5G will drive CSPs to adopt a new network architecture, with NFV and SDN as critical aspects

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According to TBR’s 3Q19 NFV/SDN Telecom Market Landscape, 5G will push CSPs to accelerate and broaden their NFV/SDN initiatives. As such, TBR expects NFV/SDN-related spend growth will correlate with 5G deployments. Since CSPs will need to upgrade their networks from an end-to-end perspective to realize the full potential of 5G, this will naturally drive CSPs toward the virtualization and cloudification of their networks. This trend will impact most, if not all, of the major network domains from an NFV/SDN perspective over the next five years. TBR notes that 5G core is inherently virtualized, and that this will also naturally push CSPs deeper into the NFV/SDN space over the next five years as they transition to stand-alone 5G networks.

CSPs are more deeply collaborating with other operators, telecom vendors and other technology providers to reap the full benefits offered by NFV and SDN. In particular, the technology industry is becoming more willing to work with open-source groups such as Airship and the O-RAN Alliance to develop open infrastructure that is interoperable across multiple vendors. CSPs such as AT&T and Colt Technology Services are also collaborating to advance the development of intercarrier virtualized network solutions, which will particularly benefit multinational businesses requiring connectivity from multiple service providers within their global footprint.

TBR’s NFV/SDN Telecom Market Landscape includes key findings, market size, customer adoption, operator positioning and strategies, geographic adoption, vendor positioning and strategies, and acquisition and alliance strategies and opportunities. TBR’s NFV and SDN research encompasses the internal (i.e., network operations) and external (e.g., SD-WAN and other virtual network functions [VNFs] sold to end users such as enterprises) NFV- and SDN-related initiatives of communication service providers (CSPs).

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].

Growing traditional revenues in IT services remains a challenge

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TBR’s quarterly IT Services Vendor Benchmark published last week, with the following comment from lead Senior Analyst Elitsa Bakalova: “Vendors are scaling transformational portfolios; however, lingering growth challenges in traditional service areas challenge revenue performance. Trailing 12-month IT services revenue growth, at 1.9% year-to-year in U.S. dollars, was down 140 basis points sequentially in 2Q19 and 670 basis points against the year-ago compare. While vendors are not making major downward revisions in revenue growth targets for 2019, revenue growth for the benchmarked vendors has been decelerating due to growth challenges in commoditized traditional service areas; increasing competitive pressures, especially around advisory, implementation and management of next-generation solutions, such as transformational engagements around digital and cloud; and potential macroeconomic uncertainty.”

Additional commentary

“This week TBR publishes its 3Q19 IBM Initial Response, focused on IBM’s corporate and Systems Hardware performance. As the first formal report since the announcement of IBM’s z15 in September, this report will dive into some of the implications of this new launch across the broader portfolio while continuing to provide analysis on IBM’s quantum computing investments and developments. Implications of the Red Hat buy will be highlighted in this report as well, but deeper analysis on this topic can be found in TBR’s IBM Cloud Initial Response. Be on the lookout for TBR’s 3Q19 IBM full report, which publishes on Nov. 6, for a more in-depth look at these topics.” — Stephanie Long, Analyst

“IBM is using its advisory, digital design and technology expertise to win and execute holistic transformational projects and drive management consulting revenue growth in 2019. Value-led and IBM-asset-powered solutions; collaborative innovation, such as in the IBM Garage facilities; and specialized consulting expertise and talent, such as in Global Business Services’ Digital Strategy & iX, Cognitive Process Transformation and Cloud Application Innovation segments, enable IBM Services to position as a digital reinvention partner for clients’ cognitive enterprise journeys.” — Bakalova

“As Julie Sweet takes over the helm, Accenture will continue to capitalize on its momentum, targeting Diamond clients by deploying industrialized, AI-enabled solutions. In FY20 we expect investment in ‘the new’ to help the company expand wallet share within existing businesses as well as position for new logo opportunities, inching total sales from ‘the new’ closer to 100%.” — Boz Hristov, Senior Analyst

Additionally, join TBR’s Professional Services team Oct. 16 for a webinar and Q&A on India-centric vendors, including how they compare to leading IT services vendors and which IT services vendors have the most to lose due to sustained success among those that are India-centric.

Interested in learning more about IT services, cloud, data center and IoT?  Contact TBR today!

Transform at the intersect: NIIT Technologies and the near future of digital and post-digital transformation

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NIIT Technologies gets closer to buyers to provide deeper support in an evolving digital and post-digital market  

Opening the event, NIIT Technologies CEO Sudhir Singh described his efforts to recraft the company as a “post-digital firm,” including making cognitive a part of every NIIT Technologies engagement. He further declared NIIT Technologies had transitioned from being a vendor that works for clients to being a services vendor that works with clients and technology partners. Across the three-day event, multiple NIIT Technologies leaders and professionals echoed this sentiment around the shift from “work for” to “work with.” Clients also repeated versions of this message, indicative of the traction it has gained within NIIT Technologies’ ecosystem. At a strategic level, Sudhir Singh said his company intended to “move the center of gravity to the markets,” putting NIIT Technologies’ people where the company’s clients are. In that effort, NIIT Technologies over the last 18 months has opened new centers in Atlanta and Augusta, Ga.; Las Vegas; Princeton, N.J.; and Boise, Idaho. At the same time, Sudhir Singh reiterated an NIIT Technologies characteristic which TBR highlighted last year: staying focused on doing a few things exceptionally well. Now and going into next year, this approach includes limiting industries served, remaining selective in partnerships and identifying a limited number of emerging technology areas where NIIT Technologies can excel. Sudhir Singh said (and multiple discussions with NIIT Technologies professionals and clients confirmed) that banking, insurance, travel and retail/media make up the vast majority of NIIT Technologies’ clients, and one of NIIT Technologies’ strengths is a “hyper-specialization” within these industries. Matrixed across those four industries, NIIT Technologies delivers services in four technology areas: cognitive, data analytics, automation/integration and cloud. Staying within its core “swim lane” is the right approach as, according to TBR’s Digital Transformation Insights research, buyers often expect vendors to bring forward pointed, purpose-driven solutions rather than “blue sky” transformational ideas during workshops discussions.

Turning to the overall IT services market, Sudhir Singh focused on three main trends. First, “technology spend is increasingly nondiscretionary,” resulting in less worry on NIIT Technologies’ part about clients’ year-to-year IT budgets and a greater emphasis on long-term relationships and fully leveraging emerging technologies. Second, at a third or more of NIIT Technologies’ clients, the COO also acts as the CIO, furthering a trend toward digital readiness and adoption across all leadership levels within an enterprise. (Note: TBR’s Digital Transformation Insights Report: Voice of the Customer from earlier this year confirms these two trends.) Lastly, Sudhir Singh said that with cognitive being the “X factor” in IT services going forward, fully connecting the front, middle and back office while continuing to get customer experience right will drive most enterprises’ digital and post-digital transformation in the near term.

NIIT Technologies gathered roughly 170 clients, technology partners, industry experts, analysts and NIIT Tech professionals, for two days of discussions and informal meetings in Miami. The setting fostered casual conversations among clients and other attendees, with clients surprisingly receptive to TBR’s questions. NIIT Technologies had only one main stage presentation, an opening address by the CEO, with clients and industry experts driving the rest of the panel discussions and main stage presentations. 

AT&T Trumpets SDN Milestone, Reiterates Virtualization Goal

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“In the realm of NFV and SDN, AT&T is among the leaders in transitioning its network to this new architecture, said Chris Antlitz, telecom principal analyst at Technology Business Research.

Significant Achievement in SDN

“‘The 75% is a significant number. They’ve built an underlay I believe for their SD-WAN … versus a lot of other operators that are doing an [over-the-top] type play,’ Antlitz said. ‘AT&T is doing it more from the ground up and from that viewpoint this makes it a little bit more significant.'” — SDxCentral

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Amdocs Partners With Samsung, Fortifies Footing in NFV Market

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“Per a Technology Business Research report, investments in telecom service provider NFV and software defined networking (SDN) are expected to exceed $168 billion by 2022.” — Zacks Equity Research, Yahoo Finance

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Cisco acquisitions in 2019 bolster service provider strategy

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“Chris Antlitz, an analyst at Technology Business Research Inc., said Cisco’s DX strategy stems from its longtime relationship with carriers, which he said accounts for about a quarter of Cisco’s overall revenue.

“‘They’re building an architecture that telcos want to align with,’ Antlitz said. ‘These acquisitions strengthen the value proposition of the architecture they’re building.'” — TechTarget Network

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HPE telco vertical ‘key gateway’ for future growth

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“According to analyst firm Technology Business Research (TBR), the vendor’s previously ‘marginalised’ Communications and Media Solutions (CMS) has received new life amid the global business transformation sweep. 

“In particular, the changes prompted by 5G, edge computing, artificial intelligence (AI) and automation will become a ‘key growth pillar’ for HPE as new opportunities emerge in the telecommunications industry.

“In particular, the vendor is in a prime position in the management and orchestration (MANO), 5G core and digital identity spaces, TBR claimed. 

“Although the proportion of CMS revenue is relatively small, TBR principal analyst Chris Antlitz claimed the unit is ‘reestablishing itself’ and now receiving the necessary funding and support to drive this.” — ARN, IDG Communications

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Red Hat to keep its partner-agnosticism post-acquisition, CSPs moving to less-popular solutions

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“According to a report from analyst firm Technology Business Research (TBR), Red Hat executives speaking at their Open Innovation Lab and Executive Briefing Center in Boston claimed that its culture and product development would stay the same after its acquisition by IBM, which was closed in July 2019.

“According to TBR telecom senior analyst Michael Soper, Red Hat’s independence is a core tenent of the company through an ‘open-source approach’ to management, application development and company direction.

“‘The open-source community, to which Red Hat and its employees are major contributors, will remain the primary influence on Red Hat’s product road map,’ Soper said.

“‘This is evident in the company’s open hybrid cloud strategy, whereby Red Hat products support hybrid cloud infrastructure from a host of strategic partners, with Red Hat adhering to a principle of partner agnosticism: No one partner is favoured over another.'” — Channel Asia, IDG Communications

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Returning to a co-CEO structure completes the executive refresh to support SAP in the ongoing cloud war

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Bill McDermott chose not to renew his contract as SAP CEO, making room for SAP to return to its co-CEO structure with Jennifer Morgan and Christian Klein. This changing of the guard is the capstone on SAP’s management realignment, and the announcement comes with some glaring similarities to key ERP challenger Oracle’s announcement a month earlier.

Morgan and Klein take over the refreshed SAP executive suite

SAP has made numerous management changes in 2019, but all changes had been made with CEO Bill McDermott leading the company — and the newly appointed leaders — through each step. That reassuring constant ended abruptly on Oct. 10, when McDermott announced he will step down from his CEO role instead of renewing his contract. McDermott will stay with the company in an advisory capacity through the end of the calendar year to smooth the transition to the newly appointed co-CEOs Morgan and Klein.

While the personnel is changing, the co-CEO structure is a familiar one for SAP. SAP operated under a dual CEO structure for quite some time, with McDermott himself sharing the CEO responsibilities with Jim Hagemann Snabe before taking over in an individual capacity. The new co-CEOs are well paired from geographical and functional standpoints, as Morgan is U.S.-based and focused on sales, while Klein is Germany-based and more focused on products and innovation. In furthering the consistency, founder Hasso Plattner, himself a former co-CEO of SAP, remains chairman of the board and very involved in the overall strategy.

Morgan was in her role as president of the Cloud Business Group for a mere six months between Robert Enslin’s April departure to Google Cloud and her promotion into the role of co-CEO. Before his appointment to co-CEO, Klein became a member of the executive board in 2018 and served as SAP’s chief operating officer and chief controlling officer. We believe Morgan’s focus on sales and customer relationships as well as Klein’s strength in operations will be required to achieve SAP’s dual overarching goals: to grow revenue through sales and improve margins through operating efficiencies.

Notably, Morgan and Klein are stepping into the driver’s seat as other SAP executives are just finding their footing in new roles:

  • One of the biggest shifts SAP made in the first half of 2019 was changing aspects of its partner programs, capped by the promotion of Karl Fahrbach from chief operating officer of the partner organization, to SAP’s first chief partner officer in March, after Rodolpho Cardenuto left his role as president of the partner organization in December 2018.
  • Without much fanfare, Juergen Mueller was promoted from chief innovation officer to chief technology officer in January 2019, and appointed to SAP’s executive board.
  • Elliot Management disclosed its investment in SAP in April 2019, and immediately directed SAP to further improve margins while chasing revenue growth.

While these changes have all come in different areas of the company, they are aligned with SAP’s goals as it transitions from a traditional software vendor to a cloud solutions provider. With its cloud portfolio largely in place (though innovation, replatforming and acquisitions persist), SAP is at the point in its transformation that requires it to invest in partner enablement to sell its cloud solutions and ongoing competitive innovation within its defined solution areas, and to do so with a focus on operating efficiencies. In this same spirit, McDermott aggregated a portfolio, and Morgan and Klein are well aligned to take that portfolio forward to achieve the goals, with the help of an invigorated C-Suite behind them. Arguably, SAP would have been well served by McDermott’s persistence as CEO to complete the technology transition to the HANA platform before departing, but Mueller and Plattner will likely both lend their technical leadership to ensure the smooth transition alongside the other business leaders.

Releasing earnings alongside the CEO announcement proves SAP’s ERP capabilities against Oracle’s speedy September release

SAP’s announcement was not allowed to pass without parallels being drawn to its most boisterous competitor: Oracle. The most discussed similarity is that SAP’s CEO change came almost exactly a month after one of Oracle’s CEOs, Mark Hurd, took an immediate leave of absence for medical reasons. Outside of the timing, the CEO announcements are, however, vastly different in motivation and succession.

The other similarity, which TBR believe is more noteworthy, comes from both companies’ ahead-of-schedule releases of quarterly earnings data in conjunction with their CEO announcements. When Oracle released its earnings Sept. 11, one day ahead of its scheduled release and 11 days after the quarter ended, CEO Safra Catz underscored the speed with which Oracle was able to prepare its financial statements by running on its own Fusion ERP Cloud suite. Nearly a month later, SAP was able to close and prerelease its results in a 10-day window using its ERP solutions. TBR expects this move to prove critical for SAP, as SAP quickly rebutted what could have been used as a competitive proof point of the capabilities of Oracle’s ERP solutions.

Hybrid, cloud-native and open source define Cloudera’s 3-pronged approach, post-merger

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Cloud-native and open source are top of mind in Cloudera’s post-merger product portfolio

One of the key highlights of the event was the launch of Cloudera Data Platform (CDP), an open-source, hybrid cloud platform that includes Cloudera Data Warehouse, Cloudera Machine Learning and Cloudera Data Hub services. CDP is currently available on Amazon Web Services (AWS; Nasdaq: AMZN); however Cloudera hopes to provide customers with a broader range of IaaS providers as the company announced plans to bring CDP to Microsoft Azure and Google Cloud Platform (GCP) in the coming months. While Cloudera is taking a calculated risk by pushing customers to competing services, TBR believes the benefits will outweigh the costs due to the vendor’s increased exposure to a large customer base. The launch of CDP highlights the company’s cloud-native play but also aligns with Cloudera’s intent to offer customers more deployment options. TBR notes that many vendors still perceive the data center as a legacy standard; however, Cloudera is attempting to view it as a gateway to creating a hybrid instance, exemplified by its forthcoming launch of an on-premises version of CDP, dubbed CDP Data Center. This offering will be especially appealing to “lift and shift” customers who have large data sets on-premises and wish to migrate to the cloud.

Relying on security and governance for differentiation

Leveraging open-source technology to deliver solutions to customers regardless of deployment method is rapidly gaining acceptance in the market and therefore has forced Cloudera to explore new avenues for differentiation. TBR believes the vendor is attempting to achieve this through its enterprise-grade security and data governance solution, Cloudera SDX (Shared Data Experience). As a single management plane, SDX separates the data layer from the compute layer to provide automated security and compliance across platforms to help reduce costs and mitigate risk. Cloudera works its SDX offering into the rest of its portfolio, including its recently launched CDP offering, to secure data lakes and centrally manage large amounts of data. VP of Product Management Fred Koopmans and VP of Engineering Ram Venkatesh highlighted the negative effects shadow IT vendors are having on customers’ data privacy as a lack of interconnectivity between platforms hinders fraud detection and data repurposing.

Additionally, shadow IT causes dispersed data, which will inevitably require more labor resources and thus only increase the burden on customers that are likely operating on a shortage of sufficient IT skills. Findings from TBR’s 1H19 Cloud Applications Customer Research indicate that shadow IT is being eliminated while increasingly consolidated purchasing is leading lines of business to report greater autonomy when it comes to making IT decisions. As a result of these trends, we believe Cloudera is taking the right approach by strengthening SDX integrations to provide customers with greater autonomy and centralized data, making app developers, data engineers, business intelligence (BI) analysts and data scientists far more likely to adopt CDP or similar platforms.

In September Cloudera hosted its annual Cloudera Analyst Day, where analysts gained insights during breakout sessions, product demonstrations, keynotes and detailed one-on-one talks with company executives, customers and partners. Key talks included product demonstrations from Cloudera’s recently appointed CEO Marty Cole, Chief Marketing Officer Mick Hollison and Chief Product Officer Arun Murthy, along with a presentation from IBM’s General Manager of Data and AI Rob Thomas. Founded in 2008, Cloudera operates in 85 countries and has approximately 3,000 employees and over 2,000 customers.