Microsoft beats out Amazon after contentious competition for DOD’s JEDI award

Last Friday’s announcement of the massive U.S. federal government cloud contract led Senior Analyst John Caucis to publish a special report explaining how Microsoft won, why Amazon lost, and what it all means for the IT services vendors in the U.S. public sector space. “Regardless of why the DOD [Department of Defense] chose to announce the winner of the biggest single cloud contract to date in federal IT (and one of the biggest IT contracts in federal IT history) when it did, Microsoft is now poised to capture potentially billions in revenue as the DOD’s leading cloud vendor on JEDI [Joint Enterprise Defense Infrastructure], an award with a $10 billion ceiling and a potential 10-year life span if all options are exercised. Vendor selection for JEDI has been ongoing for over a year, plagued by multiple protests, internal investigations, and conflict-of-interest allegations by and between the initial four contestants, Amazon, IBM, Microsoft and Oracle. The acrimony kept the DOD from awarding JEDI by its original target date of April 2019, though the agency eliminated IBM and Oracle in April in the first ‘down-select’ of the vendor review process.”

Additional assessments publishing this week from our analyst teams

“Restructuring and automation efforts help Fujitsu reposition for profitable growth in its services business. However, the company may need to look outside its traditional client base to see tangible results throughout 2020.” — Kelly Lesiczka, Analyst

“From a cloud perspective, Fujitsu will align its strategy to its competitors’ strategies, which consist of encouraging customer migrations to hybrid and multicloud environments. However, TBR believes Fujitsu’s expertise in IT outsourcing will serve as a differentiator as Fujitsu looks to explore operational services within multicloud environments more heavily compared to industry peers. Fujitsu announced plans to invest ¥500 billion in its DX business over the next five years and to launch an independently operated consulting business, expected in January 2020, to meet its technology goals.” — Nicki Catchpole, Senior Analyst

“While Cognizant faced challenges within its mature industry segments in 2Q19, we expect the company improved its ability to scale digital solutions through additional acquisitions, such as Zenith Technologies, to offset pressure in 3Q19.” — Lesiczka

Tata Consultancy Services’ (TCS) Business 4.0 strategy focuses on expanding the company’s solution suite around next-generation offerings such as AI, analytics, big data, blockchain, cloud, IoT and security. Integrating this strategy across service delivery and got-to-market teams enables TCS to sustain its global brand awareness and creates opportunities to upsell existing clients and attract new logos seeking increasingly comprehensive digital transformations, which generates opportunities for longer-term and often larger-dollar outsourcing engagements.” — Kevin Collupy, Analyst

“TBR’s Global Delivery Benchmark shows that agile-based service delivery is speeding up vendors’ ability to deliver at scale, which is forcing vendors to hire more talent with specific skills to keep pace in this delivery model. As vendors continue to adjust business models to operate in an automation-enabled services environment, their inability to systematically and consistently monetize IP will further pressure profits.” — Boz Hristov, Senior Analyst

“In the latest Digital Transformation Insights report on Digital Marketing Services, TBR notes that as the most mature digital transformation process, customer experience process has compelled buyers to embark on omnichannel projects to unify insights and processes across the customer life cycle and deliver more personalized experiences to end consumers. While macroeconomic headwinds will taper revenue growth, AI-enabled user experience solutions will continue to create entry points for customer acquisitions compelling vendors to recalibrate investment strategies.” — Hristov

Leidos’ 3Q19 revenue is expected to rise between 4% and 6% year-to-year to between $2.68 billion and $2.73 billion as the company’s backlog continues to reach new highs, owing to a strong, sustained pace of net-new contract bookings across defense, civilian and particularly, healthcare areas. Leidos also successfully defended its position on a handful of large projects during 3Q19, including the $2.9 billion, 10-year NASA End-User Services & Technologies (NEST) program and the $927 million IT and logistics support contract with the Transportation Security Agency (TSA).” — Caucis

CACI’s revenue is projected to increase between 15% and 20% year-to-year to between $1.34 billion and $1.4 billion in 3Q19. A revenue result for CACI anywhere in the projected range would represent another record level for the company, reflecting the tight alignment of its differentiated solutions with high-priority spending areas in the defense and intelligence markets. CACI is beating out incumbents on large-scale program recompetes and effectively defending its incumbency on its own legacy engagements, while the strength of its fiscal performance points to a high-value solutions mix highly relevant to its core customer set. $1 billion in acquisitions made in 1Q19 are also bolstering CACI’s top-line, though concurrently generating margin pressures.” — Caucis

Booz Allen Hamilton’s (BAH) revenue is expected to increase between 9% and 11% year-to-year to between $1.76 billion and $1.79 billion in 3Q19, consistent with the company’s plan to aggressively execute on its FY2020 growth objectives during the first half of the fiscal year (calendar 2Q19 and 3Q19).  BAH is realizing balanced growth across its government-focused business lines, while growth in its Global Commercial business has been more variable. Irrespective, BAH continues to book a strong volume of IT modernization, advisory and security-focused engagements.” — Caucis

“To further reduce churn and increase revenue, T-Mobile is building a more robust customer ecosystem by launching new value-added services, expanding its IoT portfolio, and entering new markets such as video and residential broadband.” — Steve Vachon, Analyst

AT&T’s network investments in areas including 5G, NFV, SDN and IoT are providing the foundation for businesses to support digital transformation initiatives to enhance efficiency and customer experience. AT&T is preparing to support next-generation digital solutions by fostering network innovations at its six global AT&T Foundry centers as well as working with multiple leading technology providers including Dell Technologies, IBM, Microsoft, Samsung and Hewlett Packard Enterprise.” — Vachon

Microsoft outduels Amazon for JEDI

Microsoft beats out Amazon after contentious competition for DOD’s JEDI award

Late on the afternoon of Friday, Oct. 25, the Department of Defense (DOD) announced it had selected Microsoft (Nasdaq: MSFT) for its lucrative Joint Enterprise Defense Infrastructure (JEDI) cloud contract, the Pentagon’s plan to adopt a general-purpose cloud infrastructure first announced in November 2017. The notification of JEDI’s winner came at an odd time — we saw the first notification of Microsoft’s win at 6:30 p.m. EDT. Releasing news or documents late on a Friday afternoon is sometimes referred to as a “Friday news dump” by members of the media, a technique that can thwart in-depth media analysis of bad news or unfavorable developments affecting the story’s source.

Regardless of why the DOD chose to announce the winner of the biggest single cloud contract to date in federal IT (and one of the biggest IT contracts in federal IT history) when it did, Microsoft is now poised to capture potentially billions in revenue as the DOD’s leading cloud vendor on JEDI, an award with a $10 billion ceiling and a potential 10-year life span if all options are exercised. Vendor selection for JEDI has been ongoing for over a year, plagued by multiple protests, internal investigations, and conflict-of-interest allegations by and between the initial four contestants, Amazon (Nasdaq: AMZN), IBM (NYSE: IBM), Microsoft and Oracle (NYSE: ORCL). The acrimony kept the DOD from awarding JEDI by its original target date of April 2019, though the agency eliminated IBM and Oracle in April in the first “down-select” of the vendor review process.

Amazon was once the ostensible front-runner, but Microsoft’s approach to hybrid cloud may have won out in the end

Amazon won the $600 million cloud award with the CIA in 2013, beating out AT&T (NYSE: T), IBM and Microsoft, an engagement many industry observers expected would act as a springboard for Amazon to future cloud work in the federal IT sector. After JEDI was announced in late 2017, industry analysts believed Amazon, the market share leader in the cloud space, and its ongoing cloud work in the U.S. Intelligence Community (IC) would help clear the way to victory on JEDI. Amazon’s alliance with VMware (NYSE: VMW) was key to winning the CIA cloud work, as VMware was estimated to be hosting between two-thirds and three-quarters of government workloads running on the cloud at the time. Amazon had also enhanced the security of its cloud offerings to accommodate defense- and intelligence-grade data assurance needs by steadily obtaining new authorizations to host government data at increasingly higher security levels. As the vendor selection process for JEDI moved along, however, concerns arose that JEDI’s single-source structure would diminish the DOD’s flexibility in choosing cloud vendors and technologies. There were also indications during 2019 that the DOD’s cloud migration strategy was increasingly favoring a more piecemeal and unhurried transition to the cloud. The DOD’s evolving cloud preferences seemed to shift the JEDI competition in favor of Microsoft’s hybrid cloud approach that blends exiting IT infrastructures with new cloud systems while leveraging partners to a greater degree in the migration process. 

Digital transformation in 2020: How hype gets scale and substance

TBR continues to track the evolution of emerging technologies, the changing roles of business models for vendors, and enterprises’ expectations as digital transformation further shifts from hype to concrete offerings delivered by IT services and technology vendors. The next wave of change will bring further disruption, but also scale and speed that will separate the industry leaders from the laggards.   

Join Senior Analyst Boz Hristov and Principal Analyst Patrick M. Heffernan as they dig into key findings from TBR’s full 2019 Digital Transformation Insights portfolio.

Don’t miss:

  • How consultancies and IT services vendors have shaped their offerings around digital transformation to meet new client demands and competitors’ evolving strengths and weaknesses
  • Which vendors TBR sees as leaders in the digital transformation space and if they will continue to lead in 2020 and in 2025
  • What trends across TBR’s Digital Transformation Insights portfolio say about expectations in emerging technologies and new business models

Peering over the edge with 5G

Edge and 5G computing working together: It just makes sense

5G and the edge exemplify the ‘co-influenced’ trend

The afternoon opened with an exercise whereby small groups were asked to define the relationship between the edge and 5G. The somewhat laborious attempt to define the edge in the context of 5G (or vice versa) exemplified the fact that technology is developing so rapidly, the terminology to define it does not exist yet. While the communal search for a word could have dragged on for the better part of the afternoon, the group, pressed for time, settled on the term “co-influence.”

These small group breakouts led to lively discussion, and provided insight around how co-dependency does not exist between the edge and 5G as well as how there are no hard-and-fast rules as to which precedes the other and/or which is the greater influencer. Edge technology, while not a spotlight stealer, was cast in a leading role at a conference that in previous years was solely dedicated to 5G. After a morning of 5G transport immersion, the afternoon sessions highlighted that the industry is recognizing that both technologies already have a symbiotic relationship no matter what definition is used.

5G and connecting the world via the edge

Despite the excitement about what the future holds with 5G, there is widespread acknowledgement that the technology is still extremely new and that there are very few use cases highlighting extensive deployment success and in only a few highly controlled markets. Indeed, many of the event’s examples spoke to the potential of 5G and showed fascinating benefits, but within controlled testing environments.

Outside the lab, potential exists for edge to help 5G scale massively as billions of devices will be connected and widely distributed worldwide by the end of 2019. While a fraction of devices are as ubiquitous smartphones, the rest will consist of connected wearables, drones and sensors on just about every wearable or implantable imaginable. The proliferation of edge computing provides an increased network of diverse devices, enabling a means to process, filter and protect data locally, which, in turn, plays a key role in enhancing the value of 5G networks.

On Oct. 10, over 200 5G transport industry professionals gathered in New York for a day packed with presentations and discussions around the deployment of advanced 5G transport networks as well as the integration of edge cloud infrastructures and services. The event, hosted by Light Reading, brought together industry thought leaders from Verizon, Juniper Networks, Corero, ZenFi, MetTel, Ericsson and Fujitsu, among others, who led discussions on a range of topics covering edge concepts, mobile connectivity solutions, and technology structure, architecture and design. While 5G transport was the overarching topic, discussion around the edge factored heavily into the event. For the first time in the history of the 5G transport conference, one of the two afternoon tracks was dedicated to the relevance and importance of edge technology as it relates to 5G.

Ecosystems and trust: What KPMG brings to blockchain

‘It’s not about the enterprise anymore; it’s about the ecosystem’

Opening the event with KPMG’s view of innovation and technology, including specifics around blockchain, National Managing Partner for Innovation and Enterprise Solutions Fiona Grandi and Global Blockchain Leader Arun Ghosh emphasized that achieving meaningful blockchain adoption requires moving beyond the enterprise to the entire ecosystem. In these remarks, particularly when KPMG stressed its role as a network provider, a “trusted layer” across a platform and an ecosystem, TBR heard echoes of the “Business of One” framework and the gradual shift within the IT services, consulting and technology space toward more robust partnering — and clients that expect more from their vendors’ ecosystems. Trust, as repeatedly invoked by KPMG, echoes the firm’s DNA as one of the Big Four, a firm trusted with clients’ financials, systems and regulatory obligations. Neatly pulling these two ideas together — the increasing need to play across an ecosystem, and KPMG’s core value around trust — Ghosh said one key question the firm helps clients answer, when considering blockchain, is quite simply, “Can I create a trusted ecosystem?” If clients can answer that question, they are prepared to move beyond what Grande described as a nonstarter position around blockchain. “When [clients] say, ‘We want it on blockchain,’ they haven’t thought it through,” Grandi said. On a more concrete level, KPMG’s leaders stressed the firm’s role in helping clients move toward smart contracts, a core use case for blockchain’s distributed ledger technology. Smart contracts, as KPMG’s U.S. blockchain program lead, Tegan Keele, summed up nicely, do not automate processes; they remove manual tasks. To remove those manual tasks, businesses comprising the ecosystem have to reach a consensus on process diagrams to establish the governance flows for the blockchain.

One specific example from the day stood out to TBR. KPMG professionals described a large-scale operations consulting engagement, including “pain and trust point mapping,” that led to a blockchain-enabled solution providing farm-to-table provenance, starting with the government agency responsible for licensing the farms. We will explore below how a government-mandated blockchain could enhance societal goals around welfare and certification, but the key characterization of KPMG’s role came from Ghosh, who said the use case highlighted the firm’s overall goal for blockchain, which is to “create [a] common, real-time, trusted source of the truth to help solve industry’s most critical issues … create an ecosystem around something that already exists, then add a layer of trust, enabled by blockchain.”

‘Those who get it want to create their own ecosystem and control it’

Understanding how KPMG defines the core values of blockchain requires also understanding how clients and technology partners see the firm itself, including what KPMG brings to innovations, engagements and solutions. Throughout the event, KPMG ceded the stage to clients and technology partners, such as IBM (NYSE: IBM) and Microsoft (Nasdaq: MSFT), that repeated a few key themes on what KPMG brings to blockchain. Most frequently, these speakers noted KPMG’s industry expertise, especially as related to specific business processes and industry-centric regulatory challenges. On this second point, one client stated that KPMG’s trusted brand and regulatory expertise were essential in the blockchain space “to drive institutional adoption.” Another client said KPMG brought a “holy trinity of expertise” around business processes, applicable technology and change management. (Note: In TBR’s view, change management remains a critical, if sometimes neglected, element of all emerging technology adoption and digital transformation. As multiple clients and consultancies have said, “The people, not the technology, are the problem.”) A technology partner said blockchain is a “team sport” and that “KPMG has deep process expertise in life sciences and supply chain,” two elements that had been critical to the partner’s joint engagement with a U.S. pharmaceutical giant. TBR also noted that multiple KPMG clients described the firm as a systems integrator (SI), fitting with KPMG’s approach to let the solution drive decisions around the technology stack, products and software.      

Technology Business Research, Inc. launches Telecom Edge Compute Market Forecast

Technology Business Research, Inc. is expanding its Telecom Edge Compute portfolio with the launch of the Telecom Edge Compute Market Forecast, an annual report scheduled to first publish in early 2020.

Edge computing has become a major area of interest and investment in the telecom industry, driven by CSPs’ need to improve user experiences as well as enable and support new business models. Communication service providers (CSPs) are also keen to invest in edge computing as a cost-efficiency solution, with 5G as well as the cloudification and virtualization of networks driving the build-out of edge compute environments.

Telecom Edge Compute Market Forecast, which is global in scope, will detail edge compute spending trends among CSPs, which include telecom operators, cable operators and webscales. TBR’s research will include current-year market sizing and a five-year forecast by multiple edge compute market segments and geographies.

Additionally, TBR will examine the following:

  • Spend by domain: hardware, software, services
  • Spend by hardware type: black box, gray box, white box
  • Spend by service type: deployment services, maintenance services, professional services, managed services
  • Spend by company type: telco, cableco, webscale
  • Spend by region: North America, CALA, EMEA, APAC

TBR’s Telecom Edge Compute portfolio also includes the Telecom Edge Compute Market Landscape, which launched earlier in 2019 and provides insights on use cases, business models, operator and vendor positioning and strategies, market size and adoption.

For additional information about this research or to arrange a one-on-one analyst briefing, please contact Dan Demers at +1 603.929.1166 or [email protected].

The state of cloud profitability has never been stronger

More than a decade after taking a leap of faith, cloud vendors prove profit possibilities

Hybrid cloud solutions, blockchain announcements from most major cloud providers, and data management and analytics initiatives are some of the most notable areas of investment that cloud vendors believe will shape their future markets.

McDermott will support ServiceNow’s ambitions to fill enterprise application gaps left by vendors like SAP

On Oct. 22, 2019, ServiceNow announced Bill McDermott, who resigned from SAP less than two weeks prior, would be taking over John Donahoe’s position as CEO at the end of 2019. McDermott’s experience in the enterprise software space will inform ServiceNow’s innovations in and around business applications from SAP and its closest competitors.

McDermott’s knowledge of the enterprise applications space is key

At its core, ServiceNow has a very different software portfolio than SAP, but considering the strategic objectives ServiceNow recently laid out, McDermott is well equipped to steer the company toward continued leading financial performance. As ServiceNow aims to engage more deeply with Global Elite partners such as Deloitte and Accenture, and to develop solutions that fill enterprise software gaps as it has with mobile onboarding and financial close automation, McDermott’s enterprise applications experience is a good fit. In addition to his global partner and enterprise customer relationships McDermott brings a deep and unique understanding of the “gaps,” or workflow disconnects, around enterprise applications that ServiceNow has identified as its key growth areas.

That said, it is a toss-up whether McDermott’s guidance will help ServiceNow avoid innovating into competitive overlap or steer the company directly into applications competition. With his knowledge of the functionality and gaps in broad enterprise applications suites like SAP Business Suite for HANA (S/4HANA), McDermott can direct ServiceNow’s innovation to either fill gaps or directly compete on specific functions. With that uncertainty, this appointment should put SAP, Oracle and Workday on high alert through 2020, as McDermott’s influence becomes more clear.

Notably, ServiceNow has been undergoing other executive changes, with former CFO Mike Scarpelli leaving to follow Frank Slootman (ServiceNow’s CEO before Donahoe) to Snowflake. McDermott has indicated that ServiceNow and Donahoe have already given McDermott the leeway to influence the CFO replacement process, and there is opportunity for McDermott to further shape ServiceNow through other executive appointments.

Core to ServiceNow’s capabilities, the Now Platform has long been overshadowed by the applications built on top of it. ServiceNow’s dilemma with the Now Platform is not how to enhance the capabilities, but how to brand the portfolio in such a way that the platform becomes as ubiquitous with the ServiceNow brand as the early IT workflow products have, while still capitalizing on the company’s ability to innovate into ― and capitalize on ― niche solution areas.

SAP’s McDermott joins ServiceNow to push enterprise growth

“In an unexpected move, ServiceNow announced that John Donahoe will step down as CEO of the company to accept the top job at Nike Inc. Bill McDermott, who recently resigned as CEO of SAP, will take over as ServiceNow CEO in January. While the move took many analysts by surprise, some thought it made sense to bring in McDermott, with his experience growing SAP’s business, given ServiceNow’s concerted move toward the enterprise applications market. ‘But ServiceNow has been very clear they don’t want to compete directly against an Oracle, SAP, Workday or Salesforce,’ said Meagan McGrath, an analyst at Technology Business Research in Hampton, N.H.” — TechTarget

IBM and the Raptors: Building an NBA champion and looking for a repeat

While watching the NBA’s defending champion Toronto Raptors begin their season, I thought back to a trip to IBM’s Toronto office in late summer 2018, where we got to play with the technology IBM built for the Raptors’ draft and trade war room. We created teams, selecting college players, current NBA players and even European league all-stars based on stats and contracts, influenced a bit by our own biases (toward the Celtics). And when we visited IBM Toronto again in 2019, when the Raptors were on the march to the playoffs and a championship, we understood that IBM’s technology had made a huge difference in pulling together an underappreciated, under-the-radar team. IBM’s combination of massive amounts of data, AI and a near-flawless user interface allowed the Raptors’ management team to put the right pieces in place to unseat the Warriors. Will the Raptors repeat? Unlikely, but they’re still partnering with IBM.

Later this month, we’re going to publish a special report on IBM’s role with the Raptors in the context of other consultancies and IT services vendors that have invested in analytics and sports, building on the following assessment from our Digital Transformation Insights Report: Cross Vendor, published in March.

“In 2016 IBM partnered with the NBA’s Toronto Raptors to create a ‘war room’ for the NBA draft, pulling together an exhaustive and diverse set of performance, personality and biological data on basketball players in the league, in college, and around the world.

Leveraging a user-centric design approach, IBM worked with the Raptors’ front office to develop an end-to-end platform that revolutionizes the operations experience and provides them with comprehensive and actionable data about players to support front-office decision-making processes.

IBM worked with the Raptors to gather player performance statistics and contract details, allowing the Raptors to get an instant view of all aspects of player performance and the ability to search and filter players, compare players, simulate trade scenarios, and collaborate with decision makers throughout the player recruitment and acquisition processes — how did a player do and what would it cost to have him play in Toronto.

The IBM Sports Insights Central solution was built over six months using a collaborative and agile model. The platform includes a state-of-the-art digital war room located at the Raptors’ facility as well as a mobile application and a web-based service to enable remote collaboration.

The IBM team synthesized and visualized all aspects of player data through an intuitive and highly functional user experience to make this a transformative engagement for IBM and the Raptors. Since the solution deployed, IBM has assisted the Raptors by further enhancing the functionality of the platform with scouting management, players’ social media profiles, and analytics provided by the IBM Watson AI engine via a native mobile app.”

(The Raptors started their title defense with a 130-122 win over the Pelicans.)