5G market update: Insights from TBR’s Telecom team

The global 5G market is entering the ramp stage. Driven by China, the U.S., South Korea and select countries that were among the early deployers of the technology, communication service providers (CSPs) in other countries will begin adopting and deploying 5G over the next five years. Unprecedented government stimulus targeted at the ICT sector and competitive pressures on CSPs to invest will ensure 5G infrastructure is deployed at scale through the middle of this decade.

Join Principal Analyst Chris Antlitz Wednesday, Nov. 17, 2021, for an in-depth, exclusive review of TBR’s 5G Telecom Market Landscape and 5G Telecom Market Forecast, during which he will cover major developments in the 5G market and gives his assessment of where the 5G market is trending over the next five years.

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. The 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 geographies well as examines growth drivers, top trends and leading market players.

Don’t miss:

  • How and why the 5G market is entering the ramp stage
  • Which CSPs are spending the most on 5G and why
  • What use cases CSPs are focused on for 5G

Register today 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].

WEBINAR FAQS

VMware’s Chapter 3 outline hinges on a more comprehensive portfolio and multicloud partnerships

TBR perspective

With the looming separation from Dell Technologies (NYSE: DELL) and departure of long-trusted CEO Pat Gelsinger, 2021 has undoubtedly been a turbulent year for VMware (NYSE: VMW). Since effectively taking over as CEO on June 1, Raghu Raghuram has been tasked with executing on Gelsinger’s vision of bringing the same virtualization products trusted by enterprises for decades into the cloud era. As many legacy software companies can attest, capturing net-new business in a market crowding with ‘born-in-the-cloud’ startups is no easy feat; yet, as the company that brought virtualization technology into the mainstream and remains pervasive throughout enterprises today, VMware faces a unique set of challenges and opportunities.

Since starting with stand-alone vSphere license agreements then progressing into full Software-Defined Data Center (SDDC) stack sales, VMware is now entering what Raghuram deems the company’s Chapter 3, the era of hybrid multicloud. Like the first two chapters, Chapter 3 will be defined by product innovation, but it will require a more nuanced partner strategy, leaning on value-added resellers and hyperscalers that will help bring VMware into the cloud. This is an area TBR expects VMware to execute on especially as it enters 2022 as a stand-alone company.

VMware unveils Cross-Cloud Services to drive multiproduct adoption and position as a SaaS company

At VMworld 2020 VMware was coming off a series of tuck-in acquisitions that provided the company additional value in areas like networking, security and modern applications. Evidenced by historic acquisitions, such as VeloCloud, and more recent purchases, including Pivotal, VMware has proven its ability to use acquired IP to quickly pivot and meet demand from customers’ IT operations and development teams. While Gelsinger’s departure and the company’s spinout could be playing a role in slowing acquisition activity, VMware also appears to be at a point where it has all the workings of a competitive portfolio and must now determine how to integrate and scale it. Marking a key step in this direction was the announcement of Cross-Cloud Services at VMworld 2021.

Cross-Cloud Services is a manifestation of the company’s five-pillar framework and brings application, cloud infrastructure, cloud management, security & networking and anywhere workspace & edge services into a single, unified platform that can be deployed in any IT environment. In addition to established offerings such as VMware Cloud solutions and vRealize for cloud management, VMware released new products, such as Tanzu Application Platform (TAP) and Project Arctic, which are also offered as part of the Cross-Cloud Services product family. More services are expected to be offered under the Cross-Cloud Services umbrella in the future to provide existing customers with more choices and the flexibility to deploy VMware services anywhere.

Like many market players defined as SaaS companies, such as ServiceNow and Salesforce, VMware recently has been emphasizing product bundles. For example, in 2Q21 VMware launched Anywhere Workspace, which brings endpoint management, security and networking capabilities into a single subscription through Workspace One, VMware Carbon Black Cloud and VMware Secure Access Service Edge (SASE), respectively. However, as a company born on premises, VMware is more closely aligned with vendors such as IBM and Microsoft, which are similarly looking to support customers’ hybrid cloud journeys but face pressure to appeal to customers outside their own install bases.

While VMware faces similar challenges, the pervasiveness of VMware — evidenced by roughly 80 million vSphere-based workloads currently in production — arguably puts the company under less pressure to look outside its customer base, at least in the near term, and focus on upselling cloud and application services to its loyal base of traditional virtualization customers. The release of Cross-Cloud Services indicates VMware will take a land-and-expand approach to increase annual contract value (ACV) and become perceived as a SaaS company.  

VMworld 2021: As the coronavirus delta variant continues to take its toll, VMware held its annual event virtually for the second consecutive year. While VMworld 2021 was unique largely because it was the first VMworld in nearly a decade without Pat Gelsinger as CEO, the feel of the event remained the same, offering various breakout sessions and independent talks from customers speaking to each of the five pillars that define VMware’s DT-enabling strategy. VMware also welcomed the CEOs of all major hyperscalers, further highlighting not only its commitment to partners but also to hybrid multicloud as the model that will shape enterprise IT throughout the next 20 years.

Lenovo Turnkey Solutions: How Lenovo’s art of the practical enables clients to practice the art of the possible

New offerings built on a smart long-term strategy

In advance of Lenovo’s Oct. 18 announcement of Lenovo Turnkey Solutions, executives with the company’s Industry Solutions group briefed TBR on elements of the new offering. In building the turnkey solutions, executives emphasized Lenovo’s continued focus in three critical areas: simplicity, core competencies and smart partnering. Keeping in mind Lenovo’s role in the ecosystem — particularly from the perspective of IT services vendors and consultancies — TBR sees Lenovo’s approach as essential to its promise to deliver the art of the practical while enabling clients and partners to practice the art of the possible.

So, what are those three critical areas?  

  • Lenovo’s focus on keeping things simple by “removing complexity of configuring solutions” is beneficial for consultancies and IT services vendors trying to help their clients accelerate adoption, innovation and transformation. By decreasing the configuration to a few key variables, partner enablement and scale through the channel become more manageable. Lenovo’s executives repeatedly emphasized the company brings technology from many vendors to an engagement and “makes the technology practical” to enable a seamless client experience. In TBR’s view, a technology partner that wants to leave complexity to a consultant is exactly the kind of tech partner consultants love.
  • That very division of labor connects to the second point: Lenovo focuses on doing what it does well and leaving its clients’ and partners’ market differentiation up to them. As Lenovo executives noted, their clients do not do IT or hardware; their clients do everything else and can leave IT and hardware to Lenovo, while Lenovo leaves everything else to its clients (and partners). TBR has repeatedly observed that vendors that remain focused on what they do well consistently outperform competitors with more diverse and multifaceted strategies.
  • Lastly, Lenovo’s willingness to develop and provide both niche and broad solutions indicates the company is taking strategic cues from clients and ecosystem partners, rather than trying to tell the market what it wants. Lenovo is serving clients’ and partners’ needs, not focusing on selling Lenovo solutions — of course, they do that too, very much, but it is a matter of focus and strategy.

In summary, Lenovo’s integrated turnkey solution strategy revolves around having a finger on the pulse of customer demand to identify solution areas that can inherently be simplified down to a handful of configurable variables to enable scale through the channel while playing their well-defined role in an evolving and complex ecosystem. Lenovo removes the complexity of multipartner involvement, while staying close to clients and their needs — a smart long-term strategy with plenty of room for sustained execution.

Additional contributor: Jacob Fong, Research Analyst

Hardware as a Service: 4Q21 insights from TBR’s Data Center team

Sometimes referred to as DaaS (Device as a Service), XaaS (Anything as a Service) or consumption-based models, hardware subscription offerings have become abundant in the market as vendors compete to build lasting customer relationships.

Join Principal Analyst & Practice Manager Angela Lambert and Senior Analyst Eric Costa Wednesday, Nov. 10, 2021, for a discussion on trends emerging among hardware subscription services.

Don’t miss:

  • Key developments and new offerings entering the market
  • TBR’s forecasted market growth
  • Differences in the market dynamics for PC subscription offerings versus data center offerings
  • Drivers and inhibitors that we expect to impact market expansion

Register today 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]i.com.

WEBINAR FAQS

Acquiring digital skills enables vendors to build local resources to expand revenues in APAC

Key Insights

IT services vendors are ramping up activities around building local market resource capacity on top of locally sourced global IT services delivery resources that have existed for decades.

Revenue growth leaders are eyeing opportunities to further penetrate the APAC market by leveraging digital design and creative capabilities to drive high-value opportunities.

Hiring local market resources, appointing leadership and pursuing acquisitions will improve vendors’ ability to diversify global revenues during 2022.

Acquiring digital skills enables vendors to build local resources to expand revenues in APAC

Note: TBR is expanding the IT Services Vendor Benchmark with industry-specialized and geographic deep-dive research, which we will alternate every quarter. In this 2Q21 edition of the report, we have added analysis around strategies, key developments and performance in the APAC region for select vendors in the benchmark.

The IT Services Vendor Benchmark details and compares the initiatives of and tracks the revenue and performance of the largest global IT services vendors. The report includes information on market leaders, vendor positioning, the IT services market outlook, key deals, acquisitions, alliances, new services and solutions, and personnel developments.

Opportunities for IT services abounding in a resurgent APAC market

In the most recent edition of the quarterly IT Services Vendor Benchmark, which published Oct. 7, TBR analysts took a deep dive into services vendors’ performance in APAC over the last few quarters, noting trends and anticipating how the market would react to easing pandemic restrictions and new investments in people and capabilities. The following comes from that deep dive; the full content is available from TBR.

IT services vendors see accelerating revenues as pandemic pressures slow and local investments grow

While pandemic-related pressures slowed APAC revenue growth for the vendors in TBR’s IT Services Vendor Benchmark during 2Q20, 3Q20, 4Q20 and 1Q21, regional revenue growth accelerated during 2Q21, supported by the gradual lifting of restrictions due to vaccine rollouts across the region. TBR believes the recent ramp-up of hiring of local market resources, leadership appointments, and acquisitions and partnerships will improve vendors’ ability to serve clients that are based in APAC and global clients that have operations in the region, and diversify global revenues during 2022.

APAC revenue leaders aim to better compete globally through investments outside core Japan market

The two benchmarked leaders in revenue size in APAC — Fujitsu and NTT DATA — remain deeply rooted in the APAC market, even as these vendors continue to invest in new resources and capabilities outside their core market of Japan to better attract and support clients abroad. Attempting to penetrate new geographies can be a double-edged sword for the two vendors, as it can help Fujitsu and NTT DATA compete abroad against more established peers in markets such as the U.S. and Europe, but also opens the door for peers to capture market share in Japan. The two companies have thus far taken somewhat divergent paths, with NTT DATA centering its efforts on augmenting U.S. operations through acquisitions, which is helping it gain traction in the market, while Fujitsu focuses on more internal transformations to grow its services resources and portfolio in new markets to earn client mindshare. 

NTT DATA closed the acquisitions of Acorio in 4Q20, Hashmap in 1Q21 and Nexient in 2Q21. The three U.S.-headquartered companies will add capabilities in digital, cloud and consulting, respectively, and, in the case of Acorio, horizontal technical capabilities around ServiceNow. We fully anticipate North America-focused NTT DATA Services will maintain an active acquisition pace over the next year, as synergies begin to increase and compound, boosting top-line revenue growth into 2022. 

Pursuing APAC expansion through innovation-led engagements around customer experiences

Quickly growing revenue leaders are eyeing opportunities to further penetrate the APAC market by leveraging digital design and creative capabilities to drive high-value opportunities across regions such as Japan and India. Consumer and enterprise preferences toward digital experiences and cloud-based “as a Service” solutions increasingly influences clients’ digital transformation agendas, providing growth opportunities for well-positioned vendors.

Accenture, No. 5 in revenue size in 2Q21, announced the opening of an office in Japan to host Accenture Interactive’s Droga5 team, along with plans to open similar facilities in the next 12 months in Brazil and China. Adding Droga5 capabilities in the country will augment Accenture’s innovation-led discussions to expand the company’s addressable market in areas such as marketing operations, including design, content development and content moderation, among others.

No. 6 in revenue size, Tata Consultancy Services (TCS) provided consulting and systems integration services for an India-based over-the-top streaming platform, SonyLIV, to help personalize subscriber experiences leveraging AI and machine learning. As a part of the engagement, TCS will also launch an Experience Design Center focused on rapid prototyping and digital innovation. Engagements such as this can provide a pathway into high-value services with TCS Interactive around digital design, branding and marketing. 

India-based talent serve as launching pad for services in APAC, diversifying revenue streams

The story in India is slightly different. India has traditionally offered an abundance of cost-effective global service delivery, but the local market itself only accounts for a small fraction of most vendors’ total revenues. Some companies are now viewing this juxtaposition as an opportunity, and despite a severe second wave of COVID-19 hitting between April and June 2021, vendors increasingly competed for new business with local clients in India in 2Q21. While India is unlikely to become the next frontier for growth in the near term, demand for digital transformation in the region can be an avenue for global revenue diversification, provided vendors can attract and retain skilled talent amid rising demand.

Earlier this year, Infosys signed a contract with the Federal Bank of India to implement the Oracle Customer Experience Cloud solution, helping the bank improve customer experience. Infosys also developed a new SaaS offering designed specifically for Urban Cooperative Banks in India. Infosys is facing fierce competition in recruiting and sales opportunities from both India-native peers and multinational corporations such as Accenture and Capgemini. For example, during the quarter Accenture signed deals with India-headquartered Mankind Pharma and Bharat Petroleum.

Capgemini’s three awards in the inaugural edition of the NASSCOM Engineering and Innovation Excellence Awards 2021 in India indicate the company is well positioned in the segment. Infosys has an opportunity to double down on its partnerships with Amazon Web Services, Google and Microsoft similar to peers like Wipro and Cognizant, which have formed joint business units and have been investing heavily in the country to provide the infrastructure backbone needed for India to pivot from being a frontier to emerging as a more developed market. Managing messaging around these relationships and Infosys’ broad technology agnosticism might prove most challenging for the company.

The IT Services Vendor Benchmark details and compares the initiatives of and track the revenue and performance of the largest global IT services vendors. The report includes information on market leaders, vendor positioning, the IT services market outlook, key deals, acquisitions, alliances, new services and solutions, and personnel developments.

CSP demand for 5G infrastructure is expected to remain robust for at least the next few years

Key Insights

Traditional RAN will remain the predominant architecture through 2025. Open vRAN will take time to mature and go mainstream.

Mobile broadband (MBB) and fixed wireless access (FWA) will remain primary use cases for 5G; government and enterprise pursuit of digital transformation wil drive other use cases.

APAC will lead the world in 5G investment through the forecast period. The U.S. and parts of Europe will be fast following, while most of rest of world will lag.

CSP demand for 5G infrastructure is expected to remain robust for at least the next few years; the issue is supply

TBR’s 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 geographies well as examines growth drivers, top trends and leading market players. 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.

Global governments will drive 5G development through stimulus initiatives and preference for domestic suppliers

Government stimulus will advance global 5G development; government support of domestic suppliers will aid smaller vendors

Unprecedented fiscal and monetary stimulus unleashed amid the COVID-19 pandemic will fund, both directly and indirectly, a large portion of the infrastructure cost for economic digitalization. As of August 2021, TBR estimates $3.5 trillion, or around 10% of global fiscal and monetary stimulus announced to date, will funnel into the ICT market over the next five years, a few hundred billion dollars of which is earmarked for 5G-related initiatives. communication service providers (CSPs) and their suppliers will be key beneficiaries of government stimulus, which will help CSPs ease their capex and opex burdens as they migrate to a 5G network architecture and will ensure they have the capital necessary to keep their businesses going and their debt obligations satisfied.

The rise in protectionism and government sponsorship of 5G initiatives, such as open RAN, presents opportunities for smaller RAN vendors to gain share versus incumbent OEMs. A growing number of countries aim to build domestic 5G solutions and ecosystems and are leveraging protectionist government policies and pressure on CSPs to do so, which is leading to a fracturing in the 5G market. These policies are designed to address national security concerns and to drive countries toward technological self-sufficiency and away from dependency on vendors domiciled in other countries. A prime example is the U.S. government’s strong backing of domestic open RAN vendors such as Altiostar, Mavenir and Parallel Wireless. Other countries that are pursuing similar nationalistic strategies include China, the U.K., the European Union, Japan, India, South Korea, Russia, Taiwan and Vietnam.

Coopetition is increasing globally as CSPs collaborate to share 5G network resources 

CSPs are pooling network resources to ensure nationwide 5G coverage despite competitive implications. For instance, Dish Network’s new network agreement formed with AT&T will enable Dish to support its customers while it builds its own 5G network and will provide AT&T with at least $5 billion. However, the deal will likewise limit AT&T’s customer growth from relatively higher-value retail customers if Dish’s wireless business is successful in the long term.

Other global partnerships include China Mobile’s and China Broadcasting Network’s network sharing and construction agreement, South Korean operators partnering to share 5G network infrastructure in rural markets, and Russian operators agreeing to share equal access to 5G spectrum in the country.

Customer incentive to upgrade to 5G is gradually improving though monetization remains limited

Consumer adoption of 5G services is gradually increasing and subscribers are being incentivized by expanding 5G coverage availability, accelerating data speeds, aggressive 5G device promotions, and the introduction of lower-priced 5G handsets.

Monetization remains limited, however, especially in the business-to-business space due in part to the delay of 3GPP’s Release 17, which provides industry standards for key features such as network slicing. 5G is initially being monetized primarily by fixed wireless services and serving as an incentive for customers to migrate to more expensive service plans.

TBR’s 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 geographies well as examines growth drivers, top trends and leading market players. 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.

IT services and digital transformation: 4Q21 insights from TBR’s Professional Services team

With IT services again enabling digital transformation, DeFi shifts blockchain into higher gear

As vendors address clients’ needs around cost optimization and IT transformation, many are beginning to eye investing in next frontiers such as sustainability, product engineering services and blockchain for growth. However, vendors must overcome skills shortage gaps in these domains before they can move forward. We do not anticipate these domains to require vendors developing a new services category, but rather augmenting existing ones, allowing vendors to build trust with new buyers while still relying on legacy capabilities to support it. Decentralized finance (DeFi) will likely become the necessary catalyst for broader adoption of blockchain.

Further, vendors must carefully message the promises of these new technologies as they relate to their core value proposition without jeopardizing service quality and partner ecosystem relationships. This is particularly important when scaling up blockchain technologies as implementation requires trust across multiple parties.

Join Patrick Heffernan, Boz Hristov, Geoff Woollacott, Elitsa Bakalova and John Croll Wednesday, Nov. 3, 2021, as they reveal insights into and latest trends of the IT services and digital transformation markets, with IT services revenue growth accelerating ahead of prepandemic levels, setting the stage for investments and collaboration in next frontiers. The group will also discuss recent performances of the leading 30 IT services providers and the role of blockchain among the key technologies enabling digital transformation programs.

Don’t miss:

  • TBR’s overview of performance and key trends for the 30 vendors in our IT Services Vendor Benchmark
  • Deep dive on IT services vendors’ investments and activities in APAC
  • Beyond the hype of cryptocurrency, and what’s next for DeFi

Register today 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].

WEBINAR FAQS

Hyperscalers begin to shift capex from central cloud build-outs to edge cloud build-outs

Hyperscalers’ focus is on creating value from distributed computing

Hyperscalers are at the cusp of scaling out their edge computing deployments as they focus on creating value from distributed computing, which is a key foundational aspect of their digital ecosystem initiatives. They must pivot from centralized data center build-outs to building out the edge to achieve the latency and quality of service that new network use cases will require.

TBR believes the world’s largest hyperscalers are all likely to extend their cloud footprints closer to endpoints through this decade and expects hyperscaler capex will shift significantly from central cloud to edge cloud over the next five years. The Big Nine hyperscalers will drive significant innovation in the edge space, contributing design references, technology standards, and best practices to facilitate ecosystem development.

Hyperscalers have been experimenting with ways to make it more economically feasible to deploy distributed edge network resources at scale. The commercial model will likely see hyperscalers partner with ecosystem stakeholders, such as tower companies and data center real estate investment trusts, to offset the financial burden of deploying, owning and operating edge compute environments. For example, a hyperscaler could partner with tower companies to site micro data centers at the base of cell sites and plug directly into the access and backhaul network.

Models such as this would help defray the cost and complexity of building and managing many sites. TBR also believes telco sites, such as central offices and aggregation hubs, are logical locations for edge compute resources. These facilities are usually strategically located, are owned and controlled by the operator, have access to power and cooling, have fiber readily available, offer secure access, and are ruggedized to withstand the elements.

Total CSP Edge Compute Spend 2020-2025E

Telcos are divesting their tower assets, which limits their opportunities and market leverage in the edge compute space; supply issues delay rollouts

Telcos relinquishing control over network sites opens door for hyperscalers

Hyperscalers are likely to continue their encroachment of network ownership as they build out their distributed computing platforms. Network access sites, particularly cell sites such as towers, are of unique strategic importance as hyperscalers aim to extend their platforms closer to data origination sources. The ultimate shift toward open virtual RAN and the radio intelligent controller will also spur significant innovation at the access layer of the network, which will prove to be an area of keen interest to hyperscalers that are looking at how to capitalize on new opportunities presented by edge computing, 5G and AI.

TBR believes it is highly likely that hyperscalers will become key customers of shared infrastructure owners, particularly towercos, during this decade as their reach extends beyond their central clouds.

Supply chain constraints will delay peak telecom edge compute spend growth rate to at least 2023

Delays in chipset availability — partly due to the COVID-19 pandemic and partly due to geopolitical factors and technological complexity — will slow the pace at which the vendor ecosystem can meet customer demand for edge compute infrastructure through at least 1H22. Supply chains should be able to meet demand by 2H22, setting the stage for projected 66.7% year-to-year growth in the market in 2023.

Shipping constraints are another headwind to meeting demand. Even if products can be manufactured, there are chronic problems with exporting and importing those products and bringing them to customer sites. This too will push out build timelines.

TBR’s Telecom Edge Compute Market Forecast, which is global in scope, details edge compute spending trends among communication service providers, which include telecom operators, cable operators and hyperscalers. This research includes current-year market sizing and a five-year forecast by multiple edge compute market segments and geographies. TBR’s Telecom Edge Compute Market Landscape, also global in scope, deep dives into the edge compute-related initiatives of stakeholders in the telecom market, including telecom operators, cable operators, hyperscalers and vendors that supply the telecom market.