Agile-ready everything: An India-centric special scenario

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In Technology Business Research’s (TBR) April 2018 Global Delivery Benchmark, we noted that reskilling existing resources is taking precedence over aggressive hiring, resulting in decelerating headcount growth for the 14 benchmarked vendors in 4Q17. While vendors claim that digital-related revenues contribute from 25% to over 55% of their total services sales, existing engagements continue to require nondigital skills as well. Recruitment initiatives help vendors fill skills gaps in areas such as artificial intelligence (AI), Internet of Things (IoT) and analytics. At the same time, vendors continue to build local presence by opening innovation hubs to support agile-based service delivery. The return on these investments has yet to be quantified, but TBR will continue to monitor this trend as these facilities become ubiquitous to how vendors conduct business.

Workforce, workplace, offerings, partnerships

Based on previous forays by India-centric vendors into consulting-intensive offerings, TBR remains skeptical that a trend toward agile will radically change these vendors, but the exception could be TCS. As the largest, TCS will be the biggest battleship to turn around, but the public, deliberate, and staged approach may create the kind of permanence necessary for significant organizational change. TBR has witnessed an emphasis in recent years by consultancies prioritizing recruiting, retaining and reskilling of their talent, especially in emerging tech areas and the consulting offerings tied to those technologies. By leading with two people-centric initiatives, TCS may have charted the proper course. Now, will the company follow it? And will its peers chase its wake?

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

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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

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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

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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

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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?

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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

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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].

Altice and Dish Network oppose T-Mobile and Sprint merger

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The proposed T-Mobile and Sprint merger would disrupt the cable and pay-TV industries. T-Mobile will try to cross sell its Layer3 TV video platform to combined customer base of over 125 million wireless subscribers. — Analyst Steve Vachon

 

Full article

Digital transformation advances analytics and insights

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Realizing the dream of AI-embedded business processes must start with people and data management

Realizing the dream of AI-embedded business processes must start with people and data management

Every enterprise looks to use emerging technologies to cut costs, grow revenue or create new business models. The combination of changes in how people work and what new technologies can best be applied creates massive opportunities for services vendors. This new market — broadly defined as “digital transformation” (DT) — will evolve through the current hype peak into a long, steady stream of fundamentally traditional services engagements involving a mixture of process knowledge and technical expertise. Though no longer “emerging” technologies, data management and analytics software remain at the core of DT initiatives and adoption of truly emerging technologies such as artificial intelligence (AI). As the analytics and insights (A&I) professional services market matures, competencies around AI, human-centric user experience design and DT-related change management will be key to vendors’ future growth.

To sustain A&I professional services opportunities over the long term, vendors must stay on top of AI technology developments while maintaining a broader perspective on the impact of AI on clients’ business processes and human resource (HR) strategies. As AI adoption grows, so does the technology’s complexity, particularly at the intersection points between humans and machines and between regulatory policy and technological innovation. We expect rising concerns around security and governance, regulatory compliance, and HR implications of AI systems will continue to drive consulting and solution design engagements tied to broader DT initiatives. To capture these expected opportunities, A&I services vendors invest in service and technology offerings to assist clients with AI adoption — from upfront advisory to data integration, application development and managed services. However, despite vendors’ massive investments in AI capabilities and a growing number of high-profile use cases for the technology, TBR’s research around enterprise DT initiatives indicates clients have not fully bought into the value services vendors can provide in creating AI solutions, suggesting vendors have a marketing challenge to overcome.

The model for a successful vendor is indeed a tall order. Our research indicates enterprises undergoing DT want vendors to understand their business problems in both industry and functional contexts, create solutions that mesh with their existing IT environments and maintain security, and cultivate robust ecosystems of best-of-breed technology partners. While building out strategies around each of these pillars, vendors should message how they can address technical challenges such as data preparation and training to help clients start and continue experimenting with AI, as well as provide process transformation and change management advice to enable clients to bring those experiments to scale. Vendors must walk a fine line between establishing a long-term vision for the future of business and directing clients where to take the first step toward achieving their goals. Framing AI adoption in the context of methodical modernization of individual business functions, rather than as an excuse to play with cool new technology, will keep vendors on the right side of that line.

TBR will continue to monitor the impact of AI on vendors’ go-to-market strategies and enterprise customers’ IT and professional services buying behavior through its Analytics & Insights Professional Services Vendor Benchmark, Digital Transformation Services Market Landscape and Digital Transformation Customer Research. For deeper insight on this topic, see our event perspective on the 2018 O’Reilly Artificial Intelligence Conference, held this past April in NYC.

For more information, contact Senior Analyst Jennifer Hamel ([email protected]).

IoT Customer Spotlight: Colfax survived the stormy seas of IoT after righting its ship, and its story can serve as a navigational aid for peers still caught in the squall

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Colfax is an industrial conglomerate with two operating companies under it, ESAB and Howden. ESAB produces equipment and filler metals for most welding and cutting applications, and Howden delivers precision air and gas handling equipment for numerous industrial applications. Both are worldwide industrial suppliers with multiple manufacturing plants and globally distributed support apparatus.

I learned about the conglomerate during a PTC customer panel at PTC’s LiveWorx 2018, where Colfax was represented by Ryan Cahalane, the company’s vice president of digital growth. I found his story, among others, to be an intriguing view into the development and deployment of Internet of Things (IoT) applications by an actual customer of vendor IoT solutions. Often, the real stories get lost in the marketing morass of the larger IT and operational technology (OT) companies pushing solutions. Cahalane and I connected over our thoughts on the importance of solving “the business problem” (and our intriguingly similar last names), and I took the opportunity to learn about Colfax as a customer (one could argue it could increasingly be placed as an ISV) and its experience implementing IoT.

Colfax began its journey like many of its peers: IoT was the buzz, and the company tried to react as fast as it could. Like many manufacturers or those in heavy industry, Colfax’s leadership kicked around the idea of harnessing IoT to drive new growth and differentiate from peers in a competitive marketplace, primarily via new IoT-enhanced products or digitally enabled service offerings. However, Colfax ran into challenges.

Internally, Colfax experienced the same roadblocks that plague most companies investigating IoT, especially federated ones like itself:

  • Colfax had a sizeable number of people working on IoT, but the company lacked communication and alignment across the various business units and initiatives.
  • Plenty of good ideas were being developed via shadow IT, but the company lacked cohesion and developments were technology-focused — not guided by business problems. This failed to differentiate the company, and Colfax’s messaging got lost in a crowded market.
  • Colfax initially tried to go it alone with a do-all solution, but that led to generic offerings that were not best-in-class, and handling all of the components, including design and management, was difficult for a diverse, distributed organization.

Externally, the company faced the usual challenges of the market. Its customers were interested in IoT, but Colfax found itself in proof-of-concept limbo as customers continually kicked the tires on IoT but never walked away with a key in hand. Cahalane explained that Colfax had trouble navigating customer cultures, such as garnering agreement from line-of-business, OT and IT managers from a technology viewpoint, and ultimately proving ROI for its digital solutions, from a business viewpoint, to C-level executives.

Many companies have shared the same struggles, and are now washing out, including behemoths such as General Electric, indicating no company is safe from the volatile and hypercompetitive IoT market. Colfax has persevered, however, because the company was quick to perceive the changing market dynamics. Here are my takeaways from my conversation with Cahalane around the company’s pivot:

  • I’ll begin with something that Cahalane, being humble, didn’t share with me but that I believe was an important step for Colfax: The company established Cahalane’s position of digital growth VP to coordinate IoT initiatives across the company and foster knowledge sharing, ultimately helping Colfax organize for IoT. Instead of offering a number of distributed, unfocused and perhaps competing IoT initiatives, Colfax, with Cahalane’s help, is focusing and acting on key opportunities.
  • What are those key opportunities? Colfax’s competitors would certainly like to know! Cahalane did share, however, the company’s new thought process for developing them: focus on the business challenges of its customers and narrow them down to what Colfax can best service with its technology and expertise. It’s no longer about developing fancy new technology and telling customers why they need it. It’s about listening to customers and solving their problems.
  • Colfax is going to market with the technology discussion on the back burner. Instead, the company is approaching customers with a business-problem-solving outlook, fishing for the all-important CEO buy-in and leaving the technology details to be sorted out later. As Cahalane stated, “We are staying very focused on the business message, the real value that you get from the solution. The tech is just a vehicle. A business message allows us to really spend time on bringing our knowledge to more customers. The customers finally see how it all fits together. It’s in their language.”
  • Cahalane noted that companies, such as Colfax in its early days, are often afraid of working with vendors or partners. Cooperation and coopetition among partners or working with a new vendor can be intimidating when a company knows it’s on the verge of a vertical breakthrough or solving the next use case, causing companies to keep their cards close to their vest. Laying the cards on the table and sharing technology, techniques, and customer relationships or entry points is a daunting step. Cahalane emphasized how Colfax had to shift its thinking from “How do we compete?” or “How do we keep this in-house to avoid paying for technology?” to “How could [a partner or new vendor] help?” or “How can they accelerate our goals?” Using the technology, expertise and capacity of Microsoft, OSIsoft and PTC now allows Colfax to focus on the solution components it knows best and to layer them on best-in-class platforms and tool kits provided by its vendors. This approach not only provides customer validation — for example, attaching to a well-known brand such as Microsoft for IaaS makes customers more comfortable — but also spreads out development and management. Instead of trying to support the entire load, which would be a challenge for an organization of Colfax’s size and structure, the company relies on its partners and vendors to take responsibility for their own components.
  • Finally, Cahalane emphasized the need for companies such as Colfax to remain agile in the quickly moving and erratic IoT-enhanced products market. The company constantly looks for acquisition candidates that can not only increase its expertise in its core digital initiatives and target verticals but also deliver new business models.

What is next for Colfax? Cahalane noted that there is still a lot of work for Colfax and its partners to do to develop, and educate customers about the power of data. This means not only tying data together inside one organization but also sharing data across organizations. For example, Colfax’s welding solutions could be used by customers to apply predictive and prescriptive analytics to real-time operational data to have alerts sent to supplies manufacturers for automatic resupply. Cahalane also hinted that Colfax sees the importance of shifting toward prepackaged solutions, which reduce customization costs and complexity and are built around proven ROI, to induce more customers to buy Colfax IoT solutions.

That’s the Colfax story. Why is it important? Not only does it validate concepts we have been sharing since we began our IoT coverage, but more importantly, it serves as an example to companies similar to Colfax across all verticals that may still be spinning their wheels with IoT. As Cahalane explained, true IoT success stories can be few and far between, with numerous IoT projects stuck in the mud due to vagueness, overambition, immature IoT, or lack of organization or maturity among vendors and customers to apply IoT.

However, TBR’s survey work and the insight gained from my discussion with Cahalane, among others, suggest that many projects that start with a specific business challenge, are smaller in scale or divided into digestible parts, and are led and received by companies mature in IoT, are working and delivering actual IoT revenue. TBR believes vendors and customers should take lessons from companies such as Colfax: focus on the business message, organize your business’s digital and IoT efforts around key opportunities, and use vendor partners to fill gaps while focusing initiatives around core strengths. While Colfax, as Cahalane noted, isn’t gaining explosive IoT revenue, TBR believes it’s certainly on the right path.