
taxes)
number of
companies
(paying
taxes)
& of
TOTAL
subtotals
medium companies 21-100 3,871 4,088 16,305 16,647 7.05%
small companies 6-20 31,720 33,073 46,920 48,780 20.66%
independents up to 5 196,802 194,683 175,925 180,445 76.42% 180,445
2/2012 2/2013 2/2014
TOTAL
number of firms paying
"taxes" per worker
245,872
ACCORDING TO BITUACH LEUMI 2/2015
101-250
enterprises
big companies 2,606
2014
1.10%
250,011239,150231,844232,393
65,427
2,384
1,348
2,525
1,476
2,453
251+ 0.65%
4,139
1,5331,493
201320122011
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Budgets
2012
change
from
2012
Budgets
2013
change
from
2013
Budgets
2014
change
from
2014
Budgets
2015
% total
Market
size
% total industry
government $1,350 -7.41% $1,250 4.80% $1,310 3.05% $1,350 18.99%
security $400 2.50% $410 2.44% $420 7.14% $450 6.33%
education $250 -8.00% $230 2.17% $235 -2.13% $230 3.23%
health $300 -3.33% $290 -5.17% $275 5.45% $290 4.08%
utilities $280 1.79% $285 5.26% $300 -20.00% $240 3.38%
transport $300 1.67% $305 3.28% $315 3.17% $325 4.57%
banks $900 -9.44% $815 2.45% $835 1.80% $850 11.95%
insurance $350 14.29% $400 6.25% $425 1.18% $430 6.05%
fin other $200 -5.00% $190 13.16% $215 13.95% $245 3.45%
manuf $820 -1.22% $810 4.94% $850 2.94% $875 12.31%
retail $200 -2.50% $195 7.69% $210 10.48% $232 3.26%
high tech $650 10.77% $720 4.17% $750 6.67% $800 11.25%
IT local vendors $190 -21.05% $150 23.33% $185 5.41% $195 2.74%
telecomm $260 -3.85% $250 2.00% $255 -9.80% $230 3.23%
media $90 11.11% $100 12.00% $112 33.93% $150 2.11%
SMB/SME $250 20.00% $300 6.00% $318 10.06% $350 4.92% $350 4.99% SMB
in M USD $6,790 -1.33% $6,700 4.63% $7,010 3.31% $7,242 in M USD
IT BUDGETS (opex/capex): includes some internal expenses
manuf/
retail
$2,320 33.10% public
$565 8.06%
utilities/
transport
industry
Market size 2015
2015
$995 14.19%
high tech/
IT
$380 5.42%
telecomm/
media
$1,525 21.75% financial
$1,107 15.79%
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*

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Budgets
2015
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Are we different ????
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Client inquiries (STKI) FY 2014
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29. STKI Summit 2015
Israeli IT Market V2
2014 Israel IT Market
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The Great Debate: explanations
Even if the
graphs “look”
different
“not worse”
just smaller
“boutique”

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The Great Debate: explanations
Even if the
graphs “look”
different
“not worse”
just smaller
“boutique”

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VARs or Partners: but NO double bookings
Value Added Resellers
“VAR or Partners”
are incorporated into
STKI’s “TIERS”.
Both sell into the Israeli
Market.

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IT Market in Israel

34. STKI Summit 2015
Israeli IT Market V2
2014 Israel Hardware Market
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Vendors: Hardware markets
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Israel: IT Hardware Total Market 2014-2016
HARDWARE
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Hardware: Servers and Clients
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Server Markets
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Market Players: Servers (manufacturers)
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Market Players: Servers (Resellers-VARs)
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Clients (B2B) Markets
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Market Players: Client Computing (manufacturers) B2B
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Market Players: Personal Computing (VARs)
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Hardware : storage, networking and security
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Storage and Networking Markets
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Market Players: “storage” (manufacturers)
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Market Players: “storage” (VARs)
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Market Players: Networking Products
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Market Players: Security Appliances
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Market Players: VoIP & other call center equipment
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Hardware: printers, monitors, self-service and data center
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Printers, Monitors, DC Equipment, Self Service Markets
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Market Players: DC equipment & enterprise printers
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Market Players: POS ,Self-Service, monitors and Video Systems
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Israeli IT Market V255

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Vendors that sell in the Software markets
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Israel: IT Software Total Market 2014-2016
SOFTWARE
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Delivery and Development Software
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Delivery and Development Software
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Market Players: system software
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Market Players: Storage and Backup Software
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Market Players: Data Bases Software
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Market Players: private cloud and automation tools
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Market Players: Middleware Software
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Market Players: software
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Delivery and Development Software 2
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Market Players: BSM Software
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Market Players: Security/ Cyber Software
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Market Players: Development & ALM Software
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Market Players: Mobile APPs Development Tools
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Software: Information Management
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Software: Information Management Markets
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Market Players: KM & Productivity Software
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Market Players: Collaboration and Output Software
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Market Players: Analytics & Data Mgmt Software
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Software: Business Applications
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Software: Business Applications Markets
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Market Players: ERP Software (all sizes)
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Market Players: Vertical Application Software
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Market Players: CRM & CEM (on-premises) Software
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Market Players: HR /Talent Mgmt/ LMS Software
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Market Players: PLM, WCM and e-commerce software
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Israeli IT Market V283

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Israel: Value Added Services Market 2011-2015
VALUE ADDED SERVICES
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Vendors that sell in the VAS markets
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The SIX categories of IT Value Added Services Offered in Israel
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VAS: IT consulting and analysis services
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VAS: IT consulting and analysis services

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Market Players: IT Consulting
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Market Players: IT Consulting 2
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VAS: Hardware & Software Maintenance Services
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VAS: Hardware & Software Maintenance Services

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Market Players: Hardware & Software Maintenance Services
Software Maintenance
(multi-vendor)
Rimini Street
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VAS: Infrastructure Projects
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VAS: Infrastructure Projects
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2014 2015 2016
Consolidation/ Virtualization
/Monitoring/ BSM/ Storage/
Hardware/ Data Center
Environment/ Networking
Projects
-2.56% 190,000 0.53% 191,000 0.52% 192,000 1.56%
Legacy:Mainframe/AS400/V
MS/etc.
1.41% 36,000 -5.56% 34,000 -5.88% 32,000 -6.25%
Software integration,
middleware, SOA, BPM,
ALM, Testing tools
implementation
12.90% 70,000 -2.86% 68,000 2.94% 70,000 2.86%
Security Projects (Risk
Assessment/ Penetration
Tests MDM)
12.86% 158,000 1.27% 160,000 6.25% 170,000 4.71%
Unified Communication (IM,
Video, Voice)
33.33% 10,000 5.00% 10,500 14.29% 12,000 16.67%
5.45% 464,000 -0.11% 463,500 2.70% 476,000 2.73%
Infrastructure
Projects

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Market Players: hardware integration projects
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Market Players: software integration and legacy projects
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Market Players: Security Projects
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Market Players: Unified Communication (IM,Video,Voice) projects
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VAS: Project Management, training and “Hatmaa” services
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VAS: Project Management, training and “Hatmaa” services
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2014 2015 2016
IT Training -4.00% 72,000 -2.78% 70,000 -2.86% 68,000 2.94%
Hatmaa 4.00% 52,000 5.77% 55,000 5.45% 58,000 12.07%
-0.80% 124,000 0.81% 125,000 0.80% 126,000 7.14%
Training &
Hatmaa Mgmt

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Market Players: Office of the CIO Projects
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Market Players: ALM, Q/A & Testing Projects
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Market Players: Training Services
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Market Players: “Hatmaa” Projects
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VAS: contact center & EGRC Projects
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VAS: contact center & EGRC Projects
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Market Players: Risk & GRC Projects
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Market Players: VoIP- Call Center Projects
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VAS: Business Application Implementation
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2014 2015 2016
ERP -5.00% 190,000 -7.89% 175,000 2.86% 180,000 2.78%
CRM 5.00% 168,000 1.19% 170,000 2.94% 175,000 2.86%
Knowledge Management
(ECM, Portals)
3.26% 95,000 -5.26% 90,000 2.22% 92,000 3.26%
.NET based without web 4.76% 110,000 -2.73% 107,000 -1.87% 105,000 -2.86%
java based without web 9.38% 35,000 -2.86% 34,000 -2.94% 33,000 -3.03%
other technologies
development without web
9.38% 35,000 -2.86% 34,000 5.88% 36,000 5.56%
Web 8.43% 90,000 2.22% 92,000 8.70% 100,000 10.00%
Mobile 25.00% 45,000 11.11% 50,000 24.00% 62,000 12.90%
UX Design 28.00% 32,000 9.38% 35,000 8.57% 38,000 10.53%
Data, BI, Analytics 5.88% 180,000 2.78% 185,000 3.78% 192,000 4.69%
Core Vertical Package
Implementation
2.27% 135,000 3.70% 140,000 5.71% 148,000 4.73%
Digital Output Management 10.00% 22,000 -9.09% 20,000 5.00% 21,000 9.52%
Migrations 6.90% 31,000 12.90% 35,000 14.29% 40,000 12.50%
16.90% 1,168,000 3.81% 1,167,000 19.29% 1,222,000 22.02%
Business
Applications
Implementation
VAS: Business Application Implementation

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Market Players: ERP Projects
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Market Players: Core / ERP vertical Projects
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Market Players: CRM XRM Projects
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Market Players: KM Projects
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Market Players: Data Analysis Projects
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Market Players: .NET development Projects
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Market Players: java & others (non-.NET) development
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Market Players: Output Management & Migration Projects
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Market Players: Web, Internet, Social and UX Projects
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Market Players: Mobility Projects
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VAS: outsourcing services
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VAS: outsourcing services

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Market Players: "off site" data center
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Market Players: call center/help desk outsourcing
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Market Players: application/ complete outsourcing
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Market Players: managed infrastructure (storage, DBA, ..) services
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VAS: Cloud Services
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VAS: Cloud Services

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Market Players: BSaaS (many different) B2B Services
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Market Players: PaaS & IaaS Services
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Market Players: SaaS Services
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Market Players: DRaaS Services
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VAS: Staff Augmentation
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VAS: Staff Augmentation
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Market Players: “gulgalot”- temps- on premises augmentation
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Market Players: “gulgalot”- temps- off premises augmentation
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http://index.stki.info/it-tiering/