Layoffs, AI and Optimization: Exploring Top Trends of the Chaotic Digital Landscape

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Tech sector layoffs, generative AI (GenAI) and digital optimization are the three big trends generating excessive confusion and fear in a macroeconomic climate that has already been befouled by inflation smog and a potential debt default. Let’s walk through each separately, then tie them all together and close with a positive message about emerging technologies and economic growth.

Three Trends Explain the Messy Digital Landscape

Layoffs in Tech: News Noise Obscures the Fact that We’ve Landed Where Expected

In the Q&A portion of a recent TBR webinar, participants asked three principal analysts about implications from the recent rounds of layoffs, in both the tech sector and more broadly across the market, particularly in the U.S.

 

TBR’s Boz Hristov noted that hiring ramped up considerably during the pandemic and that the recent layoffs, while newsworthy, reflect a net increase in headcount over the last four years. Taking trends from as far back as 2017 and extending them to the first half of this year, you can see the pandemic hiring spike as an aberration and current staffing levels as what could have been expected in late 2019. Not great for the tens of thousands let go by the tech giants, but not a sign of the tech sector’s impending collapse.

 

Further, current layoffs provide a huge opportunity for enterprises to hire experienced IT staff, taking advantage of their skills and expertise as many enterprises push into the next wave of digital transformation (more on that below). TBR’s Chris Antlitz has noted that telcos have been constantly looking for automation and outsourcing opportunities, quietly restructuring their talent while also seeking more specialized skills.

 

Those specialized skills should now be more abundant in the market. So, for the short term, tech giants like Meta, Microsoft and even Accenture can fine-tune their margins by reducing overhead and headcount. In the longer term, enterprises might be better staffed with IT talent, forcing tech giants to hone their value propositions.

 

And inevitably generative AI will be part of every technology player’s value proposition: If generative AI is not top of mind for your business leaders, it should be.

Robots Aren’t Hiring Robots — Yet

Let’s start with Boz’s most disruptive observation (yes, even just an observation can be disruptive): Why does an enterprise need to deploy a robotic process automation (RPA) solution if ChatGPT can write code? Why pay for any of the RPA vendors or their consulting partners if generative AI leapfrogs what RPA tools can do while eliminating the middle steps between identifying what can be automated and going full speed ahead? Within the IT services and consulting space, RPA vendors may provide the best examples of adapting to — or failing to adapt to — emerging realities around generative AI.

 

From the time you started reading this blog post to now, another company has launched its AI-enabled solution. Hype, greed and fear cloud the marketplace right now. Over the next six months, TBR expects to see quiet markers of clarity and sensibility, relentless marketing, and, eventually, some clear leaders in the early days of generative AI. What’s happened with digital transformation provides a useful road map for where GenAI could be headed.

Tell Me About Optimization, Not Transformation

Digital transformation evolving toward digital optimization has emerged as a persistent theme in TBR’s Voice of the Customer research. Enterprises that undertook digital transformation initiatives pre-pandemic now need iterative — not transformative — change and expect IT services vendors and consultancies to help with optimization, aka cost-cutting and faster return on investment.

 

IT budgets won’t contract in the latter half of 2023, but the money will be spent keeping the (technology) lights on, securing the enterprise, and making incremental improvements that reduce costs. That isn’t exciting or agile or disruptive, but it’s the reality for most enterprises in the current macroeconomic environment. And for enterprises slow to the digital transformation game, they can now hire experienced tech talent (recently laid off by Meta, Microsoft and others) and use generative AI and automation to accelerate their time to digital transformation value. Like how we pulled all those trends together?

It’s All Good as Long as There’s a Little Chaos and a Lot of High Expectations

Here are the real positive notes: 1) confusion and uncertainty fuel consulting, 2) everyone expects their tech to work and everyone has had at least one suboptimal experience with AI, so 3) growth opportunities will abound for IT services vendors, consultancies, tech vendors and telcos.

 

To learn more about the impact these trends are having on the digital landscape, watch our recent webinar “How the Latest Trends in IT Services & Telecom Influence the Evolving Digitally Enabled Ecosystem” for free now

 

PTC Liveworx Showcases Evolving Alliances and Trends in Partnering

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Recently, TBR attended PTC’s Liveworx event in Boston, where we spoke with PTC’s consulting, global systems integrator and cloud partners about their evolving alliances with PTC and the competitive landscape.

 

The sheer scale of the event — in attendees as well as booths and presentations — was only matched by the scale of stuff: huge trucks, factory mock-ups, bikes,  countless 3D printers, and product life cycle management and factory-of-the-future solutions. It was an IoT, manufacturing and networking candy store. It was also an exceptionally smoothly run event, with plenty of plenary sessions, breakouts and opportunities to speak with PTC professionals and their technology alliance partners.

 

One main stage speaker summed up the vibe as: “an asset-centric view of digital transformation.” TBR has attended countless events featuring or centered on digital transformation, but Liveworx definitely brought the physical world to the digital space.

 

As a 25-plus year veteran of the IT and OT space told TBR in a Voice of the Customer interview, “So you won’t actually go out to just a product management type of work coming from software companies. You want a very reliable overall infrastructure, and we are talking hardware and we are talking physical world. The digital will become more and more your playground where you just kind of simulate when you just kind of understand what else can I add to my overall infrastructure to my operations. We can’t afford to actually take our eyes away from what is happening in the physical world. That’s where the advantages are gonna come.”
 

 

3 Alliances Trends: Selling, Trust and Engineering DNA

Sell to, Sell Through, Sell With

In each discussion with PTC’s services partners, including Deloitte, HCLTech, Infosys, L&T Technology and Capgemini, TBR asked about go-to-market strategies and how services vendors evaluated their opportunities with PTC. While everyone praised PTC’s technology, sales teams and overall approach to the market, only a few said PTC brings clients directly to them.

 

If any one element separated the vendors listed above (since almost everything below is uniform across them all), it was whether, when and how PTC brought these partners into engagements; some claimed long-standing relationships or particular technology or services expertise made PTC inclined to bring them to the table with new clients. (Although these same vendors also said PTC treated everyone fairly — see below.)

 

In TBR’s view, this remains a tricky component of the partner landscape, requiring careful management as PTC continues to grow and adds new — possibly strategic — partners to its ecosystem.

It’s Good Doing Business With PTC

Not surprisingly, every IT services vendor and consultant TBR talked to spoke highly of PTC — this was PTC’s event, after all, and the attendees all spoke about various engagements they’d worked on that included PTC as a partner.

 

Pressing for specifics on what separated PTC from other technology and software partners, TBR heard variations on the same three themes: breadth of portfolio, ease of doing business and trust around being treated fairly. Everyone spoke about working with specific PTC offerings and added that they were familiar with the full breadth of PTC’s portfolio and were reasonably comfortable bringing all of PTC to their clients.

 

In TBR’s view, having an end-to-end or comprehensive portfolio isn’t a critical component for growth in the technology ecosystem; educating your partners on what you can do is. PTC’s consulting and services partners indicated PTC was better than average at sharing knowledge and explaining its portfolio, but still had room to grow. Undoubtedly, four days of demonstrations and presentations at Liveworx helps.

 

On the last point — that vendors trust PTC to treat them fairly — the physical setup of the partner booths at Liveworx made it easy for TBR to ask direct questions about competing for PTC’s wallet — and mindshare. “Do you think you’re getting the same opportunities as those guys right behind me?”

 

Without exception, every consultant and IT services professional said they believed PTC followed the leads of clients and/or partners but didn’t favor any particular services vendor in a competitive situation. TBR maintains healthy and informed skepticism around any vendor professing to be agnostic and the uniform responses may have reflected the environment (standing in space surrounded by PTC), but the message remains the same: PTC partners well.

‘Engineering Is In Our DNA’ — Yes, and Everyone Else’s DNA, Too

Every IT services vendor and consultancy TBR spoke with described their own product engineering expertise as differentiating them from competitors at the event and in the broader market. TBR heard multiple versions of “engineering is in our DNA” and “we have the most [certified] [experienced] [skilled] engineers,” leading TBR to look around and consider which vendors — of those mentioned above — weren’t in attendance and what their absence might say about relative product engineering offerings and capabilities.

 

One consultant, after noting her experience working with PTC’s products while at a previous employer, said she’d been asked to be at Liveworx explicitly because she could credibly talk with PTC clients and other partners about engineering challenges and her consultancy’s expertise.

 

Fittingly, her comments echoed the “asset-centric view of digital transformation” heard on the main stage. While product engineering capabilities separated the consultancies and IT services that were present from their no-show competitive peers, TBR struggled to discern differences, other than scale, among the attendee vendors. Over the next few months, TBR will dive deeper into these vendors’ engineering practices.

What’s Next?

TBR publishes detailed research on the top 10 IT services vendors’ relationships with the three hyperscalers — Amazon Web Services, Google Cloud and Microsoft Azure — and will replicate that approach with the top platform and software vendors, potentially including PTC. Stay tuned!

 

SoftwareOne Acquires Beniva in ServiceNow Expansion Play

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In a discussion with TBR, SoftwareOne’s regional vice president & transformation leader, explained that the acquisition of Beniva would help SoftwareOne move more expansively into the ServiceNow space, but in a manner that plays to two of SoftwareOne’s strengths: value-added software reselling and ITAM services.

Building on ITAM strengths and adding ITOM capabilities

On May 17, SoftwareOne announced its acquisition of Calgary-based ServiceNow boutique consultancy Beniva Consulting Group. According to SoftwareOne, the 75-person firm generated more than 70% of its revenue from Canadian clients and the rest in the U.S. SoftwareOne informed TBR that while Beniva focused on ServiceNow engagements, the firm’s revenue came from equal parts IT Asset Management (ITAM) and IT Operations Management (ITOM).
 
In a discussion with TBR, Kevin Hooton, SoftwareOne’s regional vice president & transformation leader, explained that the acquisition would help SoftwareOne move more expansively into the ServiceNow space, but in a manner that plays to two of SoftwareOne’s strengths: value-added software reselling and ITAM services. Hooton added that Beniva’s consultants will help SoftwareOne in mapping clients’ IT application ecosystem and then providing a road map for a multi-year efficiency and cloud migration and application modernization. In addition to the ITAM space, where SoftwareOne has a well-established and growing practice, Beniva will open opportunities with clients around the CMDB and establishing trustworthy data.  Furthermore, Beniva adds capabilities in event management in the growing operational technology space. Overall, Beniva a will complement and extend one of SoftwareOne’s core values to clients: take out IT redundancies and reduce IT costs while improving efficiency, speed, and time to transformation.

 

In addition to the ITAM space, where SoftwareOne has a well-established and growing practice, Beniva will create opportunities with clients around event management in the operations technology space. Overall, Beniva will complement and extend one of SoftwareOne’s core values to clients: take out IT redundancies and reduce IT costs while improving efficiency, speed and time to transformation.

TBR assessment: New buyers, comfortable sales motion and more to come

In TBR’s view, the Beniva acquisition says a few things about SoftwareOne and the broader IT services and software ecosystem. First, Beniva’s client relationships and 7-year-plus track record help SoftwareOne continue to attract a new set of buyers, moving beyond just software procurement. As TBR has discussed with SoftwareOne at length over the last year, the company’s growth will likely closely correlate with expanded footprints at existing clients, requiring SoftwareOne’s sellers to find new buyer personas. Beniva should help with this.

 

Second, given ServiceNow’s market penetration, SoftwareOne needs to be a significant ecosystem player for attracting ServiceNow opportunities. While SoftwareOne is unlikely to surpass KPMG or Deloitte in scale, it can gain market share around ServiceNow by applying an approach SoftwareOne’s salespeople know exceptionally well: asking prospective clients, “Are you really getting all you can from your software? Let’s find out.”

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One more thought on SoftwareOne: Beniva’s revenue per employee ratio is higher than SoftwareOne’s, indicating higher-value services and average deal sizes, potentially testing SoftwareOne’s ability to easily integrate Beniva. Successfully folding in Beniva and its services could help chart SoftwareOne’s road map: fewer services clients, but larger-value offerings with deeper expertise, creating a high profitability and growth business.

 

Third, acquisition season is back, especially for technology-specific talent, such as ServiceNow, SAP and Amazon Web Services (AWS) specialists. TBR’s research indicates the three cloud hyperscalers — AWS, Microsoft Azure and Google Cloud Platform — value trained and certified resources at their partners more than any other evaluation criterion.

 

TBR believes ServiceNow, Salesforce, SAP and similar technology vendors concur. Consultancies, global systems integrators (GSIs) and, increasingly, VARs will need to prove they have the skilled talent, scale and acquisitions to remain the fastest path to credibility and sales — or, in consulting speak, people and permission. SoftwareOne continues expanding on both, and this Beniva acquisition further extends its capabilities and brand.

 

For more information on SoftwareOne, see TBR’s previous special report and blog post, as well as an upcoming special report on SoftwareOne’s inaugural analyst event in Milwaukee.

What Is Driving Wireless Revenue Growth for U.S. Operators?

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Despite the relatively mature smartphone market, the majority of U.S. telecom operators were able to sustain year-to-year wireless revenue growth in 4Q22. Though inflation is limiting discretionary spending, operators are withstanding these pressures as wireless connectivity remains essential to most consumer and business customers. However, operators are being impacted by certain customers seeking lower-priced service plans to accommodate their tighter budgets, which is spurring operators to introduce new entry-level service plans, such as Verizon’s Welcome Unlimited plan.

 
Continued subscriber additions remained a main driver of wireless revenue growth. Connection growth among businesses is a predominant source of subscriber additions as companies are providing employees corporate lines and devices to accommodate hybrid work environments as well for security reasons, such as keeping corporate data and applications separate from employees’ personal devices.
 
Connected devices are also helping to drive subscriber growth, especially in areas including wearables such as the Apple Watch as well as connected car, which is generating millions of new quarterly connections for AT&T. Fixed wireless access (FWA) has also become a more predominant source of connection growth as T-Mobile’s and Verizon’s FWA services continue to outperform cablecos and other broadband providers in subscriber additions as the cost savings offered by FWA are appealing to customers amid inflationary pressures.
 
In addition to continued subscriber growth, higher average revenue per user (ARPU) is a significant driver of wireless revenue growth for U.S. operators, as a result of customers migrating to premium unlimited data plans to take advantage of incentives including subscriptions to video and music streaming services, 5G coverage without throttling limits, and increased high-speed mobile hotspot data allotments. ARPU is also benefiting from increasing international roaming revenue as travel activity gradually returns to pre-pandemic levels.

 

To learn more about the go-to-market and operational strategic shifts of U.S. operators amid inflationary pressures, watch our recent webinar “Competitive Landscape Shifts: Key Trends Impacting the U.S. Wireless Market” for free now

 

Why Federal IT Contractors and Commercial Tech Firms Need to Align

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Gimme 3 — Insight Interview with TBR’s Subject-matter Experts

In TBR’s new blog series, “Gimme 3 — Insight Interview with TBR’s Subject-matter Experts,” Principal Analyst Patrick M. Heffernan discusses our latest and most popular research with our analyst team. This month Patrick chats with TBR Federal IT Services lead and Senior Analyst John Caucis on the U.S. federal IT operations of market newcomers Accenture, CGI and IBM.

 
Patrick: Let’s start with Accenture Federal Services (AFS). A scenario in the new Accenture Federal Services Vendor Profile details a partnership bringing Leidos into a Centers for Disease Control and Prevention (CDC) engagement as a subcontractor to AFS. How often have you seen this previously, Leidos as a subcontractor to AFS or a similar commercial-centric IT services vendor that happens to do U.S. federal work, too?
 
John: Commercially focused technology companies are most certainly accelerating their push into the federal IT market and looking to ally more closely with their counterparts in federal IT, which are the traditional federal systems integrators, or to act as subcontractors on big-ticket IT programs. It really comes down to the simple fact that the emerging technologies being adopted by federal agencies to drive true digital transformation have been mostly developed and refined in commercial markets by commercially centric IT vendors. The commercial players have the tech, but the federal systems integrators know the rules of engagement and how to navigate the often onerous federal technology procurement process. So they need each other, in essence.
 
Commercially centric technology companies with a robust, long-standing or well-established U.S. federal business — for example, Accenture, CGI and increasingly IBM — have an advantage over other commercial tech firms that have the technology but don’t have a federal organization or experience. Google, for instance, just stood up a more formal government-focused organization in mid-2022, Google Public Sector, to target cloud, analytics and security opportunities at the local, state and federal levels in the U.S.
 
It’s generally more common for a contractor the size of Leidos (the biggest systems integrator, by revenue, tracked in TBR’s Federal IT Services Benchmark research program) to act as a prime contractor on large awards, but Leidos has its share of programs on which it participates as a subcontractor.
 
What caught my eye about the Leidos-AFS collaboration was not so much that Leidos was acting as a subcontractor to AFS, but that AFS was likely taking the lead as the prime on this award because of its cloud capabilities. AFS has been gaining significant traction in federal IT by leveraging the capabilities, expertise and partner relationships of the Accenture Cloud First business unit. I suspect Leidos was chosen as a key sub on the program due to its leadership in federal health IT and its long-standing relationship with the CDC, which includes bioinformatics-related analytics, data management and high-performance computing.
 
I also suspect Leidos will be called upon primarily to provide systems integration work (e.g., application services, project planning and management, and some cloud-related services) while AFS defines and maps out the cloud migration pathway.
 
AFS will also leverage the robust suite of cloud solutions provided by its parent company, including the Velocity accelerator jointly developed by Accenture and Amazon Web Services (AWS); CloudTracker, a comprehensive decision-enablement tool for cloud governance and cloud utilization that is available for Microsoft Azure and AWS; and solutions acquired as part of the 2021 acquisition of Novetta.

Watch Now: The Bull Market in Federal IT Will Continue in 2023

 


Patrick: Turning to CGI, you described the vendor as having a “natural fit” with ServiceNow as a strategic partner. And you say ServiceNow is on a hiring spree for federally focused tech talent. Any worries these two partners might be directly competing for people in an already frothy talent market?
 
John: They certainly could be competing for new hires, though the recent wave of layoffs in commercial technology may ease some of that competition as more technology workers become available. Even if these resources are not local to the Washington, D.C., area, the leading federal IT contractors have all been investing to expand internal IT and human resource management capabilities to accommodate an increasingly geographically distributed technology workforce. Offering potential new hires flexibility in work location has become table stakes in federal IT recruiting.
 
I think the real key with ServiceNow is that it has been more specifically looking to onboard partners in all verticals that bring robust, homegrown intellectual property to the table. CGI certainly fits the bill with its global IP30 initiative to grow revenue generated from its ever-expanding suite of proprietary digital technologies.
 
Patrick: I know this is supposed to be three questions, but one quick follow-up on CGI: I was struck by how much the new CGI Federal Vendor Profile highlights CGI’s alliances, particularly those with ServiceNow and MuleSoft. Do you see CGI’s ability to bring together ecosystem partners and deliver alliance vendors’ technologies as a differentiator for CGI in the federal space?
 
John: It will be a near-term differentiator, but that differentiation will be short-lived. The leading federal systems integrators like Leidos and Booz Allen Hamilton have highly refined partnership management structures and strategies, and they have leveraged these assets to establish their market and technology leadership positions in federal IT.
 
Federal IT contractors with less mature partnership ecosystems have been aggressively working to address this competitive shortcoming over the last few years. General Dynamics IT, for example, has been actively bolstering its partnerships with commercial cloud leaders since 2020 and recently formed a collaboration with five leading commercial technology companies to promote 5G adoption in the federal market.
 
Patrick: Final question, on IBM. You noted two important acquisitions by IBM over the last 18 months. Do you anticipate the company has more buying to do as a way to expand in the federal space, or do you expect it to focus on assimilating the new talent and technologies?
 
John: IBM’s federal practice needs to leverage the fiscal resources available to it from the parent company to narrow the revenue and capabilities gap with federal IT peers and win a growing share of work as a prime contractor. The acquisition of Octo Consulting was a forthright move to accomplish this, but IBM Consulting still has more work to do. I fully expect IBM to make additional purchases in the coming 12 to 24 months, particularly if valuations begin to recede and interest rates begin to decline.
 
Patrick: Thanks, John, and I look forward to seeing your analysis of these vendors in TBR’s quarterly Federal IT Services Benchmark.
 

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How Important Are Vendor Ecosystems in Network Services Deployment, and How Are They Evolving?

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For prime contractors, managing an ecosystem of subcontractors is a constant challenge. These challenges are prompting vendors to reevaluate their subcontractor ecosystem strategies, driving change in the makeup of subcontractor ecosystems as well as the approaches used to manage partners.

 
The Fiber Optic Association (FOA) predicts that the number of homes in the U.S. passed by fiber networks will increase from 68 million in 2022 to 137 million by 2026. The cost and timeline of fiber network rollouts are largely predicated on the labor associated with network construction and deployment; 60% to 80% of the costs of a fiber network stem from labor activities.
 
Fiber network rollouts are large, complex and long projects. They are often nationwide in scope and require a diversity of technical skills at different times and for different durations. Telecommunications operators often hire prime contractors such as Tier 1 engineering, procurement and construction (EPC) firms or telecom OEMs to build their fiber network. However, given the scope and scale of these projects, even the largest EPC firms and OEMs must rely on an integrated and orchestrated ecosystem of subcontractors, product providers and other partners to successfully execute projects. For example, it has been reported that AT&T works with 700-plus contractors, while Google Fiber used approximately 50 subcontractors to build its network in San Antonio and Austin, Texas.
 
For prime contractors, managing an ecosystem of subcontractors is a constant challenge. Some of the pain points prime contractors face include:

  • Finding qualified subcontractors amid labor shortages and a declining telecom workforce
  • Competing with peers for subcontractors
  • Managing subcontractors on projects (e.g., coordinating delivery timelines, reporting, enforcing quality assurance procedures, handling payments)
  • Addressing subcontractor issues in the field with the client and/or local municipalities
  • Building a supplier management function

 
These challenges are prompting vendors to reevaluate their subcontractor ecosystem strategies, driving change in the makeup of subcontractor ecosystems as well as the approaches used to manage partners. Some of these changes we’re tracking for 2023 and beyond include:

  • Emergence of new commercial models to appeal to subcontractors
  • Fluctuation in subcontractor rates and unit pricing to overcome supply shortages
  • Increased emphasis on technology adoption to help manage and orchestrate suppliers
  • Emergence of new sourcing models such as crowdsourcing
  • Innovation, including automation of service delivery tasks across the program life cycle to reduce overall dependence on subcontractors and other laborers
  • Vertical integration of suppliers

 

To learn more about how vendor ecosystems in network service deployment are evolving, watch our recent webinar “Optimizing for Telecom Network Deployment Services Opportunity in 2023 and Beyond” for free now

 

Changes in MI/CI Observed by TBR

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Doing more for less can take many forms, but based on our conversations with CI/MI profiles, we believe there are three key ways teams can do more with less in 2023

What’s the Biggest Change Observed in Competitive/Market Intelligence in ’23?

The biggest change for CI/MI (competitive intelligence/market intelligence) in 2023 is the intensification of the “do more for less” mandate. Doing more for less has always been part and parcel of the CI/MI experience, but it’s particularly true in 2023.
 
Macroeconomic conditions are prompting technology vendors to maintain or trim CI/MI headcounts and budgets and make do with currently available resources. At the same time, CI/MI has never been more strategically vital to organizational success, creating consistent demand for strategic and tactical CI/MI support. There’s an emphasis on quantifying the value of CI/MI deliverables.
 
We see this trend materialize in CI/MI requests for deeper data and insights on existing competitors, as well as extended coverage of Tier 2 and Tier 3 emerging competitors, players in adjacent industries, and ecosystem partners. Merely drawing on public resources is no longer sufficient, particularly given the CI technology platforms available, and direct-from-field customer insights on competitors are considered a requirement.

How Can CI/MI Respond to the ‘Do More For Less’ Mandate?

Doing more for less can take many forms, but based on our conversations with CI/MI profiles, we believe there are three key ways teams can do more with less in 2023:

  • Leverage technology: CI/MI platforms can help you automate the recurring tasks associated with insights collection, freeing you up for higher-value tasks. Conversational intelligence and related tools provide access to direct customer insights to amplify the quality of your CI/MI deliverables. In a not-so-distant future, generative AI platforms will further augment CI/MI.
  • Establish a CI/MI value program: Engage with your CI/MI stakeholders to understand what deliverables are truly valuable, and quantify that value. Identify areas where you may be able to reduce or minimize produced under-leveraged deliverables.
  • Partner with third parties: Third-party analyst firms, competitive intelligence agencies, win/loss providers, and other partners in your MI/CI ecosystem have access to data and resources you likely do not, which will solidify your ability to do more.

 

To learn more about the state of CI and MI in 2023, watch our recent webinar “State of Technology, Telecom and Professional Services in Competitive Intelligence in 2023” for free now

 

Comcast Business Showcases Significant Progression Toward Becoming a Leading Global Provider of Secure Networking Solutions at 2023 Analyst Conference

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A select group of industry analysts gathered at the Comcast Technology Center in Philadelphia in March 2023 to hear from Comcast Business leaders about the company’s progress and success around its network and technology capabilities, go-to-market strategies and emerging portfolio segments. The event included a state-of-the-business update from Bill Stemper (president of Comcast Business) and Dave Watson (president and CEO of Comcast Cable), and an update on Comcast’s consolidated business performance from Brian Roberts (chairman and CEO of Comcast Corp.), as well as presentations focused on areas including the Masergy acquisition, portfolio strategies, customer case studies and security. The event also included roundtable sessions in which analysts participated in detailed discussions with Comcast Business executives around specific business areas.

TBR Perspective

The 2023 Comcast Business Analyst Conference showcased the company’s significant progress since its last on-site analyst conference held in September 2019. The event highlighted the company’s evolution from primarily serving local small businesses with traditional connectivity solutions during its infancy to its current ambition of competing as a leading global provider of secure networking solutions, supported by the Masergy acquisition and Comcast Business’ burgeoning enterprise business.
 
TBR believes Comcast Business is steadily gaining market share from rival service providers, as the company grew its annual revenue to approximately $10 billion in 2022 and its customer base to over 2.5 million customers. Unlike its largest competitors, AT&T, Verizon and Lumen Technologies, Comcast Business is not challenged by customer erosion from legacy network solutions as the company continues to enhance its hybrid-fiber-coax (HFC) network, including through the implementation of DOCSIS 4.0 technology over the next several years. Comcast Business is also targeting growth through its Masergy acquisition and adjacent solutions in areas including mobility, SD-WAN, unified communications, security and IoT, and multiple executives reiterated during the event the company has the potential to take up to $80 billion (including in off-net markets) in market share from its rivals.
 
Comcast Business faces challenges, however, that will limit the company’s market share. These challenges include competitors that are expanding their fiber networks, the growing availability and adoption of fixed wireless access (FWA) services, and businesses implementing 5G private cellular networks independently or with competitors.

Impact and Opportunities

Comcast Business Advances Enterprise and Midmarket Opportunity Via Masergy Acquisition

Comcast Business is expanding its footprint among enterprises and midmarket businesses through its Masergy acquisition, in which Comcast inherited Masergy’s existing base of about 1,400 customers in 100 countries. The Masergy purchase builds on prior acquisitions including Deep Blue Communications, Blueface and BluVector, and has enabled Comcast Business to strengthen its managed services portfolio in areas including SD-WAN, Unified Communications as a Service (UCaaS), security, and Call Center as a Service (CCaaS). The acquisition is also providing significant cross-selling opportunities, especially among U.S.-based companies with multinational operations, as Comcast’s network provides a strong backbone to support Masergy’s portfolio. The Masergy acquisition has significantly expanded Comcast Business’ distribution channels as Masergy leverages indirect channel partners for about 90% of sales, whereas Comcast Business has historically leveraged its direct sales channels for about 90% of sales and its indirect channels partners for the remaining 10% of sales.
 
The Masergy acquisition, which closed in October 2021, was timely for Comcast Business as it enabled the company to more effectively capitalize on the transition to distributed workforces spurred by the pandemic. To support hybrid work environments, Comcast Business is leveraging Masergy’s portfolio in areas including unified communications and SD-WAN solutions, augmenting its existing remote work solutions such as Comcast Business at Home, which offers enterprise-grade in-home connectivity solutions that are billed to employers. Additionally, Masergy’s robust cybersecurity capabilities, which are supported by its Fortinet partnership, help reassure Comcast Business clients as their organizations implement SASE (Secure Access Service Edge) network architecture to safeguard their distributed workforces.

Comcast Business Will Enhance its Network Capabilities as it Transitions to DOCSIS 4.0

Broadband services remain at the core of Comcast Business’ strategy due to all companies’ essential need for internet access, which in turn provides Comcast Business with the opportunity to upsell and bundle adjacent services such as SD-WAN. Comcast is in the early stages of its current network evolution strategy, dubbed the Xfinity 10G Network, which includes the transition to DOCSIS 4.0 technology beginning in 2H23 in initial markets to enable symmetrical, multigig speeds. Comcast expects to expand DOCSIS 4.0 availability to reach 50 million homes and businesses by the end of 2025.
 
The move to DOCSIS 4.0 technology will enable Comcast Business to optimize service quality as data usage continues to escalate and will support clients as more companies implement advanced technologies that require higher bandwidth and lower latency, such as AR/VR, AI and machine learning, to transform their businesses over the next several years. The move to DOCSIS 4.0 also entails Comcast furthering its implementation of virtualized network technologies, including the deployment of a virtual cable model termination system (vCMTS), which will provide internal cost savings and enable Comcast to more easily implement the latest software solutions and more quickly respond to customer service disruptions.
 
Comcast Business will face competitive challenges from rivals including AT&T, Lumen and Verizon, all of which are expanding their fiber footprints aided in part by government stimulus. Though TBR believes Comcast Business’ current network capabilities will be sufficient to compete against rivals’ multigig fiber offerings for most customers, Comcast Business could face potential disruption from competitors launching aggressive promotional pricing offers in tandem with their fiber rollouts. Comcast Business is also facing competition from FWA providers, though to a lesser extent compared to Comcast’s residential business.
 
TBR believes the greatest disruption from business FWA services providers is occurring among small businesses, which are seeking to reduce connectivity expenses, as well as companies that need to quickly launch new branch locations as FWA is quicker to install compared to fixed broadband. TBR believes FWA disruption is less prevalent among larger enterprises due to their more stringent network requirements and service-level agreements, though many companies have begun deploying FWA as a backup failover solution in case their primary fixed broadband connections are disrupted.

Comcast Business Positions for Growth in the Wireless Market

Comcast Business is positioning to support its clients’ wireless needs, including through the launch of Comcast Business Mobile in July 2021. TBR believes the offering is gaining traction due to its competitive price points as well as its ability to enable businesses to enroll in wireline and wireless services from the same provider. Comcast Business Mobile is also helping to accommodate businesses as they shift from fixed voice services to using wireless voice services exclusively. Comcast Business Mobile availability is currently limited to small businesses that have a maximum of 20 lines. TBR believes expanding Comcast Business Mobile to midmarket and enterprise customers would help the company further its traction within these segments as rivals including AT&T and Verizon remain entrenched in certain larger clients due to their ability to combine wireline and mobility solutions as part of clients’ contracts.
 
Private cellular networks are an emerging segment for Comcast Business as the company has deployed these networks at initial locations including the Wells Fargo Center and the Arlen Specter US Squash Center in Philadelphia; and the Sonoma County Fairgrounds in Santa Rosa, Calif.; and the Sound Hotel Seattle Belltown. Though Comcast expects fixed broadband connectivity paired with Wi-Fi will remain sufficient for most use cases in the foreseeable future, leveraging private cellular networks will enable Comcast Business to tailor its solutions to clients’ needs and position the company to support advanced solutions in areas such as IoT and computer vision that are more suitable for 5G.
 
Comcast Business also briefly discussed the opportunity the edge computing market provides, though the company has yet to announce a commercial offering within the segment. TBR believes Comcast’s vast real estate footprint, including its central offices, would provide a strong foundation for Comcast Business to compete in the edge computing market, though establishing partnerships with hyperscalers such as Amazon Web Services, Microsoft Azure and Google Cloud would be vital due to their foothold and technology advantages within the market.

Conclusion

Comcast Business is well positioned to sustain revenue growth over the next several years through its core broadband services, growing portfolio of value-added services, and cross-selling opportunities provided by the Masergy acquisition. Creating a stickier ecosystem through adjacent services such as Comcast Business Mobile and SD-WAN will help the company retain its core base of business broadband subscribers as it faces competitive pressures from rivals’ fiber, FWA and private cellular network offerings. Additionally, by advancing its network capabilities via DOCSIS 4.0 as well as its foray into 5G private cellular networks, Comcast Business will position itself to retain clients long-term as they seek to support next-generation use cases and applications.
 

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What’s Next for Innovation and Transformation Centers?

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Gimme 3 — Insight Interview with TBR’s Subject-matter Experts

In TBR’s new blog series, “Gimme 3 — Insight Interview with TBR’s Subject-matter Experts,” Principal Analyst Patrick M. Heffernan discusses our latest and most popular research with our analyst team. This time Principal Analyst Bozhidar Hristov turns the tables on Patrick and asks him about trends and emerging ideas coming from TBR’s March 2023 Innovation and Transformation Centers Market Landscape.

 
Boz: So tell me, with all the news around macroeconomic volatility and buyers reassessing their budget priorities, how are vendors handling investments in innovation and transformation centers? In the report you wrote, ‘Vendors will try new strategies to make innovation and transformation centers essential again.’ Are there any vendors that stand out, and what makes them special?
 

Patrick: Just like children, every vendor shows specialness in its own unique way. Consultancies with the most developed centers — the Big Four, essentially — have already started trying some new approaches. EY has walked us through the metaverse in its wavespaces. KPMG’s Ignition Centers increasingly include technology partners front and center, something we at TBR have been advocating for years. And I’m expecting PwC will tap into its deep talent pool and find some creative approaches to bring the firm’s Experience Centers closer to clients.

 

It’s also worth watching how the technology vendors bring their consulting and SI partners into their spaces, expanding from tech showrooms into true innovation and business transformation centers. That’s all client-facing. Internally, I think the arguments for more investments will come down to making the best case for the broader benefits of these centers, including talent attraction, retention and training, as well as knowledge-sharing and brand improvement.

 

 

Boz: That makes me wonder what is the future of innovation and transformation centers? How much are vendors thinking about these physical locations as a touch point to drive managed services? Or even further, do you see vendors using managed services as an entrée to consulting/innovation workshops

 
Patrick: A thousand percent, yes. Enhancing stickiness with clients and exposing clients to the breadth of services were two of the fundamental motivating factors behind setting up these centers a decade ago, and those challenges remain.
 
The Big Four naturally use consulting to drive managed services opportunities. Making that pivot toward introducing new consulting opportunities to managed services clients requires a firmwide cultural shift — and that’s something these centers can provide: a catalyst for internal change, not just helping clients transform.
 
More fascinating, and maybe where you were going with your question, is will the traditional, managed services-heavy IT services vendors get into this game, building up innovation and transformation centers as a way of speeding up their penetration into consulting?
 
If I were advising an India-centric vendor right now, I’d tell it to create a Venn diagram of industry strengths, top clients and strategic technology alliances and note the cities that excel in each area. The cities that offer all three areas — the middle of the Venn diagram — should be considered as candidates for new innovation and transformation centers. Some have started, to a degree. Tata Consultancy Services (TCS) has its Pace Port in New York City, which we visited, and has opened a new one in Pittsburgh. I think it needs to triple its investment in people for these centers and then use them to introduce established managed services clients to the broader expanse of TCS’ offerings, including consulting around innovation and transformation.
 
Boz: So connect that to our ongoing research in digital transformation and IT services: What would be the role of the partner ecosystem in such a model? Are there vendors that are making these bold moves and trying to leapfrog the competition and monetize these facilities through different lenses
 
Patrick: Perhaps inadvertently you’ve raised one of the trickiest elements: measuring success. Everyone we’ve spoken to over the last eight years or so has described some way of “monetizing” these facilities, often coming up short because the financial impacts and the nonfinancial benefits — like building talent, firmwide knowledge sharing and brand awareness — are so difficult to measure. So I don’t expect bold moves, but I think we will see three trends mature and evolve in new ways.
 
First, hybrid will die. No one perfected bringing balanced and equally optimal experiences to in-person and virtual attendees at the same time. What was a tolerable fix from 2020 to 2022 just won’t be acceptable much longer. Second, vendors’ new centers — and there will be newly launched centers — will be localized, industry-centric and fully staffed, as well as cobranded with technology partners. Some centers with those characteristics exist now, and every new center opening this year and next will follow that broad blueprint. A great example right now is EY’s wavespace at Nottingham Spirk.
 
Third, you said, “leapfrog the competition,” and I think that was a mindset in the early stages of these centers, when PwC and Deloitte set the example and others tried to emulate and accelerate past them. But now I think IT services vendors and consultancies will look less at leapfrogging the competition and more at ensuring these centers reflect core competencies, ecosystem alliances and customer focus.
 
On that last element, IBM and Accenture have both brought “customer” or “client” explicitly back into the names for their centers, and among the issues I’ll be tracking closely this year is how those new centers evolve.
 

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Top 10 Impacts for CI & MI Teams in 2023

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In February 2023 TBR surveyed its client service teams on the state of competitive and market intelligence in 2023. One megatrend stood out in those results — change.

 

Change comes in many forms. At the highest level, changes within the markets companies play in place new burdens on the type and volume of intelligence. Teams, budgets and organizational structures change constantly. Change can also be its own challenge; markets and teams change, but the need for CI/MI and the deliverables that CI/MI professionals create does not change.

 

Change typically requires the most precious resource CI/MI professionals have — time. Time is under constant pressure, as CI/MI professionals are asked to do more with less. In many recent cases, this even means doing CI/MI without the benefit of a shared and centralized budget, resources and leadership structure.

 

As changes continue to disrupt the profession, CI/MI teams and professionals will increasingly look outside for help. They will seek out technologies, third-party analyst and research firms, and other tools that can help them automate and optimize CI/MI and free up available time for the most high-value, impactful projects.
 

Download State of Competitive and Marketing Intelligence in 2023 White Paper



 

Top 10 Impacts for Competitive and Market Intelligence Professionals in 2023

  1. Ecosystems of Competition

Demand for CI/MI continues to grow because markets are becoming more competitive. They are not just crowding with small, ankle biter competitors, either. Markets are converging and overlapping, and major established technology vendors are encroaching on each other’s territory. This creates an ecosystem dynamic in CI/MI for technology firms, in which vendors need to not only track their usual suspects but also assess how the broader ecosystem is forming in the area(s) they play in.

 

  1. CI/MI Professionals Taking on More Responsibilities

This is the one that most CI/MI professionals have figuratively, if not literally, tattooed on themselves. CI/MI teams are always being asked to provide more resources, answers, assets and support with less time, budget and people. CI/MI professionals must ruthlessly prioritize projects to focus on the greatest areas of impact, lean heavily on third parties for support, and find new ways to activate competitive and market intelligence via self-service, often enabled by technology. In many cases, CI/MI is becoming the full or partial responsibility of business unit or other resources such as product managers, marketers, strategy leaders, and sales enablement, strategy and operations teams.

  1. Staying the Course

Most CI/MI teams are staying the course for 2023 in terms of their team size, structure and deliverables, despite tech sector and macroeconomic headwinds. If anything, as we said above, they are being asked to do more with the same — or less — resources. For many, CI/MI has become an established mechanism that supports deal pursuits and development of products and services. Making major functional or strategic changes to CI/MI would require eliminating the systems that have been developed to support deal win rates and the other key KPIs that are attributable to CI/MI outcomes.

 

  1. Core Deliverables Matter

We have not seen much change in how competitive intelligence is being translated into core deliverables. Competitive battlecards, profiles, benchmarks and newsletters remain common tools to deliver intelligence. Where dividing lines exist is around CI/MI maturity. We find that many less mature organizations are more reactive, request-driven and ad hoc in their approach to deliverables, whereas established programs at larger companies have created embedded programmatic CI/Mi deliverables.

 

  1. Live where stakeholders live

Just as core deliverables have not changed much for CI/MI leaders, neither have the methods in which stakeholders seek to consume intelligence. This is suggested by the deliverables themselves. Email remains the most popular way in which to get competitive updates, and newsletters continue to be a popular deliverable for CI/MI teams. The big lesson for CI/MI teams is to take a stakeholder-led approach. Understand what they want and where they want it, and create resources that support that.

 

  1. Specialization Everywhere

We believe specialization is going to define the future of CI/MI for practitioners at technology companies and the research firms, agencies, and other types of service providers that support them. In this research, we found no material changes happening in how companies are using third-party research vendors. CI/MI programs still rely heavily on analysts and other providers to augment their internal staff. However, sophisticated programs increasingly demand specialization around the market areas, customer segments, topics and/or services they care most about. As technology tools elevate the baseline of CI/MI, those organizations and providers that can provide specialization via access to nonpublic, direct-from-market data and insights will stand to win.

 

  1. Small Teams

Even at the largest global technology organizations, CI/MI teams are typically fewer than 10 FTEs, and often fewer than five. In our surveys, we did not see any indications that companies plan to substantively grow or shrink their teams in 2023. This is why establishing specialized partnerships with research providers and analyst firms is so important; they are a lifeline for time-and-resource-strapped internal teams. This trend also underpins the importance of building a culture of self-service and all-hands-on-deck CI/MI.

 

  1. Empowering Self-service

Self-service is the foundation of all small CI/MI programs and increasingly a priority for larger teams at bigger vendors. Through CI platforms like Crayon and Klue, solo CI/MI professionals can establish a baseline program and deliverable assets and activate through self-service, freeing up their time to respond to ad hoc field requests versus build standard deliverables. At larger organizations, the trend is to move in a similar direction where possible. A key challenge we have heard from CI/MI teams is how to design (and reinforce) systems to make sure that stakeholders know exactly where and how to collect the self-service resources they require.

 

  1. Manage Centrally; Empower Everyone

The best CI/MI programs at organizations of all sizes focus on building a CI/MI  sharing culture. Having the full support of an organization collecting and disseminating intelligence and insights can greatly amplify the resources of the core team. We have seen great examples of how companies are using Slack, lunch-and-learn meetings, and other similar vehicles to promote CI/MI wins outside of the centralized CI/MI organization. There is a catch, however: This type of strategy does not eliminate the need for a centralized and dedicated CI/MI team. A central team is necessary to quarterback the process, provide a baseline program of assets and resources, and be available for ad hoc requests and questions.

 

  1. Technology Enables but Does Not Replace

The emergence of CI platforms is probably the biggest technology disruption in CI/MI, but there are others on the horizon. Just as tools are being built for marketers that leverage OpenAI’s ChatGPT and other functionalities, a new crop of AI tools will emerge for CI/MI use cases. For example, in 2022 a new startup named 1up emerged, billing itself as “the competitive AI.” Others will follow suit. While these types of tools will automate how publicly available intelligence can be gathered and distributed, they are unlikely to replace intelligence methods such as win/loss interviews or unseat industry and/or sector specialized analysts with nonpublic data and insights. These tools promise to enable CI/MI through efficiencies but will not replace CI/MI roles and services providers. Rather, they will create more demand for unique, differentiated and specialized intelligence.