BearingPoint’s bold triple bet on cars

Can the Europe-centric consultancy lead the race to remake the automotive industry?

In recent years, as nearly every IT services vendor and consultancy has attached itself to an automotive sector client and touted their industry expertise, TBR has followed the routes those vendors have taken and which aspects of the car industry they have focused on. In broad strokes, consultancies and IT services vendors help their automotive clients in one or more of three areas: 1) AI and autonomous vehicles; 2) customization, customer mobility and brand; and/or 3) Manufacturing 4.0. For example, last fall, TBR spoke at length with Accenture about the company’s new efforts in Stuttgart, Germany, which mostly fell into the second category. Cutting across all three areas, trends in car ownership, transportation, ride sharing, car sharing, and privacy and data sharing have sustained opportunities for consulting, with anticipated large-scale implementations and managed services to follow.

In a recent discussion with BearingPoint, TBR learned the automotive sector would be a priority over the next few years, as the firm has recognized changes that affect the industry, such as climate change, air pollution, buyer needs and behaviors, mobility services, parking “as a Service,” and car rental “as a Service,” to name a few, were forcing changes in the business models for every supplier, maker, advertiser and buyer involved. With established relationships with all the major car manufacturers in Europe, as well as a legacy working with manufacturers across the continent, BearingPoint will do what almost no other consultancy or IT services vendor has done: organically build an automotive practice that tackles all three areas — AI and autonomous vehicles, customer experience and brand, and Manufacturing 4.0 — and place that business group among the firm’s highest priorities.

TBR will watch BearingPoint’s progress closely, in part as a component of our ongoing management consulting research, which includes a detailed profile on BearingPoint. Secondly, we want to see if a consultancy or IT services firm can balance serving the three elements of the automotive sector we have outlined. Many vendors have developed strengths in one or two areas, but no one vendor has applied consistent, sustained and leadership-supported investments in all three. It is a tough road. Let’s see if BearingPoint can navigate it.  

Quick Quantum Quips: Economic advantage nears as software development advances

Welcome to TBR’s monthly newsletter on the quantum computing market: Quick Quantum Quips (Q3). Market activity remains strong despite the impact of COVID-19 on daily lives, as researchers spider out through many different elements of the quantum ecosystem in pursuit of scientific discoveries that will bring the quantum era into clearer view and closer proximity.

For more details, reach out to Stephanie Long or Geoff Woollacott to set up a time to chat.

April 2020 developments

Announcements continue in different scientific discoveries to enhance quantum systems and bring them closer to economic advantage. More interesting are the flurry of announcements aimed at developing software for live applications, especially for financial services use cases.  

  1. Singapore Management University (SMU) and Tradeteq announced they are working on a project to develop a quantum-based credit scoring method for companies. The work will be underpinned by a grant from the Monetary Authority of Singapore’s Financial Sector Technology & Innovation (FSTI) – Artificial Intelligence and Data Analytics (AIDA) Grant Scheme. To TBR, this is a clear example of the kind of application that will become a proof point of quantum’s economic advantage. The goal of the application will be quicker credit assessments based on greater volumes and varieties of data. This speed to insight can underpin fintech instruments based on AI credit checks.
  2. QC Ware’s France subsidiary announced it had been selected as one of 32 BPIFrance Concours d’Innovation i-Nov award winners. QC Ware’s award was in the deep tech category for its work on quantum machine learning. Like SMU and Tradeteq, QC Ware’s initial focus has been computational finance applications in concert with Goldman Sachs. Like many early quantum leaders, the efforts have been to create software tools for classical data scientists as the initial “bridge” between the classical and quantum computing worlds. 
  3. The IBM Quantum Challenge, timed to coincide with IBM (Virtual) Think in May, serves multiple purposes. First, it provides a reference point to how far IBM efforts have grown since quantum systems were made available in the cloud — now at 16 systems accessed by 225,000 registered users performing 500 million circuit calculations daily. Second, it seeks to foster broader market education on the technology as well as on the tool sets IBM has available for those seeking to familiarize themselves with the technology and its potential commercial use cases.  
  4. Terra Quantum, based in Switzerland, announced it has raised €10 million to advance the European quantum tech ecosystem. This announcement has geopolitical implications as different regions see the strategic implications of quantum technology and seek to establish their in-region competencies. The startup intends to use its funding to build infrastructure and software solutions leveraging quantum technologies. Initially, the efforts will revolve around developing hybrid quantum algorithms ahead of the development of commercial-grade quantum computing systems.
  5. University of New South Wales and Delft University of Technology announced independent efforts using silicon spin, or “hot,” qubit devices. These devices operate at 1 kelvin, which is 15 times hotter than current technologies can tolerate. Reduced cooling costs and the ability to locate traditional computing instances near the quantum systems are two of the proposed benefits of this new technological approach.

If you would like more detailed information around the quantum computing market, please inquire about TBR’s Quantum Computing Market Landscape, a semiannual deep dive into the quantum computing market. Our latest version published in December. The next iteration will be placing attention on the Quantum-related professional services being deployed to increase business awareness and technical skills that will be in short supply once quantum’s economic advantage becomes reality. Vendors interested in being considered for inclusion in the report should reach out to Geoff or Stephanie directly to arrange a briefing.

And, lastly, on behalf of the entire TBR team, we hope you stay healthy and safe in these unique times.

Hybrid-influenced vendors respond to customer demands, including limited vendor lock-in and seamless, secure integrations

Hybrid-influenced vendors sit in a high-growth market as they rely on proprietary infrastructure to architect in-demand hybrid solutions. Microsoft (Nasdaq: MSFT) is separating itself from much of the market as many enterprises use Office 365 in a hybrid environment and as the vendor wins legacy VMware (NYSE: VMW), Oracle (NYSE: ORCL) and SAP (NYSE: SAP) workloads. Among vendors competing for legacy workloads, TBR expects Amazon Web Services’ hybrid-influenced revenue will continue to grow as the vendor strongly competes against Microsoft for the enterprise migrations.

TBR’s Hybrid Benchmark helps providers of hybrid environments and their partners align to growing opportunity, highlighting the market size of hybrid-influenced public cloud, hosted private cloud and traditional software; the go-to-market strategies vendors are using to drive revenue in the hybrid IT space; gaps in the current ecosystems for enterprises; how vendors are addressing customers’ integration challenges; and more.

Fujitsu continues on path of transformation despite macroeconomic challenges

2020 will be a critical year for Fujitsu as the firm executes on its plan to become a digital transformation (DT) company, emphasizing key areas of emerging technologies and superior client experience. The company’s pace of portfolio investments and expansion outside Japan will support Fujitsu’s goal of driving top-line revenue growth and transitioning to a DT provider. Additionally, Fujitsu’s ability to retain its client base despite COVID-19 challenges will showcase whether the company can quickly adapt to dynamic economic conditions and address client needs; if the firm is unable to evolve its portfolio in a timely manner while protecting its existing market, Fujitsu could face greater challenges in creating new avenues of growth around emerging areas.

Fujitsu focuses on growth areas to drive its top-line revenue

AI is a top-of-mind concern for clients when considering digital transformation (DT) strategies as they look to automate certain processes as well as adopt other emerging technology solutions such as analytics, which enhance and increase efficiencies of human tasks. IT services vendors develop their portfolios around AI to help maintain client engagement as well as to capture demand around AI and analytics. Cloud is also an area vendors have sought to build services around to support migration, integration and management services as clients seek to leverage more responsive and insightful operations.

The cloud market has been growing more rapidly than the IT services space — the cloud professional services market grew 16.3% year-to-year, according to TBR’s 4Q19 Cloud Professional Services Benchmark, versus IT services growth of 2.2% year-to-year, according to TBR’s 4Q19 IT Services Vendor Benchmark — as clients shift to remote work environments that require greater capacity and workload support to ensure stable operations and client delivery and prepare for the post-pandemic era.

Changing client initiatives coupled with increased demand for AI guided Fujitsu’s September decision to transition from a traditional IT vendor to a DT company that will infuse digital throughout operations and engagements as well as work more closely with partners and clients using its network of transformation centers to improve delivery and execution. Fujitsu identified AI, IoT and data utilization as key areas that will enhance and uphold its transformation engagements and has invested in filling gaps around AI and data tools in 2020 to deliver on its clients’ DT initiatives. For example, in collaboration with Inria, a France-based research institute that focuses on emerging technologies, Fujitsu developed a technology that identifies patterns and outliers within IoT environments through devices and sensors that use AI. Capabilities of the technology include sorting methods and AI deployment models that guide business decisions and drive operational efficiencies, improving clients’ data analytics.

PwC Products: Not your father’s PwC

“Us disrupting ourselves” — PwC Digital’s journey to 2020

“In contrast to peers such as EY, which held an entire analyst conference focused on, and organized around, its technology consulting capabilities, PwC structured each of its client stories around the central business challenge, with the technology solution presented as only part of the successful outcome. PwC placed considerably more emphasis on how it worked with clients’ C-Suite and line employees to identify and resolve key pain points and organizational issues, rather than leading with silver-bullet technology solutions that addressed clients’ specific RFPs.” TBR analysis, October 2018

While PwC Products fully coalesced into being over the last 12 to 18 months, the firm’s technology evolution started at least 10 years ago, with the Hallandale Experience Center perhaps the most critical catalyst in changing the firm’s overall approach to embedding technology into every engagement. Importantly, embedding technology did not mean, as noted above, focusing first on technology, even as the firm developed fully formed solutions. As PwC leaders reminded TBR, the firm developed the DoubleJump Health platform more than three years ago, building experience with a subscription-based software business model. In the last year, PwC enhanced collaboration among the eight digital factories and labs across the firm and took careful stock of the assets the firm had already developed and deployed with clients.

While previously PwC developed bespoke solutions within an industry or service line, with little collaboration across the firm, the recent shift included consolidation of the independent assets that had potential and a scrubbing of these old assets through a digital process pipeline. By putting the solutions through a rigorous vetting process with the goal, as explained by PwC, of determining which assets would meet consistency and quality standards as well as “make an impact,” the firm created a model for product innovation that could be implemented across all of PwC. As one PwC leader noted, “The assets were there. PwC Digital’s job was to put them together.” In addition to process, the firm also needed creativity and a willingness to disrupt itself, something TBR commented on in April 2019: “A PwC leader once challenged TBR to explain why the consulting business model seemed immune to the disruptions changing every other industry. The answer, and the disruption, are within his own building, and consultancies and IT services vendors not seeing it risk falling substantially behind.”

PwC Products: The $500M business built on BXT

“Is PwC now a software company or a technology-enabled consultancy with a global distribution channel for assets and managed services? We’re watching and waiting to see.” TBR analysis, October 2018

We have our answer. PwC is a business solution provider, and some of those solutions include products — tangible, defined assets that allow the firm to be, as the PwC leaders noted, “better, faster, and cheaper for clients.” Some of those assets will remain within the firm, scalable but deployed only to increase speed or efficiency in certain engagements. Some assets will remain with the client, paid for in full, through licensing or by subscription.

Wave of growth that will outpace prior estimates expected for cloud professional services market

Cloud professional services market overview

Market overview

Prior to the COVID-19 outbreak, the increasing complexity of enterprise hybrid and multicloud environments had already established a growing need for managed services and system integration vendors. Traditional deployment schedules and delivery timelines have been accelerated as the pandemic has created a short-term need to fulfill the demands of a new work-from-home reality, especially in the realm of security and privacy. The increased demand for cloud professional services will necessitate both immediate and ongoing advisory and implementation services as the pace of multicloud and hybrid cloud adoption will increase rapidly for many enterprises needing advisory and implementation services.

TBR’s Cloud Professional Services Benchmark covers the professional services that are critical to enabling customers to take advantage of available technology as well as the market opportunity that exists for firms that cater to service needs. Additionally, the benchmark analyzes the size, growth and leading providers of services around cloud environments.

EY and technology: Embedding AI and moving beyond trust

Taking AI further

EY’s “six habits” study provides detailed information and assessments of digital transformation leaders’ best practices as well as “actions for the boardroom,” such as “create a culture of continuous learning” and “embed innovation with corporate governance.” In previewing the study, TBR noted that the recommendations for boards to consider when accelerating AI — “assess the current state,” “integrate AI into core” and “measure AI benefits” — perfectly mirror EY’s own consulting offerings around AI. In discussing AI further, Higgins and Little explained that the firm has been applying AI when making its own financial forecasting and HR management decisions, providing additional insights into how different solutions could be rolled out to clients. Little made explicit that the firm would “build AI into every solution we have,” laying down a clear marker of the firm’s bet on emerging technologies. The firm has been trying to move away from the historical consulting and systems integration approach of putting many people on projects and would instead be adopting more agile sprint methodologies, automation and AI. A concerted effort to embed AI both internally and in every solution built for clients echoes TBR’s November 2019 Digital Transformation Insights Report: Emerging Technology, which noted that, “to capitalize on the cost savings generated by AI, vendors must shift their value proposition toward navigating clients’ technical and business change management obstacles to implement solutions, a strategy requiring continued investment in consulting expertise.”

Building better ecosystems

In discussing changes to the partnering ecosystem for all consultancies and IT services vendors, TBR has emphasized the need for re-evaluation and constant management of alliances, particularly as the technology vendors themselves change their own partnering models and go-to-market approaches. EY has stepped ahead of this change, recognizing the firm needed to evolve its traditional partner program into strategic ecosystem management.

In February EY released a new study on the “six habits of digital transformation leaders,” based on a survey of global CEOs and board members. TBR spoke with Jim Little, EY’s global Microsoft Alliance lead and EY Americas Technology Strategy lead, and Dan Higgins, EY’s global Technology Consulting leader, to gain additional insights and comments on the study, as well as to understand how the firm has shifted its internal operations and strategy around technology. TBR has attended multiple EY events in the last few years, including those geared specifically toward highlighting the firm’s technology practice. Based on those events and the March 2020 discussions with Little and Higgins, TBR believes EY has substantially changed its approach to technology consulting, from enabled to embedded and scalable, which will increasingly expand the firm’s opportunities with global clients, potentially at the expense of traditionally more technology-centric competitors, such as Accenture (NYSE: ACN) and Deloitte. Little and Higgins explained that EY fully intended to embrace a new strategy around technology, with solutions designed for reach and scale, a brand seeking to move beyond trust, and an ecosystem managed to “create real outcomes” for clients.

Trailing vendors collaborate to better compete against market leaders, which are expanding globally

Public Cloud Market Summary

Amazon Web Services (AWS) and Microsoft remain leaders in public cloud, but their cloud strategies are extending well beyond the segment as they also enable hybrid environments with internal hybrid cloud offerings such as Azure and Azure Stack that entice enterprises with latency-sensitive or regulated workloads to leverage cloud environments. Microsoft is improving its competitive position against AWS through partnerships, notably its direct data center connections with Oracle. Although only a limited number of regions support these direct connections currently, the Microsoft-Oracle partnership is expanding with new direct connections in Canada. However, AWS holds significant IaaS market share and remains the leading IaaS provider as of 4Q19.

While both vendors still offer IaaS, IBM and Google have taken unique approaches to winning enterprise customers through vendor-agnostic and Kubernetes-based PaaS. IBM holds a greater share of this market as it attained a strong IBM Cloud Private customer base prior to the launch of Anthos, and IBM’s acquisition of Red Hat grew IBM’s position in the space. TBR expects that both IBM and Google will be successful with this vendor-agnostic strategy as many enterprises look to leverage Kubernetes-based PaaS for their hybrid environments, evidenced by IBM’s customer base of more than 2,000 clients using Red Hat and IBM container solutions — such as IBM Cloud Paks — as of 4Q19.

Public cloud remains the largest and fastest growing segment of the cloud market. Changes in customer acceptance, data integrations and innovation have combined to sustain the rapid growth of public cloud adoption. TBR’s Public Cloud Benchmark details how hybrid deployments, new use cases for enterprise apps, and trends in emerging technology will make public cloud even more relevant in the future.