“Steve Vachon, telecom analyst at Technology Business Research, also considers 600 MHz spectrum to be at the ‘foundation’ of T-Mobile’s 5G strategy. ‘The coverage range provided by the licenses will enable the operator to provide nationwide 5G coverage in 2020,’ he wrote in a research note.”
The U.S. federal earnings season kicks off the week of July 22, with legacy defense contractors General Dynamics, Northrop Grumman and Raytheon releasing their fiscal results for the second calendar quarter of 2019.
Leaders in TBR’s Public Cloud Benchmark continue to deliver strong results, but their closest competitors are aggressively innovating to challenge them. Google and IBM have enlisted Kubernetes to help them decouple PaaS business from Microsoft’s and Amazon Web Services’ (AWS) IaaS-led strongholds on the market, while pressure on Salesforce from both full-suite and modular CRM competitors is building. — Meaghan McGrath, Senior Analyst
Microsoft’s Commercial Cloud business continued to grow in FY4Q19, to $11 billion. Office 365 and Azure products accounted for 52% and 33% of total Commercial Cloud revenue, respectively. Though not yet the primary revenue driver of its Commercial Cloud business, Microsoft’s Azure portfolio is critical to the vendor’s long-term cloud growth, prompting investment in its developer community and tools as well as in high-profile partnerships that challenge AWS. — Meaghan McGrath
Tata Consultancy Services’ (TCS) revenue increased 8.6% year-to-year to $5.5 billion in 2Q19, highlighting the successful alignment of TCS’ service delivery frameworks with the needs of its global client base. Digitally based engagements constitute an ever-expanding share of TCS’ revenue base and backlog, and TCS claims nearly one-third of its revenues are digital-related, which would explain the top-line growth despite marketwide pressures facing legacy services, such as traditional outsourcing engagements. — Kevin Collupy, Analyst
Atos is well positioned to compete in the dynamic digital transformation (DT) services market. With Atos’ shift to an industry-specific go-to-market strategy, developing outcome-based vertical solutions will help Atos not only build a business case that persuades clients to invest in DT but also expand mindshare among existing clients, a necessary move as Atos tries to grow sales from digital services. Expanded cloud capabilities with partners such as Microsoft and Google Cloud enable Atos to design, build, manage and deploy cloud solutions and grow revenues in the segment. Two cybersecurity capabilities set Atos apart from its IT services peers: its portfolio of security services and IP-based solutions, and its verticalized cybersecurity offerings. Partnerships with established technology vendors and increasingly with startups enable Atos to innovate its portfolio and expand client reach. — Elitsa Bakalova, Senior Analyst
Fujitsu continues to invest in its portfolio offerings to provide vertical-oriented solutions, including within travel and transportation as well as healthcare. As the company looks to focus on its primary markets, Fujitsu expands its talent bench to support market presence and portfolio development, evidenced by the opening of a security operations center in its office in Canberra, Australia. The center will enable Fujitsu to maintain its client base in the region while also capturing upselling opportunities. We expect these investments will allow Fujitsu to build out its presence outside Japan to bolster revenue streams. — Kelly Lesiczka, Analyst
Recently, Analyst Stephanie Long hosted a webinar on how the quantum computing market will evolve from research-centric to commercial use cases as the technology reaches economic advantage — algorithm by algorithm — in the next two to five years. Once this occurs, developments will be rapid and organizations with the foundation built to take advantage of quantum computing will quickly reap the rewards of their early investments. Quantum computing, as a transformation-inducing technology, will impact multiple aspects of the IT environment, including power consumption, data generation, security and classical computing tie-ins. The swift impact of quantum computing will be a key factor in determining who wins and who loses in this technological transformation. Check out the replay of this webinar anytime in TBR’s Webinar Portal.
TBR believes that creating common terminology and understanding around data is key to successfully implementing an evolutionary digital transformation strategy, one that enables the organization to transform incrementally, as it capitalizes on new opportunities and deals with new challenges. Essential to this approach to digital transformation is an organizational cultural transformation, one that embraces continual innovation and ongoing collaboration across departments and disciplines and that enlists all parties in the process of harnessing organizational data assets to move the organization forward.
It is commonly accepted that IoT represents the intersection of IT with operations technology (OT). This is true, but only part of the story. Business management is another key player in many projects, and TBR believes it should be a component in all IoT projects. In fact, potential users of data from IoT projects extend beyond these three stakeholders, including many of the departments throughout an organization, such as marketing and sales. To deliver the greatest possible value from any project, including but not confined to IoT, all the potential users of the data should be considered in the design and evolution of each project.
In the early stages of the recent surge in IoT, three to four years ago, the different stakeholders were often brought together for workshops or ideation sessions to invent new solutions made possible by IoT. As IoT has become more common and relevant players are more familiar with common use cases such as status monitoring and asset tracking, there has been less need for this challenging and expensive invention phase of IoT projects. Instead, new projects are often undertaken entirely or almost entirely by OT, sometimes working with IT to ensure compliance with company standards. These projects can confidently deliver a positive ROI while only using data for a single purpose, usually operational efficiency. Potential other uses for the data, or from data that could be generated by the solution, are often not considered in the design. This can be a waste.
The data generated from an IoT project often have value beyond the immediate purpose of the project. For instance, data from a status monitoring solution can be used to identify patterns that could predict service-related incidents. Similarly, comparing status reports across different assembly lines or factories might help identify superior or deficient configurations. Status reports could be correlated with operations speed to help identify either capacity problems or the potential for greater capacity. Capacity limitations or windfalls affect both marketing and sales.
The same kind of potential repurposing of data can be found for most IoT projects. Data has multiple uses. Different people within the organization are able to recognize different potential uses. Uses can be classified into short term and long term. Status data is valuable immediately. Indeed, for the purpose of reacting quickly to status deviations, the data has no long-term value. A solution built for only that purpose would often discard the data to minimize project cost, resulting in a loss of the potential value of the data for long-term analyses. To extract the greatest value and meet broader organizational needs, other people in the organization should be involved in the project design.
“‘VMware has been neck and neck with Nutanix as the software HCI market leader,’ said Allan Krans, practice manager and analyst at Technology Business Research, based out of Hampton, N.H.”
5G is becoming a must-deploy technology for an increasing number of CSPs globally, prompting accelerated build-out timelines and broader rollouts
The 5G era is progressing as several countries expanded or commenced commercial 5G deployments in 2019, particularly the U.S., South Korea, Australia, the U.K., Germany, Spain, Italy and Switzerland. An increasing number of communications service providers (CSPs) globally, predominantly in developed countries, are accelerating and broadening the scope of their 5G build-outs. There are a few reasons for this pull forward, including the need for CSPs to stay competitive for customers of traditional mobile broadband and high-speed internet services, reducing the cost per gigabyte of carrying traffic (network opex efficiencies), and building a foundation in preparation for new use cases of the network. The availability of 5G devices, including a variety of smartphones, in 2019 is another key driver prompting earlier infrastructure investment.
Though 5G deployments are accelerating, TBR expects CSP 5G revenue generation will be minimal in the short term as consumers will be slow to adopt 5G devices due to their high prices and limited initial 5G service coverage. TBR believes business customers will provide the greatest opportunity for long-term 5G revenue generation as use cases requiring the ultra-low latency and accelerated data speeds enabled by 5G will be more prevalent in the enterprise space. CSPs are positioning to support enterprise 5G use cases by investing in innovation centers and targeting private 5G network customers.
TBR’s 5G Telecom Market Landscape tracks the 5G-related initiatives of leading operators and vendors worldwide. The report provides a comprehensive overview of the global 5G ecosystem and includes insights pertaining to market development, market sizing, use cases, adoption, regional trends, and operator and vendor positioning and strategies.
If you are a skeptic of or bullish on the quantum computing market, or somewhere in between, TBR has insights to share with you! Over the next few months, TBR will dissect the developments occurring in the quantum computing market and share a lot of interesting findings.
With Julie Sweet appointed the next CEO of Accenture and David Rowland named the executive chairman of the board, the company doubles down on its proven go-to-market strategy and delivery frameworks. However, as Accenture strengthens its core as a technology organization and Accenture Technology plays a pivotal role in North America’s performance (Sweet was previously CEO of Accenture North America), TBR Senior Analyst Boz Hristov says a couple of questions remain:
We do not expect major changes in Accenture’s strategy and/or performance in the short term; however, as with any new CEO, one should always expect some degree of change. Only time will tell if that change will be minimal or involve a 180. As TBR recently noted, Accenture delivered record-breaking quarterly revenue, with growth increasing 3.8% year-to-year in USD (8.4% in local currency) to $11.1 billion in FY3Q19, as the company’s aggressive investments in “the new” are paying off, as the segment now contributes over 60% of total sales and expanding at double digits in constant currency. While many of the new opportunities for Accenture stem from investing in innovative offerings (e.g., Industry X.0) and building out relationships with new buyers, demand for application services in connection with adopting intelligent ERP systems, enabled by key partners such as SAP, Oracle, Microsoft, Salesforce and Workday, drove double-digit revenue growth in local currency, with the segment generating 40% of sales.
Ericsson has made significant progress in its latest restructuring initiative, leading to higher margins and a more focused go-to-market strategy. The company has also lately been helped by the ongoing deployment of 5G and 5G-ready networks in the U.S. and, to a lesser extent, South Korea. U.S. spend on 5G will accelerate as operators aim to gain a competitive advantage, and Ericsson is positioned to capitalize. In our 2Q19 Ericsson Initial Response, we will examine Ericsson’s continued restructuring progress and monitor its status as a leading 5G RAN supplier. — Michael Soper, Senior Analyst
TBR will publish its 2Q19 Oracle Cloud report on Thursday, discussing where Oracle sits in its quest for cloud dominance, the status of autonomous database adoption and the expected impact of Oracle’s alliance with co-AWS-rival, Microsoft Azure. — Meaghan McGrath, Senior Analyst
Application software vendors continue to realize healthy growth of subscription revenues, accompanied by accelerating declines in licensing, as reported in the upcoming Applications Software Vendor Benchmark. Application vendors aggressively pursue cross-selling of subscription solutions to generate scale and protect operating margins as the cloud sales mix increases. This is particularly true for multiline vendors with substantial legacy license bases, though these vendors are well positioned to upsell existing customers to cloud alternatives by emphasizing the value of deploying managed, unified suites between the front and back office. — Meaghan McGrath
SAP will release its 2Q19 earnings on Thursday, uncovering the near-term impact of its highly transparent restructuring effort. TBR will discuss this, as well as portfolio developments related to C/4HANA and Qualtrics application releases, in our SAP Cloud Initial Response, which will publish on Friday. — Meaghan McGrath
IBM’s acquisition of Red Hat officially closed on July 9 and will impact the trajectory of the business for the remainder of 2019 and beyond. TBR’s Initial Response report will touch on this and other developments at IBM in 2Q19, including within the company’s Systems Hardware business. — Stephanie Long, Analyst
IBM Services continues with its portfolio realignment initiatives to deliver higher-value and higher-margin services that integrate technology and industry expertise and enable clients’ digital reinventions. While IBM Services’ activities around advising, building, moving and managing next-generation technology solutions are increasing, it will take time before the shifting business mix returns sustainable revenue growth. — Elitsa Bakalova, Senior Analyst
On Friday TBR’s 2Q19 IBM Cloud Initial Response is publishing, detailing the company’s last full quarter without Red Hat. Recent and ongoing portfolio investments, particularly at the platform layer, are expected to help boost IBM’s cloud revenue in the second quarter. — Cassandra Mooshian, Senior Analyst
TBR’s 1Q19 Hosted Private Cloud Benchmark discusses how vendors with hybrid PaaS and IaaS portfolios that span vendor and customer data centers are well positioned to capture additional hosted private cloud market share. IBM and Google continue to enhance their Kubernetes-based platforms to be increasingly infrastructure and environment agnostic while Amazon Web Services and Microsoft focus on hybrid cloud stacks, with emphasis on the IaaS layer. — Cassandra Mooshian
“TBR expects the use of white-box hardware in NFV / SDN environments will proliferate, accounting for 60 percent of NFV / SDN hardware spend in 2023, up from 15 percent in 2018. This industry shift toward white-box hardware will significantly disrupt incumbent OEMs’ business models, prompting them to evolve into software-centric companies.”
“IBM’s Arvind Krishna, head of Cloud and Cognitive Software, acknowledged Red Hat’s coming influence in a conference call after the deal closed, noting that there could be some ‘red washing’ of IBM as opposed of ‘blue washing’ Red Hat. Blue washing would be ‘a bid thing,’ he added, according to Technology Business Research.”
On July 9 IBM held a 30-minute Q&A with industry analysts, led by Red Hat EVP of Engineering Paul Cormier and IBM SVP of Cloud and Cognitive Software Arvind Krishna. The discussion confirmed the overarching strategic benefits both parties see in the union while stressing the intentions to keep Red Hat vendor agnostic. Around three-quarters of Red Hat’s revenue is generated through its channel, suggesting Red Hat is viewed as a valuable and highly sought-after partner. Despite the fact that IBM and Red Hat executives continue to echo the necessity of maintaining all of Red Hat’s existing alliances, these relationships could come under review by the partners themselves now that the acquisition of Red Hat by IBM has been approved by regulatory boards globally and finalized.
Indeed, when queried about industry concerns that Red Hat would be “blue washed,” Krishna said, “[Blue washing] would be a bad thing for both [companies],” and suggested the exact opposite — that there could be some “red washing” of IBM that results, which has also been an opinion TBR has offered in various commentary as this deal moved toward closure.
Red Hat almost single-handedly commoditized the enterprise software space before taking aim to do the same thing with the platform layer through OpenShift. Commoditization is not something IBM necessarily has liked to see over the years at it rapidly eroded the transaction-oriented hardware segment of the industry as IBM pivoted to software and services. The developer community can now accelerate innovation through this open foundation layer, which is how Red Hat will remain autonomous from IBM. Red Hat’s best practices around subscription monetization of essentially free IP generated by the open-source community will likely be the best practices brought forward to red wash IBM as it moves further into the automated services arena, with Watson Anywhere and Blockchain Anywhere as two recent examples of these moves.
IBM will bring its technical skills to the union to bridge the legacy world with the open-source world underpinned by Red Hat Enterprise Linux (RHEL), OpenShift and Kubernetes containers. Both Cormier and Krishna highlighted the breadth of IBM Services’ that can be brought to bear for enterprises looking to migrate the 80% of workloads that have yet to migrate to cloud, according to IBM. Through OpenShift, this migration can extend beyond just moving from legacy applications to one public cloud, to encompass nimble and secure migration to and between multiple clouds and on-premises instances.
Red Hat will still operate with multiple vendors while also maintaining the robust and expansive developer community that has been described, with some legitimacy, as almost a cult-like following. Indeed, it can be argued that this merger will in retrospect be viewed as a milestone event in the ongoing march to consumerize IT to simplify the technology side of business operations and focus more on business objectives than on the technical challenges. DevOps and security practitioners will have one platform cemented by Kubernetes containers to work within a true multicloud environment.
The teleconference had TBR analysts pondering many of the as-yet-unanswered questions that IBM and Red Hat stated will be addressed in the upcoming weeks. Principal among those TBR questions are the following:
All the right words were spoken, and the strategic vision appears sound. As always, the devil will be in the details, and those details will be laid out in the ensuing weeks and months around one of the most important acquisitions in IBM’s — and the industry’s — history.
Authors: Senior Analyst Cassandra Mooshian ([email protected]) and Senior Strategy Consultant & Principal Analyst Geoff Woollacott ([email protected])
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