Data center builds and expansions, along with AI investments, will drive webscale ‘Super 7’ ICT capex to $69B by 2022

HAMPTON, N.H. (Sept. 6, 2018) According to Technology Business Research, Inc.’s (TBR) 3Q18 Webscale ICT Market Landscape, webscale ICT capex for the “Super 7” will grow at a 26.2% CAGR to over $69 billion in 2022 as these top webscales aim to future-proof business-critical infrastructure and map network capacity to data traffic growth, which is expected to increase exponentially through the forecast period. Webscales are investing tens of billions of dollars in new data centers, either to support their core businesses or to increase the scale of their cloud services businesses.

“Capex spend is spiking in 2018 as the Super 7 build new facilities on land acquired in 2017. Amazon’s 30.4% ICT capex growth rate in 2018 is noticeably lower than its peers, which is largely due to its leading presence in the cloud services market,” said Michael Soper, a senior analyst at TBR. “Challengers Microsoft, Alphabet and Alibaba will grow 2018 ICT capex 73.6%, 100.3%, and 101.6%, respectively, year-to-year in a bid to catch up to market leader Amazon Web Services.”


The OEM landscape is being upended as webscales embrace ODMs and open-source technology. A growing number of ODMs aim to take share from incumbent hardware vendors such as Cisco and Dell EMC. Webscales often possess the talent necessary to design their own equipment, then outsource production to an ODM. In these instances, the software is disaggregated from the hardware and the code is written by webscale software engineers. This threat gives webscales negotiating power over incumbents. Cisco is mitigating the threat from ODMs with acquisitions, strong customer relationships and litigation.

TBR’s Webscale ICT Market Landscape tracks the ICT-related initiatives of the seven largest webscale companies in the world, known as the Super 7, which includes Alibaba, Alphabet, Amazon, Baidu, Facebook, Microsoft and Tencent. The report provides a market assessment, deep dives into company strategies and analyzes capex trends, particularly as they pertain to ICT. Vendors are also covered from the perspective of relative opportunities with webscale companies as customers.


Creating innovation; creating clients

A New Thing: BearingPoint ‘At the Heart of Innovation’

“I came in with absolute clarity about what my challenge was, and now I don’t know.” After two days of large-group discussions on the fundamentals of innovation and small-group challenges putting those fundamentals to the test, one participant at a recent BearingPoint innovation event seemingly lamented having gone backward and away from solutions. However, the participant quickly followed up that “I don’t know” comment by explaining how examining her company’s and her own individual challenges revealed an incredible complexity — but the presence and guidance of an established consultancy provided reassurance that complexity could be managed and innovation started, if not guaranteed to bring success. Every consulting client should be so thoroughly uncertain about their problems while comforted knowing they’ve got help at the ready.

TBR perspective: Diversity, subtlety and the art of consulting

The entire event accentuated uncertainty, but with a sense that innovation challenges can be solved, creating an ideal hunting ground for consulting opportunities. BearingPoint strengthened advocates for innovation while consistently and subtly reminding those advocates that they would need help. By building toward a workable solution to a real-world innovation challenge, BearingPoint used a velvet hammer to reinforce that “you can change, you must change, and change requires consulting.”

TBR includes coverage of BearingPoint in our Management Consulting Benchmark, and the most recent profile, published in April, noted that “as a business and technology consulting firm [positioned] for predominantly EMEA clients, BearingPoint will continue to attract clients with holistic consult-build-run solutions across its three business pillars — Consulting, Solutions and Ventures — to enable clients’ business transformations through advanced technologies. BearingPoint’s agile offerings in its three primary business units and local market expertise will resonate well in the EMEA market and support the company’s growth over the next two years.” This innovation event reinforced TBR’s assessment of BearingPoint’s ability to see its approach and offerings resonate well with existing clients and very likely continue to lure new clients away from traditional European and global consulting competitors. BearingPoint has not built its own innovation/collaboration/experience center and the firm’s overall approach at the innovation event remained subtle throughout the two and a half days — but BearingPoint’s effort was effective and highly replicable, and the lasting impact will likely be measurable by the firm’s 2019 growth.

BFSI: An India-centric special scenario

Two up, two down

Four of the India-centric vendors share similar assessments of IT investments, predicting they will improve behind spend from larger-enterprise banking clients, with growth in digital implementations, mobility, and modernization of legacy IT infrastructures and applications portfolios. The divergence in performance in 2Q18 likely reflects one-time or short-term changes at large clients and not a strategic shift for any single vendor. From TBR’s quarterly analysis:

  • Infosys’ (NYSE: INFY) revenue expanded 6.8% in USD year-to-year to $2.83 billion during the quarter but was flat sequentially due to softness in its largest vertical, Financial Services. With 40% of large-scale deals in 2Q18 stemming from Financial Services clients, we expect vertical performance to rebound and bolster Infosys’ overall performance. While Infosys experienced softness among a few key accounts within Financial Services, the vertical continued to generate the largest percentage of sales, at 31.8% in 2Q18, as the company benefits from its platform-centric portfolio and “as a Service” solutions portfolio. In addition to Finacle-related deals, an uptick in demand among insurance clients, similar to the deal win with John Hancock, is driving McCamish platform adoption.
  • In recent quarters, Cognizant (Nasdaq: CTSH) has noted some acceleration in initial projects to map out blockchain implementations for banking and financial services clients. In fact, Cognizant has described the banking industry as the most mature sector regarding blockchain implementation, while insurers and retail companies are somewhat behind their banking counterparts and other industries are still in trial phases. Financial Services sales rose 4.5% year-to-year in 2Q18 as Cognizant’s slowly expanding pipeline of new business with banks and financial services clients began to translate into new revenue streams.
  • Banking, Financial Services and Insurance growth slowed for Tata Consultancy Services (TCS) to 5.3% year-to-year in 2Q18, from 6.9% in 1Q18, though TCS executives noted improving IT investment trends among U.S.-based financial institutions, saying they believe the recent slowdown in IT spend has “bottomed out.” TBR believes TCS’ open-based banking API framework enabling banking, financial services and insurance (BFSI) clients to expedite digital transformations is resonating increasingly well. TCS’ massive, $2 billion digital transformation award with Transamerica (won in January) continues to spool up while growth among banking institutions in Europe and APAC remains strong.

The 4 P’s of marketing – people, process, partners and platforms – emerge behind AI and compel vendors to adopt S-centric frameworks

digital marketing services infographic, 4 P's marketing

Market dynamics will evolve in the next 5 years, with voice and video the core conduits for trusted and tangible AI-based marketing campaigns

The digital marketing services (DMS) market will grow at a CAGR of 16.2% from 2017 to 2022, reaching $125 billion, as organizations across geographies adopt artificial intelligence (AI)-enabled, customer experience-based voice and video solutions to run outcome-based campaigns addressing business pain points beyond brand awareness. Marketing in the moment frameworks will continue to dictate the shift toward hyper-personalization as consumers’ attention becomes the new currency and creates opportunities in areas such as omnichannel delivery and intelligent operations.

The shift from brand awareness to activation and support results in four new P’s of marketing — people, process, partners and platforms — leading to data management issues and opportunities. Winning vendors can adopt “S”-centric frameworks that emphasize closing skills gaps, delivering at scale and being in sync with partners’ visions, and addressing customer data silos through the development of interoperable and secure solutions.

Portfolio and go-to-market transformation and AI solution integration will be among the levers vendors can use to capitalize on a growing DMS market. Feeding the hype of AI could be a double-edged sword if technology and services vendors cannot deliver on the promise to shift the perception of marketing from a cost center to a business value driver.

AI-based voice and video platforms will increasingly take center stage as enablers for delivering campaigns in hybrid marketing environments, helping brands better connect consumers’ offline and online professional, purchasing and social behavior data. Technology partnerships and expertise in integrating platforms such as IBM Watson, Google and Adobe Sensei in the business-to-business segment and Amazon Echo and Google Home in the business-to-consumer segment will be key to services vendors’ success. The inability of vendors to recruit and retain talent with skills in these technologies might hinder market share as vendors are unable to address tasks at speed. Lastly, within the next two years, the broad-based adoption of AI across omnichannel platforms will reduce the need for multiple vendors to support engagements, and will also result in new opportunities in intelligent marketing operations.

For more information, contact Senior Analyst Bozhidar Hristov ([email protected]).

Robots laundering IT budgets?

Automate a bad process or fix the process first?

As consultancies start expanding their robotics process automation offerings (RPA) and the software and related services begin permeating through enterprises’ procurement, human resources, IT, and even internal audit, a curious debate has surfaced between the merits of opting for careful and meticulous process assessment, documentation and improvement or just deciding to throw some robots at the process to get the cost savings benefits as quickly as possible.

I’m not surprised this discussion surfaced, given the rapid adoption of RPA solutions by companies in a wide variety of industries and the sustained investment by IT services vendors and consultancies in the people and assets needed to implement RPA (see any of our reporting in the last year on EY, Accenture, PwC or Capgemini). What surprises me is where the vendors and clients come down on this debate. At a recent three-day event, I listened to fairly passionate discussions on this topic, with clients taking the position that a company needs to do the standard evaluate-improve-refine process for their processes before applying automation. In contrast, the consultants — the ones best positioned to provide advisory services around that standard approach and charge for those services — argued for the fast fix-and-go approach. One consultant noted, “Throw robots at a bad process if it saves time and money now. … Then reinvest those savings into whatever else you need completed.” One client, who changed her mind by the third day after absorbing the consultants’ lessons, described some processes as tasks that employees “deplore, but must be done accurately, timely and repeatedly to help run the business.” She said RPA could be applied to these, with the savings poured into new artificial intelligence or other desired-but-not-a-priority initiatives.

Of course, it’s not that easy, or robots would be doing every deplorable task and automating every aggravating process

And plenty of consultancies will continue to offer process optimization and change management as core elements to most engagements. I’ll be watching the consultancies that have invested heavily in RPA and how they describe their engagements, which clients they highlight, and how their talent models shift over the next year. I’ll also be looking for examples of companies embracing rapid RPA deployments, knowing not every process was improved, but they threw the robots at them. Most importantly, we will be asking about the redeployment of those costs savings.

My colleague Jen Hamel’s Digital Transformation Customer Research, published in March, noted that clients haven’t been investing as much in data management, “despite the struggle organizations face with underlying data integrity and standardization issues that hamstring generation of actionable insight and limit analytics solution value.” She went on to note that TBR expects “this trend will be exacerbated by the proliferation of connected devices, ingestion of new data from the incorporation of additional sensor technology and breakdown of silos accelerating data inputs as processes are transformed.” So, if I had to bet, I’d say the smarter enterprises will be plowing RPA savings into the less-exciting, more-impactful data management tools or enhanced capabilities around risk and compliance. As Jen also pointed out, “[As] 66% of DT [digital transformation] services buyers used a vendor from a prior IT services engagement, existing relationships in clients’ IT organizations are a good starting place for ascertaining and accessing DT budgets.” We’ll be watching this closely, all the while wishing I had a robot to do the watching while I do the thinking.


Technology Business Research, Inc. announces 4Q18 webinar schedule

Technology Business Research, Inc. (TBR) announces the schedule for its 4Q18 webinar series.

Oct. 10         Crossing the chasm: Transforming from a CSP to a DSP

Don’t miss attributes of a CSP versus a DSP, operators leading in the market, vendors successfully enabling transformation and more.

Oct. 17         IoT customer maturity

Don’t miss customer capabilities needed for IoT, implications of customer maturity in go-to-market tactics and delivery, and more.

Oct. 31         IT services expectations for 2019: Assets, industries and human transformation

Don’t miss IT services expectations for 2019, including how vendors and their clients will manage co-innovation’s impact on services-related assets.

Nov. 14       Customer-centric digital transformation: What’s up with that?

Don’t miss the state of adoption of digital transformation technology and services, marketing maturity and opportunities, and more.

Nov. 28        2018: The year multicloud and hybrid cloud became inevitable?

Don’t miss shifts in cloud consumption, cloud vendor adaptations and expectations for 2019.

Dec. 5          Can management consulting survive digital transformation?

Don’t miss the next evolution of digital transformation and co-innovation centers, management consulting, and more.

Dec. 12        Why asset-based IT services will rule 2019

Don’t miss how vendors will adjust to asset-based services, changes observed in 2018 that will gather steam in 2019 and more.


TBR webinars are held typically on Wednesdays at 1 p.m. ET and include a 15-minute Q&A session following the main presentation. Previous webinars can be viewed anytime on TBR’s Webinar Portal.

For additional information or to arrange a briefing with our analysts, please contact TBR at [email protected].