IBM Think Digital 2020: Making the case for better together

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IBM places hybrid cloud at the center of its digital transformation strategy from both a product and a services perspective

At both the IBM and Red Hat sessions, there was no shortage of content that placed hybrid cloud at the center of digital transformation. Through various keynotes and sessions, IBM’s architectural approach, which places Red Hat as the foundational layer for future innovations, came to the forefront. A key example is the IBM Cloud Paks, which are to IBM Services what Red Hat products are to open-source projects. Cloud Paks provide functionality as a service, making it easy for customers to deploy the middleware functionalities that support solutions and applications. The combination of the advantages of cloud computing with IBM’s trusted ability to manage, update and certify solutions for regulatory compliance enable significant improvements in ability and flexibility. It is an emulation of the Red Hat playbook, albeit with far-reaching implications to the Global Technology Services business.

At the event IBM unveiled the IBM Cloud Pak for Data 3.0, which leverages OpenShift 4.3 to deliver new analytics and data management services. Further, IBM’s Partner Packages is a new incentive program for partners that successfully sell the solutions, underscoring IBM’s desire to facilitate customers’ cloud migrations by combining the expertise of services partners with the flexibility of the Cloud Paks.

However, the hybrid cloud model is anything but confined, and Whitehurst noted that edge devices must essentially operate as little clouds and require the same orchestration and interoperability standards. Edge implications address both the telco and enterprise spaces. Network virtualizations seemingly merge IT and cellular technology (CT) through virtualizing those functions to run on the same common platforms supported by OpenShift. Vodafone Business made the case that it leap-frogged competition in India by building a modern architecture that enabled the company to run IT and CT from the same cloud, delivering better consumer service for voice and extending IBM into the adjacent market of hosting enterprise workloads from the same instance.

IBM Think Digital 2020 made the case that IBM and Red Hat are better together — better together in mixed infrastructure, better together in cloud and AI, and better together in IBM’s and Red Hat’s ways of working. Lastly, IBM and Red Hat are better together with Arvind Krishna as IBM’s CEO and Jim Whitehurst as IBM’s president, as the former can assure customers of the IBM offering road map built on Red Hat’s engine while the latter can instill the operational best practices for managing people, processes and financial metrics for a technology world built increasingly on open platforms and recurring revenue subscription models.

IBM expands hybrid cloud activities by partnering with India-based IT services peers

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Partnering with IT services peers and integrating Global Business Services and Global Technology Services capabilities will help IBM improve client engagement and increase cloud signings

Hybrid cloud remains an area of investment for IBM as the company pursues transformational opportunities with clients. IBM’s recent investments in improving its hybrid cloud capabilities, most notably with IBM Cloud Paks and bringing Red Hat solutions and professional services on board, help strengthen its position in cloud. IBM’s ambition is to deepen its understanding of clients’ journeys to hybrid cloud and AI; in 1Q20 the company announced that it is making hybrid cloud its fourth platform — the others being services, mainframe and middleware.

Partnering with India-centric IT service providers such as HCL Technologies (HCLT), Infosys and Tech Mahindra expands IBM Services’ client reach for hybrid cloud solutions. IBM partnered with HCLT in November to migrate and modernize VMware workloads on the IBM public cloud. IBM is combining its secured, enterprise-grade public cloud with HCLT’s delivery and managed services capabilities to move, manage and modernize complex VMware workloads in the cloud.

In March IBM partnered with Infosys to enable clients’ digital transformations through the IBM public cloud offering. IBM Services’ reach in the financial services, insurance and healthcare sectors will expand as the partners integrate their professional services capabilities to enable clients to transition, modernize and transform enterprise workloads and applications, leveraging security, open innovation and enterprise solutions on the IBM public cloud. The partnership will also increase adoption of IBM’s Red Hat OpenShift platform and generate opportunities for IBM Services around consulting and technology services offerings for Red Hat and multicloud management. In April IBM partnered with Tech Mahindra to migrate core business applications to the IBM public cloud utilizing IBM Cloud Paks. The partners will open innovation centers, with the first one in Bangalore, India, to address business problems using transformational solutions developed with IBM Cloud Paks.

According to TBR’s 4Q19 Cloud Professional Services Benchmark, COVID‐19 has jolted the cloud adoption timeline from a comfortable curve to a forced spike, which opens up myriad cloud professional services opportunities. IBM Services’ well-established security and hybrid cloud capabilities will provide growth opportunities for the rest of 2020 as business disruptions caused by COVID-19 highlight the benefits of cybersecurity and cloud-based solutions. The pandemic will accelerate IBM’s partnership activities as the company pursues opportunities to ramp up adoption of hybrid cloud and AI solutions to enable clients to restore and relaunch post-pandemic and establish new business models in a new normal.

Red Hat enables hybrid cloud with a business model focused on open architectures, processes and cultures

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With a foundation in open source, Red Hat is poised to deliver to the hybrid-ready enterprise

The open source proposition has been embedded in Red Hat’s roots since the company’s founding in 1993 and has since remained at the core of its guiding principles, with Linux operating system (OS) at the heart of all its innovations. Vendor loyalty and clearly charted paths were the mantras many companies operated on for years, while “digital transformation” was barely on an enterprise’s short-term road map. Then a decade ago, cloud adoption surged, creating the impetus to embrace more agile and flexible development models, and open source technologies emerged. While business models centered on open source software have proved challenging for many, Red Hat’s pre-established culture and leadership around open source communities solidifies the Red Hat brand, paving the way for rapid scale, as the company has captured over 90% of the Fortune 500 as clients and in 2019 became the first open source-defined company to reach $3 billion in annual revenue.

During opening keynotes, Products and Technologies EVP Matt Hicks discussed how Red Hat is leveraging its foundational strengths in an open hybrid cloud approach, which, by virtue of being open, goes beyond technology and extends to processes, cultures and transformation, to further differentiate. Red Hat is releasing new offerings to capture opportunities around hybrid infrastructures, application development and management while rapidly scaling up the integration of technologies such as AI and edge, bolstered by collaborative engines like its Innovation Labs.

Originally scheduled to be hosted in San Francisco, Red Hat Summit 2020 offered participants numerous opportunities to virtually engage in hands-on labs, converse with industry leads and hear from Red Hat customers, and it did so while maintaining the spirit of openness and collaboration for which Red Hat is known. While the topic of COVID-19 did not overtly dominate the discussions or significantly color the overarching Red Hat messaging, it became clear that the ability to pivot rapidly, embrace change and remain flexible will underscore Red Hat’s efforts to successfully promote transformation amid the pandemic. Red Hat’s reputation has historically been predicated on its open and agile approach to development and deployment, long before such attributes were considered valuable, let alone essential.

Telecom operators felt the effects from COVID-19 in 1Q20; the impact on telecom vendors will be more pronounced in 2Q20

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Telecom market impact

COVID-19 impacted the telecom industry during 1Q20 on different levels, with telecom operators feeling the initial effects during the quarter. TBR believes telecom vendors were initially shielded from the early effects, but we anticipate a deeper negative impact on both operators and vendors in 2Q20 as the pandemic plays out.

Though company results and the broader ICT market are expected to be challenged further in the short term (over the next year) due to the crisis, TBR believes the near term (two to three years) and long term (three to five years) will be net positive on the ICT industry as the post-COVID era drives enterprises and governments around the world to double down on digitalization and invest in a broad range of technologies to evolve their businesses and increase safety in the new world.

Telecom edge compute

The COVID-19 virus will significantly impact the ICT infrastructure supply chain, and, more broadly, the global economy. This dynamic and evolving situation prompted TBR to revise its telecom edge compute market size in the recently published Telecom Edge Compute Market Landscape.

Though the virus will delay the ultimate build-out of the edge, the cumulative market size during the forecast period is expected to be larger and grow faster than originally anticipated once the dust settles from the virus.

TBR expects the virus to delay edge spend in 2020 and a portion of 2021. By mid-2021 TBR expects the supply chain to be fully operational again, at which time the industry will attempt to catch up to align with pent-up demand.

TBR expects governments and businesses around the world will reassess their disaster response and risk profiles to mitigate future risks to their societies and operations. This will drive investment in surveillance, drones, industrial automation, blockchain, AR/VR and other use cases that require edge resources to operate. As such, TBR increased the cumulative market size for edge infrastructure as it is expected that many governments, not just the U.S. and China, will justify these investments for national security and business resiliency purposes. It is expected that communication service providers (CSPs) will be key beneficiaries of this addressable market to support government and business initiatives in these areas.

Private cellular networks

Despite short-term issues, COVID-19 will ultimately be a net positive driver of the private cellular networks market over the near to long term.

Forecast: 5G network demand receiving a boost from COVID-19 pandemic

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“The environment after COVID-19 will prompt enterprises and governments to take a hard look at how they can apply new technologies such as 5G to mitigate operational and safety risks. Leading enterprises in the U.S., Germany, Finland, South Korea and Japan will drive the first wave of private 5G network investment through 2021, giving way to broader adoption beginning in 2022 as key 3rd Generation Partnership Project (3GPP) standards are finalized, devices become available and the technology matures.” — WRAL TechWire

Accenture and CHROs connect people and work during COVID-19

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In the early days of the nationwide shutdowns, members of the Accenture Chief Human Resource Officers (CHRO) Forum saw the storm brewing, compelling them to think creatively. With swift action and support from CEOs, HR leaders from Accenture, Lincoln Financial Group, ServiceNow and Verizon mobilized their efforts and capabilities and developed a solution that facilitates continued employment. Accenture stood up People + Work Connect, an analytics-enabled platform, with the goal of helping enterprises sustain business continuity by allowing human resources to move to meet demand.

What it is and what it is not

TBR had a chance to discuss the nuances of the People + Work Connect platform with two of the architects behind it, Accenture Talent & Organization/Human Potential Lead Eva Sage-Gavin and Work & Workforce Lead Nicholas Whittall, to understand their motivations for and expectations of the platform.

With Accenture acting as the technology provider, rather than the mediator between organizations’ supply and demand workforce needs, the company’s role is largely centered on assembling and managing the collation and design, and building and running the platform. A team from Accenture Liquid Studio built a business-to-business, fit-for-purpose platform to help companies match available workers to open jobs based on select criteria including location, experience and number of openings. The platform is currently available for free, and Accenture leaders have said the company “won’t ever charge.”

While TBR recognizes the noble approach Accenture and its partners have taken to develop, manage and offer the platform free of charge, in the long run we believe the company is gaining value from the effort (discussed below). With design principles including “progress over perfection,” Accenture developed the platform in 14 days from pilot to launch, reaching its goal of a “Minimally Loveable Product,” rather than an all-encompassing solution. TBR sees Accenture’s approach here as another example of COVID-19 accelerating change across IT environments and, more broadly, business policies and practices.

At the same time, both Sage-Gavin and Whittall reinforced that the platform’s simplicity and scale appealed to businesses looking for immediate solutions to massive problems. We see the simplicity of the data request — Accenture stayed away from using personally identifiable information when developing the platform — as critical to the platform’s uptake and success, such as when two call center companies — one laying off workers and one looking for experienced call center staff — can use the platform to ensure a minimal number of jobs are lost in particular locations. Additionally, features such as a depository for ideas, questions and advice, called a “Knowledge Exchange” on the platform, can provide insights into best practices on benefits and evolving HR practices.

We see such insights impacting not only the HR role but also the broader organization. As COVID-19 abates, revised HR policies and the lessons learned through using the platform to address challenges during the pandemic will likely influence future staffing and IT needs, thus affecting organizations’ planning and financial cycles. As Accenture maintains an arm’s length distance from how companies handle the recruiting and onboarding processes once the match is made, the company is able to provide data concierge services, identifying which data is most important to future refinements of existing ERP systems and HR platforms.

Human-based service delivery vendors’ talent management strategies and revenue growth will be tested amid COVID-19

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Headcount growth surpassed revenue growth, a trend we expect to continue, albeit at a lower pace as vendors stall hiring due to COVID-19

The 14 vendors in TBR’s Global Delivery Benchmark continued to hire and acquire resources ahead of revenue growth in 4Q19 as they geared up to address buyer demand for scaling digital transformation (DT) initiatives. Developing certified talent supporting Agile-based service delivery helps vendors build and solidify trust with enterprises seeking to optimize and/or modernize IT operations through next-generation technologies. While vendors will continue to act as price-competitive solutions brokers by developing teams at on-site and nearshore locations that can split the work and either execute on delivery or collaborate with offshore teams for support, the global pandemic will likely dampen buyer sentiment around DT spend, impacting vendors’ hiring initiatives in 1H20. Workplace management and security are two bright spots in in-demand skills during the pandemic.

TBR’s Global Delivery Benchmark documents vendor performance; attrition and utilization rates; and market, growth and profit drivers of 14 of the largest systems integrators globally.

COVID-19 earnings impact review: Early warnings

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Early earnings indicators reveal ICT vendor ‘new normal’

The reality of COVID-19’s impact potential is clear. You do not have to be an analyst by trade to understand the pandemic will create new normals in our personal and professional lives, disrupting entire business sectors, including ICT, in the process. What remains unclear in many respects, however, is the quantification of that impact.

As of the publication of this report, approximately half of the vendors that TBR authors dedicated quarterly or semiannual reports on have released their 1Q20 earnings results. While earnings announcements and presentations are still rife with uncertainty, these releases, plus TBR’s ongoing vendor-centric financial modeling, provide some indicators of how to quantify the impacts yet to come.

Beginning with this report and continuing through this quarter’s earnings and benchmarking cycle, we will be aggregating some of our financial modeling data across our upcoming reports to assess the current state impact of COVID-19 on vendor performance and to predict next quarter and full-year outcomes.

TBR’s advice to vendors: Get predictive about benchmarking

These early results suggest the industry will be split on how to best set business performance expectations in the current environment but will increasingly err on the side of caution in terms of predicting the future. Stalwarts yet to release, such as Dell Technologies and Hewlett Packard Enterprise (NYSE: HPE), have already announced that they, too, will suspend financial guidance. Now more than ever, understanding the trajectory of the ICT vendor peer ecosystem and aligning on industry best practices to navigate the effects of COVID-19 is critical for ICT players. Building, maintaining and updating line-of-business financial models on competitors enables vendors to better benchmark performance, predict quarterly and annual outcomes, and deploy tactics to optimize performance. Vendors should look at the context of peers’ earnings announcements for clues — while many are “going dark” in terms of providing revenue guidance, rich discussions are occurring in earnings calls regarding resource utilization, portfolio management, sales and go-to-market alignment that can be tapped for vendor insight to infuse into practices

In addition to this report, we are writing and reporting in depth on the COVID-19 impact in a dedicated special report series, webinars and our regular published analysis as vendors release earnings. Our published content is regularly updated on TBR’s website and can also be accessed through our client portals.

Private 5G networks market will see strong growth as a broad range of industries and governments adopt the technology

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The environment after COVID-19 will prompt enterprises and governments to take a hard look at how they can apply new technologies such as 5G to mitigate operational and safety risks. Leading enterprises in the U.S., Germany, Finland, South Korea and Japan will drive the first wave of private 5G network investment through 2021, giving way to broader adoption beginning in 2022 as key 3rd Generation Partnership Project (3GPP) standards are finalized, devices become available and the technology matures. The governments of these countries will also be key initial investors in 5G for civilian, first responder and, in the case of the U.S. and South Korea, military purposes. The Chinese government will also invest in private 5G networks.

Preliminary private 5G deployments are mostly exploratory in nature

Private 5G network spend in 2020 is primarily for exploratory purposes. The ecosystem is experimenting with different use cases, business models and value chain structures in a bid to test the technology and prove the business case as well as to formulate a plan on how best to go to market and which solutions to focus on commercializing.

One key feature of this exploration is ecosystem participants innovating in their own environments, such as RAN vendors applying their own 5G solutions in their factories and industrial companies coinnovating with their partners on pilots. This will help parse out reference cases that can prove the business case for 5G, and some of these pilots will result in commercial contracts.

TBR’s Private Cellular Networks Market Landscape deep dives into the market for private cellular networks, particularly as it pertains to 5G. This global report covers enterprises and governments that are investing in private cellular networks as well as all of the major vendors and some of the key disruptors (e.g., startups) that supply infrastructure in this space. The research includes key findings, key market developments, market size and forecast, regional trends, technology trends, vertical trends, use cases, and acquisitions and alliances that are occurring in the market. The report also provides lists of key companies in the private cellular networks ecosystem that play a role in the market.

BearingPoint’s bold triple bet on cars

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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.