The Evolution of Acquisitions, GenAI and Digital Transformation in IT Services and Consulting in 2023

Each quarter TBR’s Professional Services team reviews the activities, investments, financial performances and announcements of a wide range of vendors, including management consultancies like McKinsey & Co., market behemoths like Accenture and technology-centric services companies like Dell Technologies. The team then extracts trends affecting vendors, their technology partners and their clients across the broad ecosystem. In this blog, TBR’s subject-matter experts share their predictions for 2H23 based on trends in acquisitions, organization and talent, sustainability, and generative AI (GenAI) seen in 1H23. For quarterly performance analysis of individual vendors, start your Insight Center™ free trial today!

Acquisition Activity Is Low and Trending Down in 2023 and into 2024

Vendors acquire for skills, scale and clients — this has not changed. And yet, a more expansive and favorable ecosystem diminishes the need for massive scale as does the realization that no one can compete with the largest vendors on the strength of scale alone. (Accenture [NYSE: ACN] is closing in on 750,000 employees).


Similarly, trained and certified resources and even intellectual property can be more easily leveraged through partnering smartly. And with clients spending in smaller increments and with elongated budget cycles, maybe acquiring for new logos has lost some of its urgency. Accenture — normally an acquisition-a-day company — has been slowing down in 2023. Tech Mahindra and CGI (NYSE: GIB) also seemingly dialed back their acquisitive pace.


In the U.S. federal IT services sector, an area TBR covers in detail, analysts have seen a significant slowdown in acquisition activities, with no major moves since 2019 and many of the covered vendors redirecting capital to internal investments to optimize or to pay down debt.

  • That said, within the IT services and digital transformations space, migration to S/4HANA remains a substantial opportunity, and many vendors still lack sufficient scale to meet demand. TBR anticipates that a push to pick up SAP (NYSE: SAP) talent could drive a 2H23 wave of SAP-specific acquisitions.
  • Still, why acquire IP and technical skills, when you can just partner more smartly, leaning on the talent and client access in your ecosystem? As you partner better, you should be able to continue growing while acquiring less.


As with nearly every trend, TBR sees an outlier: Bain & Co. It is the smallest of the MBB (McKinsey, Bain and Boston Consulting Group [BCG]) consultancies. After 40 years of entirely organic growth, Bain has made at least three acquisitions in 2023 and 12 since the start of 2018.


As TBR noted in the Spring 2023 Management Consulting Profile: Bain, “Acquiring and embracing new technologies is no longer a hurdle to overcome but rather a springboard to broadening Bain’s capabilities and expertise so the firm can better serve its long-standing clients. Bain’s current acquisitions strategy is steady and should prove incrementally advantageous, rather than being disruptive to the firm’s operations or brand.”

‘End to end’ Is Ending, and GenAI Might Kill It

At an analyst event this spring, TBR heard leaders from a VAR/IT services vendor talk about their “superpower”: the capabilities and offerings that they believed they delivered at a level far above their peers.


While these leaders could perform a wide range of IT services, they focused on strengthening their superpower to include ensuring clients and ecosystem partners knew what made them special. In contrast, many of the vendors TBR covers describe themselves as “end to end.” While that once may have brought clients some reassurance that the vendor could handle anything and everything, minimizing the need for many IT and services suppliers (cue the “one throat to choke” and “too many cooks” cliches), TBR’s research shows that buyers value specialization.


IT services vendors and consultancies that credibly say, “We’re exceptional at this particular thing,” stand a better chance of standing out in a crowded field of vendors shouting about being end-to-end. Looking at the vendors themselves, having too broad of a portfolio becomes too broad to manage.


Some vendors struggle to operate efficiently, particularly when multiple large and distinct sales groups within the same organization sell differently to different clients or, worse, sell differently to the same client.

  • Accenture Operations is separate from Accenture Technology, which is separate from Accenture Strategy, so that even within an organization it is hard to pass the baton. Of course, Accenture continues to grow in ways that many peers strive to emulate, but decades worth of smart management and corporate culture cannot be replicated easily, especially when organizations have been cobbled together from disparate parts.
  • Into this mix, throw GenAI, which may do to the people business (IT services fundamentally remains a people business) what an asset-light approach to managing and delivering IT did to the asset-heavy vendors. Does GenAI make people — the professionals employed by these IT services vendors — into heavy assets, eventually outpaced by asset-light organizations that can function more efficiently? With layoffs across commoditized technology, the talent pool for enterprises and specialized IT services vendors has expanded, further diminishing the need for large-scale managed services providers.


Of course, there is always an opening for better software tools around productivity, and TBR has seen a ramp-up of investments in training, particularly across organizations. People Advisory Services (see EY) and certifications across cloud platforms (see TBR’s ) should keep IT services and consulting talent ahead of any existential threat from GenAI, but TBR expects, at a minimum, GenAI will accelerate specialization and eliminate end to end. Good riddance.

Near-term, Expect GenAI Opportunities Around Consulting and Limited Case Uses Around Productivity

When looking at the IT services and professional services space, TBR considers two GenAI tracks: What opportunities will vendors seize for generating new revenues, and what changes will GenAI force on how vendors operate?


Currently, the first track is pretty straightforward: Fear, uncertainty and doubt around GenAI — fueled by massive hype — create consulting opportunities, particularly for vendors with established governance, risk and compliance offerings. Every vendor has core artificial intelligence, data orchestration, analytics and cloud capabilities, so no vendor can credibly separate itself from the pack with those tools alone.


For TBR, the Big Four firms have the most near-term potential, followed by IBM Consulting (NYSE: IBM), which can lean into its technology legacy (think: Watson).

  • On the second track, GenAI could be highly disruptive, especially around managed services, to include changes to the staffing pyramid, as less experienced employees either shift to higher-value tasks or leave. Of course, if you get rid of the bottom of the pyramid, how will you staff and grow at the top? Does GenAI change the number of new college graduates recruited every year into the always-growing headcounts of the largest IT services vendors? If demand for IT services accelerates, fueled in part by GenAI, how will vendors react in terms of hiring and staffing?
  • In addition to internal challenges, IT services vendors may begin facing competitive threats from “born-on-AI” companies that can disrupt enterprises and their business processes across the entire technology stack. Will the smartest IT services vendors and consultancies invest in incubating born-on-AI practices to cannibalize themselves before a competitor does?


As with all the discussion around GenAI, TBR has more questions than answers. One calming note with respect to GenAI and the threat to IT services professionals across the entire staffing pyramid: For years, Tata Consultancy Services has had software that writes code, but the vendor still hires tens of thousands of people and is the second largest vendor, in terms of headcount, in TBR’s IT Services Vendor Benchmark. If GenAI is going to massively displace IT services talent, it will not happen in 2023. Or 2024. Maybe.

Two Mini Trends: From Transformation to Optimization (aka, Digital Gets Boring), and Sustainability Slows but Is Not Going Away

Digital transformation was fun: big ideas, disruption, every company a technology company, agile, innovation, design thinking. But now buyers have more defined needs and therefore no longer need unlimited spurt-like-crazy digital transformations. Buyers want to iterate and optimize what they have, not get excited about the art of the possible or the next big disruption (aside from GenAI, of course, for the moment).


With more cautious IT services and consulting buyers, the vendors now have greater openings for FinOps, which happens to open the door wider for value-added resellers seeking to expand into broader IT services. In this changed market, vendors also need to be more strategic around bringing new technology to clients that are a little wary of being sold new toys (or sold more cloud, which they are already getting tired of paying for).


If new technologies need to be sold cautiously, vendors need to manage their skill sets and not become over-stuffed with data engineers, solution architects and design thinkers whom they cannot deploy. The COVID-19 pandemic supposedly compressed three years of digital transformation into three months. If that is true, businesses now want to just run their business and leverage their IT infrastructure and not transform again so soon.


On sustainability, TBR’s Digital Transformation: Voice of the Customer Research and the annual Decarbonization Market Landscape show that enterprises have already budgeted for sustainability in 2023 and will still spend on consulting and IT services, although likely at a reduced pace. At the same time, IT services vendors and consultancies that built sustainability practices will continue to run them, although likely with less funding and enthusiasm, at least in the near term.


What might emerge over the end of 2023 and into 2024 is significant disruption from smaller consultancies providing specialized sustainability engagements and delivering credible results at rates cheaper than the Big Four and other consulting-heavy IT services vendors. Sustainability may, for a time, devolve into pockets of niche offerings, profitable only to those consultancies focused entirely on specialized services.

IBM Consulting Works with Ecosystem Partners to Drive Transformation Through Hybrid Cloud and AI

IBM Consulting welcomed the analyst community to its Innovation Studio in London’s South Bank district to provide an update on its global strategy and business expansion in the Europe, Middle East and Africa (EMEA) region. Inviting clients and ecosystem partners to the event, such as the U.K.’s Ministry of Defence and Microsoft, to share experiences and success stories increased IBM Consulting’s credibility.

IBM Consulting Is on a Profitable Growth Trajectory, Utilizing Data and AI to Address Business Challenges and Building Hybrid and Multicloud Solutions

Neil McCormack, IBM Consulting managing partner, EMEA, opened the event by saying that the company, together with its strategic partners, helps clients transform at the intersection of business and technology. IBM Consulting utilizes its professional services and hybrid cloud and AI solutions, along with partner ecosystems, to deliver large-scale digital transformation projects that yield quick ROI and target cost takeout and productivity improvement. IBM Consulting has been on a positive trajectory, with revenue growing year-to-year since 1Q21 and reported operating margin improving year-to-year over the past three consecutive quarters. Moving security services from IBM Software into IBM Consulting reinforces IBM Consulting’s organizational structure and portfolio, enabling it to deliver services while securing clients’ hybrid cloud and AI models.


The buyer decision cycle is lengthening, especially for consulting services, which will challenge IBM Consulting’s revenue growth in 2023, despite the expansion of run-the-business managed services opportunities. However, TBR expects revenue growth year-to-year will remain positive — in the midsingle digits in U.S. dollars — driven by IBM Consulting’s ability to utilize data and AI to address complex business challenges and build hybrid and multicloud solutions and platforms. TBR expects IBM Consulting’s revenue growth will be driven by continued activities with clients around digital transformation, application modernization, workflow optimization and automation, and the creation of flexible and secure hybrid cloud environments.

The IT Services Industry Is Changing, Providing IBM Consulting With More Opportunities

According to McCormack, the IT services industry has been changing over the past 12 months and IBM Consulting is seeing a reemergence of large programs tied to the modernization of SAP (NYSE: SAP) solutions. IBM Consulting has a strong track record of working with SAP, including implementing more than 300 SAP S/4HANA projects in the past five years and working with more than 10,000 SAP customers over 50 years to deliver and run their SAP systems.
McCormack also shared that demand for hyperscaler skills is strong, which will create opportunities for IBM Consulting as the company has approximately 83,000 strategic partnership certifications across Amazon Web Services (AWS) (Nasdaq: AMZN), Microsoft, Google Cloud (Nasdaq: GOOGL), Adobe (Nasdaq: ADBE), Oracle (NYSE: ORCL), Salesforce (NYSE: CRM), SAP and Workday (Nasdaq: WDAY) (TBR includes IBM in the Digital Transformation: Cloud Ecosystems Market Landscape report). While digital transformation continues to drive clients’ investments, such as in the public sector, the return of big strategic outsourcing deals and business services is a notable shift in the industry.

IBM Consulting Is Augmenting Its Partner Ecosystem to Increase Solution Value

IBM continues to shift from being a historically closed company that largely relied on IBM technology products and solutions to being a company that is much more open to partnerships. IBM pursues strategic partnerships; furthers its engagement with existing partners, such as Microsoft and SAP; and proactively moves toward joint go-to-market models.
IBM Consulting invited Ralph Haupter, president, EMEA at Microsoft, to the analyst summit for a strategic partner fireside chat to provide insights into the two companies’ relationship. Microsoft and IBM Consulting work across multiple capability areas such as providing consulting services; building cloud-native, migration and modernization services for the Azure Kubernetes Service; collaborating with Microsoft and SAP to offer support and services to simplify clients’ move to S/4HANA; delivering Microsoft Dynamics 365 Industry Solutions across the banking, insurance, agriculture and public sectors; and supplying enterprise-grade cloud security services.
During the event Haupter highlighted notable traits of the partnership, including that IBM Consulting and Microsoft invest jointly in initiatives, show up together when working with clients, understand challenges, drive demand around value, and establish trust and commitment levels. Haupter also noted that IBM Consulting’s solid partnership skills and systems integration capabilities make a difference and that IBM Consulting’s user experience and industry knowledge benefit the partners’ symbiotic approach.
IBM Consulting has approximately 40,000 Microsoft Azure certifications, which enables it to address demand across areas such as security, data and AI, business applications, and infrastructure. In August IBM Consulting expanded its relationship with Microsoft to accelerate generative AI (GenAI) adoption. The new IBM Consulting Azure OpenAI Service is a managed AI service that is available on the Azure Marketplace and enables developers and data scientists to apply large language models, such as OpenAI’s GPT and Codex series, to their work.

Developing GenAI Capabilities and Utilizing a Client-first Approach Improve IBM Consulting’s Business Transformation Expertise

During the analyst summit, Chris Hay, an IBM distinguished engineer, showcased multiple GenAI use cases that highlight IBM Consulting’s activities and opportunities in the segment. For example, GenAI can be used to summarize large volumes of data, such as call center interactions, analyst articles and financial reports. It can also be used to provide conversational knowledge, such as by interacting with knowledge from data sets and gaining insights to drive market research and marketing activities; create content, such as in marketing and in collaboration with Adobe; and develop code for applications to improve speed and create efficiencies.


GenAI, which IBM sees as a solution that augments but does not replace human intelligence, provides IBM Consulting with opportunities such as helping clients transform business models, improve productivity, create new experiences and connect service delivery; however, these efforts must be aligned internally to drive change. With approximately 21,000 skilled data and AI practitioners, IBM Consulting can support clients by taking a client-first approach in consulting and driving collaborative transformations, utilizing the IBM Garage for GenAI methods that involve use case ideation as well as open, domain-specific and multimodal approaches to architecture selection and training.
In addition to utilizing the IBM watsonx solution, IBM partners with Adobe, AWS, Microsoft, Salesforce and SAP to transform businesses across industries through GenAI solutions. In May IBM Consulting opened a Center of Excellence (CoE) for generative AI that is part of IBM’s existing global AI and Automation practice. The CoE houses more than 1,000 consultants specialized in GenAI who will help clients adopt the technology along with IBM watsonx, IBM’s AI and data platform, as well as technology from Microsoft and other ecosystem partners.

Delivering Business Value Through Industry Expertise Strengthens IBM Consulting’s Competitive Position

During the event IBM Consulting shared that it is making its industry expertise central to its go-to-market approach. Approximately 50% of IBM Consulting’s employees are industry specialists and interact with skilled professionals such as in data and AI, enterprise strategy and business design, process change, cloud, and enterprise application, as well as with strategic partners to deliver business value through digital transformations.


IBM Consulting showcased its industry transformation capabilities through examples from multiple clients, including the U.K.’s Ministry of Defence (MoD). In 2018 IBM Consulting won an £80 million (or $103 million in U.S. dollars) deal with the ministry to develop and implement a scalable Air Command and Control System called Guardian. The system, which is now operational, securely integrates radar devices, radios and tactical data links from across the U.K. with NATO data to defend the U.K.’s and NATO’s airspace from air threats.
According to the MoD’s representative, Group Captain John “JB” Booth, Commander Battlespace Management Operations, IBM’s relationship with the Royal Air Force dates back 25 years, underscoring the company’s ability to develop strong ties with clients and offer technology solutions from multiple partners, avoiding vendor lock-in, which the MoD sees as a challenge when collaborating with defense prime contractors.
For example, Guardian’s core computer systems, voice computer systems and data tracker systems were provided by three vendors, including IBM. IBM utilized design thinking during the development of the system, taking into consideration requirements from public procurement and fine-tuning the system in consultation with the client to address specific needs.
Notably, the MoD representative commented on IBM’s openness to being challenged, saying the ministry and IBM have a “consensus-based relationship where we challenge them and they challenge us, and others [defense prime contractors] are less open to such relationships.” Showcasing capabilities, such as by inviting representatives from the militaries of NATO member countries Australia and Ireland to see the Guardian system in action and discuss pros and cons of the system, solidifies IBM’s industry and transformational expertise.


IT modernization in the public sector is prevalent across Europe and North America, and IBM can capture opportunities utilizing its technology and industry expertise and history of working with clients across the two continents. According to TBR’s 1Q23 Federal IT Services Benchmark, “Defense agencies are increasingly integrating open-architecture edge and cloud-based platforms, built using DevSecOps principles … into new mission-critical operations systems …. Scaling IT modernization and security (specifically using zero-trust data protection frameworks) agencywide remains the core of technology investment priorities at civilian, defense and intelligence agencies alike and the foundation for the eventual operationalization of analytics, AI and other emerging technologies that will digitally transform agency operations, citizen services, intelligence gathering and analysis, and warfighting operations.”


IBM Consulting’s high-value hybrid cloud and AI services resonate with price-sensitive clients, opening new opportunities and offsetting the negative effects of tightened discretionary spending in areas like the U.S. Continued investments in hybrid cloud, industry specialization and ecosystem expansion will enable IBM Consulting to achieve revenue growth in the midsingle digits in 2023, despite unfavorable macroeconomic trends.
IBM had a productive summer, announcing the acquisition of Agyla SAS, a France-based cloud professional services company. The acquisition expands IBM Consulting’s hybrid multicloud services and local expertise for clients in France around building, deploying and running mission-critical infrastructure and applications on hybrid cloud.
Also in June, IBM announced the acquisition of Apptio, a provider of financial and operational IT management and optimization software, for $4.6 billion. The acquisition, which is fully software-related, will drive synergies across IBM’s businesses, including IBM Consulting, and IBM’s partnerships with systems integrators such as Accenture (NYSE: ACN), Deloitte, KPMG and EY, which are also members of Apptio’s ecosystem.


TBR will continue to analyze IBM Consulting’s performance, and our next IBM earnings report, publishing in October, will review the company’s 3Q23 financials.

Ericsson Will Have to Make Strategy and Go-to-market Adjustments to Achieve Critical Mass in Enterprise Domain

Ericsson (Nasdaq: ERIC) hosted Ericsson Enterprise Industry Analyst Day in Boston to discuss strategy and portfolio updates in its Enterprise business unit (BU). The event kicked off with Ericsson’s Global CTO Erik Ekudden providing a strategy overview of Ericsson’s Enterprise BU, which includes the company’s Wireless WAN (Cradlepoint), Private Networks (which includes Ericsson Private 5G and Cradlepoint-provided NetCloud Private Networks), and Cloud Communications & Network APIs (Vonage) subunits. Following Ekudden’s overview, leaders from each of the subunits provided deeper dives into their respective business areas. Peter Linder, head of thought leadership in North America, also discussed key trends occurring in the U.S. and where the telecom industry is heading in the country.

TBR perspective

Ericsson’s Enterprise BU is exhibiting strong growth and serves as a bright spot amid the company’s broader challenge of operating in a post-peak RAN spend market environment. Ericsson has built a compelling 5G-related portfolio that builds solutions addressing the unique needs of enterprises ranging from small- and medium-sized businesses (SMBs) to large industrial entities. Ericsson also has a compelling story for Vonage and the global communications platform the company is building, though Vonage’s ability to achieve sustainable profitability remains uncertain.


Overall, TBR is confident that Ericsson will carve out and capitalize on a meaningful portion of the nascent private 5G opportunity but notes that the company needs to take disruptive peripheral trends more seriously. Specifically, TBR’s research indicates that hyperscalers are likely to move deeper into private networks and capitalize on the opportunity in network APIs as well as key growth areas such as Communications Platform as a Service (CPaaS). There is also a range of other disruptive players (e.g., Celona and Athonet, which is now owned by Hewlett Packard Enterprise [HPE] [NYSE: HPE]) that are vying to sell enterprises niche products and services pertaining to private networks. Additionally, the spectrum situation continues to evolve, and unlicensed and shared bands are likely to become a more disruptive force in the industry.

Impact and opportunities

Network application developer conundrum

Ericsson noted there is a worldwide dearth of application developers who understand the network enough to effectively leverage network APIs. This limitation needs to be addressed by vendors to unlock the value of the network. Ericsson aims to influence network-oriented app developers to address this issue via sponsorship programs in academia (e.g., hackathons, training programs) and by reskilling experienced workers.

Channel is critical for scaling adoption of private networks

Ericsson is almost exclusively leveraging partners to pursue enterprise opportunities, with communication service providers (CSPs) being one type of channel partner. Ericsson is focused on a multichannel approach, which includes consulting & system integrators (C&SIs), value-added resellers (VARs), and managed service providers (MSPs), in addition to CSPs. The channel partner route to market has become a necessity for vendors to profit from the private network opportunity. Though some vendors, like private cellular networks (PCN) market leader Nokia (NYSE: NOK), have achieved strong traction by selling directly to enterprises, this approach is unsustainable. Even Nokia is now trying to rely almost exclusively on the channel so that it can profitably scale.


With all of that said, TBR notes that Ericsson made little mention of C&SIs in its messaging about partners, with much more emphasis given to CSPs and other types of VARs. Given C&SI (aka global systems integrator [GSI]) firms are deeply entrenched with enterprises, this underemphasis or lack of strong focus is a limitation for Ericsson. Conversely, Nokia has established deep partnerships with a range of C&SI firms, such as Accenture (NYSE: ACN), Deloitte, EY and Kyndryl (NYSE: KD), for PCN opportunities, and these relationships are driving significant deal flow.


C&SI firms have been slowly moving away from vendor-agnostic strategies and more fully embracing joint go-to-market and sales efforts with their technology partners, in part because hyperscalers have demanded the change. Ericsson could ride that change wave and partner more closely with specific consultancies and SIs, using them as a gateway to enterprise buyers.

FWA in the U.S. remains underestimated and has huge potential

Though the U.S. government’s preference is to connect every premise across the nation with fiber, the financial reality is that the current round of stimulus programs (e.g., Broadband Equity, Access, and Deployment [BEAD]; Rural Digital Opportunity Fund [RDOF]; U.S. Department of Agriculture ReConnect; Tribal Broadband Connectivity Program) are not able to fully achieve this goal. TBR believes that 5G fixed wireless access (FWA) will ultimately be widely embraced as a viable alternative to fiber-to-the-premises (FTTP) as the technology can achieve the minimum speed requirements set forth by the U.S. government of 100Mbps download and 20Mbps upload.
5G FWA will be prioritized in more locations as a means to reduce lead time-to-market and cost-per-connected premise. When including unserved and underserved premises that would be excellent candidates for 5G FWA, TBR’s research suggests FWA has significant runway left in the U.S. market, greatly exceeding the modest subscriber targets put forth by incumbent CSPs like T-Mobile (Nasdaq: TMUS) and Verizon (NYSE: VZ). The spectrum problem will be mitigated over time by a mix of new technologies (e.g., carrier aggregation, massive MIMO, NR-U, extended range mmWave) and new or underutilized spectrum bands (especially unlicensed bands like 6GHz as well as mmWave, CBRS and the K-Band.

Telecom Industry Navigated Weakening Macro Backdrop Well in 1H23, but 2H23 and 2024 Will Likely be a More Challenging Situation

Despite holding up relatively well thus far in 2023, CSPs face significant challenges in managing their debt — the pressure is on to grow revenue and monetize their 5G investments

Cellular convergence with Wi-Fi needs to be taken more seriously in the industry

Most enterprises already use Wi-Fi and are unlikely to replace those systems with cellular technologies like 5G. Instead, swim lanes are forming whereby certain use cases and situations are best addressed by either Wi-Fi or cellular, but these access mediums must still coexist in an enterprise’s environment to bring the full benefit of IT-OT convergence and digital transformation. This convergence piece remains under-addressed by the ecosystem but represents a potentially massive opportunity. Ericsson, which has significant experience with Wi-Fi from past acquisitions (e.g., BelAir Networks) and R&D (e.g., Wi-Fi calling), can and should play a key role in convergence between cellular and Wi-Fi.


One of the biggest challenges to IT-OT convergence is not the technology but the people. At enterprises, IT and OT buyers are separate, with potentially divergent business priorities that sometimes compete for budget. Ericsson appears to understand that they need different selling motions for these buyers, even at the same enterprise — e.g., Wi-Fi-like experience and solutions for IT buyers; hardened network experience, and solutions for OT buyers. That understanding could be a successful way for Ericson to partner across the IT-OT ecosystem.

Vonage has interesting technology, strategy and vision but faces major threat from hyperscalers

TBR’s research indicates hyperscalers continue to encroach on the communication applications domain, the evolution of which will leverage network APIs. Examples of this are evident with the integration of Microsoft Teams (Nasdaq: MSFT) with Azure Communication Services, and hyperscaler development of super apps that blend social with commerce and other features into an integrated platform, similar to Tencent’s WeChat in China. Hyperscalers already have several billion users on their communication applications globally (e.g., WhatsApp, Instagram, Messenger [Nasdaq: META]; Teams; Google Meet and Google RCS [Nasdaq: GOOGL); iMessage [Nasdaq: AAPL]), which are all conduits to bring network API innovation to their install bases. Though Vonage currently has a compelling market position in the communication applications domain, the company could quickly be blindsided by hyperscaler moves, similar to what has occurred with Microsoft Teams taking significant market share from prior leader Cisco Webex (Nasdaq: CSCO) in the unified communications & collaboration (UC&C) domain.


Ericsson has compelling ideas and portfolio to address nascent opportunities in the private networks and network API domains, but TBR is skeptical the company will be able to build critical mass in these areas due to hyperscalers’ role, road maps and ambitions in the ecosystem. Ericsson’s primary customers, CSPs, also face this disruption, which has historical precedent in voice, text, linear TV, and other business areas that have been fundamentally disrupted by hyperscalers over the past two decades.


TBR believes further integration of the telecom industry into hyperscaler ecosystems is inevitable. Ericsson and its partners are encouraged to think more about focusing on niche areas where hyperscalers cannot or will not play and/or integrating deeper with hyperscalers to achieve joint critical mass in a cooperative framework. If it chose to take both approaches, Ericsson could make itself indispensable, which typically comes from being trusted, dependable and easy to work with. Any company can bring the technology; Ericsson needs to become the best possible ecosystem partner, so every player in the ecosystem wants to partner with it.


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Telecom Industry Navigated Weakening Macro Backdrop Well in 1H23, but 2H23 and 2024 Will Likely be a More Challenging Situation

Despite holding up relatively well thus far in 2023, CSPs face significant challenges in managing their debt — the pressure is on to grow revenue and monetize their 5G investments

Snowflake’s Data Warehouse Evolution: Embracing a Single Platform Approach for Success

Abiding by the notion that new software should be built on the data cloud, not on the database, Snowflake is moving further into the app development space, using its expertise at the data warehouse layer to support read/write operations and empower a new set of data-intensive applications