Microsoft outduels Amazon for JEDI

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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

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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

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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

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‘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

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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].

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

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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

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“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

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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.)

Mixed results expected in the U.S. federal sector for IT services vendors

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Earnings season for federally focused IT vendors begins the week of Oct. 21. Senior Analyst John Caucis has been tracking Northrop Grumman Technology Services (TS), General Dynamics Information Technology (GDIT) and Raytheon Intelligence, Information and Services (IIS) ahead of their 3Q19 fiscal earnings release. 

Raytheon IIS is expected to be the top performer among the first group of companies to tender their financial performance, owing to new contract signings in the lucrative cyber and space sectors and expanding project volumes on existing programs in these segments. Growth is likely to moderate in 3Q19, though this is expected with the ramp down of the Warfighter Field Operations Customer Support (FOCUS) program. Some of the lost Warfighter FOCUS revenue will be offset by a recent rise in domestic bookings that is converting to revenue on IIS’ top line while IIS continues expanding its overseas footprint.

Northrop Grumman TS’ recent sales slide is expected to continue in 3Q19, though we also expect the pace of TS’ contraction to continue moderating as the impact of large engagement losses wanes and bookings with sustainment, logistics and modernization programs strengthen.

The CSRA acquisition is no longer inorganically lifting GDIT’s revenue, and recent business divestitures (GDIT’s call center and 911 businesses) are expected to further erode GDIT’s revenue base. The expiration of a handful of large engagements in 3Q19, combined with the expiration of those in early 2019, will exacerbate the impact of the aforementioned issues on GDIT’s performance. Cross-sales with the Aerospace and Mission Systems segments of General Dynamics are helping offset these headwinds, as are the large-scale awards GDIT is increasingly booking, but a complete return to top-line growth is not expected until 2020.

Additional assessments publishing this week from our analyst teams

Driving innovation across its North America client base via a senior leadership team strengthened by its new Digital Transformation Office and establishing an Application and Technology Services practice will enable Atos to ramp up activities with clients around improving business operations and results through next-generation solutions. The next step for Atos is to successfully cross-sell its solutions by explaining the company’s capabilities to internal sales and delivery teams and to existing clients, as well as to effectively deliver services to grow revenues and improve profitability in North America. — Elitsa Bakalova, Senior Analyst

With Atos’ 3Q19 earnings release TBR expects cloud will remain a vibrant segment for Atos, and revenue growth in the segment will continue to outpace the company’s total revenue growth. Atos’ cloud business will be positively affected by increased activities with clients, such as around transforming legacy applications and infrastructures to cloud, orchestrating hybrid cloud, ensuring cloud security through services and IP-based solutions, and providing cloud-enabled IoT solutions. Collaborating with clients’ IT and business stakeholders during cloud transformations and adding industry expertise will improve Atos’ ability to drive business outcomes for clients through cloud. — Bakalova

TBR expects six consecutive quarters of bookings growth and cross-selling opportunities to clients that came from recent acquisitions such as Leidos Cyber will sustain Capgemini’s growth momentum in 3Q19. Enhancing client relationships and industry expertise, such as through the acquisition of KONEXUS Consulting and the proposed acquisition of Altran, and approaching clients’ CxOs will improve Capgemini’s ability to access budget stakeholders and sustain revenue growth. — Bakalova

With a robust legacy client base and deep relationships with key technology partners, Accenture’s cloud business will continue to flourish. Accenture is doubling down on Google Cloud, adding another node to its multicloud management strategy. Additionally, Accenture Security continues to provide the trust needed to win new buyers and fuel cloud opportunities. — Boz Hristov, Senior Analyst

Though Verizon will continue to trail T-Mobile in postpaid phone net additions for the foreseeable future, Verizon remains able to capitalize on its reputation as a premium wireless service provider to attract customers willing to pay a higher price point for the operator’s network coverage and premium unlimited data plans. Additionally, aggressive cost-cutting and digital transformation initiatives are helping improve profitability. — Steve Vachon, Analyst

HCL Technologies’ (HCLT) acquisition activity and efforts to strengthen in-demand portfolio offerings generated double-digit growth in 2Q19. We expect HCLT will leverage its partner network to gain access to an expanded client base and lead with its expertise in Engineering and R&D Services to support its ability to differentiate and compete against peers as well as maintain growth momentum in 3Q19. — Kelly Lesiczka, Analyst

Centricity of technology and talent: Atos keeps growing in North America

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New Artificial Intelligence Lab in Texas will facilitate Atos’ collaborative innovation work with clients

On Oct. 3 Atos held a ceremony for the launch of its new Artificial Intelligence (AI) Lab in partnership with Google Cloud (Nasdaq: GOOGL). The Atos AI Lab, so far the largest of Atos’ labs, is located on the first floor of Atos’ office building in Irving, Texas, and joins a global network of labs, the rest of which are located in London, Paris, Frankfurt and Munich. The lab will work with clients in North America to build clients’ understanding around AI and define use cases for data analytics and machine learning with the goal of improving their business performance. Collaborating with Atos and Google, clients will be able to jointly develop solutions that are specific to their business and industry needs. TBR noted that the lab is a very bright, flexible and laid-back environment that enables ideation and creative thinking by combining digital experience and design thinking methodology. Another thing that stood out during our discussions with Atos’ North America leadership team is that North America is becoming a region for the company’s innovation. Atos is instilling a culture of innovation, entrepreneurship and creative thinking in North America and creating intellectual property that is brought back to Europe to be utilized with clients in Atos’ main geography. Because these kinds of collaborative centers play an important role in vendors’, including Atos’, ability to groom talent and leadership, the proper messaging about specific technology capabilities, such as around Google, will help Atos stay abreast of the next wave of partnership models. According to TBR’s Digital Transformation Insights Report: Cross Vendor, published in September 2019, partnerships will also evolve in the long term, as in their current form, the technology diminishes differentiation among all parties. This evolution could create siloed, federated-like model enterprises, which bring a different set of challenges. However, with the expectations coming from the advent of open data standards amplified through blockchain, TBR anticipates such hurdles will be easy to overcome.

Establishing a talent base will improve Atos’ ability to generate IP in North America

Early in the event, Walsh spoke of the “centricity of technology and talent” summarizing Atos’ view of itself, its clients and its ecosystem — a sentiment echoed repeatedly by Atos executives throughout the day. In TBR’s view, Atos recognizes that its strength lies not in strategy consulting but instead in staying centered on technology while trying to help clients solve business problems. Atos also recognizes that talent, not technology, will differentiate consultancies and IT services vendors from each other as everyone pursues digital transformation. On multiple occasions during the event, as both part of the formal presentations and in side-bar discussions, Atos executives stressed the company’s commitment to training, reskilling, developing and retaining top talent across all of its lines of business (and geographies, although most of the event centered on North America). Wagner’s description of purpose-built, SAP-centric teams around consulting, Google Cloud Platform and the CTO was as much about the talent Atos needed to recruit and develop as it was about the organizational changes Atos needed to make and the SAP capabilities it needed to acquire.

In all, the Texas event confirmed to TBR that Atos’ strategy and execution in North America have shifted into a substantially higher gear, as the company accelerates its push to bring U.S.-led initiatives to the front of this very European company. One small indication: According to Walsh, Atos North America now generates more IP to share with Atos Europe than Europe develops to send to the U.S. TBR does not expect Atos’ U.S. headquarters in Irving to replace Atos’ global headquarters near Paris any time soon, but the gravitational pull of success will make the next few years interesting for Atos. 

Supporting its strategy to expand in North America, France-based digital transformation company Atos held its second annual North America industry analyst event at its North America headquarters in Irving, Texas. The event took place in Atos’ Business Technology Innovation Center (BTIC), which is part of a network of nine BTICs that Atos uses as a platform for hands-on innovation with customers and partners. Using a balanced mix of presentations, innovation showcases set up at the BTIC, one-on-one sessions, and North America client examples — one of which, a public sector organization, was presented live on stage — Atos showed the industry analyst community that its expansion in the region is accelerating. Atos is using acquisitions, such as that of Syntel, to expand its portfolio and resources, improve its service delivery model, and drive profitable growth in North America.