SAP enhances its best-of-suite strategy with core apps running on HANA and improved industry approach

/by

COVID-19 impacts highlight the value of SAP’s existing portfolio and road map

Before SAP CEO Christian Klein took the virtual stage for SAPPHIRE NOW 2020’s keynote, Chief Marketing Officer Alicia Tillman spoke with the company’s regional leaders for EMEA, APJ and the Americas. Across geographies, there was consistency in customer sentiment, particularly around the benefits of using technology to react quickly to changes in demand and supply chain challenges.

SAP’s president of Asia Pacific and Japan, Scott Russell, summarized many of the regional leaders’ key points by saying, “There’s one thing that I keep on hearing from our customers small, medium and large, whether you’re in the manufacturing sector, which is really strong in this region, or in other industries, is that ability to be flexible, agile and act with speed. And that’s the expectation of SAP: You need a digital platform … to give you the information you want in real time, so I can make better decisions and adapt to a situation, which for all of us is very unpredictable.”

The pandemic-induced, turbulent business environment has created a new lens for customers to look through and appreciate SAP’s portfolio, but at its core, SAP’s strategy has remained consistent in recent years. SAP has been building upon its Intelligent Enterprise vision, in which customers use wall-to-wall SAP products to integrate their IT environments and gain AI-enabled insights from their data. However, the pandemic did enable Klein to double down on SAP’s messaging about the value of IT modernization, stating, “We have all realized companies which use innovative technologies were more competitive before the crisis and are more resilient in the crisis. Those that enabled new digital business models drove automation and adapted their supply chains and were better prepared for the unexpected. This crisis shows us if your business is not resilient, you will be left with nothing.”

SAP (NYSE: SAP) held SAPPHIRE NOW 2020 Reimagined, with the “Reimagined” branding stemming from the event’s virtual delivery method. While this was a new delivery method for SAP’s annual event, the vendor’s messaging stayed largely the same, with a focus on SAP Business Suite 4 HANA (S/4HANA), S/4HANA Cloud, Qualtrics and emerging technologies — all part of SAP’s Intelligent Enterprise vision. In addition, SAP’s recent strategic shift toward industry-specific solutions in the back office added a new flavor to the vendor’s go-to-market strategy.

IT services vendors react as the pandemic persists

/by

TBR perspective

The first theme to emerge in TBR’s discussions with industry participants — coping with COVID-19 — centered on the maturation of approaches, solutions and ongoing concerns across the IT services space. Vendors continue to prioritize employee safety while increasingly looking to employee productivity measures, and continue to prioritize sales and go-to-market motions around retaining existing clients. Not surprisingly, some vendors have seen the pandemic’s sustained presence as an opportunity to organize offerings and solutions around pandemic-dedicated business units. The second theme, based on extensive discussions with IT services and consulting leaders over the last six weeks, focused on positioning for 2021 and recognizing that this annus horribilis must end before enterprises can truly return to growth. While IT services vendors and consultancies have seen some profit and growth pockets, notably in cloud and security, the overall sentiment can be summed up as, “Survive and operate now; grow next year.” The final theme, emerging from the vendors’ earnings releases last quarter and in-depth discussions with subject matter experts in areas such as supply chains, healthcare IT and outsourcing operations, was scale. Many people TBR spoke with believe scale matters more now than ever, in large part because sustaining operations and retaining talent through what will be a chaotic end to 2020 and a likely rocky start to 2021 require sound financials, the ability to pivot resources to new areas, and the wherewithal to acquire talent and serve new clients when smaller vendors collapse. TBR expects this last theme to carry well into 2021 as federal, state and local budgets begin to feel the pinch of dramatically reduced tax collections caused by the COVID-19 lockdowns. With the overlay of these themes, TBR sees the following six topics as key for 2020.

COVID-19: Coping with employees

Having managed or muddled through the shift to all-remote working and delivery, IT services vendors and consultancies have now begun to face challenges around reopening their offices, including establishing newly defined roles and restructured physical spaces, with variations across every region and country. Companies need to wrestle with setting new work-from-home policies, right-sizing real estate and addressing lingering worries around the virus. In this transitional phase, IT services vendors and consultancies can test their own technology solutions and change management even as they roll out return-to-workplace offerings for clients. For the most aggressive companies, IT services will encompass areas as basic as connectivity and as pandemic-specific as biometrics, telemedicine, enhanced IoT and contact tracing. As vendors do begin allowing employees to return to their offices, some are looking to embrace a hybrid approach with employees working both remotely and on-site, which requires further adapting to remote-working tactics.

Coping with clients

Retaining clients and securing a larger piece of a shrinking budgetary pie continue to be IT services vendors’ and consultancies’ primary concerns with respect to clients as the pandemic continues depressing economic activity, particularly in hard-hit industries, such as transportation and retail. Further disrupting traditional sales motions, attracting and landing new logos has become vastly more difficult in an all-virtual environment, challenging IT services vendors and consultancies to develop novel ways to promote new offerings to existing and potential clients. TBR expects to see changes in marketing spend, particularly as companies begin learning what promotional efforts do and don’t work in an all-virtual reality.

Moving into a third quarter of pandemic-caused disruptions across the entire IT services and consulting space, TBR has spoken with vendors and clients across three broad themes — coping with COVID-19, positioning for 2021 and scaling — leading us to focus our 2H20 intelligence gathering and analysis on six topics.

Atos is pivoting to industry and leading with technology

/by

Atos emphasizes 7 digital breakthroughs to support its expansion in the mid term  

Atos (Nasdaq: ATOS) is an expert at establishing short- and long-term strategies and not only strictly following and executing its plans but also providing checkpoints and information around milestones and financial achievements related to these strategies. During the Atos 2020 Analyst Day, the company announced seven areas of expansion across its six industry segments in the mid term. The areas are organized around three needs that clients expect to fulfill as they continue with their digitalization:

  • Value — deliver outcome-based services around full-stack cloud, business-critical applications and digital platforms
  • Experience — deliver innovative and flexible services around customer experience (CX) and employee experience
  • Safety — deliver services around security and decarbonization

Atos’ goal is to grow revenue between 5% and 7% year-to-year in constant currency in the mid term and to collectively generate 65% of total revenues from digital, cloud, security and decarbonization solutions, up from 40% in 2019. While digital, cloud and security have been among Atos’ revenue growth levers for the past several years, decarbonization is a new lever that Atos will use to support revenue growth by providing it externally and benefiting from a first-mover approach in the segment, and to improve profitability by expanding its carbon footprint internally. 

Atos 2020 Analyst Day: Atos’ ambition is to be the leader in secure and decarbonized digital. The company will achieve its goal by approaching customers with its technology DNA and a new industry-aligned organization and by targeting seven digital breakthrough segments that address three client needs: value, experience and safety. The global COVID-19 pandemic did not stop Atos from organizing its annual industry analyst day. While the event was held online due to country lockdowns, travel bans and social distancing requirements, the virtual event very much resembled the ones Atos organized in physical locations in past years. Over two days and with a rich agenda of plenary and breakout sessions, a client panel, and virtual one-on-one meetings with Atos’ executives, the company connected with the industry analyst community and shared details on its strategic plans and financial performance expectations in the mid term, or during the next four to five years.

PwC brings data to Return to Workplace decisions

/by

Understanding the risks of returning to the physical office

As PwC and its clients begin the slow and uncertain return to physical offices, the firm has responded with solutions to help navigate business, health and safety concerns, while keeping a close eye on risks. With clients across the full spectrum of industries and geographies, the firm’s insights into factors challenging a return to workplace, opportunities presented by compelled changes, and risks both obvious and unexpected have become invaluable as the firm assists clients in what Risk leaders described as the mission to “help clients navigate massive disruptions and uncertainty.” Risk leaders shared that clients are reimagining the workplace and the workforce, questioning which roles are best performed in the traditional workplace; what kinds of physical offices meet business, health and safety needs; and how to mitigate the risks around a feared second wave of coronavirus.

While PwC has been active in assisting clients with immediate challenges, such as navigating the coronavirus relief bill, helping them organize for the massive change management related to Libor’s replacement, and addressing essential safety and productivity issues (see TBR’s special report on PwC’s “Check-in” solution), the firm has also accelerated efforts to pull together PwC-wide assets into newly configured platforms that specifically address the risks associated with returning to physical offices. The firm described its Workforce Planning for a Return to Workplace Dashboard as a technology-enabled tool designed to facilitate clients’ data-driven decisions around a wide range of risks. The tool creates a client-specific dashboard with data and analysis around health, safety and operational risks, as well as analysis around business considerations and employee sentiment and preferences.

In TBR’s view, zip code-specific healthcare (COVID-19) data paired with local regulations around return to work provide an immediately relevant operational view for clients evaluating risks around returning to the workplace, essentially providing a curated way to look at the complexities of all the locally specific issues when planning at the national or international level, knowing one size does not fit all in the COVID-19 world. The platform also provides clients with insight into employees’ remote working preferences, historical trends and risks broken down by region and by employee role. In PwC’s efforts to help clients operate with greater agility, gain better visibility into their business and risks, and anticipate what is next, these newly developed products should provide the firm sustained opportunities to engage with the full range of services.

During an hour-long analyst briefing session, PwC Risk leaders, including Tim Ryan, PwC US chairman and senior partner, shared with TBR recent developments around the firm’s response to COVID-19 as well as shifting client sentiments around the macroeconomic picture for 2020 and 2021. While the following special report contains information provided by PwC as well as TBR’s analysis, a more complete assessment of the firm can be found in TBR’s recently published semiannual Management Consulting Benchmark.

TCS poised for strategic purchases in 2020 as peers’ M&A activity slows

/by

Despite COVID-19 pressures, Tata Consultancy Services (TCS) has not shied away from enacting bold initiatives, evidenced by the announcement of Vision 25×25 during the company’s CY1Q20 earnings call. Even in the face of decelerating revenue growth in the first quarter, executives remained optimistic, suggesting that — unlike the broader trend in the IT services industry — TCS is not ruling out investing in M&A if the price is right. For TCS, key characteristics of its business model enable the company to kick the tires in the M&A market and take advantage of favorable valuations brought about by a dwindling number of interested buyers.

Massive scale and healthy balance sheet support M&A consideration

A strong financial model provides the foundation for TCS’ capital allocation strategy and gives the company more flexibility compared to its peers around strategic investments. For example, TCS’ operating margin was 25.1% in 1Q20, far exceeding TBR’s benchmark average of 9.6% and surpassing all of TCS’ India-based peers by over 400 basis points (Infosys’ operating margin trailed closest behind at 21.1% in 1Q20). Additionally, TCS is backed by massive conglomerate Tata Group and has limited long-term debt, putting it in a comparatively lower-risk position even during a time of global macroeconomic uncertainty, provided the company can mitigate impacts to its top line in the coming quarters.

In CEO’s words: “The best time to execute is when nobody else is buying”

Although TCS made two acquisitions in 2018, ending a four-year lull in the company’s M&A activity, competitors with more mature acquisition proficiencies such as Accenture, Cognizant and IBM usually tend to crowd the market and challenge TCS’ ability to gain market share in key areas. For example, Accenture remains committed to carrying out its $1.6 billion acquisition budget in FY20, evidenced by the five AI-centric purchases the company made in CY2Q20. Driving the optimistic viewpoint of TCS CEO Rajesh Gopinathan, however, are opportunities to pick up acquisitions at attractive price points as typically active buyers have lost purchasing power and/or voluntarily corralled investment strategies.

DXC Technology, for instance, remains weighed down by elevated integration costs and restructuring plans following six acquisitions in 2019, including the $2 billion buyout of Switzerland-based engineering firm Luxoft. India-based peer HCL Technologies (HCLT) is in a similar situation, as executives expressed a cautionary mindset while the company looks to complete remaining payments on the $1.8 billion purchase of several IBM software products such as Unica, Portal and Connections in late 2018. As HCLT CFO Prateek Aggarwal explained, “As you can imagine, these are turbulent times, and we don’t want to sort of fritter away the cash at this point in time.”

Previous investments display an audacious mindset amid macroeconomic turmoil

TCS’ acquisition strategy has historically been very selective, with the company opting to build its talent, IP and technology capabilities in-house and normally waiting several years before kick-starting new activity. During its most recent spending pickup, the company has stuck to low-risk and nonintensive purchases such as BridgePoint and W12 Studios in 2018, both consultancies with fewer than 50 employees and with estimated annual revenues of less than $5 million. In mid-2019 TCS also increased its stake in TCS Japan, a 2014 joint venture with Mitsubishi Corp., from 51% to 66%, in what was already a safe bet as the unit achieved double-digit constant currency growth in the two years prior.  

TCS’ last large-scale acquisition came during a risky time for most companies — the peak of the 2007-2008 financial crisis. In the fourth quarter of 2008, TCS completed its acquisition of Citigroup Global Services Limited for $512 million cash and brought on 12,000 India-based employees to provide BPO services in the banking, financial services and insurance sectors. While TBR anticipates the company will likely stay true to its existing strategy around more tactical tuck-in plays versus making a bold large-scale merger, a reflection on the past reminds us that the option — and willingness — exists.

IP will remain at the forefront of TCS’ acquisitions strategy

TCS already touts scale and well-trained talent, leading TBR to believe that the company will focus on obtaining IP, filling portfolio gaps and expanding its addressable market when considering M&A candidates. Because of its selective M&A stance, TCS is often left playing catch-up in the M&A market, reflected in its 2018 purchases of BridgePoint and W12 Studios, which mimicked Accenture’s push around digital design capabilities, and TBR believes this trend will continue.

According to TBR’s 1Q20 IT Services Vendor Benchmark, “The acquisition pace slowed in 1Q20; the nature of acquisitions remained similar to that in 2019 as vendors look to build out emerging technology portfolios, including security and deepened software practices around Salesforce and Workday.” This sets the stage for TCS to follow in the footsteps of its India-centric peers Infosys and Cognizant, which recently completed the acquisitions of Salesforce consultancy Simplus, as well as Salesforce Platinum Partner and digital consulting firm Lev. In TBR’s view, the central component of TCS’ acquisitions strategy will be targeting M&A candidates that can quickly and cost-efficiently add to its IP portfolio, similar to HCLT’s purchase of several IBM software assets in 2018, as TCS has built lucrative services offerings around the success of its homegrown products and platforms, such as BaNCS and Ignio.

Technology Business Research, Inc. announces 3Q20 webinar schedule

/by

Technology Business Research, Inc. (TBR) announces the schedule for its 3Q20 webinar series.

July 15          The long view: Which post-pandemic trends will shape the world in 2030?

Technology trends that were shaping the digital transformation world pre-pandemic as well as predictions for 2030

July 29          From boom to bust and back: COVID-19 changes dynamics of consulting-led digital transformation programs

Key findings around leading IT services and management consulting vendors’ performances as well as evolving buyer expectations around service delivery and vendor consolidation

Aug. 26        5G is coming faster than originally expected

Impact of key market occurrences over the past six months on the 5G market and the broader ICT ecosystem

Sept. 16       Cloud vendors expand their go-to-market tool kits

How vendor go-to-market strategies are evolving and becoming increasingly creative in the cloud era

Sept. 23       PCs in a pandemic

How the global COVID-19 pandemic is affecting the PC business and the use of PCs in general

Sept. 30       Federal IT moves past COVID-19

Trends shaping the federal IT market as the federal government’s fiscal year comes to a close

TBR webinars are held typically each Wednesday at 1 p.m. EDT and include a 15-minute Q&A following the main presentation. Previous webinars can be viewed anytime on TBR’s Webinar Portal.

For additional information or to arrange a briefing with our analysts, please contact TBR at [email protected].

Quantum market awareness at the top of the stack spurs business innovation to capitalize on anticipated systems innovations

/by

Key findings

Customer engagement increases

Services vendors have increasingly shifted their focus and activities from engineering teams to IT shops, deploying workshops for “ideation” sessions designed to outline critical business pain points. IT decision makers can then tie business needs to certain algorithms once quantum performance specifications have been achieved. To date, activity persists primarily in the financial services, healthcare and pharmaceutical sectors.

Infusing legacy applications with quantum insights will not pose a major hurdle

Prioritizing use cases and mapping them against the viability of current and future quantum system performance poses a greater challenge than actual integration. Numerous firms, including startups, are working on the standard building blocks for these integrations. Basic API connections into legacy applications will allow for the quick exploitation of quantum-generated insights once the science and engineering yields system performance capable of executing the algorithm with the appropriate speed and accuracy.

Logical or virtual circuits build on years of lessons learned in the industry

Logical circuits decouple algorithm development from the actual systems. Noisy quantum systems operate similar to a carbureted combustion engine with various tuning deployed to optimize the actual quantum circuits for the specific application. In addition to heavily capitalized vendors such as IBM and Microsoft, numerous startups such as QCWare, 1QBit, Zapata and Cambridge Quantum Computing have materialized, specializing in quantum algorithm development. Some, such as QCWare, provide a brokering platform to distribute the algorithm workload requests to a multitude of different cloud-based quantum systems as they come online.

TBR’s Quantum Computing Market Landscape, which is global in scope, deep dives into the quantum computing-related initiatives of key players in the space. It lays out the vendor landscape, details current leaders and laggards, and discusses the differing strategies of vendors in the market. The report discusses alliances as well as the tie-ins between quantum computing vendors and their nonquantum computing counterparts. Predictions around use cases and workloads that will benefit initially from quantum computing are explored as well as current customer sentiment around the technology.

Cloud vendors expand their go-to-market tool kits

/by

Customers’ desire for choice and flexibility coupled with complex market dynamics are shifting the cloud landscape, forcing vendors to adopt technology-neutral approaches through partnerships and targeted acquisitions.

Join Allan Krans, Nicole Catchpole, Jack McElwee and Catie Merrill Sept. 16 for a discussion on how vendor go-to-market strategies are evolving and becoming increasingly creative in the cloud era. TBR’s Cloud team will also deep dive into recent go-to-market activities of leading cloud players, including regional- and industry-specific trends that vendors are capitalizing on to become more competitive, efficient and agile.

Don’t miss:

  • Examples and analysis of coopetition and strategic alliances
  • Recent high-profile acquisition activity
  • Global trends and geographic nuances
  • Industry-specific insights and use cases

5G is coming faster than originally expected

/by

Competitive and government pressures have been building for communication service providers (CSPs) in key countries and regions, especially over the past six months, to implement 5G faster and more widely across geographies than original timelines suggested. COVID-19 is one of the few key catalysts of this push.

Join Principal Analyst Chris Antlitz Aug. 26 for an in-depth, exclusive review of TBR’s most recent 5G Telecom Market Landscape and 5G Telecom Market Forecast where he will discuss the impact of key market occurrences over the past six months on the 5G market and the broader ICT ecosystem.

TBR’s 5G 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. Our 5G Telecom Market Forecast details 5G trends among the most influential market players, including both suppliers and operators. This research includes current-year market sizing and a five-year forecast by multiple 5G market segments and by geography, including the Americas, EMEA and APAC, as well as examines growth drivers, top trends and leading market players.

Don’t miss:

  • Why CSPs are accelerating 5G investments
  • Which countries are driving the bulk of 5G investment
  • How COVID-19 is impacting the 5G market

The long view: Which post-pandemic trends will shape the world in 2030?

/by

The global COVID-19 pandemic revealed stark weaknesses across the entire technology ecosystem, including supply chains, regulatory environments and emerging technologies. Responses by cloud and software vendors, consultancies, and IT services vendors showed both their immediate operational needs — and opportunities — and the trends TBR believes will persist long-term in the post-pandemic world. Innovation continues, and the underlying technologies that will rapidly transform business and society in what some futurists call a “step function” will materialize when the quantum compute engine matures enough to be deployed in live applications. So what do recent trends and events tell us about what the world will look like, especially with respect to the technology business, in 2030?

Join Geoff Woollacott, Patrick Heffernan, Bozhidar Hristov, Jack McElwee and Kelly Lesiczka July 15 as they describe pre-pandemic technology trends that were shaping the digital transformation world and the post-digital era, then transition to predictions for the world in 2030.

Don’t miss:

  • How we got here
  • Pandemic-induced changes across the technology ecosystem
  • Trends that will persist and trends that will emerge by 2030