COVID-19 necessitates data center investments, becoming a catalyst for digital transformation

Like the rest of the world, IT decision makers have been moving into a highly reactive and tactical mode in 2020 to mitigate COVID-19’s impact on the businesses they underpin. TBR believes the ripple effect of these decisions will continue through 2021. The COVID-19 pandemic has accelerated macro trends toward cloud technologies that leverage automation to reduce person-to-person contact in economic commerce. AI and machine learning will pull infrastructure along and similarly push the infrastructure deployments further to the edge, while reinforcing the need for investment in emerging technologies to solve pain points that existing technologies cannot address.​

Join Stephanie Long and Geoff Woollacott as they dive into the impacts of COVID-19 on the data center market thus far and how they predict the impacts will evolve during 2021.

Don’t miss:

  • How 1H20 investments in modernizing the data center to meet COVID-19 mandates will reduce data center hardware spend in 2021
  • COVID-19 increases the need for edge deployments
  • Quantum computing advancements persist, leading to an increase in M&A activity to consolidate capabilities

Mark your calendars for Wednesday, Feb. 3, 2021, at 1 p.m. EST,
and REGISTER to reserve your space.

TBR webinars are held typically on Wednesdays at 1 p.m. ET and include a 15-minute Q&A session 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].

EY 2021: Hybrid and omnipresent

TBR perspective

A few years ago in a wide-ranging discussion, TBR analysts and EY executives considered the future consulting business model, noting how most industries had been fundamentally disrupted by technology while consulting had seemingly remained unchanged. Fast forward to the current pandemic, and EY clearly anticipated where consulting was headed: hybrid engagements, delivered in-person and virtually, substantially aided by technologies, including big bets EY made on AI, blockchain and cybersecurity. In addition, EY has understood a significant shift in the IT services and consulting ecosystem, in which technology vendors’ needs have been supplanted by clients’ needs, making partnerships less about sales and marketing and more about delivery.

During the opening session of the Technology Analyst Summit, Dan Higgins, the firm’s Global Technology Consulting Leader, said clearly and definitively EY intends to become “the transformation consulting leader,” an ambition that requires best-in-class and scaled capabilities around technology, data, platforms, products and ecosystems. In Higgins’ view, one of EY’s strengths in tackling that ambition came from being able to bring the entire firm to bear at a client, from all aspects of consulting, as well as tax and strategy & transactions. The September Technology Analyst Summit and the one-on-one discussions with EY executives in the following weeks confirmed TBR’s assessment that EY’s evolution continues, undeterred by COVID-19.

In an expansive and informal discussion with TBR after the event, EY’s Global Vice Chair for Consulting Errol Gardner said the firm’s performance in the Asia Pacific region has returned to close to 2019 levels, adjusting more rapidly to the COVID-19 era than other regions. He predicted massive opportunities to consult with the government sector in Europe in the coming year as well as sustained uncertainty in North America (specifically the United States), all while noting that the current market does not favor new entrants or substantial account turnover, with most clients unwilling to take on additional risks associated with onboarding new consultants.

Gardner’s comments extended his Technology Analyst Summit opening remarks and provided some assurance that the radically changed business model for consulting would not lead to a radically changed EY, except in certain areas, such as remote working, diversity and inclusion, and resilience. Gardner also reinforced one of the overarching themes TBR took away from the entire event: The future is hybrid, which includes not just delivery but also how EY structures itself and continues to build its business. Beyond recruiting talent, building solutions and acquiring assets, Gardner reiterated the firm would be relying on ecosystem partners and expanding beyond traditional alliance structures to meet clients’ evolving demands. In TBR’s view, this approach to ecosystems has developed over the last few years as the firm has shifted from selective and limited alliances to a more expansive partnering model.

In a follow-up discussion after the Technology Analyst Summit, EY’s Global Business Consulting Leader Amy Brachio described an evolution of clients’ consulting needs and how EY tackles those changes. According to Brachio, clients previously brought EY problems that required a specific skill set or clearly defined capabilities to solve. As emerging technologies have forced changes to clients’ business models, EY has responded to more complex and transformational problems by bringing to bear the entire firm.

Frictions within the global firm that previously prevented more holistic responses have been minimized through resetting how EY looks at clients’ problems and how EY measures its own success. Rather than focusing on global total engagement revenue by competency (such as supply chain), EY has shifted to evaluating performance based on the buyer’s agenda and understanding which skills and capabilities the entire firm needs to bring to solve more complex problems. In TBR’s view, shifting from a traditional mindset around revenue metrics based on competencies to a client-centric, holistic understanding of EY’s role within a client’s ecosystem reflects the firm’s overall culture around purpose.  

Sticking to strategies and building alliances around security, AI and blockchain

Ever-expanding alliances with key technology partners have underpinned EY’s technology evolution over the past few years. Building on comments made during the Technology Analyst Summit, Global Alliance and Ecosystem Leader Greg Sarafin explained to TBR that the firm’s alliance remained grounded in joint solutions, integrated platforms and shared clients, not joint ventures or business groups. In contrast to other leading consultancies and global SIs, EY’s approach to partnering with technology vendors, particularly companies such as SAP (NYSE: SAP), IBM (NYSE: IBM) and Microsoft (Nasdaq: MSFT), revolves around definitive opportunities centered on EY-built platforms and solutions. For example, the firm has partnered with IBM Watson to create Diligence Edge, a due diligence platform that, according to Sarafin, substantially reduces the hours needed to “find the worms and the pearls … [to] accelerate the time to find issues and accelerate the time to value” for clients examining acquisition targets. Sarafin added that EY will “lean in on solutions” and “solve big problems” with EY-built solutions and platforms.

While EY may deliver some of these products as managed services, the firm’s primary business model will continue to revolve around the consulting, process re-engineering, integration and change management work necessary for clients to continue with their digital transformations. On that last element, Sarafin noted that COVID-19 brought religion to boards about the importance of digital transformation, ending the indecisive start-and-stop nature of many engagements and convincing EY’s clients they need to move to the cloud. As part of EY’s story on digital transformation, Sarafin shared with TBR that EY’s wavespaces would continue to evolve, becoming more tightly aligned with technology partners, such as Microsoft, or more industry-centric, such as around manufacturing in a to-be-opened wavespace in Ohio. (Note: TBR has written extensively on wavespaces and on innovation and transformation centers generally.)

EY Virtual Technology Analyst Summit: On Sept. 28 and 29, EY hosted analysts for a global EY Virtual Technology Analyst Summit, which showcased the firm’s technology-centric offerings and capabilities and included breakout sessions on functional areas, such as blockchain, security and analytics, as well as client success stories. The following includes information gathered during the event and in subsequent one-on-one discussions with EY executives.  

Quick Quantum Quips: Quantum systems become increasingly accessible

Welcome to TBR’s monthly newsletter on the quantum computing market: Quick Quantum Quips (Q3). This market changes rapidly, and the hype can often distract from the realities of the actual technological developments. This newsletter keeps the community up to date on recent announcements while stripping away the hype around developments.

November 2020 Developments

Access to quantum systems and vertical-specific use cases is beginning to emerge in more commercially available ways. While quantum computing has yet to achieve economic advantage, these developments are necessary next steps toward this goal.

  1. IQM Quantum Computing (IQM),a quantum hardware startup based in Finland, was selected to produce Finland’s first quantum system. The company committed to delivering a 50-qubit system by 2024. IQM has a geographical advantage in the quantum computing market because it is located in Europe and there are few vendors on the continent investing in quantum hardware. IQM’s partnership with Atos on quantum provides IQM with increased visibility into the European Union.
  2. Zapata Computing closed its latest round of funding, a series B round that raised $38 million. Comcast’s and Honeywell’s venture capital arms both invested in this round of funding, with Honeywell as an existing investor and Comcast as a new addition. The investments in quantum computing from vendors working in adjacent fields demonstrate the value quantum computing can provide. TBR believes Zapata’s software capabilities are some of the most mature in the industry, making it a valuable long-term partner to Honeywell in the quantum computing market.
  3. Duke University has begun expanding its existing quantum computing facility at its Chesterfield location in Durham, N.C., adding 10,000 square feet. The expansion will be completed by March 2021, and the facility is one of five in the U.S. gaining support from a $115 million grant by the U.S. Department of Energy. Duke University’s quantum computing efforts focus on trapped-ion quantum systems. The systems in development at Duke will be purpose-built to solve specific problems.
  4. AlgoDynamix unveiled a behavior-forecasting use case for financial services customers underpinned by D-Wave quantum annealing technology. This offering is consumed as a cloud service and is significant in the quantum computing market for two reasons, according to TBR. First, it is a very specific vertical use case that leverages quantum computing technology. Second, it demonstrates that a quantum-specific vendor partnering with a vertical-specific vendor can create very practical applications in the greater quantum ecosystem. The analytics of this use case are SaaS-based and do not require customer-specific data to be leveraged, making onboarding new customers to the offering relatively simple.
  5. Honeywell unveiled a 10th-generation 10-qubit quantum system named System H1. The computer leverages Honeywell’s quantum charge-coupled device (QCCD) trapped-ion technology, which is a differentiator in that the QCCD makes it easier to upgrade the system throughout its lifetime. This enables existing customers to take advantage of system advancements as they are developed. System H1 can be accessed as a cloud service either directly through a cloud API or through partners including Microsoft Azure Quantum, Zapata or Cambridge Quantum Computing. All access to System H1 is billed as a subscription service.

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 upcoming version, publishing in December, will focus on the software layer of quantum systems. You can also sign up for our webinar on the topic, which will be held on Dec. 16 at 1 p.m. EST.

SAP and Ericsson in Egypt: Thriving in an expansive environment

Ericsson and SAP anticipate further expansion in Cairo

Ericsson has also leveraged this environment to support its global strategy, by tapping local talent in the fields of artificial intelligence, software development and digitalization. “It is the existence of the required competent engineers, with various backgrounds and capabilities, that makes it very attractive to operate in the country,” an Egypt-based Ericsson executive noted. Ericsson has been operating a digital services hub in the country to serve the Middle East and Africa region. The Ericsson executive stated, “Since we are covering the Middle East and Africa, Arabic is an advantage for working in Arab countries.

Egyptian professionals have relatively better English communication skills as well to add on top. Plus, Egypt provides reliable telecom infrastructure that can help different engineers to communicate and engage remotely with colleagues and customers.” According to Ericsson, the environment has been very encouraging to do more and serve on the global level as well. The Egyptian government has a strong focus on the ICT sector, is making more spectrum available to operators to improve mobile broadband experience, and has the aspiration to introduce 5G. In Ericsson’s estimation, Egypt is a firm believer in building a connected society and smart cities and is already executing on a solid national artificial intelligence strategy.

Notably, in October Ericsson announced the shipment of the first AI-enabled software developed at its Artificial Intelligence & Analytics Hub in Egypt to be used by Ericsson’s customers globally. According to the press release, “The AI & Analytics Hub has accelerated the execution of Ericsson’s focused strategy in Egypt by using AI and automation technologies to create data-driven, intelligent products and services.”

Looking ahead for SAP, Mansour explained that she hopes to hire more resources in digital marketing, digital sales, presales and services, and, if SAP’s management approves, to establish more partnerships with the headquarters of companies serving the region. For Mansour, a true coup would be to convince the Egyptian talent currently employed in Germany to return to Cairo and help “regain historic leadership of the region.” Potentially accelerating that effort would be SAP’s continued success with SAP Business Suite 4 SAP HANA (S/4HANA) implementations and expanded opportunities with IoT, analytics and other emerging technologies. Ericsson’s Egyptian future, according to its executives, depends on ever-increasing internet connection speeds, recruitment of local talent, and support of a wider array of Ericsson products and services.

Building on the company’s legacy in Egypt, which dates back to 1897, when the first Ericsson telephony equipment was introduced in the country, connecting Alexandria to Cairo, Ericsson believes 5G will be next significant step. Ericsson executives noted that the Egyptian government “took proactive steps in launching 4G in the country … a testimony that the country realizes the importance of technology in building economic development. From a technology point of view, [Ericsson is] ready to switch on 5G on the existing 4G networks, so it is all a matter of getting the 5G license in place. [Ericsson’s] focus area now is to offer the latest solutions and technologies to existing customers for their 4G networks while working together on paving the way to launching 5G.”

Earlier in 2020, TBR spoke with Egyptian officials about the country’s continuing efforts to build a robust alternative for companies looking to outsource their IT services operations. As part of a follow-up, TBR also connected with SAP (NYSE: SAP) and Ericsson (Nasdaq: ERIC) executives to understand why both technology vendors have chosen to expand operations in Cairo. The following reflects those exchanges and TBR’s ongoing analysis of offshore IT services centers.

Webscales will ultimately become more like competitors than partners to operators to capitalize on 5G-era opportunities

Webscales are not the telco’s friend

The Big Nine have various initiatives underway that will disrupt aspects of the telecom business model and pose a direct threat to operators’ existing connectivity businesses and their ability to capitalize on new value created from 5G.

Though webscales are posturing like they want to partner with telcos on new opportunities, they actually need to disrupt telcos’ core business (i.e., providing connectivity) to realize their digital ecosystem goals.

Webscales ultimately need to become more like competitors, rather than partners, of telcos because they need access to new types of data, and realizing their digital lifestyle goals will require them to take control over the network rather than be beholden to telcos. Both of these needs are satisfied by owning greater portions of the network.

Webscales already own significant portions of long-haul transport, cloud data centers, SD-WAN and communications platforms globally, and TBR believes the next step will be for webscales to take over the mobile core and the last mile of the network. This is already occurring in the enterprise network domain, but TBR expects webscales will increasingly delve into the consumer domain as spectrum is increasingly democratized and key technological advancements make it much easier, faster and cheaper to build and operate greenfield networks.

The webscale companies (hyperscalers or internet content providers) covered in TBR’s Webscale ICT Market Landscape invest in ICT and related digital infrastructure to drive their core businesses, which can include, but are not limited to, advertising, cloud services, e-commerce, financial services and media. In some cases, webscale companies will also invest in and provide telecommunications services, such as broadband access, to accelerate their digital businesses. This report focuses on the nine webscales (the Big Nine — Alibaba, Alphabet, Amazon, Apple, Baidu, Facebook, Microsoft, Rakuten, Tencent) that TBR believes will own the largest, most comprehensive end-to-end digital ecosystems in the digital era. Additionally, the report includes key findings, market size, customer adoption, operator positioning and strategies, geographic adoption, vendor positioning and strategies, and acquisition and alliance strategies and opportunities.

The Big 9 will own and control the value chain in the digital era

The Big 9 will own and control the value chain in the digital era

Drivers and Investments

The Big Nine’s underlying goal is to provide a seamless, end-to-end digital experience to end users that will maximize webscales’ value capture in the digital era.

Webscales already own significant portions of long-haul transport, cloud data centers, SD-WAN and communications platforms globally, and TBR believes the next step will be for webscales to move into the mobile core and last mile of the network.

Webscales need access to network data, which they will obtain through partnerships with telcos or outright ownership of the network.

The webscale companies (hyperscalers or internet content providers) covered in TBR’s Webscale ICT Market Landscape invest in ICT and related digital infrastructure to drive their core businesses, which can include, but are not limited to, advertising, cloud services, e-commerce, financial services and media. In some cases, webscale companies will also invest in and provide telecommunications services, such as broadband access, to accelerate their digital businesses. This report focuses on the nine webscales (the Big Nine — Alibaba, Alphabet, Amazon, Apple, Baidu, Facebook, Microsoft, Rakuten, Tencent) that TBR believes will own the largest, most comprehensive end-to-end digital ecosystems in the digital era. Additionally, the report includes key findings, market size, customer adoption, operator positioning and strategies, geographic adoption, vendor positioning and strategies, and acquisition and alliance strategies and opportunities.

3 ways hybrid engagements will change consultants’ innovation & transformation centers

Join Principal Analyst Patrick M. Heffernan, Senior Analyst Boz Hristov and Analyst Kelly Lesiczka as they detail three key forces shaping the way IT services vendors and consultancies adjust their innovation and transformation centers to the new reality of hybrid engagements. With over 50 on-site visits to these digital experience centers prior to the COVID-19 pandemic, Patrick, Boz and Kelly bring firsthand understanding of how these centers have been designed, staffed and operated as well as what changes customers can expect from these centers going into 2021.

Don’t miss:

  • What the best-prepared consultancies did to shift to all-virtual engagements, and how quickly they will evolve to a hybrid model
  • How clients’ expectations changed before the pandemic, and what new demands will emerge in 2021
  • Why hybrid engagements at innovation and transformation centers signal a shift to hybrid consulting

HPE continues to evolve technical solutions for a dispersed workforce

HPE’s VDI portfolio is not new but is increasingly valuable to its customers as remote work looks like a more permanent situation than initially anticipated

As of April HPE had rolled out a series of VDI solutions that enable customers to adapt to the growing workforce and garnered a significant number of new customers. This week’s announcement at Workplace Next rides the momentum that highlighted use case-specific VDI offerings, allowing customers to customize their experience based on the type of worker and the size of the remote workforce. With these inputs, HPE can optimize newly designed VDI configurations that are dependent on each type of worker and customize pricing, billing and delivery.

Kaddoura explained that customers “need access to their data centers in a very secure way, and in a highly cost-optimized way as well,” and highlighted GreenLake as the cloud that can be implemented in a customer’s data center, colocation facility or edge. Additionally, she noted that what HPE has done is “brought together the best of our Pointnext Services, our software management layer, as well as HPE’s rich portfolio of hardware to create that cloud experience.”

While the announcement of HPE’s GreenLake virtual desktop cloud services was the banner topic woven throughout the event’s discussions, HPE’s rich ecosystem of partners was highlighted as key to optimizing the rollout of these latest features. For example, in addition to offering VDI from Citrix (Nasdaq: CTXS), HPE can now include VMware (NYSE: VMW) Horizon as well as NVIDIA (Nasdaq: NVDA) virtual GPU (vGPU) technology for more cumbersome workloads. The extension of HPE’s partnership with Wipro was also announced, enabling delivery of hybrid cloud and VDI solutions “as a Service” through HPE GreenLake.

Yadavalli expanded on the partnership between Wipro and HPE explaining how the relationship will allow Wipro to leverage HPE GreenLake across its managed services portfolio, offering a pay-per-use model that is subscription based and easily consumable. The aim, said Yadavalli, is to “bring hyperscaler capabilities to customers on-premises or on hosted infrastructure,” which will enable customers to “fast track their workplace transformation efforts by eliminating the need for upfront capital investments and provisioning costs while enjoying the benefits of on-premises control, security and compliance.”

On Nov. 10 HPE sponsored Workplace Next, a series of discussions on the trends and impacts of the reimagined workforce as a result of the COVID-19 pandemic, featuring a cross-industry panel of experts and executives. During the virtual broadcast, business leaders from various industry roles, including human resources, real estate, healthcare and manufacturing, discussed not only the workplace challenges and trends resulting from the pandemic but also highlighted the opportunities a remote work mandate have unveiled. HPE is a prime example of an enterprise that has addressed the challenges of remote work internally while reorienting its portfolio of solutions to enable as seamless a shift as possible for customers. Additionally, with the discussion of the reimagined workplace as the backdrop, HPE notably leveraged the event to announce expansion of HPE GreenLake VDI cloud services, which included several updates to its workforce strategy for the digital economy.

Despite complexity and market challenges, CSP spend on NFV/SDN will grow at a 32.4% CAGR from 2019 to 2024 to nearly $147B

Key Insights

NFV/SDN spend will scale through the forecast period as leading CSPs broaden their transformation initiatives and as other CSPs begin their transformational journeys.

Operators will increasingly invest in virtualized network solutions, including vRAN and virtual network cores, to reap the full benefits of 5G.

The pool of vendors capable of aiding telecom operators in their network transformations is growing as cloud service providers and Japan-based vendors join the fray.

TBR’s NFV/SDN Telecom Market Forecast details NFV and SDN 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 NFV and SDN market segments and by geography as well as examines growth drivers, top trends and leading market players. TBR’s NFV/SDN Telecom Market Landscape includes key findings, market size, customer and geographic adoption, operator and vendor positioning and strategies, and acquisition and alliance strategies.