The IoT market has begun sorting itself out in 2019 — a vast improvement from its disorganized past

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It has been a wild and chaotic ride for Internet of Things (IoT) vendors, with many placing big bets on IoT in the past and entering 2018 largely disappointed by the results. While IoT will likely never meet the expectations placed on it in 2015 and 2016 — the peak of hype — IoT’s contribution to IT vendor revenue will increase, with IoT ultimately becoming a core revenue driver. IoT, as a technique to solve business challenges through the assembly of technology to drive results, such as predictive maintenance, resource efficiency, value-added services or generally, increase insight, is not going anywhere.

The good news for vendors is IoT is getting a lot easier as the ecosystem sorts itself out. The increase in portfolio focus and partnering is making the market easier to navigate for vendors and customers. Offerings are becoming easier to implement and integrate as vendors begin to converge on architectures and standards, as well as orient go-to-market strategies toward coopetition rather than “winner takes all.” Customers are coming to market with a greater understanding of what they are looking for thanks to efforts by vendors and early adopters educating the market and cutting through the hype pays off. TBR believes 2019 marks the emergence of “go-to-market 2.0” as an evolved strategy for both IT and OT vendors seeking to better profit from IoT.

 

The 1Q19 Commercial IoT Market Landscape looks at technologies and trends of the commercial IoT market. Additionally, TBR catalogs and analyzes by vertical more than 450 customer deals, uncovering use trends, identifying opportunities, examining maturity, and discussing drivers and inhibitors.

What an energy sector use case teaches us about getting digital transformation right

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TBR has kept a close eye on the energy sector as macroeconomic pressures have forced adoption of digital solutions to problems as old as oil itself. As the business of providing digital transformation services has evolved, TBR has increasingly seen use cases proving substantive, transformative change for companies not in the news or in every emerging technologies presentation. PwC provided TBR a deeper dive on one particular use case, which pulls together those two strands and serves as a useful marker for the present moment in digital transformation.

Show me how I can shrink my inventory using data and analytics

For an oil field services company, PwC deployed elements of its Supply Chain Opportunity and Optimization Platform (SCOOP) offering, including analytics and visualization tools. The company, an existing finance, tax and IT services client, admitted to having “no visibility” into its inventory, making it a perfect case for PwC’s Supply Chain and Data & Analytics practice offerings. By delivering prescriptive analytics across a single product line stored in more than 200 warehouses globally, through a visualization tool that “sold the project,” PwC identified opportunities for the client to reduce inventory by approximately 20% and reduce associated costs by as much as 5%.

Change management determines everything

In debriefing TBR, PwC shared some additional insights into what made the project a success — with success in part defined by the client’s decision to replicate the analytics-based approach across additional product lines. First, PwC baked change management into the engagement, declaring that “managing the change is part of everything we do.” While TBR has heard similar assertions around the criticality of change management in digital transformation engagements, PwC brought forward a few new elements, including a redefinition of the client’s operating model based on the talent the client would need to have on hand to gain the most benefit from PwC’s SCOOP solution. PwC planned upfront for the client’s talent needs and ensured the business model implications would minimize downstream efforts to train client personnel.

In addition, PwC considered the client’s needs to demonstrate success internally — to justify the costs, ensure additional investments, and keep the project funded and viable — and said simply that “change management includes showing that [the PwC solution] is working.” This marks a subtle shift of KPIs from measuring clients’ satisfaction with the consultancy to serving as part of internal change management. Pulling the various strands together, PwC noted that change management can be the most complex element in an engagement: “Training, communications, implementation, coaching, building the metrics, and ensuring changed behavior” all determine whether a project takes four weeks or more than 12 to go from visualization to full-on implementation.

 

Deconsolidating Worldline: Atos gets ready for new age of digital transformation

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At its 2016 Investor Day, Atos publicly set its course for the next three years, identifying digital transformation as the high-growth, high-value segment of the market on which it aimed to capitalize. The company then positioned itself as the digital services and payments leader in Europe and leveraged its Digital Transformation Factory (DTF) and e-payments subsidiary Worldline to shift its revenue mix to higher-value, next-generation solutions. Back in 2016 TBR predicted that Atos was making a smart move that was in line with industry trends. We expected that staying with its digital services and payments strengths as well as diversifying its geographic reach by expanding in North America would enable Atos to sustain revenue growth and improve profitability. Atos met its financial goals for 2018, and the company is now making a shift in its strategic direction. At its 2019 Investor Day, Atos updated its course for the next three years. While Atos will continue to expand in digital services, the payments services component will not be part of the equation as Atos is deconsolidating its e-payments subsidiary Worldline. Deconsolidating Worldline as a stand-alone listed pure play business is a logical move that will have an immediate positive effect and enable Atos to focus on its core digital services activities.

The big break: Separating Atos and Worldline

TBR believes Atos began to prepare Worldline to become a stand-alone business with the initial public offering (IPO) of Worldline in 2014. During the past four years, Worldline has operated as an Atos subsidiary and, as part of financial reporting, was one of Atos’ four divisions along with Infrastructure & Data Management (IDM), Business & Platform Solutions and Big Data & Cybersecurity. Worldline had its own CEO, leadership team, brand identity, strategy and financial goals, and the separation from Atos will not hinder the new company. With annual revenues of €2.2 billion (or $2.5 billion) and 11,500 employees, Worldline will continue to pursue its goal of becoming a leading payment services provider in Europe, especially after the acquisition of SIX Payment Services in May 2018. At its Annual General Meeting on April 30, Atos plans to submit a resolution to distribute to Atos shareholders 23.4% of Worldline’s share capital, out of the 50.8% currently owned by the Atos Group. After the transaction is complete, Atos will retain 27.4% of Worldline’s share capital, 26.9% will be held by SIX Group, and the balance of 45.7% will be free float shares.

As of May, Atos and Worldline will become two listed global pure play services providers specializing in digital services and payment services, respectively. TBR sees this split as inevitable as it enables both companies to individually pursue their goals utilizing their core expertise and gives them a targeted direction for their strategic activities. While the preparations to scale Worldline to a stand-alone company took several years, the Atos board was very quick to organize the separation process by establishing an ad hoc committee in December 2018 and announcing the decision on Jan. 30. As noted during the presentation, Atos and Worldline will maintain all existing partnerships “on an arm’s length basis,” pursuing a joint go-to-market strategy and continuing their industrial and commercial partnership.

 

 

Atos’ 2019 Investor Day was held at the company’s headquarters near Paris. The meeting was hosted by Atos Chairman and CEO Thierry Breton and key members of Atos’ executive leadership team. The company used the event to announce to the financial and industry analyst community its vision, strategy and three-year plan through 2021. The main message was that Atos is positioning as a trusted partner for clients’ digital journeys. Atos focuses on enabling customers’ digital businesses with secure, data-driven ecosystems and end-to-end, industry-specific services and technologies.

Key findings from TBR’s 2H18 Hyperconverged Platforms Customer Research

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  • TBR forecasts the HCI market will reach $15 billion by 2023, representing a significant growth opportunity for data center vendors.
  • Survey incidence data indicate that the majority of potential customers have not yet begun their hyperconverged infrastructure (HCI) journey.
  • Emerging solutions, such as Lenovo’s TruScale Infrastructure Services and AWS Outposts have the potential to shake up the HCI market.

Opportunity for successful HCI vendors is great, as the market will rapidly expand through 2023

The HCI market evolves to meet customers’ changing demands. As customers embrace digital transformation, the opportunity in HCI increases, and vendors invest and adapt to become agents of change for customers. TBR estimates the HCI market will increase from $4.6 billion in 2018 to $15 billion by 2023 as customers leverage HCI for a wide array of needs, both traditional and emerging.

A majority of potential customers have not yet purchased HCI, creating opportunities for all HCI vendors to gain customers. Incidence data from TBR’s research show that only 27% of companies surveyed purchased HCI. This demonstrates the massive opportunity that remains for vendors to gain net-new customers in the space. Converged infrastructure (CI) leaders Dell EMC and Cisco have a distinct advantage over other HCI peers, as their CI legacies have afforded them incumbent status with existing CI customers. Despite the incumbent advantage, there is opportunity for any vendor to capitalize on emerging buyer preferences. For example, software is an increasingly central piece of the HCI story, and with 79% of respondents indicating that they would consider consumption-based HCI purchases, strategic marketing and investments can enable any HCI vendor to rise through the ranks.

While Lenovo is not a leading vendor at this time, 30% of respondents indicated they considered Lenovo for their HCI purchase. Lenovo’s restructured portfolio, its recent unveiling of TruScale Infrastructure Services, and the rapid positive changes in its overall data center business are likely to bolster gains for the vendor in HCI as well. Although Dell EMC’s and Cisco’s leadership in the HCI space has been established, the opportunity in HCI remains vast, even for fast followers in the space. Digital transformation only stands to reinforce this trend as HCI becomes more widely adopted.

Customers leverage HCI for private and hybrid cloud installments as security remains a top concern with public cloud adoption

It is clear the private and hybrid cloud value proposition is a benefit HCI buyers are looking to achieve, with 80% of respondents indicating they leverage HCI for private or hybrid cloud installments. A majority of customers (60%) leverage their HCI for database management, and many of these customers indicated their database management use was for mission-critical purposes. This underscores the need to protect critical and sensitive data. TBR’s research showed that buyers are making additional investments in security in conjunction with HCI, particularly network security.

 

Going forward, the emergence of AWS Outposts in the market will challenge current HCI deployment trends as Amazon Web Services (AWS) messages its Outposts offering as being able to seamlessly integrate with AWS public cloud, addressing a key driver behind HCI adoption for private cloud installments. AWS Outposts are expected to hit the market in 2H19, so it will take some time before the impact of Outposts is known. However, that AWS is making its Outposts offering available as a managed service will improve ease of use, and will likely increase demand, especially among existing AWS customers as the underlying hardware of Outposts will resemble that of AWS’ public cloud environment.

Lenovo unveils on-demand service for data centers, joining competitors

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Lenovo’s Data Center Group (DCG) has unveiled TruScale Infrastructure Services. A Hardware as a Service (HaaS) solution with subscription-based pricing, TruScale makes DCG’s entire ThinkSystem and ThinkAgile portfolio available to customers “as a Service” through both Lenovo sales associates and channel partners.

For a monthly fee, customers will gain access to data center infrastructure, which can be installed at the customer’s location of choice. Cost will be based on power consumption, as power consumption is a relatively accurate way to measure usage without compromising infrastructure security. The hardware remains Lenovo-owned, -maintained and -supported, and with no minimum usage requirement, customers gain the financial flexibility available through public cloud offerings without the risks associated with taking data off premises. — Stephanie Long, Analyst

Lenovo unveils TruScale Infrastructure Services, consumption-based data center pricing

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In February Lenovo’s Data Center Group (DCG) unveiled TruScale Infrastructure Services. A Hardware as a Service (HaaS) solution with subscription-based pricing, TruScale makes DCG’s entire ThinkSystem and ThinkAgile portfolio available to customers “as a Service” through both Lenovo sales associates and channel partners. For a monthly fee, customers will gain access to data center infrastructure, which can be installed at the customer’s location of choice. Cost will be based on power consumption, as power consumption is a relatively accurate way to measure usage without compromising infrastructure security. The hardware remains Lenovo-owned, -maintained and -supported, and with no minimum usage requirement, customers gain the financial flexibility available through public cloud offerings without the risks associated with taking data off premises. Further, the monthly pricing structure includes installation, deployment, management, maintenance, remote monitoring, system health checks and removal of the hardware once the subscription expires. Pricing details of the solution have not yet been disclosed and are likely to be determined case-by-case. The solution is currently available only in English and priced in USD and Euros.

DCG’s late-to-market status will be advantageous in the consumption-based pricing realm

DCG is a fast-follower in consumption-based pricing, as Hewlett Packard Enterprise (HPE) and Dell Technologies have offered consumption-based pricing for over a year. While these offerings have greater market longevity, as they are typically multiyear agreements, customer adoption remains relatively nascent for consumption-based pricing models. These deals are more complex than traditional hardware sales, and therefore require a mindset shift in some ways to promote adoption, just as cloud did initially. DCG’s entrance into the market times well with customer interest, and the vendor’s later arrival to the space will not prove to be a major inhibitor to growth.

The total inclusion of DCG’s channel partners, in addition to its direct sales force, in providing TruScale, is an asset and distinction for the group. Because Lenovo’s services portfolio is not as mature as that of vendors such as Dell EMC, providing channel partners with this opportunity will prove to be a win-win as it enables channel partners to sell attached services while affording Lenovo a more passive revenue stream. Involving the channel has been an initial challenge for some vendors offering consumption-based pricing as the partners need to be incentivized to pursue it over a traditional hardware sale, in which they would get a lump sum payout versus a subscription-like payout. TBR believes that because Lenovo has arrived to market later than peers with its consumption-based pricing offerings, it was able to work out channel partner challenges before going live with the solution.

AI chips: Explosive growth of deep learning is leading to rapid evolution of diverse, dedicated processors

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Artificial intelligence (AI) utilization has been accelerating rapidly for more than 10 years, as decreases in memory, storage and computation cost have made an increasing number of applications cost-effective. The technique of deep learning has emerged as the most useful. Large public websites such as Facebook (Nasdaq: FB) and Amazon (Nasdaq: AMZN), with enormous stores of data on user behavior and a clear benefit from influencing user behavior, were among the earliest adopters and continue to expand such techniques. Publicly visible applications include speech recognition, natural language processing and image recognition. Other high-value applications include network threat detection, credit fraud detection and pharmaceutical research.

Deep learning techniques are based on neural networks, inspired by animal brain structure. Neural networks perform successive computations on large amounts of data. Each iteration operates on the results of the prior computation, which is why the process is called “deep.” Deep learning relies on large amounts computation. In fact, deep learning techniques are well known; the recent growth is driven by decreasing costs of data acquisition, data transmission, data storage and computation. The new processors all aim to lower the cost of computation.

The new chips are less costly than CPUs for running deep learning workloads

Each computation is limited and tends to require relatively low precision, necessitating fewer bits than found in typical CPU operations. Deep learning computations are mostly tensor operations — predominantly matrix multiplication — and parallel tensor processing is the heart of many specialized AI chips. Traditional CPUs are relatively inefficient in carrying out this kind of processing. They cannot process many operations at the same time, and they deliver precision and capacity for complex computations that are not needed.

Nvidia (Nasdaq: NVDA) GPUs led the wave of new processors. In 2012, Google announced that its Google Brain deep learning project to recognize images of cats was powered by Nvidia GPUs, resulting in a hundredfold improvement in performance over conventional CPUs. With this kind of endorsement and with the widespread acceptance of the importance of deep learning, many companies, large and small, are following the money and investing in new types of processors. It is not certain that the GPU will be a long-term winner; successful applications of FPGAs and TPUs are plentiful.