Monetizing GenAI: Cloud Vendors’ Investment Strategies and 2025 Outlook

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Join us Nov. 7, 2024, for TBR Insights Live

 

How Will Cloud Vendors Navigate GenAI Investment and Monetization Challenges?

Cloud vendors are on the front lines of the generative AI (GenAI) business opportunity. These vendors have been rushed to invest ahead of competitors, and as a result, they are forced to figure out the right model(s) to monetize the new capabilities.

 

After more than a year of GenAI hype, TBR is beginning to see clear investment trajectories and various formulas among vendors on how best to price GenAI solutions across infrastructure and applications spaces.

 

Join TBR’s Cloud team — Principal Analyst & Practice Manager Allan Krans, Senior Analyst Catie Merrill, Analyst Alex Demeule and Research Analyst Gunnar Tache Thursday, Nov. 7, 2024, at 1 p.m. EST/10 a.m. PST for a free 30-minute discussion and Q&A about AI’s impact on the cloud industry. The team will highlight key findings from TBR’s newest cloud research report, AI & GenAI Model Provider Market Landscape, including examples of technology companies’ activities in 2024 as well as what to expect across the GenAI landscape in 2025.

In This FREE Webinar on AI’s Impact on Cloud You’ll Learn:

  • The investments cloud vendors are making in their infrastructure, partnerships and portfolios
  • The business models that enable vendors to best monetize GenAI technologies
  • TBR’s early projections for industry changes in 2025

 

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TBR Insights Live sessions are held typically on Thursdays at 1 p.m. ET and include a 15-minute Q&A session following the main presentation. Previous sessions can be viewed anytime on TBR’s Webinar Portal.

GenAI Use Cases: Where Enterprises Are Investing Now and What’s Next for Multimodal AI

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Generative AI (GenAI) clients are looking for offerings that complement existing technologies and use cases built around customer zero and that deliver fast ROI. In this blog, we highlight some of the GenAI use cases currently seen in the professional and IT services, cloud, IT infrastructure, and telecom industries. To learn more about TBR’s AI and GenAI analysis and data, start your TBR Insight Center™ free trial today!

 

Perhaps no two questions have bedeviled the business side of the GenAI space more than which use cases are resonating with clients and where TBR and others expect to see near-term adoption and growth.

 

According to TBR’s research, use cases that provide a quick ROI with minimal enterprisewide disruption and no significant increase in risk profile get funded now; use cases with demands on data, dependencies on external data and/or long horizons to ROI remain the subjects of innovation sessions, proofs of concepts and road maps.

As Multimodal AI Extends GenAI’s Promise, Buyers Still Seek Immediately Effective Use Cases

Different from traditional large language models (LLMs), multimodal AI can process and interpret several types of data inputs, including text, images and sounds, at the same time. This versatility makes multimodal models critical for expanding the viable use cases for GenAI, specifically to support the creation of marketing content.

 

According to TBR’s latest research, multimodal AI is currently a top five use case for GenAI. Cloud service providers and foundation model vendors alike have made efforts to internally develop multimodal models or form collaborations to harness GenAI’s data interpretation capabilities. TBR believes cloud service providers and foundation model vendors will drive innovation of multimodal models to improve data interpretation and insights across all business segments.
 
Graph: Use Cases GenAI Is Currently Best Suited For (2H23)

GenAI Use Cases Across Industries

Professional and IT Services GenAI Use Cases

  • In February 2024 Cisco launched Motific, a SaaS solution that enables adoption and application of GenAI in support of clients’ needs around data, security, AI and overall cost reduction. Through Motific, Cisco speeds up GenAI deployment while using automated controls to reduce the risks associated with the technologies. Leaning on its security prowess, Cisco applies its risk management tools, sensitive data capabilities and monitoring services to protect clients’ environments.
  • Hewlett Packard Enterprise (HPE) introduced HPE GreenLake for LLMs, a cloud service that provisions AI-optimized high-performance computing resources designed for dedicated single-workload utilization, setting itself apart from public cloud resources that share infrastructure and run multiple workloads.
  • Through its partnership with ServiceNow, EY looks to apply GenAI to risk management and governance. In June 2024 EY adopted ServiceNow’s Assist GenAI capabilities to facilitate its internal operations as well as drive innovation in AI risk and regulatory compliance needs.
  • Some ongoing Leidos AI initiatives include helping the Department of Defense make training and other materials more easily accessible and improving the efficiency of new software testing using digital twinning solutions. GenAI also increasingly features in Leidos’ digital transformation work, as the company utilizes the technology to expedite the mapping of legacy IT infrastructures, which in turn accelerates downstream systems modernization. Leidos has also developed AI-based natural language solutions enabling military operators to interact more easily with autonomous drones deployed in contested environments.
  • Infosys launched the Responsible AI suite, which includes accelerators across three main areas: Scan (identifying AI risk), Shield (building technical guardrails) and Steer (providing AI governance consulting). These capabilities will help Infosys strengthen ecosystem trust via the Responsible AI Coalition as well as foundation models and emerging startups. These models and startups are increasingly important among clients, many of which are reaching a point of fatigue and confusion amid a slew of GenAI-related announcements.

Cloud GenAI Use Cases

  • Staying true to its history of releasing nascent services to the market and building them up into more feature-rich offerings over time, Amazon Web Services (AWS) recently launched new capabilities for Bedrock. For example, Custom Model Import allows customers to automatically pull entire Bedrock models they have already customized, likely with SageMaker, into the Bedrock interface. This allows customers to access their own custom model through the Bedrock API interface like they would with any other model from third parties, such as Anthropic and Cohere. The feature, in addition to other built-in tools native to Bedrock, reaffirms AWS’ commitment to making the service the best place to not only access out-of-the-box models but also customize them and develop applications that will ultimately spin the IaaS meter on AWS infrastructure.​
  • Google Cloud is putting Gemini to work, embedding the LLM into core Google Cloud Platform (GCP) products, from BigQuery for analytics use cases like data preparation and query recommendation to Looker for conversational analytics and automated BI. With these features and capabilities, Gemini is now at the heart of Google Cloud’s portfolio and replaces the existing Duet AI tool, which Google Cloud touted as its “always-on AI collaborator” in both GCP and Workspace just a few months ago. Google Cloud’s rapid transition from Duet AI to Gemini speaks to how quickly the GenAI space is evolving, as new vendors enter the market with out-of-the-box LLMs and incumbents expand context windows to make models more powerful and capable of handling more complex tasks.

IT Infrastructure GenAI Use Cases

  • Dell Technologies and Supermicro have seen rapid growth with their 8-GPU servers certified on NVIDIA’s HGX platform and continue to add new liquid cooling options, networking choices and accelerator variants. In recognizing the opportunity in this market segment, Lenovo recently announced its first competing server.
  • HPE’s AI server strategy primarily revolves around its Cray supercomputers and delivering solutions through its flagship HPE GreenLake platform, although the company has also rolled out a smaller validated server stack with NVIDIA.
  • IBM is incorporating AI into its mainframe business through its Telum processor and close integrations with the watsonx platform.

Telecom GenAI Use Cases

The telecom industry is contemplating hundreds of use cases for GenAI, including those that are an evolution of traditional AI, such as chatbots.

Customer care:

  • Chatbots (intelligent versus static) to handle higher-level customer issues
  • Bill explainer
  • Dynamic, contextualized prompts for care agents
  • Foreign language support
  • Truck route optimization

Administrative functions:

  • Meeting transcription — notes/summarization
  • Legal document creation
  • Corporate document querying

IT:

  • Code development
  • Advanced threat detection and autonomous rectification

Sales:

  • First pass at creating proposals
  • Dynamic, contextualized prompts for salespeople
  • Offer customization and personalization

Marketing:

  • First pass at creating marketing materials

Network:

  • Code development
  • Performance monitoring
  • Advanced alarm management

 

How Consultancies and IT Services Companies Are Adapting to Capture Growth Opportunities in India

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Join us Oct. 17, 2024, for TBR Insights Live

 

IT Services and Consulting Aim to Succeed in the Next Era of India’s Economic Growth

While management consultancies and IT services companies have long provided their global clients with India-based resources, a surge of growth in the country’s economy over the last couple of years is causing them to shift their strategy to provide new consulting and IT services to their India-based clients.

 

The Big Four — Deloitte, EY, KPMG and PwC — are betting on India becoming the home of their fourth, or possibly even third, largest member firms. However, India-based IT services behemoths like Infosys and Tata Consultancy Services believe their entrenched market presence and strengths afford them an advantage among local clients for IT services.

 

Join Principal Analyst Patrick M. Heffernan, Senior Analyst Kelly Lesiczka and Research Analyst Jill Cookingham Thursday, Oct. 31, 2024, at 1 p.m. EDT/10 a.m. PDT for a live discussion and Q&A on expectations for the next era of India’s economic growth. The team will look at whether local IT services vendors can really capture those opportunities from the Big Four as well as which vendors our research shows will lead the market overall.

In This FREE Webinar on Consulting and IT Services in India You’ll Learn:

  • The strategies, investments and internal activities global management consultancies and global systems integrators have leveraged to address the local Indian market
  • The market minefields and systemic challenges that may slow growth in consulting and IT services
  • The consultancies and IT services companies TBR believes will lead and lag in the market

 

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TBR Insights Live sessions are held typically on Thursdays at 1 p.m. ET and include a 15-minute Q&A session following the main presentation. Previous sessions can be viewed anytime on TBR’s Webinar Portal.

What to Expect: Cloud Provider Market Share Through 2027

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Hyperscalers, Traditional Software Players and Consulting Firms Drive Hybrid Multicloud Adoption Amid Shifting Market Priorities

Cloud Providers’ Market Share Projections

Over the next five years, TBR expects to see incremental strengthening of the professional services capabilities of hyperscalers, including Amazon Web Services (AWS), Microsoft and Google Cloud, as well as traditional software players, such as Oracle and SAP. However, professional services companies such as Deloitte and Accenture, along with India-centric players, have demonstrated their ability to scale vast talent benches to serve clients and act as go-to partners for the biggest cloud vendors.
 
Graph: Cloud Professional Services Leaders 2027

Cloud Segment Forecast

Modern IT environments are increasingly relying on hybrid multicloud technologies and cloud-native applications to manage data streams, expanding professional services vendors’ importance in the market. Automation continues to threaten aspects of some segments, such as infrastructure management, but new opportunities will arise with the continual development of emerging technologies.

Cloud Providers’ Geographic Focus

As the U.S. cloud market matures, price is becoming less of a determining factor in enterprise cloud migration decisions. In many cases, customers are willing to pay a premium to get the best business outcome. In line with Western European regulations and the increasing value governments are placing on data sovereignty, cloud vendors are adjusting their go-to-market strategies to lead with localized talent and providing managed services through dedicated cloud regions that offer additional security protocols.

Cloud Market Share Expectations Through 2027

Accenture Is Expected to Continue Its Cloud Dominance, Growing Its Leadership Position Over the Next 5 Years

Accenture’s acquisition strategy has been critical to bolstering the company’s headcount with skilled cloud talent and has helped enhance its cloud business groups and the Accenture Cloud First unit. Further, leveraging inorganic assets will allow Accenture to upsell and cross-sell its consulting and IT services offerings, stimulating revenue growth. For IBM, acquisition candidates primarily consist of companies that specialize in cloud and AI capabilities, as well as industry and niche consulting experts who can support the expansion of IBM Consulting with more software and technical services.

 

Professional service providers continually expand their cloud portfolios through solution development to target cloud opportunities. For example, Cisco invested in technologies to bolster Cisco Customer Experience’s ability to support the adoption of security, cloud, analytics and IoT solutions. India-centric vendors are investing in high-demand solutions and skill sets such as AI, security and engineering to innovate within their cloud portfolios, such as Wipro FullStride Cloud Services and Infosys Cobalt.

 

To access all available cloud data and analysis, start your free Insight Center™ trial today.

Oracle’s Path to $100B+: Unlocking Growth with Multicloud Strategy

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Oracle Is Charting a Path for Unprecedented Growth with Its ‘Infrastructure Anywhere’ Vision

Oracle has among the most complete, full-stack cloud portfolios, from infrastructure to database to applications. While Oracle Cloud World 2024 covered a sizable landscape, one theme stuck out during the four-day event: deployment flexibility. This theme reflects how much Oracle has changed compared to 2016, when Gen2 OCI (Oracle Cloud Infrastructure) launched.

 

With multitenant OCI, Dedicated Regions, Cloud@Customer and Oracle Alloy, a specialized service where customers white label OCI services inside their own data centers, Oracle has quickly emerged as one of the most flexible, delivery-agnostic IaaS vendors on the market. Of course, the other big component of Oracle’s “infrastructure anywhere” vision is multicloud, in which customers can run Oracle databases as native services hosted in the data centers of Oracle’s biggest hyperscaler competitors.

 

Not only does this move reflect a major maturity leap for Oracle, in which Oracle cozies up to its rivals to better address the needs of the customer, but it is also critical to the company’s financial strategy. In addition to giving Oracle the flexibility to allocate more capex dollars toward strategic compute and storage resources as opposed to land and buildings, this strategy will help Oracle get its on-premises database support base to the cloud faster. In doing so, Oracle may forfeit lucrative support and license contracts, but the company reports that for every $1 in lost license and support gross profit it could realize as much as $5 in gross profit in the cloud, which is a testament to how quickly the cloud business is growing.

 

The multicloud strategy is also one of the reasons Oracle awed financial analysts not only by raising its FY26 revenue targets by $1 billion, to $66 billion, but also by setting a FY29 goal of $104 billion. This target, backed by Oracle’s $99 billion RPO (remaining performance obligation) balance, implies an average corporate revenue growth rate of roughly 16% over the next five years. This kind of growth was once unheard of for Oracle, but with cloud now overtaking support as the biggest business, Oracle is a different company, and the OCI growth trajectory instills a degree of optimism in Oracle’s ability to disrupt a highly saturated market in the years to come.

Announcing Oracle Database@AWS

Based on interactions at Cloud World, it is clear the Oracle Database@AWS announcement was the most noteworthy. In our view, given Oracle already launched Oracle Database@Azure, and more recently Oracle Database@Google Cloud, which is now live in four regions, it was only a question of when, not if, Amazon Web Services (AWS) would partner with Oracle.

 

With this announcement, Oracle officially saved the biggest hyperscaler for last, onboarding all the critical partners it needs to migrate legacy database customers and accelerate cloud revenue growth. In terms of how this alliance will work, it is no different than the approach Oracle takes with Microsoft Azure and Google Cloud; Oracle will deliver the hardware and networking inside AWS data centers so customers can provision Oracle database services natively from the AWS console and have the system run in AWS, just as it would if it was hosted in OCI.

 

The approach of physically embedding OCI within other clouds as opposed to just bolting Oracle Database on to other infrastructure through a standard interconnection is important as it will not only give customers the native AWS, Azure and Google Cloud Platform (GCP) experiences they are used to, but also limit latency as the Oracle Exadata hardware is physically located with the appropriate hyperscaler.

 

One could argue Oracle is taking a lot of risk with this strategy, as it is essentially bringing customers and their data closer to AWS, Azure and GCP. But in the age of mounting competition, not to mention generative AI (GenAI), it is a risk worth taking. As one customer at a major financial services firm recently told us, “The GenAI decision makers will not be the old world relational database experts,” and these alliances could help ensure Oracle stays relevant in cloud GenAI discussions by making it easier for customers to use the data within Oracle Database for RAG (retrieval augmented generation), to fine-tune foundation models and build new applications using tools many customers are likely already using, like Amazon SageMaker.

 

We should also point out the concept of data gravity. Customers leveraging these multicloud services will still be established Oracle Database customers with some Oracle SaaS presence, and therefore the bulk of their business data gravity will naturally reside within OCI. Those customers may still be inclined to keep their databases within OCI and not extend to other clouds, but with this strategy, Oracle is at least giving them the option to do so. We expect that these multicloud offerings will gain a lot of traction among Oracle Database customers that have big application footprints on other clouds.

Oracle Analytics Is the Glue Between IaaS and SaaS

Analytics, and the ability to turn data into business insight, is the ultimate objective for nearly every organization. With popular tools like Power BI and Tableau as well as neutral data platforms like Snowflake on the market, customers have a lot of choices when crafting the analytics stack.

 

But customers have also made it clear they want to limit the integration burden, and one of the compelling things about Oracle’s approach to analytics is how it can store customers’ operational data from Fusion applications in the Autonomous Data Warehouse (ADW) for analytics as part of a single SKU. This approach, productized as Fusion Data Intelligence (FDI), reinforces the value of Oracle playing in both the SaaS and IaaS markets and its ability to deliver a unified solution.

Evolving the Data Lake Strategy and Competing as a Unified Solution

Access to operational data in the Fusion suite will remain the hallmark differentiator for FDI, but it is on the infrastructure side where Oracle took a big leap forward with the launch of Intelligent Data Lake. Oracle has been elevating its data lake strategy and positioning for some time, but this announcement puts Oracle more squarely into the space.

 

At its core, Intelligent Data Lake is a reworking of existing OCI capabilities, such as cataloging and integration, to create a single abstraction layer that in true data lake fashion, allows customers to query data on object storage, such as Amazon S3 or Microsoft OneLake, with support for the popular Apache Iceberg and Delta Lake frameworks.

 

To be fair, with Fabric and BigLake, Microsoft and Google Cloud, respectively, have been similarly making advancements with the data lake architecture to better address analytics workloads. However, Oracle is not only adding the simplicity and performance benefits of the data lake but also delivering the architecture in a way in which customers can run the entire data pipeline and still have all the analytics components in a single SKU.

 

With Oracle’s launch of a native Salesforce integration with FDI, which allows customers to combine their CRM and Fusion data within the lakehouse architecture, Oracle’s vision of embedded clouds at the database layer is extending to analytics.

 

Though FDI’s draw will still be primarily with existing Oracle customers, the company is clearly taking steps to help combine Fusion with non-Fusion data and make its platform more relevant within the cloud ecosystem. While FDI may not rip and replace the analytics footprint within any particular account, we could see scenarios where FDI displaces some components of the stack, such as Snowflake at the infrastructure layer, or on the analytics side, PowerBI in Microsoft Fabric.

New Applications Are Being Built on the Analytics Stack

In general, scaling the existing platform components of Oracle Analytics is a top priority for the company, but there is another emerging piece of the analytics vision: Intelligent Applications. Coming soon, Oracle will offer applications — People Leader Workbench for HCM and Supply Chain Command Center for SCM — that sit on top of the Fusion system of record, within the FDI platform.

 

This approach should allow Oracle to target a broader set of personas. For example, in People Leader Workbench, it is not necessarily about reaching only the C-Suite but rather anyone who manages people and can benefit from data-driven insights on their people, and most notably, take action on that insight by connecting back to the Fusion HCM system of record.

What About GenAI?

GenAI has officially exited the hype cycle and is being widely deployed within the enterprise, but when it comes to analytics, capabilities like dashboarding, semantic models and visualization are still taking precedence It is still early, but customer feedback suggests that if data is properly configured and there are guardrails in place, GenAI in analytics has a lot of potential.
 

Dive into the complexities of vendor partnerships in this recent TBR Insights Live session — Click the image below to watch on demand today!

On-demand Video - TBR Insights Live webinar: How to Think as a Partner in the Era of GenAI

One of the key announcements at the event was the general availability of Analytics Cloud AI Assistant in Oracle Analytics Cloud (OAC), which is based on a large language model (LLM) so customers can ask questions about their data. Staying in line with the rest of the Oracle strategy, where GenAI is fully embedded into the portfolio and available to customers at no added cost, the analytics assistant will be available to OAC customers for free as part of their existing instances.

Speaking of SaaS and IaaS

From database alliances to the data lake architecture, Oracle has made many calculated moves at the PaaS layer to better compete for strategic workloads. But there are other innovations and key developments in the upper and lower rungs of Oracle’s cloud portfolio.

Oracle Targets Complete End-to-end Process Automation with AI Agents in Fusion Suite

Since it first entered the GenAI game in late 2023, Oracle stood out in the SaaS market for not upcharging customers for GenAI in their SaaS applications. This speaks to Oracle’s play at the IaaS layer with the OCI GenAI Service, which is native to the same infrastructure where all Oracle’s SaaS applications live.

 

Logically, this approach means that as Oracle’s LLM partners, which host in OCI, push the boundaries of their models, Fusion customers stand to benefit in not just using GenAI for basic assisted authoring and summarization use cases (e.g., writing a job description in Fusion HCM or summarizing customer calls in CX), but actually contextualizing data. In the long term, this could mean providing reasoning on that data to manage more complex workflows and deliver business recommendations.

 

At this time last year, Oracle announced 50 GenAI use cases in the SaaS suite. This year, the applications team announced the number of use cases has grown to over 100, while there are now more than 50 AI agents within the Fusion suite. This announcement marks a progression in how Oracle is moving from more generic prompt-and-response use cases in Fusion to actual contextualization use cases, by applying LLM-based RAG agents to address specific goals and roles within a particular business function. In Fusion HCM, this could include a benefits analyst agent, offering users the ability to ask questions, such as which health plan features are available, based on the enrollment data contained in Fusion HCM and the health plan document specific to the company.

 

But the most commonly cited example throughout the event was the Document IO agent in Fusion ERP, which can convert a picture of a quote in a particular currency into U.S. dollars and automatically create and load a purchase order (PO) within the system. With these AI agents, we see Oracle taking the next big step in addressing more complete process automation and productivity enhancements within its SaaS portfolio, and ultimately a shift in mindset where it is less about delivering an ERP system or an HCM system but more about completing end-to-end business process and experience.

OCI Strategy Centers on Growing Within the Large Enterprise and Attracting Cloud-natives

Oracle’s ability to offer among the most flexible cloud delivery methods is the focus of the OCI strategy and strategic road map, led by high-profile partnerships with AWS and others. But Oracle’s strategy is about being agnostic to not only where customers run OCI but also how they run OCI.

 

For example, at Cloud World Oracle announced Dedicated Region 25, a longtime investment and feat of engineering that essentially consolidates a standard Oracle Cloud region into just three racks, which we physically saw on the keynote stage. This configuration extends the value proposition of Dedicated Region, where customers can get the scale and economics of the public cloud inside their own data centers.

 

Dedicated Region 25 could also play a big role in helping Oracle reach new customers. Oracle’s multicloud alliances will undoubtedly be appealing to the large enterprise customer base, but offerings like Dedicated Region 25 could help Oracle attract cloud-native and AI companies looking for a more compact footprint that can still scale to support critical workloads.

Conclusion

Led by its partnership with AWS, Oracle Cloud World 2024 told a story of a maturing business that is turning competitors into partners to better address the needs of the customer. By keeping the lifeblood of the cloud stack, the database, relevant in customers’ cloud transformations, Oracle also ensures it remains competitive in GenAI scenarios, which aligns with the GenAI investments the company is making in other areas of the stack, from analytics to Fusion applications.

 

As the company continues to navigate as a full-stack vendor catering to the existing Oracle base, while simultaneously gaining relevance in the broader cloud ecosystem, there is a lot of potential ahead, and Oracle is well on its way to becoming a $100-plus billion company.

Diversification Into Other Verticals Is Critical to Amdocs Sustaining Long-term Growth

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TBR Perspective: Amdocs Must Accelerate Push into Non-Telecom Verticals for Growth and Diversification

Amdocs has made substantial progress on its reinvention, diversifying its customer base, portfolio and business mix while shifting the market perception of the company from a traditional OSS/BSS provider to more of an ICT software transformation specialist. However, most of Amdocs’ transformation thus far pertains to the telecom industry; Amdocs still needs to transition from being a telecom-centric vendor to a multifaceted provider that supports a diversified mix of verticals. The pressure to move in this direction will intensify as the telecom industry’s challenges persist and Amdocs’ organic growth from the industry continues to slow.
 
Amdocs’ current situation is reminiscent of Tech Mahindra’s before it merged with Mahindra Satyam in 2013. Pre-merger, Tech Mahindra was largely viewed as a telecom-only shop and had minimal exposure to other verticals (the company’s revenue split was around 90% telecom and 10% other verticals pre-merger). This specialization helped Tech Mahindra differentiate and compete for business in the telecom vertical but kept it from benefiting from diversification and greater scale.
 
After the Mahindra Satyam merger was completed, Tech Mahindra became a multifaceted ICT services provider, with robust diversification across many verticals. Though TBR is not suggesting Amdocs should or will take a similar approach, Amdocs has already made several acquisitions that bring exposure to nontelecom verticals. However, these acquisitions are relatively small and have not brought transformational changes to the company’s business mix.
 
Amdocs has been involved in nontelecom verticals for at least a couple of decades, and TBR estimates Amdocs’ nontelecom revenue currently composes approximately 10% of the company’s total revenue. While Amdocs has yet to formalize its foray into nontelecom verticals, TBR notes that is beginning to change as the company seems to be making a stronger push into the financial services vertical, as evidenced by acquisitions (especially Astadia, Projekt202 and Sourced Group) and an increase in dedicated resources to support that vertical.
 
Amdocs is also supporting a variety of brand-forward customers from other verticals, primarily via its Stellar Elements business unit, and is focused on opportunities to help companies in the utilities and media & entertainment verticals with IT and digital transformation.

Impact and Opportunities

Astadia Exposes Amdocs to Mainframe Migration Opportunities

One of Amdocs’ newest acquisitions, Astadia, plays into the nontelecom vertical theme and could serve as a key beachhead to winning more deals with nontelecom customers. Astadia is focused on helping mainframe users migrate to the cloud and has carved out a strong niche in the financial services industry, which is one of the verticals outside of telecom that Amdocs is focusing on. Helping companies migrate off mainframes plays well into Amdocs’ mission-critical transformation value proposition. Amdocs estimates there are 40,000 mainframe computers still in use worldwide by a range of companies and government entities, representing a significant opportunity for net-new business.

Competitor List for Products and Services Broadens for Amdocs

Amdocs’ string of acquisitions and new strategic initiatives, such as the partnership with Microsoft, broadens the scope of companies Amdocs now competes with, from both a products and services standpoint. Historically, Netcracker was Amdocs’ most formidable competitor in terms of portfolio overlap, but that list now includes companies like Salesforce, ServiceNow and Oracle. Meanwhile, on the services side, Amdocs is increasingly crossing paths with traditional C&SI companies, such as Accenture, Tata Consultancy Services and Tech Mahindra.

Amdocs Can Compete (and Win) Against C&SIs like Accenture, Just at Smaller Scale

Amdocs possesses all the capabilities required to drive customer IT and digital transformation, both for and beyond the telecom industry. Though the vendor is less than a tenth of the size of Accenture (which is arguably the benchmark vendor to emulate in the C&SI domain) in metrics such as revenue and headcount, Amdocs can still compete against Accenture and other C&SI firms and win business.
 
Amdocs needs to focus on its specialization in delivering migration and transformation for mission-critical software environments, a skill that is broadly applicable across verticals, as well as its leading KPIs for project completion rates.

There Is More Juice to Squeeze Out of CSPs but Not Much

Amdocs boasts over 400 communication service provider (CSP) logos globally, including most of the top 50 CSPs, and in many of these accounts Amdocs is already the dominant provider in terms of the products it sells. Therefore, squeezing more revenue out of these customers (and/or taking more market share from competitors) will be increasingly challenging as telecom operators chronically struggle amid market maturity and anemic growth prospects, and resort to cost containment and M&A for additional economies of scale.
 
Amdocs is also proactively trying to move further down market, targeting smaller CSPs such as MVNOs and Tier 3 operators to sustain growth. However, this approach is unlikely to move the revenue needle significantly, given the largest CSPs globally account for well over 80% of the total telecom market opportunity.
 
GenAI remains exploratory; automated, scaled usage of GenAI in commercial environments is at least a year away
Amdocs is actively exploring how generative AI (GenAI) can be incorporated across domains, both within its own company and for its customers. Thus far, the company is primarily utilizing GenAI internally for code development, and focusing on contact center transformation for its customers. Amdocs’ strategic partnership with Microsoft broadly applies to AI coinnovation and go-to-market efforts and the current focus is offering a joint solution for marketing and sales process automation.
 
Amdocs is also embedding Microsoft Copilot across its broader product portfolio. TBR notes that the GenAI-enabled “virtual agent” and process automation technology Amdocs showcased at the event were compelling and demonstrate a clear path to business value for CSPs.

Learnings From Partnerships with Hyperscalers Provide a Strong Beachhead Into Other Verticals

Amdocs has been learning a lot from its partnerships with Microsoft, Amazon Web Services and Google Cloud, especially as it pertains to implementing cloud migrations of ICT workloads and digital transformation. Specifically, Amdocs has obtained certifications, status and organizational alignment with hyperscalers. The skills and capabilities Amdocs has developed from the telecom ecosystem can be leveraged across other verticals. Solution cocreation also opens new doors for Amdocs, both within telecom and in other verticals.

Amdocs Makes Waves in CRM for Telecom Leveraging Microsoft Partnership

Amdocs has integrated Microsoft Dynamics (CRM) with Amdocs’ Customer Engagement Platform to offer marketing and sales automation solutions to its customers (TBR notes the joint solution, including the GenAI large language model it uses, is customized specifically for the telecom industry by Amdocs’ TelcoGPT, amAIz).
 
Microsoft Dynamics is integrated with Microsoft’s other key business productivity applications, such as Outlook, O365 and Teams, and the company’s Copilot is embedded across the stack, bringing customers improved outcomes. The joint Amdocs-Microsoft solution will enable the two companies to compete with incumbent CRM providers, especially Salesforce, Oracle and ServiceNow. TBR notes that the joint CRM solution is differentiated by the power of its GenAI platform, an aspect where incumbent CRM providers are lagging, and could displace incumbent CRM providers from CSP accounts. Deals would draw in Amdocs’ systems integration capabilities as well as other services, yielding larger deal sizes.

Conclusion

Amdocs has been navigating the increasingly challenged telecom market well, but with organic growth slowing, the company will need to seek out and accelerate into other areas for more sustainable, long-term growth. Amdocs’ incremental steps into other verticals, mostly via acquisitions, are moving the company in the right direction, but a larger magnitude shift is required.
 
This aspect of Amdocs’ reinvention would encompass the institution of formalized strategic, organizational and portfolio changes gearing the company toward addressing multiple verticals. Doing so would enable Amdocs to expand its total addressable market, diversify its business mix and hedge against downturns in the telecom industry.
 
As a first step toward formalizing Amdocs’ strategy in other verticals, TBR encourages the company to start providing more information about its initiatives in verticals outside of telecom, which are known to be significant but are unquantified and minimally discussed, as it will become more important to Amdocs’ business results and growth profile over time.

Digital Transformation Examples: How Vendors Are Adapting to GenAI and Market Shifts

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Digital Transformation Market Status

As Digital Transformation Programs Mature, So Do Buyers’ Expectations, Testing Vendors’ Engagement and Partner Strategies

As the most mature digital transformation component, customer experience (CX) has compelled buyers to embark on omnichannel projects to unify insights and processes across the customer life cycle for years now. Vendors have plenty of use cases to rely on, but slower discretionary spend is pressure-testing vendors’ value propositions rooted in trusted algorithms.

 

The digital marketing services space, as tracked by TBR, will expand at a CAGR of 6.5% from 2023 to 2028, reaching $145 billion, which is lower than our forecast from six months ago of $152 billion. The marketing industry is on the cusp of transformation with the advent of generative AI (GenAI) chatbots, particularly in relation to content development and brand safety. Vendors have an opportunity to optimize personalization at scale, but only if they also address talent management and data protection, compelling them to carefully balance messaging across ecosystem stakeholders.
 

Watch Below: TBR Principal Analysts Discuss How the GenAI Disruption Is Similar to Prior Disruptions, as well as How It Is Different, and Which Technology Vendors Are Best Positioned to Win and Why

GenAI Remains the Single Most Disruptive Technology, Testing Vendors’ Ability to Deliver Transparent Campaigns Through Ecosystem Lenses

Since we began estimating the digital marketing services market seven years ago, we have projected annually that Strategy and Creative & Branding services would grow the fastest. Creative & Branding served as the DNA of digital marketing, and brands have constantly sought guidance on how to adapt to operating in digital environments.

 

GenAI will change that, as the technology has the potential to bring the cost of content development to $0. This will pressure Creative & Branding revenue growth but also test vendors’ analytics models as the spending shifts toward Advertising & Analytics services, provided vendors ensure that transparency, governance and clear data strategies are in place.

Examples of Vendors’ Recent Digital Transformation Activities

  • Ogilvy launched Influencer Shield, a risk management solution that helps target opportunities around brand safety.
  • Bain strengthened its footprint in APAC with the acquisition of the consulting and managed services division of Max Kelsen, an Australia-based AI and machine learning solution provider.
  • Accenture Song has been chosen as the global creative and content agency of record for the talent company Randstad. Accenture Song will also support the transformation of Randstad’s marketing department through the use of GenAI.
  • AKQA launched a new campaign for IBM, showcasing the transformative power of IBM Hybrid Cloud using visuals and a cinematic storytelling approach.
  • McKinsey & Co. launched its Salesforce-enabled Growth Tech capability. The service will pair McKinsey’s AI modules from QuantumBlack and help the firm pursue business transformation opportunities with clients seeking to optimize the Salesforce stack.
  • Capgemini and Salesforce partner to provide GenAI for CX Foundry to deliver personalized and data-driven customer experiences by automating customized content creation.
  • IBM Consulting launched a practice that helps clients create AI foundation models and large language models utilizing open-source approaches and proprietary data to train purpose-specific AI models through IBM’s InstructLab solution. IBM is also expanding the IBM Consulting Advantage portfolio by adding new assistants, assets and methods that will support specific consulting roles, and client engagements around application modernization and management as well as data and business process transformation.

 
TBR’s Digital Transformation: Digital Marketing Services Benchmark provides key service line, regional and operational data and analysis across 19 leading digital marketing services vendors. Vendor coverage includes Accenture, Capgemini, Deloitte, HCLTech, IBM Consulting, McKinsey & Co., Tata Consultancy Services, and more. Service lines covered are Strategy, Creative & Branding, Web, Mobile & Commerce, and Advertising and Analytics. To access all available Digital Transformation: Digital Marketing Services Benchmark data and analysis, start your free Insight Center™ trial today.

IT Service Vendors Shift Focus to Operational Efficiency and GenAI Investments Amid Economic Uncertainty

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TBR Fourcast is a quarterly blog series examining and comparing the performance, strategies and industry standing of four IT services companies. The series also highlights standouts and laggards, according to TBR’s quarterly revenue projections. This quarter we are looking at Accenture, Deloitte, IBM Consulting and Infosys, including Accenture’s extensive investment in GenAI and IBM Consulting’s and Infosys’ risk of falling into a downward trajectory.  

Vendors Ramp Up Optimization and Operational Efficiency Projects Amid Revenue Deceleration from Tight Client Discretionary Spending

IT services vendors currently face client discretionary spending headwinds, resulting in increasingly long decision cycles. According to TBR’s IT Services Vendor Benchmark, year-to-year revenue growth for the 31 vendors decelerated from 13.8% in 1Q19 and 8.6% in 1Q22 to 2.1% in 1Q24.

 

In response to these headwinds, Deloitte, IBM Consulting and Infosys are slowing their hiring pace and focusing on reskilling and upskilling existing professionals. Accenture will likely follow suit, although it currently maintains its skills-based hiring approach. A closer look shows that Accenture has started slowing organic hiring, but acquisitions are helping the firm offset some of the headcount growth deceleration. As part of its resource management strategy, Accenture is rotating the skills composition of its workforce with the goal of maintaining a large enough bench to meet booked demand while ensuring quality (bookings increased 22.1% year-to-year to $21.1 billion in FY3Q24, putting Accenture on track to reach $80 billion during FY24).

 

As discussed in detail in TBR’s quarterly reports, Accenture and Deloitte are expected to have uneven revenue growth through the remainder of 2024. Amid persistent macroeconomic uncertainty, every IT services company and consultancy is reporting greater customer interest in digital transformation and projects centered on cost optimization and operational efficiency. According to TBR’s December 2023 Digital Transformation: Voice of the Customer Research, “Improving IT operations remains the top DT [digital transformation] initiative for most buyers, but this objective is reaching maturity as more buyers are in the true Transformation stage and are now focusing on extracting benefits from existing assets.”

Investments in Industry Expertise and GenAI Will Position Vendors for Growth in the Market

Not surprisingly, IT services companies are investing in generative AI (GenAI) and industry expertise to capitalize on growth opportunities as they must demonstrate knowledge in both of these areas to stand out among competitors.

 

In TBR’s view, Deloitte and Accenture have invested extensively in industry expertise and GenAI compared to other vendors and have done well in marketing themselves as leaders, helping them better position for near-term growth in demand for operational efficiency and longer-term opportunities around GenAI governance. Deloitte’s broad portfolio and training investments closely align with many of its IT services peers, which is not surprising, given the firm’s position within the value chain.

 

To differentiate, Deloitte’s release of industry use cases as a thought leadership platform is a striking contrast to the approach of its most immediate rival, Accenture, suggesting Deloitte will stay true to its industry-wrapped, consulting-led value proposition. Accenture’s release of its useful “switchboard” tool, which helps clients select the best foundational model for their needs, aligns well with Accenture’s technology heritage.

 

Similar growth pathways are not out of reach for IBM Consulting and Infosys. The former could utilize tuck-in acquisitions to drive specialization and continued collaboration with technology partners and academia to support portfolio build-out and strengthen its position in the market. At the same time, IBM Consulting could leverage hybrid cloud and AI solutions, its incumbency with clients, and its ability to deliver small and large projects at scale to expand wallet share. Meanwhile, Infosys will continue to execute on its strategy to pursue large-scale deals as the company recalibrates and enhances its portfolio offerings to address buyers’ needs. The recent acquisitions of InSemi and in-tech highlight Infosys’ efforts to add skills and capabilities in areas such as chip design and product engineering, supporting the company’s goals of expanding wallet share and capitalizing on its existing relationships while gradually drifting away from commoditized portfolio areas.

If Vendors Fall, They Will Fall for Different Reasons but Will Have Similar Outcomes

 

IT Services Revenue Forecast: Accenture, Deloitte, IBM Consulting, Infosys - September 2024

What Could Go Wrong?

In the worst-case scenario, IBM Consulting’s and Infosys’ revenue could begin to take a negative trajectory for similar reasons: drifting away from hybrid cloud and AI (IBM Consulting) and away from services in pursuit of GenAI-related software licensing sales (Infosys).

 

Unsurprisingly, Deloitte could face quality issues related to its overemphasis on growing the firm’s IT services offerings. In contrast, according to TBR’s 2Q24 Accenture report view, an Accenture slide could come from accelerated GenAI adoption, pressuring “Accenture’s legacy applications and business process management services so much that it cannibalizes revenue to a greater extent than originally anticipated.”

 

For all four vendors, a loss of trust could lead to client retention issues, which would accelerate any downward momentum. To be clear, TBR does not expect any of these companies will experience their worst-case scenarios, but the market pressures and potential for strategic mistakes remain entirely real.

Conclusion

TBR expects IBM Consulting will be the growth leader among this foursome yet will likely continue to trail the overall IT services market, absent a massive GenAI-induced upheaval. Accenture and Deloitte continue to be best positioned to outperform TBR’s projections, although Infosys has been a surprisingly strong player in the market over the last couple of years, reflecting its strong leadership.

 

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How India-centric IT Services Vendors Are Navigating Economic Pressures in 2024

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Overall Revenue and Trends

In late 2023 and thus far in 2024, the companies within TBR’s IT Services coverage faced pressures within their respective financial services practices, experiencing industry declines from a revenue perspective as higher interest rates limited opportunities and hindered growth trajectories.

 

The India-centric vendors TBR covers — Cognizant, HCLTech, Infosys, Tata Consultancy Services (TCS) and Wipro IT Services (ITS) — experienced these financial services revenue declines, despite their efforts to embed automation, AI and efficiency-driven services.

 

The five vendors experienced mixed performance in terms of overall revenue in 2Q24 and pursued varying portfolio expansions and strategy directions. Growth leaders HCLTech, Infosys and TCS have benefited from demand for cloud migration, application management and digital services, which helped to offset declines in financial services revenue. Digital services enabled by innovation-led frameworks remain an important sales engine for Infosys, helping the company build a foundation for future performance.

 

While HCLTech also leverages Digital Workplace Services, the company’s engineering expertise provides an avenue of differentiation as well as relationship building through developed infrastructure and solutions. HCLTech’s integration of its Engineering and R&D Services sales with its IT and Business Services practice enables the company to better address demand for transformation services that stretch across multiple segment groups, driving value creation.

 

Meanwhile, demand for next-generation solutions across connected plants, connected services and intelligent product engineering is boosting TCS’ Digital Transformation Services revenue.

 

Revenue growth for both Cognizant and Wipro ITS was more sluggish during 2Q24 as the companies struggled to capture new opportunities amid limited discretionary spend. Cognizant is experiencing longer contract periods from larger engagements, which extends the revenue generation but leads to smaller pockets of revenue recognition. Wipro is in a slightly more precarious position as it appoints new leadership and establishes new strategic directions. While the investments and leadership transitions will help Wipro evolve its portfolio, the company will continue to struggle to accelerate revenue growth and expand market presence.

 

 

Financial Services

For the India-centric IT services vendors, financial services revenue performance has been hit harder relative to overall revenue as the macro environment remains challenged. Inflation rates, higher interest rates and ongoing economic uncertainty have pushed financial services companies, primarily within the banking space, to reduce budgets and prioritize cost cutting. While financial services companies look to invest in data, AI, cloud and digital platforms, spending restrictions have led to a focus on cost optimization through cloud and digital services.

 

Wipro experienced the greatest impacts on its financial services revenue, owing largely to overall market pressures. The company continues to struggle to fully capitalize on existing client relationships and create upselling opportunities. Leveraging its AI solutions and services for modernization could support the company’s efforts to forge additional discussions among insurance clients but will not offset limited interactions within the banking space. Wipro will likely prioritize engaging with insurance clients rather than banking institutions to generate revenue streams during 2024.

 

Infosys followed Wipro in terms of financial services performance, as a contract renegotiation within the financial services vertical reduced revenue growth by 100 basis points, which negatively impacted Infosys’ P&L and pressured margins. However, there are signs of improvement for Infosys in the segment, with increased activities in the U.S. and six large financial services deals signed in 1Q24. The deals likely comprise a mix of both insurance and banking clients. High inflation and interest rates are limiting client spend, pushing more vendors to prioritize workload and operations optimization.

 

Cognizant also experienced the impacts of limited budgets among its financial services clients. As conditions begin to improve, however, Cognizant management has highlighted new activities around personalization services as well as infrastructure and platform modernization, bringing in opportunities in the industry. Cognizant aims to grow its industry knowledge and specific offerings to better engage with clients and deliver personalized solutions. To address demand, Cognizant will look to create customer experience solutions and workload optimization offerings that leverage AI to strengthen its connection with clients in the sector.

TCS leverages the TCS BaNCS platform to deliver digital transformation services to a variety of financial services clients using a SaaS model or through the cloud. The platform supports infrastructure, application and workflow transformation, enabling users to modernize their environments, enhance customer engagement, utilize data and analytics, and accelerate innovation efforts. The platform allows TCS to deliver core banking transformations for clients and provides more personalized financial management services that can be aligned with budgets.

 

With demand around cloud and AI transformation projected to increase, TCS will develop new capabilities and functions such as TCS BaNCS for Intelligent Experience, allowing for the utilization of data and AI services across banking environments.

 

HCLTech offset a good amount of financial services pressures, benefiting from its digital marketing, data management, digital workplace services and IT transformation. The company was better able to withstand macroeconomic impacts, owing to its software application portfolio as well as experience around data services. Further, the company’s client management strategy enables HCLTech to solidify client relationships, allowing it to capture smaller-scale budget-friendly projects that are geared toward improving business operations and client interactions.

 

Conclusion

Vendors have taken different approaches to capitalize on financial services opportunities as macroeconomic challenges ease. One approach is to focus on the insurance sector, which was more protected from the impacts of reduced customer budgets than the banking sector.

 

While HCLTech maintained a steady performance, generating growth in financial services when excluding 2Q24, its peers invested in portfolio offerings that aligned with trends and demand for data, customer experience, cloud migration and IT modernization. During the remainder of 2024 and into 2025, HCLTech and TCS will likely be stronger candidates for financial services engagements, leveraging large platforms and solutions such as the TCS BaNCS platform to lead the technology-driven transformation across the industry.

 

Further, Infosys could pressure its India-centric peers, leaning on recent investments to strengthen its professional services positioning, such as through the acquisition of in-tech, which bolstered the company’s engineering services.

 

TBR publishes quarterly assessments of these IT services companies as well as others in the IT services, cloud, software, consulting, telecom, infrastructure and devices spaces. To access all current and historical data and analysis, start your TBR Insight Center™ free trial today.

Ericsson Aims to Accelerate Network API Market Development via New Venture with Leading Global Telcos

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TBR Perspective

Ericsson’s Enterprise Wireless Solutions unit is exhibiting strong revenue growth and serves as a bright spot amid the company’s broader challenges. Ericsson has a compelling 5G-related portfolio that addresses the unique needs of enterprises ranging from SMBs to large industrial entities. Ericsson’s focus on enhancing its enterprise portfolio in areas including private cellular networks (PCNs), neutral host networks, fixed wireless access (FWA) and IoT will generate new revenue that will help to partially offset declining consolidated revenue, which is being negatively impacted by most Tier 1 operators decreasing network capex as they enter the later stages of 5G deployments.

 

Ericsson’s Enterprise segment has experienced challenges, however, namely declining revenue within its Global Communications Platform division, which includes Vonage. Ericsson appeared to overpay ($6.2 billion) for its acquisition of Vonage, which fits awkwardly within Ericsson’s historical core business and was primarily considered a down payment on developing a network API business with an unproven business model when it closed in 2022, and Ericsson has essentially confirmed that notion.

 

In October 2023 the company booked an SEK 32 billion ($3 billion) impairment charge on Vonage’s goodwill, writing off half of the acquisition price. The company took a further SEK 11.2 billion ($1.1 billion) noncash charge on the Vonage acquisition in July 2024. TBR believes Ericsson is correcting course, however, by more deeply collaborating with industry partners through its new network API joint venture, which will reduce fragmentation in the market and make it easier for developers to innovate and create new apps and use cases.

 

The joint venture will also provide Ericsson with a more risk-averse approach to tackling the network API opportunity by pooling funding and resources from the partners as the long-term market size for network APIs is uncertain. Ericsson will need to split proceeds from the joint venture with its partners, however, which will limit long-term revenue potential.

Ericsson Realizes the Need to Collaborate with Industry Partners to Accelerate Network API Development

The composition of Ericsson’s new network API joint venture, which currently does not have a formal name and is expected to close in early 2025 pending regulatory approval, entails Ericsson holding 50% equity in the venture, with the following telecom operators holding the remaining 50% of equity: America Móvil, AT&T, Bharti Airtel, Deutsche Telekom, Orange, Reliance Jio, Singtel, Telefonica, Telstra, T-Mobile, Verizon and Vodafone.

 

Vonage and Google Cloud will serve as channel partners for the joint venture, providing access to their ecosystems of millions of developers as well as their partners, and additional communication service providers (CSPs) and channel partners will be invited to join the entity in the future (Ericsson would maintain its 50% share in the venture if additional CSPs join). The goal of the joint venture is to create a platform that will provide network APIs to an ecosystem of developers, including hyperscalers, Communications Platform as a Service (CPaaS) providers, systems integrators and independent software vendors. The joint venture will be in alignment with existing industry network API initiatives, including the GSMA’s Open Gateway and the Linux Foundation’s CAMARA Project.

 

TBR believes the main benefit of the joint venture will be incentivizing developers to focus on the network API market by providing them with a simpler way to create apps at scale. For instance, developers currently need to engage with CSPs on a one-on-one basis to procure network APIs, which can be a slow and complex process. The joint venture aims to accelerate market development by providing combined common APIs that can work from any location or network. Reduced fragmentation will also speed market development as developers will be able to more fully concentrate on new use cases and applications rather than spending time modifying existing applications to make them compatible with networks on an operator-by-operator basis.

 

Industry projections for the network API market are wide ranging, with Ericsson citing McKinsey & Co.’s projections that the market will generate around $100 billion to $300 billion in incremental connectivity and edge computing-related revenue for operators by 2030 and that an additional $10 billion to $30 billion in revenue will be generated from the APIs themselves.

 

TBR believes the market size of the segment will mainly hinge on network APIs being able to provide developers with differentiated and compelling capabilities that are distinct from existing 5G capabilities that are available independent of network API access. Enhanced capabilities enabled by network APIs include differentiated connectivity, device-based location, security (e.g., authentication) and network insights.

 

Current primary use cases for network APIs include simplified secure login for devices and advanced network authentication to strengthen fraud prevention. Other main use cases include enabling enhanced location verification and more reliable connectivity to support point-of-sale platforms, as well as optimizing the user experience for entertainment services such as video streaming and gaming applications.

 

Ericsson’s joint venture will create competitive pressures for Nokia, which is providing network API solutions via its Network as Code platform. Nokia has at least 14 Network as Code CSP partners as of June and aims to have more than 30 partners by the end of 2024. Nokia may be challenged in meeting this goal, however, due to potential CSP partners possibly being swayed by the ecosystem and benefits provided by Ericsson’s joint venture. Ericsson’s CSP partners are not tied exclusively to the joint venture, however, and have the option to join Nokia’s ecosystem as well.

For IT Services Companies and Consultancies, the New Joint Venture Could be a Promising Change Agent in the Broader Ecosystem

From the perspective of global IT services companies and consultancies, such as Accenture, Infosys and Deloitte, Ericsson’s event theme, “Capture the value of enterprise 5G,” remained focused on Ericsson’s opportunities with and through telco operators while providing a modest opening for increased go-to-market and alliance activity.

 

Based on the event presentations, sidebar discussions with Ericsson leaders, and TBR’s analysis of Ericsson over the last two decades, we see two opportunities for Ericsson to enhance its ecosystem plays with IT services companies and consultancies that align well with Ericsson’s overall strategy.

 

First, TBR’s recent Voice of the Partner research shows that cloud and software vendors, OEMs, and IT services companies see 5G as a promising source of near-term growth, nearly on par with generative AI. To address their enterprise clients’ growing 5G needs, IT services companies and consultancies will need closer alliances with incumbent telcos and OEMs, including Ericsson. IT services companies and consultancies will not try to sell their own connectivity solutions but will readily partner to bring those solutions to their enterprise clients if informed, aligned and incented, particularly if the five-to-eight-times revenue multiplier applies to services attached to Ericsson’s hardware.

 

Second, TBR’s ecosystem reports, which cover a dozen leading global IT services companies’ relationships with Amazon Web Services (AWS), Google Cloud, Microsoft Azure, Adobe and Salesforce, confirm that scale remains a key differentiating characteristic, both for alliances managers across the ecosystem and enterprise clients looking for multiparty, well-orchestrated technology solutions. Ericsson’s joint venture with Google and the 12 operators could be highly appealing as an alliance partner, bringing IT services companies and consultancies into contact with new personas within their enterprise clients, which will create an expanded playing field for professional and managed services companies. In short, Ericsson’s new joint venture could be an ecosystem catalyst, provided the joint venture finds a go-to-market focus and well-led partnerships with the right IT services companies and consultancies.

Ericsson Launches Private 5G and Neutral Host Network Solutions Under its Ericsson Enterprise 5G Segment

At Ericsson Enterprise Industry Analyst Day in September, Ericsson reintroduced its Ericsson Enterprise 5G portfolio, which includes three solutions:

 

  • Ericsson Private 5G: A converged LTE/5G PCN solution with industry and licensed spectrum support
  • Ericsson Private 5G Compact: A U.S. CBRS-based solution designed for enterprises requiring connectivity that is more reliable than Wi-Fi. The solution was previously branded as Cradlepoint NetCloud Private Networks.
  • Ericsson Enterprise 5G Coverage: A turnkey neutral host solution that features certification from all Tier 1 U.S. operators. The solution can support up to three carriers per radio.

 

The relaunch of the Ericsson Enterprise 5G portfolio, in addition to the legacy Cradlepoint business now branded under this segment, will help Ericsson strengthen its messaging within the PCN market and better compete against Nokia, which TBR estimates is the second-largest PCN vendor by revenue globally (behind Huawei) and the largest when excluding China.

 

Ericsson Enterprise 5G Coverage is certified by AT&T, T-Mobile and Verizon, which will be a significant benefit as Ericsson aims to gain headway within the neutral host networks market. Neutral host networks are gradually gaining traction as they are easier to deploy compared to legacy distributed antenna systems (DAS) and can provide significant cost savings as they enable a single neutral host network to support customers from multiple operators without requiring each operator to deploy its own separate infrastructure.

 

Industrial sites, schools and hospitals are the primary locations where neutral host networks are initially being deployed, and Ericsson’s early customers for the solution include Toyota Forklifts in Indiana and engine manufacturer Cummins in New York.

Conclusion

TBR believes Ericsson is effectively positioning to capitalize on 5G-based solutions within the telecom enterprise space, including network APIs, PCNs and neutral host networks. Ericsson is aware that industry collaboration is essential for these segments to reach their peak potential, evidenced by the vendor’s initiatives including the formation of the network API joint venture and gaining certification from AT&T, T-Mobile and Verizon for its neutral host network solution.

 

Ericsson’s success in areas including network APIs, PCN and multi-access edge computing will be impacted by coopetition from hyperscalers within these segments. Though Ericsson has established partnerships with AWS, Google Cloud and Microsoft Azure within multiple portfolio segments, the company’s revenue opportunities will be limited as hyperscalers take a portion of revenue from enterprise deployments.