Webscales will capture the majority of economic value of telecom edge compute market

Webscales have various initiatives underway that will disrupt aspects of telcos’ business model, posing a direct threat to their connectivity businesses and ability to capitalize on new value created from 5G and edge computing. Webscales’ rapidly expanding presence in the edge compute space and keen focus on private cellular networks — particularly in the U.S. — are prime examples of this trend.

Though webscales are posturing like they want to partner with telcos on new opportunities, edge compute partnerships involving a webscale and telco to date are more exploitative than cooperative in nature. Arguably, the highest profile agreement to date is between Amazon Web Services (AWS) (Nasdaq: AMZN) and Verizon (NYSE: VZ), and while Verizon has touted the monetization opportunities, it is providing little more than site access and network connectivity, while AWS’ intelligent edge capabilities provide the bulk of the customer value. In this relationship, AWS doles out a cut of the revenue to Verizon while holding on to the customer relationship and most of the value that emanates from the use of its platform.

The end state of this competitive dynamic will see telcos capturing even less value as they increasingly offload towers and other sites to towercos and data center real estate investment trusts (REITs), and as webscales own greater portions of the network.

Webscales and data center players invest in India to capitalize on the nascent digitalization opportunity

India has become the epicenter of webscales’ focus and investment among emerging markets due to the country’s large population and growth prospects. Alphabet (Nasdaq: GOOGL), Amazon, Microsoft (Nasdaq: MSFT) and Facebook (Nasdaq: FB) are all investing billions of dollars in equity stakes, infrastructure build-out, applications and platforms customized to meet the needs of the Indian market, and setting up business model structures. Reliance Jio, Bharti Airtel and Vodafone Idea are partnering with these webscales on various projects to realize this digitalization opportunity in India.

TBR’s Telecom Edge Compute Market Landscape, which is global in scope, deep dives into the edge compute-related initiatives of stakeholders in the telecom market, including telecom operators, cable operators, webscales and vendors that supply the telecom market. The research includes key findings, market size, regional summary, technology trends, use cases, operator and vendor positioning and strategies, and acquisition and alliance strategies and opportunities.

DXC acquisition expected to bring Atos gain — but not without pain

“Atos would also get DXC’s security services and solutions capabilities, as well as add 3,000 staff to its already existing team of 5,000 security professionals. It would also gain its digital security services, an area that TBR claims Atos is aiming to increase revenues in — from €0.7 billion in 2019 up to €2.1 billion in the midterm.” — ARN

5 Things To Know About A Possible Atos-DXC Technology Deal

“‘Atos would directly benefit from the market consolidation of a direct competitor, while DXC Technology, which has historically prioritized its fiduciary responsibility, would seize the chance for its shareholders to capitalize on the opportunity and end its seemingly perennial turnaround efforts,’ according to Technology Business Research.” — CRN

Quantum computing momentum builds, especially at Duke, Honeywell

“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.” — WRAL TechWire

Atos will gain scale it seeks in the U.S. with planned DXC Technology acquisition

France-based IT services giant Atos confirmed on Jan. 7 rumors regarding a “friendly transaction” with DXC Technology (NYSE: DXC), which could result in the second-largest global IT services vendor, closer to the size of Accenture (NYSE: ACN) ($45 billion revenue in 2020) and larger than Tata Consultancy Services ($22 billion revenue estimated in 2020) and IBM Services (NYSE: IBM) after the Global Technology Services spin-off at the end of 2021 ($23 billion annual revenue after the spin-off).

What is in it for Atos? Scale, and more scale

Atos has not been shy about making larger-scale acquisitions over the last decade, acquiring Siemens IT Solutions and Services, and its roughly 26,300 employees, in 2011; Xerox’s ITO business, with 9,600 employees, in 2015; and Syntel, and its 23,500 employees, in 2018, proving its capabilities at absorbing companies of different sizes. With DXC Technology, Atos would gain scale in the U.S., something the company has been pursuing in fits and starts over the last five years, often through acquisitions as well as changes in leadership in North America.

From a portfolio diversification perspective, though, acquiring DXC Technology is not the best choice, in TBR’s opinion, as Atos’ scale would increase in managed infrastructure services, an area in which it is already well-established. However, Atos would gain DXC Technology’s security services and solutions capabilities and add approximately 3,000 people to its more than 5,000 security professionals. Additionally, Atos would gain scale in digital security, an area of strategic expansion as Atos aims to increase its revenues in this segment from €0.7 billion (or $0.9 billion) in 2019 to €2.1 billion (or $2.6 billion) over the midterm.

Despite the recent challenging market environment, Atos has been on an acquisition spree, using its remaining free cash flow after dividend payments to make bolt-on transactions. Since the beginning of 2020, Atos has announced nine acquisitions in four expansion segments: cloud, digital, security and decarbonization. With DXC Technology, Atos’ global service delivery capabilities would also expand and the company would reach a combined low-cost resource leverage of approximately 53%, compared to 46% for Atos alone.

DXC Technology gains opportunity for payout and stability

If Atos acquires DXC Technology, three years of failed attempts by DXC Technology to turn around eroding revenues and thinning profitability would be forgiven. DXC Technology leadership would see a cash-out payday, while remaining assets (people and capabilities) would move to a more stable corporate environment with a long-term view and objective, something Atos is strong at setting up and following through on.

Vendors pursue tactical run-the-business engagements to help clients react to COVID-19 and maintain operations

Management consulting market summary


The COVID-19 pandemic will continue to pressure discretionary spending and challenge vendors’ interactions with clients due to social distancing and travel restrictions. The vendors that will succeed are the ones that immediately adjusted their portfolios and service delivery models to accommodate clients’ pandemic-related run-the-business challenges and are now looking ahead to provide services to support clients in the post-pandemic world. TBR expects vendors to master the hybrid engagement model, navigate more smartly through the technology alliance ecosystem, deliver digital transformations and expand activities around decarbonization to recover ground lost in 2020.


Hybrid sales and service delivery, in which consultancies interact with clients both virtually and face-to-face, existed before the COVID-19 pandemic spread across the world in 2020; however, the dramatic difference from pre-pandemic days is the universal acceptance that hybrid engagements are a necessary and valuable way to conduct business. Vendors are now more adept at delivering services in person and remotely and have made collaborative technologies a natural extension of the job. Clients now receive services and adapt to different ways of working, recognizing that value in a services relationship can be sustained without face-to-face encounters. In 2021 IT services vendors and management consultancies that perfect the hybrid engagement model will outperform peers and accelerate consolidation across the IT ecosystem.

Market overview

TBR expects benchmarked vendors in the management consulting segment to increase revenue 0.9% year-to-year in 2020, a growth trend that will continue to surpass that of benchmarked IT services vendors in TBR’s IT Services Vendor Benchmark, which we expect to decrease 1.7% year-to-year in 2020. The Big Four vendor group will remain the largest revenue contributor at 55.2% of benchmarked revenue in 2020; however, strategy-led vendors will increase their market share by 50 basis points year-to-year to 28.6%. Solutions-led companies, the Big Four and strategy-led firms are all expanding their technology capabilities, intellectual property assets and managed services capabilities to address clients’ run-the-business needs with holistic capabilities.

Total Benchmarked Management Consulting Revenue 2015-2020E

The Management Consulting Benchmark provides key service line, regional, vertical and operational data and analysis for 13 leading management consulting firms. The research program also includes a deep dive into 11 vendors’ management consulting business strategies as well as SWOT analysis.

Hybrid delivery models, diversified partnerships and expanded portfolios alleviate vendor revenue pressures

Key Insights

Hybrid delivery — Virtual selling and management consulting service delivery replace face-to-face interactions between vendors, clients and partners.

Partnerships — Emerging technologies necessitate more complex ecosystems, pressuring all players in the IT services space to partner differently.

Portfolio expansion — Vendors are establishing applications and infrastructure managed services capabilities to provide design-build-run solutions.

The Management Consulting Benchmark provides key service line, regional, vertical and operational data and analysis for 13 leading management consulting firms. The research program also includes a deep dive into 11 vendors’ management consulting business strategies as well as SWOT analysis.