Two Back, Three Forward: How will this pandemic change digital transformations? A few early signs

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In our new weekly blog series Two Back, Three Forward, we look at two numbers in TBR reports from the prior week as well as three numbers from our upcoming reports, highlighting the analysis TBR provides and the vast amount of data — the numbers — we’re working with every day. It’s all about the data and what that data means to you.

Two Back

508,572, Accenture’s global headcount, as of FY2Q20. Investing in a local presence could pay off significantly for Accenture as COVID-19 sweeps across the globe and makes travel nearly impossible. As TBR Senior Analyst Boz Hristov pointed out in TBR’s initial response to Accenture’s earnings last week, 60% of Accenture’s workforce in India and the Philippines is already working remotely, a number expected to rise in coming weeks. For both local and global clients, the company’s massive scale and proven connectivity should lessen the strains on sustained operations through the pandemic.

12%, TBR’s estimate of Dell Technology Services’ contribution to overall company revenues. With Services far outpacing the growth rate of corporate-level Dell Technologies (5.5% year-to-year in 4Q19 in contrast to 0.8%), TBR expects Services to increasingly become both a lead-in for Dell Technology engagements and an area where the company invests, including through acquisitions and headcount growth. As TBR Senior Analyst Kevin Collupy noted last week, “Dell Technologies Services’ profitability remains above the overall company figure, highlighting the importance of repeatable and standardized services to the company’s profitable growth expansion, and their criticality in offsetting commoditizing core product areas.”

Three Forward

55.7%, IBM’s management consulting 2019 revenues, according to TBR estimates, in three industries likely to be hit hard by COVID-19 fallout. As detailed in our upcoming Management Consulting Benchmark Profile: IBM, the company earned nearly 60% of its 2019 revenues from the banking, consumer goods and manufacturing verticals. Defaults and bankruptcies, supply chain chaos, and depressed consumer spending in a global recession will negatively impact those clients. Spending on consulting may stay constant or even grow — confusion breeds consulting opportunities — but more likely these clients will not be contributing such a large percentage of management consulting revenues by the end of 2020.

6, habits of digital transformation leaders, according to EY’s Tech Horizon survey. TBR analysts previewed the survey findings with EY and noted the substantial shift by EY itself from a firm with technology capabilities to a firm deeply rooted in delivery technology solutions to clients. The six habits were not surprising (they echoed findings in our December 2019 Digital Transformation Insights Report: Voice of the Customer), but in an upcoming special report, we will be highlighting specific findings that resonate most with consulting clients and the consultancies themselves.

$3.67B, annual revenue generated by Egyptian ICT sector exports. According to the Egyptian Information Technology Industry Development Agency (ITIDA), the country’s IT sector has become a substantial part of the overall economy, contributing both jobs and export revenues, primarily from software, app development and maintenance, and technical support services. Why is this important? First, because TBR will be meeting with the ITIDA later this week to learn more. And second, because this global pandemic will force companies to rethink their supply chains for everything, including outsourced IT services, potentially creating opportunity for Egypt’s IT sector to continue growing. Much more to come on this.

COVID-19 outbreak pushes virtual technology events to sink or swim

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Events in general and global annual events in particular have been slow to adapt to a changed world

So many things have changed in the business and technology environments over the past two decades, but in-person events have maintained their importance. Even as digital marketing has replaced most traditional mediums and activities like cold calling and outbound email have waned, in-person events still play a huge role in most technology vendors’ go-to-market investments and strategies. However, there certainly have been changes to the types, frequency, audience and purpose of the events. Many of these changes in strategy are driven by a fundamentally different customer buying cycle. Through online research, customer reviews and other peer interactions, customers now have a very high level of knowledge before they even interact with a salesperson. Also, the pace of modern life and changes culturally make prospective clients less likely to spend business or personal time with salespeople while participating in leisure activities like golfing or attending entertainment events. As a result, many vendor marketing and sales teams utilize smaller, shorter and more meaningful events aimed at customers that have already expressed an interest in a solution, rather than targeting customers at the top of the funnel. Those changes have mostly taken place for local and regional events, while the global annual events have continued with largely the same cadence.

It is sink or swim for technology vendors with near-term annual events

Sometimes people and organizations do not know what they are capable of until they are forced to find out. Faced with no alternative, vendors like IBM (NYSE: IBM), Microsoft, Dell Technologies (NYSE: DELL) and Google (Nasdaq: GOOGL), among an ever-growing list of others, will need to recreate the in-person event through a virtual experience. The good news is that most of these companies have significantly increased their video production and social media capabilities over the past decade. For most in-person events over the past five years, video replays of the sessions are available and of good quality. Beyond video production of core content, below are some of the changes that can allow vendors to achieve the best outcomes from the necessary shift to virtual events:

  • Replicating the in-person “feel” — There is an aspect of performance during the large events that draws in the presenter and audience. The size of the crowds entering the venue and the audience for keynote sessions, the music, and the theatrics of the speaker are all part of the experience. Finding ways for virtual platforms to capture those elements can build and hold the interest of customer and partner audiences.
  • Soft selling — Nobody wants to sit through a shameless sales pitch for multiple days. With in-person events, vendors have broken that tension by bringing customers, analysts, partners and even celebrities to participate in presentations. Virtual events need the same level of third-party participation to keep the audience engaged and make the sessions more than just a vendor-to-customer sales pitch.
  • Training and certification benefits — For customers and partners, these events are great opportunities to take advantage of discounted training and certification testing. Vendors can use online platforms to increase participation through a virtual format.
  • Networking and social interaction — Informal and formal face-to-face meetings might be the most difficult aspect of in-person events to replicate virtually. Between social media and online networking platforms, there could be ways to connect people with similar interests and facilitate communication during the course of multiday virtual events.

Old habits die hard, and for technology vendors global annual in-person conferences have been a mainstay for 20-plus years. Although IT purchasing and smaller events have evolved a lot over the years, large technology events have remained largely unchanged since the mid-1990s — until COVID-19. Until at least early May, most technology vendors will have no choice but to make the best of virtual events. Modernizing the traditional annual in-person event may be one of the long-lasting impacts of the COVID-19 virus on the technology industry.

Technology Business Research, Inc. announces 2Q20 webinar schedule

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Technology Business Research, Inc. (TBR) announces the schedule for its 2Q20 webinar series.

May 6           IoT use case stories: How use cases drive IoT

May 20        The digital transformation ecosystem demands cooperative partnerships

June 10        The CSP ecosystem is gearing up for a major edge build-out; the U.S. and China will lead the world

June 17        Cloud is becoming higher touch

June 24        Advisory-led discussions help quantum computing emerge in customers’ transformation-centric conversations

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].

COVID-19 and IT: Pains, changes, pockets of opportunity

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COVID-19 creates pain, change and even pockets of opportunity for the IT industry

There is still a fog of uncertainty around COVID-19’s impact. What is clear, however, is this outbreak is unlike any event in living history. The long-term health crisis, economic disruption and social disruption are occurring at levels that were unfathomable just months ago. These changes are taking place in a world that is much different from when the last widespread pandemic, the Spanish flu, hit more than 100 years ago. Technology has become such an integral part of our lives since that time and, as such, will be deeply ingrained in many of the short-term and long-term effects of the COVID-19 virus.

While most of the market effects will be painful due to the economic disruption occurring, many will lead to changes in long-held business strategies and create opportunities as technology needs shift for both individuals and organizations. Find out more on this topic in a recent TBR special report, and contact us today to discuss COVID-19’s potential impact on your business.

Excerpts from additional reports recently published by TBR’s analyst teams

4Q19 HP Inc.: Takeover threat remains as revenue falls from soft print market

HP Inc. revenue declined in 4Q19 as a softer printing market offset single-digit growth in Personal Systems. To return to growth, the company is executing an aggressive cost-reduction strategy and a three-year value creation plan, while continuing to combat hostile takeover attempts from Xerox.

1Q20 Oracle Cloud Initial Response

Oracle experienced its highest growth rate in two years as the company gains further momentum around its ERP Cloud and Autonomous Database offerings, suggesting Oracle is shedding its legacy ties and migrating toward a subscription-led revenue model.

4Q19 Salesforce: Leveraging partners and acquisitions to expand TAM

Salesforce drives revenue growth with industry-specific apps, multiproduct deals and inorganic revenue contribution from acquisitions. However, gross margin improvements were offset by Dreamforce-related expenses and costs related to the acquisitions, such as R&D, resulting in an operating margin decline.

4Q19 VMware, Inc.: Container strategy in full swing

With the Pivotal acquisition now complete, VMware enters 2020 prepared to execute on its container strategy and spark growth around Tanzu and other “as a Service” portfolio offerings as the company continues its shift to a SaaS-led revenue model.

4Q19 Dell Technologies: Embracing ‘better together’ at the channel level

Dell Technologies leaned on strong VMware performance and growth in both commercial and consumer PCs to keep corporate revenue growing, as the Infrastructure Solutions Group continued to suffer from a weak server market.

4Q19 Dell Technologies Services: Benefiting from upsale of profitable attached services

Dell Technologies Services is leveraging its simplified and streamlined services portfolio around repeatable and standardized services offerings to improve service attach rates and generate predictable and profitable revenue streams.

1Q20 Accenture Initial Response

While record-breaking bookings in FY2Q20 provide a strong foothold, investing in leadership and security offerings to maintain clients’ trust in the COVID-19 era will test Accenture’s new growth model.

1Q20 Accenture Cloud Initial Response

As Accenture strives to maintain a strong brand for multicloud management opportunities through its certified cloud delivery bench and the launch of myNav, the global coronavirus pandemic will test its ability to succeed.

COVID-19 creates pain, change and even pockets of opportunity for the IT industry

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There is still a fog of uncertainty around COVID-19’s impact. What is clear, however, is this outbreak is unlike any event in living history. The long-term health crisis, economic disruption and social disruption are occurring at levels that were unfathomable just months ago. These changes are taking place in a world that is much different from when the last widespread pandemic, the Spanish flu, hit more than 100 years ago. Technology has become such an integral part of our lives since that time and, as such, will be deeply ingrained in many of the short-term and long-term effects of the COVID-19 virus. In this report, TBR will provide a high-level overview of the impact these recent events will have across the hardware, software, cloud, telecom and services markets we cover. While most of the market effects will be painful due to the economic disruption occurring, many will lead to changes in long-held business strategies and create opportunities as technology needs shift for both individuals and organizations.

Social distancing challenges core of IT services industry

Pain: At the core, IT services and professional services are human-centric businesses, delivered by humans and intended to improve employees’ efficiency or accelerate their ability to connect with clients and enable growth. Changes in travel and personal interaction as well as business disruption all challenge the existing IT services business model. Additionally, many of the largest IT services providers will have new leadership tasked with managing these disruptions. In 2019 TBR noted a large number of C-level changes at the largest IT services vendors and consulting firms, as well as their technology partners. Those leaders will be tested in the coming months, and TBR anticipated more positive than negative reviews. More significantly for the long-term business impacts will be the performance of those leaders at the team and business group level, the equivalent of squad leaders and company commanders in a military organization. Adjusting to COVID-19 safety measures; managing people remotely; delivering to clients and managing their expectations, particularly in a tough economy; and continuing to lead — those will be massive challenges for team leaders. How well prepared they are, how well their companies have trained them, and how agile and flexible they can be in an ever-changing business climate are the factors that will distinguish high-performing IT services vendors and consultancies from struggling ones in 2020. The CEOs and top leadership will set the tone, but execution at the lower levels will become exponentially more difficult with this pandemic. 

Change: TBR has already spoken with consultancies and IT services vendors grappling with changes to their business models, particularly around collaborative design sessions in the early stages of digital transformation engagements. Vendors with pilot projects to enhance global coordination and project management have accelerated those efforts and expect to invest heavily in the infrastructure needed to perform at speed and at scale. Vendors have also begun evaluating their technology alliances and resetting expectations around large-scale systems integrations. Also being mentioned are new engagements based on COVID-19, including technology consulting around delivering healthcare — and, critically, testing — through “drive-up” systems.

Opportunity: TBR expects that recent trends around automation, AI and platform-delivered services will be catalyzed by the spread of COVID-19 and imperatives to work remotely and with minimal in-person contact, resulting in a few knock-on effects across the broad IT services and consulting space. Most significantly, those companies that have invested most heavily in automation and remote delivery will see the least impact on their engagements, even if clients begin to freeze or reduce spend in line with a broader economic slowdown. Second, consultancies and IT services vendors with experience in online, remote training and upskilling will be able to both continue their own digital transformations and provide offerings around human capital training and management based on their own lessons learned and best practices. Third, vendors that anticipated a global economic slowdown and prepared to take advantage of lower costs for acquisitions and new opportunities to assist clients in distressed markets — while they likely did not anticipate this virus — are best positioned to provide consulting and IT services throughout the pandemic.

The CSP ecosystem is gearing up for a major edge build-out; the U.S. and China will lead the world

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Communication service provider (CSP) spend on edge compute infrastructure is poised to ramp up over the next few years as telcos and cablecos virtualize and cloudify their networks and as webscales pursue their digital lifestyle-related initiatives and stimulate growth of their cloud businesses. The U.S. and China will lead the world in edge compute development.

TBR’s Telecom Edge Compute Market Forecast, which is global in scope, details edge compute spending trends among CSPs, including telecom operators, cable operators and webscales. This research includes current-year market sizing and a five-year forecast by multiple edge compute market segments and geographies, with the most recent publication covering 2019 to 2024.

Join Principal Analyst Chris Antlitz on June 10 for an in-depth and exclusive review of TBR’s most recent Telecom Edge Compute Market Forecast.

Don’t miss:

  • Why webscale companies such as Amazon and Microsoft are building out the edge
  • Which countries will deploy the most edge sites by 2025 and why
  • How COVID-19 could impact demand for edge computing

Cloud is becoming higher touch

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Join Allan Krans, Nicole Catchpole, Jack McElwee and Catie Merrill to learn about how cloud initially promised simplicity for customers, but has matured to offer much the opposite. Shifting use cases, emerging technologies and a diverse mix of IT delivery methods are challenging customer skill sets and resources. Customers need more assistance at each step along their cloud journeys, from upfront solutioning to migration and implementation to ongoing operational support delivered through managed services. Join TBR to hear more about customer demand for higher-touch models and how vendors are adapting their businesses to meet those needs.

Don’t miss:

  • The struggles of successfully moving enterprise applications to cloud
  • Managed service provider programs and ecosystems maturing around cloud platforms
  • Cross-vendor partnerships and alliance strategies
  • Managed services trends and utilization by customers

Advisory-led discussions help quantum computing emerge in customers’ transformation-centric conversations

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Prescient business leaders will ready their business for quantum’s economic advantage tomorrow by starting on application exploration today. This will be especially valuable for advisory-led vendors as they evolve their digital transformation recommendations and offers to clients. The featured iteration of TBR’s Quantum Computing Market Landscape delves into the professional services aspects being built out by quantum boutiques as well as by larger, more diverse professional services firms.

Join Geoff Woollacott, Patrick Heffernan and Boz Hristov as they dig into key findings from TBR’s new Quantum Computing Market Landscape.

Don’t miss:

  • TBR’s analysis of the current state of the quantum computing market and its predictions for the future
  • Key vendor spotlights
  • Economic disruption due to the emergence of this new technology

IoT use case stories: How use cases drive IoT

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Join Ezra Gottheil and Eric Costa to explore the wealth of knowledge TBR has gathered on IoT use cases over the past five years. While thousands of use cases have emerged, there are clear winners and patterns of adoption for specific verticals and business processes. For most vendors, and for most IoT-related products and services, use cases drive go-to-market strategies. Customers buy use-case solutions, and successful vendors present their offerings through use cases.

Don’t miss:

  • Winning use cases and implications
  • Viable routes to market for IoT components in use case solutions
  • Vendor best practices for leveraging use cases

The digital transformation ecosystem demands cooperative partnerships

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Competitive pressures in traditional and emerging IT service areas such as digital, cloud and cybersecurity, combined with unfavorable market dynamics tied to rising macroeconomic uncertainties and pockets of tight spending, are challenging IT services vendors’ performance. No vendor can do it alone, so partnering with software providers, such as SAP, enables vendors to expand their portfolios and manage clients’ digital and cloud-based applications.

Join Boz Hristov, Elitsa Bakalova and Kelly Lesiczka as they reveal key findings around leading IT services vendors’ performance as well as how current successful partnerships will evolve as cloud and software vendors seek differentiation.

Don’t miss:

  • How major IT services vendors performed in 2019, and what TBR’s outlook is for 2020
  • What the key trends are in the IT services segments
  • How successful partnerships between SAP and IT services vendors and consultancies have been structured and maintained
  • What SAP can expect from its partners now and as digital transformation matures