PCN vendors poised for rapid growth as 5G ecosystem is built out

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5G represented a small portion of the overall PCN market in 2020, but is poised to rapidly scale in coming years

According to TBR’s estimates, 5G represented 8%, on average, of benchmarked companies’ private cellular network (PCN) revenue in 2020, with the rest being LTE. LTE remains the de facto technology for PCN, thanks to its maturity and vibrant ecosystem, which has been developed over the past decade. 5G for private networks, on the other hand, remains in its infancy, with key 3GPP Release 16 standards recently ratified, 5G spectrum gradually coming to market, compatible infrastructure commercialized and endpoint devices becoming available in the past year.

The endpoint device aspect of the nascent 5G ecosystem will begin to proliferate over the next couple of years, at which point 5G PCN implementations can be scaled commercially. In the meantime, most of the 5G engagements that occurred in 2020, with the notable exception of those in China, were focused on experiments and pilots, pending the commercial availability of compatible endpoint devices.

China has a significant head start with private 5G, with Huawei and ZTE equipping leading entities in the country, particularly the government, with the technology as part of national digitalization-related initiatives. Other developed APAC countries, namely South Korea, Japan, Taiwan and Singapore, are following closely behind China in 5G readiness.

Vendors’ PCN sales funnels are burgeoning

Vendors are experiencing significant and broad interest from enterprises and governments for how to leverage PCN for digital transformation-related initiatives. 5G is of particular interest, portending a strong growth profile through this decade.

Though 5G remains primarily in the exploratory phase, many of these engagements are likely to convert into commercial contracts over the next couple of years. In the interim, the bulk of PCN deal wins will be for private LTE networks.

TBR’s Private Cellular Networks Vendor Benchmark tracks the revenue key vendors obtain from the sale of LTE- and 5G-related infrastructure (includes RAN, core, transport and services provided for that infrastructure) to governments and enterprises, including large, medium and small non-CSP (telco, cableco, webscale) businesses. The benchmark ranks key private cellular networks vendors by overall revenue and by segment. Global market share and regional data and analysis are also provided.

At its customer conference, Informatica unifies cloud-agnostic data management

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TBR perspective

According to TBR’s December 2020 Digital Transformation: Voice of the Customer Research, 61% of respondents indicate cloud computing is the leading technology they purchase as part of their central digital transformation (DT) initiatives. Over the course of the next five years, enterprises will continue to lead with cloud-first strategies — a trend that will be accelerated due to lessons learned from the COVID-19 pandemic. As customers move outside the data center, control over IT assets rapidly changes, as by no longer owning their hardware, customers can focus on data to drive innovation. Since cloud migration is the first step in unlocking data insights, Informatica is positioning its new solutions, most notably Intelligent Data Management Cloud (IDMC), as the foundation for true digital transformation. While maintaining strong ties to technical specialists, such as data scientists and engineers, Informatica’s ability to enable DT with a cloud-first approach positions the company to expand its applicability to nontechnical influencers and evolve its portfolio for a data-driven economy, which will be underpinned by cloud infrastructure.

By unifying data management with the cloud, IDMC will serve as the connection point for Informatica’s entire portfolio

Historically, Informatica’s Intelligent Data Platform (IDP) has underpinned much of the company’s core portfolio and provided customers a landing spot for their data management, integration, quality and security services. However, as cloud continues to dominate the technology landscape, Informatica’s strategy and market messaging are evolving to address customers’ challenges around storing data in the cloud. While leveraging the same underlying technology as IDP, IDMC takes data integration and management to the next level, offering customers over 260 services natively built into the platform, which can be deployed in the public or private cloud and consumed in a pay-as-you-go manner. Meanwhile, at the core of the platform remains Informatica’s embedded AI engine, CLAIRE, which acts as a system of record for metadata and helps customers derive insights across assets and product modules. The launch of IDMC reaffirms Informatica’s commitment to the cloud and modern applications, as IDMC serves as a complete replacement of IDP, which largely supported traditional software. Nonetheless, with a more scalable delivery model, the release mirrors the modular approach Informatica has always applied to data, offering customers choice and flexibility when it comes to the services that can be deployed on top of the platform, and their underlying data sources. For example, during the event’s opening remarks, Informatica Chief Product Officer Jitesh Ghai discussed how the company’s services are agnostic across infrastructures and data processing methods. An example of this impartiality is highlighted in services like Database Ingestion, which allows customers to take data residing in an Oracle database and move it into storage with an Azure data lake, for example. Informatica’s Data Integration service on IDMC is another example of how customers can leverage Informatica to integrate data across leading public clouds as an alternative to using three competing services from each cloud provider.

Supported by the cloud, Informatica’s platform services and capabilities meet customers’ specific business needs

Customer experience (CX) also remains the cornerstone of digital transformation efforts, and customers are adopting CX frameworks backed by emerging technologies, including AI and machine learning (ML) to complement their back-office operations. CX remains integral to Informatica’s strategy, evidenced by the January 2021 launch of Informatica Customer 360 as a SaaS solution. Customer & Business 360 is one of the core capabilities supported by IDMC in providing customers with a single-pane view of data across key business functions. Other capabilities of the platform that are in line with the main benefits of cloud computing include data discovery, ingestion, preparation, cleansing, records, delivery and governance. Throughout the event, one of the customer highlights was from Peloton (Nasdaq: PTON), a born-in-the-cloud company that has adopted IDMC to support its daily volume of roughly 10 million to 15 million records. Further, the New York State Department of Health adopted Informatica’s platform and leveraged the benefits of cloud-native analytics to support decisions and drive efficiencies during the height of the COVID-19 pandemic. Emphasizing data-driven business initiatives is a key gap IDMC aims to fill, as the platform not only supports customers’ IT initiatives, such as data engineering and warehousing, but also targets core business functions, such as e-commerce and finance. TBR suspects these core capabilities delivered through IDMC will provide Informatica with a strong competitive position, as the company unifies IT teams and line-of-business leaders through a cohesive data platform. 

What would have been a large gathering in the heart of Las Vegas became Informatica’s biggest virtual event, which hosted over 10,000 registrants and featured talks from customers, partners and industry experts on their experiences with data and the critical role it is playing in the digital economy. Informatica World 2021’s theme of going from “Binary to Extraordinary” speaks to Informatica’s main announcement — the launch of its Intelligent Data Management Cloud — as the company looks to support a variety of data-centric use cases, which are positioned for success when built in the cloud. While Informatica’s neutral standing — as the “the Switzerland of data,” as CEO Amit Walia puts it — remains unchanged, a cloud-first approach positions the company to meet a unique set of challenges enterprises face in the cloud, regardless of underlying infrastructure or deployment method.

Maritime ports serve as a natural test bed for blockchain ecosystems

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Testing smart city concepts, technologies and operations in a semi-confined setting

As detailed in TBR’s most recent Digital Transformation: Blockchain Market Landscape, maritime ports present an intriguing test bed for blockchain technology, given three intertwined elements essential to successful blockchain adoption. First, ports rest at the center of a diverse ecosystem, with players engaging directly on varying cadences, with different technologies and IT infrastructures and collaborative as well as competing needs — in short, a place messy and competitive enough to warrant a comprehensive solution to restrain complexity and digitize trust. (And if you do not believe ports can be messy, corrupt places, watch the second season of HBO’s “The Wire.”) Second, governments typically have a strong interest in port operations, either running them as quasi-governmental entities or regulating and overseeing them to advance national security and local and/or regional economic interests. For blockchain, as has been made clear in this report, government involvement can accelerate adoption. And third, with their diverse landscape of actors — shipping companies, trucking companies, freight forwarders, inspectors, stevedores, even local fire and rescue units — maritime ports are self-contained mini-universes, like small cities, a characteristic that pulls together the diverse ecosystem and government interest into a useful whole, for the purposes of blockchain.

As TBR noted previously, “The Port of Oulu has taken an approach shared by most municipalities looking to become a smart city — start small, but with a large, long, deep vision, and build incrementally … a port like Oulu’s, which is both small enough to be manageable through a disruptive digital transformation and large enough to be replicative of a larger port’s ecosystem and challenges, could be an ideal place for connectivity and emerging technology vendors to experiment and prove out the use case for bringing one of the most fundamental infrastructure environments fully into the digital age.”

Some blockchain consultancies have been experimenting with these ideas, as we noted here: “For EY, a firmwide approach to addressing every element of trade — including supply chain, tax and regulatory compliance, blockchain solutions, in-port IoT, connectivity to inland regions, and real-time shipping data — comes together under its NextWave Global Trade Initiative, a white space for EY to build cross-border, cross-service-line and cross-industry solutions.”

As is clear from both the Oulu and EY examples, blockchain can only be part of a port’s digital transformation, not the entirety of it. In line with the concept that a “rising tide lifts all ships,” connectivity, IoT and analytics round out the picture (cloud and cybersecurity should already be there), making blockchain an essential component, if not the most easily adopted or most transformational (arguably IoT sensors on every element of a port — with supporting analytics and insights — would more rapidly lead to streamlined operations, even if blockchain-enabled tracking and trade-based financing would lead to longer-term value).

Even recognizing the limitations, for blockchain services vendors, maritime ports may provide an essential opportunity to test solutions in diverse, yet manageable, ecosystems while partnering with governments or quasi-governmental institutions that will be critical to wider blockchain adoption. If the use case appears limited, consider the more than 50 ports that exist between Duluth, Minn., and the Atlantic Ocean. Blockchain-enabling that supply chain archipelago could be a massive use case and spark wider adoption across the enterprises interacting with every one of those ports.

For further details about blockchain in the context of digital transformation, IT services and consulting, see TBR’s most recent Digital Transformation: Blockchain Market Landscape, which includes use cases, vendor insights, and client pain points and needs.

Infosys and manufacturing: Technology prowess, low-cost presence and innovative offerings

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Deal wins and investments in manufacturing suggest Infosys is anticipating a rebound in the vertical

With COVID-19 disrupting global supply chains and forcing participants to seek alternative channels to either reduce transaction costs by leveraging blockchain or transform IT infrastructure by migrating applications to cloud to offset technical debt and diminish financials pressure, some vendors have had the opportunity to gain a prime position. This includes Infosys, which has technology acumen and a low-cost presence and continues to go to market by industry vertical. During the first quarter of 2021, Infosys capitalized on these market dynamics, most prominently within the manufacturing vertical.

Infosys’ manufacturing sales declined significantly throughout 2020, with sales as a percentage of total revenue sliding 50 basis points to 9.5%, on average, in 2020 compared to 2019. However, in 1Q21 the company experienced strong momentum, illustrated by several deal wins, including with Siemens Gamesa Renewable Energy for SAP Business Suite 4 HANA (S/4HANA) implementation and with Johnson Controls to modernize the company’s smart global warranty solutions using the S/4HANA-ready SAP Fiori platform. Additionally, Infosys tested new ways to interact with clients to maintain trust and stickiness. The company also deployed Infosys Meridian, a collaboration platform that enables virtual events, including a four-day dealer engagement forum for Toyota Material Handling North America, which has been a client since 2018.

As COVID-19 continues to impede high-touch consulting opportunities and as auto shows — the main channel for the automotive community to interact — have essentially ground to a halt, testing innovative ways to interact with clients will benefit Infosys, provided the company captures feedback and applies lessons learned. Further, Infosys added $1 million to its 2016 investment of $1.6 million in the drone startup ideaForge as Infosys tries to diversify its manufacturing addressable market. Lastly, Infosys partnered with FourKites, gaining access to real-time tracking and visibility solutions and bolstering its supply chain capabilities, a necessary move as the company seeks to generate ongoing revenue growth in the manufacturing vertical.

Publishing in June, TBR’s latest IT Services Vendor Benchmark will include special detailed analysis of the changing ways IT services vendors are addressing new demands and digital transformations within the manufacturing sector.

Telecom infrastructure services: 2Q21 insights from TBR’s Telecom team

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5G and geopolitics take center stage in the development of the TIS market

Unprecedented government support will boost the ICT sector over at least the next five years, with the telecom industry poised to be one of the key beneficiaries of the stimulus. Western-aligned governments will also increasingly mandate and provide support for CSPs to swap out gear from Huawei and ZTE, and these projects could take several years to complete.

Join Telecom Senior Analyst Michael Soper for a webinar examining TBR’s Telecom Infrastructure Services (TIS) Global Market Forecast for 2020-2025, including the expected impact of these events on the market.

Don’t miss:

  • Key growth drivers and growth detractors in the TIS market from 2021-2025
  • How government spend and geopolitics will influence the TIS market
  • Which vendors are well-positioned to capitalize on trends in the TIS market

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

Who is going to want Boomi?

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In TBR’s newest blog series, What Do You Think?, we’re sharing questions our subject-matter experts have been asking each other lately, as well as posing the question to our readers. If you’d like to discuss this edition’s topic further, contact Geoff Woollacott at [email protected].

What Happened

Boomi will be sold to Francisco Partners and TPG for $4 billion in yet another in a series of asset sales, spinoffs and engineering measures Dell EMC has been making to cover the debt load from Dell’s acquisition of EMC in 2016. But this is not about Dell and the efficacy of its strategic actions. This is about Boomi. Who is going to want Boomi?

It is a broad question in terms of customers and potential buyers. Ultimately, the acquiring equity firms that shelled out $4 billion for the assets will want to “optimize” Boomi to resell the operation in whole or in part for more than $4 billion after having added their “value.” Rarely are these equity firms eager to sink money into long-overdue R&D to align an aging portfolio to the current market situation. If they were home flippers, they would want to put a fresh coat of paint on the clapboards for a five-year fix, not strip the bottom four rows of siding, replace the sill damage, reside it and paint it for a 15-year fix.

Customer Situation

Boomi lags with API tool sets in an era often called the API economy. Even those with sound API management capabilities such as MuleSoft are now being called into question for not having API automation for push-button development capabilities. There are a lot of emerging companies, such as Entefy and Kong, getting serious evaluation in early adopter enterprises as the next leap forward in the iPaaS tool set space while UiPath receives mention in TBR’s discussions with customers as having the capabilities to swing into this space as well.

Boomi’s sweet spot seems to be the late majority large and midsize enterprises, with most of these customer applications residing on premises and many of them bespoke or highly customized. These data transport vessels are like the African Queen steamboat chugging along in the data river.  These data center leaders will not find out-of-the-box API integrations into their bespoke applications from the leading SaaS apps they may be adopting at the start of their slow roll to native-cloud applications and data center consolidations that are a threat to Boomi as well as the traditional hardware manufacturers such as Dell, Hewlett Packard Enterprise and Lenovo.

Those are the customers that will likely want Boomi, but the number of potential buyers will rapidly dwindle as the market trends that threaten that sweet spot support the continued acceleration of cloud migration, sparked by the pandemic. Specifically, Salesforce’s 2018 acquisition of MuleSoft provided the SaaS front-office leader with an integration layer to tie together its proprietary solutions, in addition to integrations with AppExchange, its app partner ecosystem. While MuleSoft was born in legacy IT, its combination with Salesforce provides MuleSoft with substantial capital to innovate and evolve its offerings for better alignment with Salesforce by enhancing its tool sets for cloud application integration. Boomi’s challenge is to take these core strengths for business-to-business/EDI management and easy self-service reporting and integrations and build out the API and AI/machine learning capabilities sooner rather than later.

Buyer situation

In terms of who may want Boomi in their portfolio, the current owners likely eye Salesforce’s $6.5 billion acquisition of MuleSoft as the kind of pinata they hope to crack open with this $4 billion swing at a payoff. To TBR, that is likely a swing and a miss due to the aging portfolio issues referenced. Yes, SaaS players will increasingly bake in iPaaS tool sets, but emerging SaaS players will be less inclined to worry about on-premises and bespoke integrations where Boomi excels as they will be to have out-of-the-box connectors to market-share-leading SaaS apps in other segments.

This leaves buyers looking to consolidate aging assets to profitably manage opportunity in declining markets. A sound firm such as Informatica can follow the acquisition strategy deployed to great success by Computer Associates (CA) in the late ’80s and the ’90s as minicomputer consolidation started. In essence, CA became a software distributor of disparate, stand-alone utilities and tools for the various proprietary install bases that started their slow decline into irrelevance as Intel/Microsoft ate the data center. The CA acquisitions in that era were often asset sales, however. Ultimately, that consolidation caught up to both CA and BMC. While they are in operation, they likely lack the cash flow to justify adding Boomi to their boneyard — unless, of course, the equity partners decide to cut their losses if the financial pinata fails to crack open.

So, what do you think? Who is going to want Boomi?

Quick Quantum Quips: Public investment continues to drive quantum computing development

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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.

For more details, reach out to Geoff Woollacott or Jacob Fong to set up a time to chat.

April 2021 Developments:

Activities this month illustrate the burgeoning signs of early quantum commercialization more so than the research discoveries advancing the computational power of quantum architectures themselves would suggest. Microsoft landed a new enterprise partnership; QC Ware established a public military partnership; the University of Maryland furthered its goal of becoming a quantum hub by creating a quantum-focused incubator; and CQC added talent to its rich scientific team. In addition, we highlight infinityQ Technology, which introduced its first quantum computer using what it describes as “quantum analog computing.”

Microsoft: In late April Microsoft announced an early quantum partnership with Ally Financial, the parent company of Ally Bank, to explore quantum algorithm use cases. Through Azure Quantum, Ally will gain access to quantum computing expertise and the ability to upskill its team on specific quantum software development through Microsoft’s quantum development kit.

Near-term enterprise quantum activity will likely continue to look very similar to this type of partnership. While full-scale enterprise quantum applications are still several years away, enterprises will want to begin learning about the fundamental technology, current and anticipated capabilities, and high-level application and integration scenarios specific to their industries and businesses if they intend on capitalizing on early adoption advantages. As we see with the Microsoft-Ally partnership, enterprises are beginning to take the important steps to most effectively utilize the capabilities quantum computing will bring by developing these relationships with quantum vendors and cultivating talent and subject-matter expertise.

Additionally, TBR believes the leading cloud platform and infrastructure providers in enterprise, such as Amazon Web Services (AWS), Microsoft Azure, Google Cloud Platform (GCP) and IBM Cloud, will play a large role in quantum computing distribution, as buying and deploying on-premises quantum computers will not always be necessary or practical in use cases that do not have strict low-latency requirements.

QC Ware: The Air Force Research Laboratory (AFRL), the primary research and development branch of the Air Force, formed a partnership with QC Ware to use its quantum machine learning algorithm, q-means, to infer unmanned aircraft mission objectives based on the observed flight paths. A core objective of the AFRL has been to facilitate the advancement of key areas of quantum algorithm development such as optimization, machine learning and quantum simulation.

University of Maryland: The University of Maryland is creating a quantum incubator to help nurture early-stage startups that spawn from the university, such as academic spinoffs and companies started by entrepreneurial graduates. Initially budgeted at $25 million, the incubator will presumably provide funding and operational resources such as access to offices and labs, high-speed internet, and networking opportunities for executive advisers, talent and potential customers.

Cambridge Quantum Computing (CQC): The U.K.-based quantum startup bolstered its scientific team by naming Professor Stephen Clark as head of artificial intelligence. He transitioned from DeepMind, an AI subsidiary of Alphabet Inc., where he was a senior staff research scientist. DeepMind notably created some of the strongest AI engines with its games Chess and Go, which are well suited for AI experimentation due to the astronomically large number of permutations achievable in a bounded environment. Clark specializes in natural language processing and led a team at DeepMind that was working on grounded language learning in virtual environments. Prior to his work in the private sector, Clark was a faculty member at the University of Cambridge and the University of Oxford.  

infinityQ Technology, Inc.: This Montreal-based, woman-founded and -led quantum startup introduced its first-generation quantum computer, which uses a unique approach the company calls “quantum-analog computing.” The approach falls outside the categories found in other system architectures that use elements of superconductivity or ion-trap technology to reap the benefits of quantum mechanics in computing.

InfinityQ describes quantum-analog computing as using “artificial atoms to exploit the superposition effect and achieve quantum computing capabilities without the error correction and cryogenics tax.” The company reported that the quantum-analog computing approach offers certain advantages, including extreme energy efficiency, a compact form factor and the ability to operate at room temperature — all characteristics that are in direct contrast to the shortcomings of the superconductive quantum architecture. The company claims it has demonstrated the ability to solve the famous traveling salesman problem for 128 cities, compared to the 22 cities that other, presumably quantum, machines have been able to solve.

If you would like more detailed information about the quantum computing market, please inquire about TBR’s Quantum Computing Market Landscape, a semiannual deep dive into the quantum computing market. Our latest edition, published in December, focuses on the software layer of quantum systems.

IT services market: 2Q21 insights from TBR’s Professional Services team

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IT services market rebounding in 2021 after pandemic-caused trough

Revenue growth for TBR’s benchmarked IT services vendors was flat during 2020 as growth challenges stemming from the COVID-19 pandemic negatively affected vendors’ revenue generation. Investments in cloud, cyber, AI and industry specialization will accelerate revenue growth for benchmarked vendors during 2021. This pent-up demand is also fueling a rebound in additions of resources with skills in cloud, cybersecurity, AI and product engineering services, following year-to-year deceleration in 2H20. Vendors, though, must account for digital exhaustion, especially as remote working will likely continue for the time being. 

In this upcoming webinar, Patrick Heffernan, Boz Hristov, Elitsa Bakalova and Kelly Lesiczka will reveal insights and latest trends of the IT services market and global service delivery. The group will also discuss vendors’ roads to recovery post-pandemic based on findings in TBR’s latest IT Services Vendor Benchmark and Spring 2021 Global Delivery Benchmark.  

Don’t miss:

  • TBR’s overview of performance and key trends during 2020 for the 30 vendors in our IT Services Vendor Benchmark
  • How pursuing technology-enabled transformational opportunities will enable vendors to ramp up revenue growth during 2021
  • How vendors have managed resources amid the global pandemic, and what is next for their headcount strategies in 2021
  • State of adoption of automation in service delivery and the impact on vendors’ P&L

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

Spinout will soothe some ailments for Dell and VMware

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After over a year of discussions about the future of the Dell-VMware relationship, on April 14, 2021, it was confirmed that Dell (NYSE: DELL) will spin off its 81% majority stake in VMware (NYSE: VMW) to create two independent companies, effective CY4Q21. Evidenced by the market’s immediate reaction, the spinoff will be an overall positive move for both companies, giving Dell the chance to reorganize as a leaner, more targeted organization while offering VMware more go-to-market flexibility. Of course, as independent companies, Dell and VMware will face challenges, but increasingly differing portfolios, revenue models and market views will position both companies for longer-term success as separate entities. 

While mostly beneficial to VMware, the spinoff will offer stand-alone Dell some pockets of opportunity

While it is true that VMware has been Dell’s secret sauce for years, the announced spinoff will not necessarily cost Dell a long-term competitive advantage. Given the investments VMware has made in the last five years to accelerate its cloud strategy and position itself as more than a virtualization software company, it makes sense for VMware to operate separately. This is true even from a branding perspective, given Dell EMC’s play in many legacy markets.

However, there is also a potential upside for Dell, as the separation could enable the company to be less reliant on VMware and move beyond the big bets it placed on software-defined hardware solutions, which have generally performed below market expectations over the past few years. TBR suspects this strategy will allow Dell to become more focused on capturing the roughly 80% of enterprises that continue to operate on premises by providing them with access to cloud services and flexible pricing within their own data centers. There are already signs of this strategy developing.

While this release could be viewed as Dell giving the market a sense of what its post-spinoff portfolio could look like, at issue for the company is that it will now be more directly aligned with competitors such as Hewlett Packard Enterprise (HPE) (NYSE: HPE), Cisco (Nasdaq: CSCO) and Lenovo. Given HPE’s head start in the market through its GreenLake brand, Dell will be forced to explore new avenues for differentiation with Project APEX, and this could largely come down to Dell’s still unique five-year go-to-market agreement with VMware and any potential influence from Dell Technologies CEO and Chairman Michael Dell, who will remain VMware’s chairman of the board post-spinoff.

Apart from the near-term impacts and challenges in the competitive landscape, the spinoff is best viewed in opportunities. Following the sale of RSA and current speculation regarding Secureworks (Nasdaq: SCWX), Dell has recently focused on shedding underperforming brands to become a leaner organization. TBR suspects the spinoff of VMware, along with potential sale of integration PaaS (iPaaS) subsidiary Dell Boomi, will present an opportunity for Dell to streamline its operating structure and support the large investment it made in legacy EMC.

Additionally, TBR believes Dell has in many ways backed the innovative concepts and ideas that have emerged from VMware, namely intrinsic security, but have not been fully executed. As such, this spinoff could help Dell become more selective in which markets it wants to innovate and truly scale in, which may include enabling enterprise hybrid cloud, edge computing and data management. TBR expects Dell will turn to its partner network as an immediate avenue for growth, yet as the company more aggressively pursues new growth areas, tuck-in acquisitions that complement the EMC software cannot be ruled out and, down the road, could be essential to competing on par with peers.

Corporate structure does impact performance

In theory, the ownership structure and model of firms do not impact their business model, but in practice they sure do. The evolving case of Dell and VMware is one of the most — if not the most — complicated in the history of the IT market. VMware has grown accustomed to operating under a complex and dependent ownership structure; the firm has not been fully independent since EMC acquired it in 2004 for $635 million.

Since that time, VMware has been an embedded gem within both EMC and Dell, driving growth and profitability well above the traditional hardware segments that made up the majority of both firms. VMware’s consistent performance over the past 15 years is driving this latest change in ownership structure, with VMware set to be spun out of Dell and have its most independent ownership structure since 2004. For VMware, the change is all positive, giving the firm a single-minded clarity to operate in its own best interest, without the weight of supporting the corporate performance of either EMC or, more recently, Dell

EY’s Strategy and Transactions practice: Long-term value in the post-pandemic world

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Investing more than $1B in technology, people and ecosystems  

According to EY Global Vice Chair for Strategy and Transactions Andrea Guerzoni, the firm is investing $1.5 billion in technology and people, with four specific goals. First, EY aims to improve the breadth and depth of its skills and expertise and accelerate innovation through a comprehensive learning program and acquisitions. Second, the firm seeks to prioritize reusable assets and technology tool kits across Tax, Assurance, Consulting, and its Strategy and Transactions practice. Guerzoni described this effort as focusing on “new client-facing technology” designed to help EY “get closer to and bring more value to clients.” Third, the firm works to establish strategic alliances, including a robust startup ecosystem and enhanced engagement with academia. Finally, EY spotlights the 25-plus wavespaces globally that provide an “immersive digital intense experience,” where clients can “rethink business, connect dots and look at reality differently.”

In TBR’s view, encompassing technology assets and ecosystems of people and partners as part of the $1.5 billion investment reflects the firm’s broader evolution to a more expansive player in the digital transformation space. EY also boasts a million-person alumni network that it can tap for ideas, introductions and opportunities, boosting its ability to influence the market.

Differentiating in an urgent, critical and complex space

At different points during the virtual Strategy and Transactions: Enabling CEOs to Navigate the NextWave event, members of the EY team presented their view on the firm’s differentiation in a professional services strategy consulting market, including new entrants such as investment banks, which stood out to TBR as an indication that EY views placing the transactions advisory component inside its overall consulting practice as something uniquely differentiated in the market.

Additionally, EY leaders specifically mentioned clients choosing the firm for holistic strategies with enterprisewide impact focused on long-term value and grounded in reality, sector and functional expertise, and the ability to both advise and enable change. Speaking directly about why clients seek out EY-Parthenon, EMEIA EY-Parthenon Leader Falco Weidemeyer said the firm brought experience and scale and delivered results. He cited a number of characteristics, such as outside-in sector experience and a focus on delivery, with the most significant and differentiating, in TBR’s view, being EY’s emphasis on transformational leadership “in urgent, critical, and complex situations to help [EY’s] clients create, preserve and recover value.” Combining strategy, leadership and expertise around transactions – and recognizing that long-term value will depend on optimal resource allocation – strikes TBR as an approach not frequently taken or delivered by EY’s peers.

Strategy and Transactions: Enabling CEOs to Navigate the NextWave — EY’s three-hour analyst event featured senior leaders from the firm’s Strategy and Transactions practice, including Global Vice Chair Andrea Guerzoni and Deputy Vice Chair for Strategy and Transactions Nadine Mirchandani. This assessment draws from presentations made during the event, as well as Q&A and breakout sessions between EY leaders and TBR analysts that took place immediately after the event.