Welcome to the KuppingerCole Analyst Chat. I'm your host. My name is Matthias Reinwarth, I'm the director of the Practice Identity and Access Management at KuppingerCole Analysts. My guest today is, and I'm really looking forward to that, Marina Iantorno. She is a Research Analyst with KuppingerCole. Hi Marina!
Hi, Matthias. Thanks for inviting me today.
Great to have you. And we want to talk about a topic which has been making some noise in the social media recently. You are behind a concept that we do that is called market sizing and we are publishing some bits and pieces of that over time right now. So let's talk about market sizing. What is it and why is it so important?
Yes. When we look at the market size, what we try to see is what is the total revenue that the companies receive for the sales of a particular product worldwide. And here at KuppingerCole, what we are doing is taking into account this descriptions the software license, the maintainers and in the end, what we do is trying to see how big this market is.
And it is important to know about that because the bigger the market is, the easier it could be to get a piece of that market, right? So if we talk about investments. And on the other hand as well, if the market is smaller than we really think, maybe there is a sector that is underserved, so then it is giving us hints that they are very useful for investments. There are two concepts that could be actually confused, that are the market share and the market sizing. These two concepts are not exactly the same.
The market sizing is the size of the entire market, while the market share is telling us the proportion or the percentage that a particular company has over this total of the market. It is also a very important term, a very important metric, because it can tell us how our product is growing or shrinking, along the time.
So then this this is actually the importance of it, we need to know where we are standing and what are our possibilities within the market.
Right. You just mentioned that. So is the market growing? Is it shrinking? There are other key figures around other metrics that could be looked at. One is the compound annual growth rate. How does market sizing relate to that?
Yes, the compound annual growth rate is actually the percentage growth of this market size along a certain period of time. What we are trying to do at KuppingerCole is actually take business a five year period, because of course we need to do a prediction in this. And the idea when we calculate the compound annual growth rate is understanding what is the percentage growth of this market per year over this period of time.
And as well, this is another metric that tells us how the market is shrinking or expanding. And in this sense, we can understand as well what are the best strategies to do and to move on with. Because sometimes it is commonly thought that if the growth rate is showing low numbers or is showing that the market is shrinking, it is because we actually have to leave this market segment and try to invest somewhere else.
And this is not always a reality. Sometimes what we have to do is maybe investing more money to extend our service, for instance, or to reach a greater target. So then it is another metric that is very important in terms of investment and business.
Okay. If I understand correctly, this is a service, or this data that you are providing can be used as a service for investors, but also for vendors, for organizations, for service providers themselves. Which of these metrics that you've just mentioned are most important, for them to do their decision making?
Well, I would say that it is very hard to decide if one is better than the other one. All of them work together, actually. It is important as well to have a research in place because if you understand the market and you read the figures, it is easier to understand what the numbers want to tell us. And the idea is that with these metrics, we can really understand what is going on, what is happening in the market, and if you work, let's say, with a research team, as in KuppingerCole, well, we have enough experience to actually see if there are certain anomalies or trends that are in the market.
And these metrics are helping us to understand better what are the opportunities and the trends.
Okay. And to look a behind the curtain. You are the main person behind these figures that we are creating right now. What does KuppingerCole Analysts do to calculate the market sizing? What is the magic behind it?
Well, initially, we collect the data from the Leadership Compass. This is a file that contains a questionnaire for many different vendors. Of course, as many vendors as possible that are in the market and we collect this information from them, then we verify this information with public statements because there is always information that is available, for example, financial statements that the companies publish every year. And we calculate the market sizing based on our analysis in historical data.
So what is currently happening and what happened in the past? Of course we consider as well different events that could affect what is changing, let's say an unforeseen scenario like with COVID19. So this is something that nobody expected. And of course, it actually made different changes in the market. And what our company is doing is checking these data and see what was happening along the years,
and we try to identify or to spot anomalies and trends.
Okay, great. So as KuppingerCole Analysts, we are focusing on specific market segments. The work that you're doing, is it for the market in general as a whole, or is there a breakdown? Are you looking at specific market segments? Because they are different, they are emerging, there are established ones, mature, not so mature ones. Where are we looking?
Well, we actually do break down by different products and services. We are not considering only a particular vendor or a particular, let's say, umbrella that is covered in many markets. But we are going right away to analyze different products and services. And this is because if we dig into the segment that we can understand better, what are the opportunities that are there?
And it is actually much better than analyzing something like very generic.
Right. So when you say you're doing these breakdowns and you're looking at that and are not looking into the individual market segment components that we are looking at at KuppingerCole, that is IAM, that is cybersecurity, that is what is the advantage of doing it the way that you just described it.
Because what we are trying to understand is, what are the possibilities of the products that we have within all these segments? For example, let's say Identity and Access Management, there are many products that are involved in this and for example, PAM, or Access Tool Management for SAP system, we try to analyze what is happening with each of these products within this umbrella and not the entire umbrella itself, because of course, there are different vendors, there are different organizations, different companies, and they are interested in their particular products.
And sometimes you don't have a company that is working with all the services of Identity and Access Management or cybersecurity or AI, but they are working only in one line of that. And we are very specific in understanding what is happening in each of the products of these segments.
Right. When we talk to investors, what is key information that is required? How important is this market sizing, and can investment decisions really be based on these key figures or is there more?
Well, the metrics, of course, help a lot in terms of making the best decisions. If we know where we are standing, it is actually much better to make a decision than going blind, let's say, right? So then what we try to advice always is, Yes, it is very good to know these metrics, but also it is very good to have a research in place or a research thing that is helping you to understand where you are standing.
Because the main point here is not only to see the figures, the final figures or the final calculations, but also understand what these figures means in this dynamic word. Because everything is changing. This is a very moving market, a very moving segment, especially the IT sector. So then the main idea would be place in a very good research
plus understanding these metrics.
Interesting, so it's really supporting also the investors in making their decisions. But who else, we just talked about the investors, who else should be interested in this data? What are the companies that should look at this market sizing data that you determine?
I would say, every company because these metrics are actually giving us a big picture of the reality, what is happening and what is going on. And if we want our business to succeed, the main idea is that we understand what are the changes that are happening, what are our weaknesses or what are the threats that we can face?
How is our target changing? What are the demands that are changing in the market as well along the years, if it is growing or not, because it will help every organization to understand, the reality is like their environment where they are moving. So I would say every organization should to be aware of the market sizing.
Okay. That's really interesting. What you've described is mainly analyzing historical data up until now. But of course the interesting part is the prediction part. But the saying goes that predictions are very difficult, especially when they concern the future. So what are the challenges when it comes to predicting the market sizing or daring to make forecasts?
Well, what company wouldn't like to know what we have in the future? You know, this is, I would say this would be a fantastic point. Luckily for us, we can actually make some forecasting using the historical data, and there are different challenges that we face in terms of the IT sector, for example, the technology is progressing so fast and there are constantly many changes that are happening.
And this is a very, very dynamic environment in terms of business. Of course, either makes the forecast challenging, we are not going to lie about that. But at the same time, if you really know the market, you can see or you can spot, as I mentioned earlier, if there is any factor that is really affecting any external factor that is making the numbers change along the time.
And the idea with the IT industry in general is that, yes, we know that there are many changes, but at the same time we know how to deal with the data. So then there are challenges, but we are willing to face them.
Okay, great. Thanks for that. When it comes to these predictions, and we are talking about a new service that we as KuppingerCole Analysts are providing, just to be frank, that's quite obvious. So it's a new service. How can companies really benefit from this service that we provide or that you provide? And how is it conveyed?
How can you consume these services?
Well, we launched, a couple of months ago, a series of market sizing by product in a period of time from 2020 to 2025. So then this is something that we are running, it is a project that is still ongoing and it is available in our press release and on our social media. Every Thursday we publish a new analysis with a new market and give a brief explanation on what is happening, what is the coverage of a particular product in different locations, and what is the prediction for the market sizing to be in 2025?
The idea is that along with this data, we can offer our research services and advisory services. So then we can always go deeper and understand what the companies are needing and if there are new opportunities that they can actually take advantage of and break into the industry or making the market grow.
That's interesting. So those of our audience who are interested in having a look at this market sizing data, how can they get access to that? Do they head over to the KuppingerCole website and then?
It is in our website on the press releases. So if they go to our website, company information, press release and they will find it there or else on our LinkedIn profile. So it is there and every Thursday we are publishing it.
Okay, great. Thank you for that. So thank you very much, Marina, for giving insight into this really new, interesting service that we provide. We cannot close down before I hint at something that will be published next year, which is not yet available, but it's like a bit of a teaser. KuppingerCole will extend its area of services by providing a new set of digital services.
No names now, no product names. But this will be more interactive. This will be a new way of getting access to our research data. And one should be really looking forward to that. And I hope it can give away a bit more over time until it is launched in early 2023. So that is a spoiler for next year.
But the market sizing data is already available. Thanks again, Marina, for being my guest today. I am looking forward to talking to you soon again.
Thank you, Matthias. Same here and I am really looking forward to see the new project launch from KuppingerCole.
