What happened to smart cities?

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COVID-19 and cloud have overrun smart cities, for now

A question from a client spurred an internal discussion among TBR’s Professional Services, IT Services and Digital Transformation Services Team around smart cities and what the vendors we cover had been doing lately to advance what had been one of the hottest topics in 2017, 2018, 2019 and right up until March 2020 — when the pandemic and cloud seemingly drowned out smart cities.

But maybe not. Maybe smart cities just splintered into component parts until municipalities and sponsoring larger government entities can get back to large-scale, transformative projects not directly tied to public health. Maybe the underpinning technologies continued to mature, in both capabilities and adoption, so that the next couple of years will see a resurgence in smart city solutions. Maybe track-and-trace programs and vaccine rollouts have provided the test beds and built the relationships needed for investments to flow again toward smart cities. Maybe. Here’s what TBR’s Services team sees as the current state of play and what may come next:

The components never went away

If the smart cities umbrella faded as the pandemic surged, the technology components and services around them did not. IT services vendors and management consultancies continued to invest in and develop capabilities around analytics, edge computing, 5G and IoT — all key components in the smart cities ecosystem. TBR’s May 2020 Digital Transformation Insights Report: Emerging Technology, 5G described investments by Accenture, Infosys, Tata Consulting Services, Capgemini, IBM and Nokia, among others, while noting that engagement “opportunities centered on speed, connectivity and reliability help elevate 5G’s position in the crowded emerging tech market, but only if vendors can demonstrate the ecosystem will remain navigable.”

A similar report, TBR’s February 2020 Digital Transformation Insights Report: Emerging Technologies, Edge Computing — built upon three separate TBR market landscape reports covering telecom edge compute, 5G telecom and commercial IoT — commented that “embracing collaborative, edge-enabled digital transformation will benefit all parties if risk and responsibilities are shared,” reinforcing the sentiment across nearly all of TBR’s research into various technologies that ecosystem plays provided the greatest opportunities. Components, in other words, remained essential, but needed other components to be truly critical to harnessing digital transformation.  

Green trends, red tape and politics

As the pandemic fades, sustainability and standardization may provide levers to bring smart cities back to the forefront for IT services vendors and management consultancies. The Brooklyn Bridge has a new bike lane. New York City has new regulations around carbon emissions and commercial real estate. Municipalities faced with renewed interests in greening their infrastructure will look for consultancies and technology companies for help. And as federal dollars flow toward all infrastructure — brown and green — cities will look to consultancies with deep expertise in risk and compliance for assistance with standardization around what is and is not permissible around emerging technologies. One substantial caution: Priorities around which initiatives to pursue, even and maybe especially ones rooted in sustainability and standardization, remain political decisions typically disconnected from technology. Smart cities require political will, not just budgets and IT architecture.

TBR’s May 2021 Digital Transformation: Blockchain Market Landscape highlighted this confluence of political will and integrating technology components: “Contributing to the muted adoption of blockchain are many factors, including but not limited to: the outbreak of COVID-19, requiring customers to reprioritize budgets to maintain business continuity; the presence of blockchain alternatives that complement, rather than replace, existing IT environments; and a general lack of knowledge in the market, given the hype surrounding cryptocurrencies today. That being said, as consultancies continue to embark on their shepherding role to lead and manage community participants, they also must consider factors that are influencing buyers’ decisions to invest and/or purchase a blockchain solution, including: 1) solution feasibility, 2) solution integrability into existing IT environment and 3) solution accuracy.”

As always, data at the center

And then there is data, an obstacle even larger than political will but also a massive opportunity for IT services vendors and management consultancies that have been honing their capabilities around data collection, orchestration, distribution and security. Here, the pandemic may have provided technology test beds and relationship building for the vendors that participated in track-and-trace and/or vaccine rollout engagements with states and federal governments, building use cases for technology deployments within the public sector — that is, gateways to smart cities.

In 2022 TBR expects to see more announcements around smart cities, beyond the high-profile greenfield opportunities of brand-new cities or untested technologies. We anticipate vendors such as Accenture, PwC, DXC Technology and Infosys will return to investing in and marketing their smart cities portfolios, pulling together capabilities around cloud, IoT, 5G and analytics while emphasizing their roles within the larger ecosystem of connectivity, cloud and software vendors.

TBR will cover those developments across multiple reports, including our digital transformation insights reports, various telecom and cloud benchmarks and market landscapes, and sustained quarterly analysis of the most dynamic IT services vendors and management consultancies.  

Quick Quantum Quips: August quantum developments advance multiple rival architectures, with education and standards rising in importance

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Welcome to TBR’s monthly newsletter on the quantum computing market: Quick Quantum Quips (Q3). This market changes rapidly, and the hype can often distract from the realities of the actual technological developments. This newsletter keeps the community up to date on recent announcements while stripping away the hype around developments.

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

August Developments

The overall quantum market has seen an uptick in announcements and a trickle of introductory articles hitting mainstream media. On the one hand, quantum articles delivered to a broader audience can exacerbate the so-called hype cycle, but on the other hand the articles highlight that ongoing efforts in scientific discovery across the broader quantum landscape are beginning to show promise for delivering commercial-grade quantum computing infrastructure for businesses, academia and governments to use for advantage rather than just for exploration and experimentation with quantum logical constructs. For example, both Honeywell/Cambridge Quantum Computing (CQC) and Q-Ctrl released research signaling improvements in quantum error correction (QEC), which is crucial to the development of fault-tolerant quantum systems — the aspirational objective — of all quantum systems vendors today. In turn, IonQ announced a reconfigurable multicore quantum architecture (RMQA) that it believes has the potential to increase qubit counts into the triple digits on a single chip. Xanadu made announcements regarding advancements in photonic — or light-based — quantum computing in a form factor the size of a penny that could one day eclipse the early advantage of the superconducting and trapped ion architectures.

IBM hosted a two-day virtual event for academia to discuss the curricula necessary to provide native quantum credentials to those entering the workforce at the dawn of this era in the ever-evolving technology sector. The Hudson Institute’s Quantum Alliance Initiative (QAI) added another partner, Quantum eMotion, to its efforts to create global standards for quantum communications that will be necessary for the scaled utilization of this game-changing compute technology.

Honeywell/CQC and Q-CTRL: Both entities promoted advancements in QEC in an effort to optimize qubit computational accuracy. QEC is a critical tool many quantum system vendors, such as IBM, are investing considerable time and energy in trying to perfect, as it is necessary to achieve fault-tolerant quantum that can address not only noise on stored quantum information but also faulty quantum gates, quantum preparation and measurements. QEC is at the heart of quantum advantages in computation by delivering precise outputs with lower time and cost input. The importance of QEC also indicates that a broad quantum ecosystem is necessary to make the computational potential of quantum a reality.

IonQ made a major announcement in late August about a patent-pending chip design offering tighter ion confinement, improved ion lifetime and reduced ion heating that relies on IonQ’s technological platform, which is called Evaporated Glass Traps (EGTs). The architecture is expected to allow IonQ to scale qubit count on its quantum chips without suffering qubit fidelity performance losses.

Xanadu and imec: Xanadu, a Canada-based quantum computing company, collaborated with Belgium-based fabricator imec around photonic or light computing and has moved to the point of early production. The partnership illustrates the need for a broad ecosystem of quantum adjacent businesses capable of taking lab innovations into scaled production.

IBM Quantum Educators Summit: IBM sponsored a virtual summit Aug. 3-4 aimed at high school and undergraduate educators seeking to learn how to incorporate foundational quantum computing elements into their courses. Of interest to TBR in auditing the conference was the premise put forth by the speakers that the world’s quantum experts are actually quantum immigrants, having come to the field from other academic tracks such as physics and mathematics. As such, the fundamental impetus for the summit was to assist academia in assembling the proper curricula to prepare native quantum professionals for students interested in the growing number of quantum — and quantum-adjacent — professional tracks that will arise as the leading innovators develop fault-tolerant quantum.

Quantum eMotion: Montreal-based Quantum eMotion announced it joined the Hudson Institute’s QAI, which is an international consortium of companies, institutions and academics. QAI seeks to establish policies that will serve as guardrails for quantum as the technology emerges into a mature and mission-critical element of global business and research. A primary focus for the organization is looking at the impact the domain will have on national security and on the economy and how QAI can foster global standards for securing quantum communication. With individual nation states and regions all vying to assure a quantum gravity center and the high value jobs that will come with it, the establishment of these standard protocols has been both a delicate and sclerotic process.

Deconstructing COVID-19’s impact on IT services and manufacturing

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For IT services vendors working with manufacturers, resiliency, business continuity, security and digitalization spark new revenue growth

During 2020 the COVID-19 pandemic negatively affected IT services vendors’ revenue growth in industrial solutions, manufacturing and automotive due to country lockdowns across the globe that caused major supply chain and production disruptions. Enterprises in the sector weathered the worst of the pandemic at the beginning of 2020 and made the necessary run-the-business changes to improve operational efficiency and reduce costs. As such, IT services vendors evolved their relationships and are now working with clients to ensure their IT and workforces are modernized, secure and digitally enabled and their operations are resilient.

Uncertainty around the pandemic can continue to create disruptions like the supply chain challenges faced at the onset of the crisis. IT services vendors are capitalizing on their advise-build-run expertise to support clients during challenging times and capture growth opportunities, indicated by the revenue growth acceleration that began in 4Q20. Vendors are investing in digital twins to enhance their supply chain, digital sales and marketing as well as in AI and machine learning capabilities to offset pressure.

According to TBR’s special report Digital twins, innovation and Godzilla: 3 IT services trends for the rest of 2021, published in April, digital twins are becoming more synonymous within the supply chain of manufacturing firms as they present a hedge against unique macroeconomic factors, such as the pandemic. Larger technology vendors are finding partnerships, bringing cloud-enabled analytics to shipping, and opening opportunities for IT services vendors and consultancies. These openings allow for interoperability across supply chains, orchestration of technologies and data, and change management.

With COVID-19 disrupting global supply chains and forcing participants to seek alternative channels to either reduce transaction costs enabled by blockchain or transform IT infrastructure by migrating applications to cloud to offset technical debt and diminish financials pressure, some vendors have had the opportunity to gain a prime position. Six of the top 10 revenue leaders in industrial solutions, manufacturing and automotive accelerated revenue growth year-to-year in 1Q21 compared to 1Q20.

Accenture is gaining traction with manufacturing clients by helping them improve operational technology security and discrete manufacturing processes to optimize efficiencies. Accenture is also investing in developing, integrating and connecting smart devices that help Accenture drive Industry X-centric sales and extensions into C&SI services around analytics and AI. SAP implementation opportunities enabling agile IT infrastructure through SAP Business Suite 4 HANA and improving customer experience through SAP Fiori, illustrated by the deal expansions with Siemens Gamesa Renewable Energy and Johnson Controls, helped Infosys grow vertical sales 7.4% on an annual basis in 1Q21.

Acquisitions contribute to IT services vendors’ expansion in engineering and R&D services

The acquisition of Altran in April 2020 expanded Capgemini’s capabilities and revenues in the sector. On Jan. 1 the company established Capgemini Engineering, a new global business line and brand. Capgemini Engineering includes 52,000 engineers and scientists and provides R&D and engineering capabilities in three domains: product and systems engineering, digital and software engineering, and industrial operations.

In March Cognizant announced plans to acquire ESG Mobility, a Germany-based provider of engineering R&D servicers for autonomous and electric vehicles. The acquisition will provide Cognizant with advanced technologies to complement its existing automotive capabilities, giving the company an opportunity to upsell existing clients that are targeting growth in autonomous or connected vehicles.

Recent acquisitions, such as Eximius Design and International TechneGroup Incorporated, bolstered Wipro’s capabilities around digital engineering services and product lifecycle management, which will strengthen the company’s ability to provide client-specific outcomes in areas like industrial manufacturing, a vertical that cloud platforms are targeting for growth given the IaaS opportunity related to IoT data.

DXC’s acquisition of Luxoft in 2019 continues to enable DXC to move up the value chain as it expanded the company’s presence in Europe, deepened its expertise within the manufacturing industry and added high-value digital engineering capabilities. During 1Q21 DXC Luxoft launched a joint venture, ALLUTO, with LG around vehicle customer experience and will focus on the commercialization of digital automotive technologies, such as in-vehicle entertainment and infotainment as well as ride-hailing systems.

The 1Q21 IT Services Vendor Benchmark, which published on June 30, extends the analysis above to include how pairing technology and engineering skills and low-cost presence positions India-centric vendors for growth in manufacturing in the coming quarters and further adoption of technology partners’ solutions to advance Industrial IoT initiatives.

Note: This blog has been adapted from TBR’s 1Q21 IT Services Vendor Benchmark, which provides a quarterly assessment of leading IT services vendors’ performances and an assessment of their strategies. A newly launched Industry Views section within the benchmark provides analysis that focuses on one industry sector. In 1Q21 TBR began with a deep dive on the industrial solutions, manufacturing and automotive sector. Every quarter we will alternate industry deep dives with geo deep dives.

Quick Quantum Quips: July quantum developments encompass the entirety of the ecosystem

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Welcome to TBR’s monthly newsletter on the quantum computing market: Quick Quantum Quips (Q3). This market changes rapidly, and the hype can often distract from the realities of the actual technological developments. This newsletter keeps the community up to date on recent announcements while stripping away the hype around developments.

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

July Developments

July quantum industry events spanned the full spectrum of the quantum stack. IBM installed its second quantum system internationally with a research center as part of its ongoing collaboration efforts, which are focused as much on skills development as they are on system innovations. Additionally, incremental scientific improvements are occurring across rival technology stacks in the race to achieve fault tolerant quantum computing. PsiQuantum received large cash infusions for its photonics research, Honeywell released papers outlining its high-fidelity single-qubit and two-qubit gates and China outlined a series of breakthroughs that may give analysts pause from a geopolitical perspective.

Lastly, Dartmouth College announced a collaborative research effort on the various materials that can be utilized in the manufacture of qubits. This last announcement, while low in the overall quantum stack, will be critical for manufacturing yields as these rival quantum architectures inch ever closer to viable, economically advantageous systems to apply against real-world intractable problems. 

IBM: Big Blue continued its global quantum expansion with its second international deployment of its flagship quantum computer, IBM System One, in the Kawasaki Business Incubation Center, located just outside Tokyo in Kawasaki, Japan. The deployment is part of a 2019 partner agreement between IBM and the University of Tokyo, and is IBM’s second-ever on-premises quantum installation, following the one it completed for Germany’s Fraunhofer Institute in June.

These international deployments should prove advantageous as IBM improves relations with influential organizations, which will allow IBM to tap into their deep academic talent pools. Another benefit of having closer relations with academic and research institutions is the ability to evangelize the technology and skills development needed to grow the talent pool from the roots up, a strategy IBM has supported for years. The company’s partnerships and recent deployments illustrate how it is tactically executing on the early phases of that strategy.

PsiQuantum: This quantum startup came out of stealth mode last year with a $215 million venture capital investment round with notable investors such as Blackrock and Microsoft, which caught the attention of the quantum industry. PsiQuantum, a quantum computing hardware company that is using photonics as its qubits, has the ambitious goal of creating a 1 million qubit processor — a milestone that is expected to unlock the potential of a universal quantum computer.

In late July PsiQuantum announced another colossal funding round with Blackrock and Microsoft as returning investors in its Series D round that net the company $450 million. In May the company signed a deal with GlobalFoundries to house PsiQuantum’s quantum chip manufacturing inside GlobalFoundries’ fabrication facilities. This partnership is critical as PsiQuantum plans to leverage fabrication techniques used in classical semiconductors being produced today. While the company asserts it has customers in various industries and is providing use-case and algorithm identification services, it has had limited means to produce meaningful revenue without a prototype. While development of a million-qubit processor is still a long way out, the investment provides PsiQuantum additional capital to scale its R&D operations while maintaining significant cash runway.

Honeywell: In September 2020 Honeywell Quantum Solutions introduced its latest 10-qubit ion trap quantum computer, System Model H1. Since then, the company has made strides to improve the fidelity of the system and the overall system performance metric created by IBM, called Quantum Volume (QV). When the system was released, it had a QV of 128, and in March the system reached a QV of 512. In July IBM announced it doubled its QV once again, achieving a QV of 1024. The system averaged a single-qubit gate fidelity of 99.99(1)% and an average two-qubit gate fidelity of 99.72(6)%. The company attributed the improvement to techniques involving real-time error correction by creating a logical qubit out of seven linked ion trap qubits.

China: Three papers on quantum computing and communication achievements of physicists at the University of Science and Technology of China were published in arXiv.org, an open-source archive owned by Cornell University that contains pre-peer reviewed scientific papers. One of the three papers reported that the physicists had successfully transmitted single photons over 300km of fiber using quantum dots. A second paper reported an achievement in photonics where scientists were able to detect 113 individual photons using Gaussian boson sampling (GBS), which was an improvement on the 76 detected photons from previous experiments. The third paper discussed an experiment that built on Google’s 2019 Sycamore demonstration, using a 66-qubit superconducting computer. The paper claims that the sampling problem the quantum computer finished was “2-3 orders of magnitude higher than the previous work on 53-qubit Sycamore processor” in computational difficulty.

Since none of these papers have been peer reviewed yet, it is imperative the results be taken with a grain of salt. However, considering the concealed nature of China’s quantum computing developments, the papers provide a window into the country’s progress. With techno-nationalism and geopolitical tensions peaking, there is a likelihood that in the coming months political action will take place in the West in the form of investment as the quantum race heats up.

Dartmouth: The Thayer School of Engineering at Dartmouth College is launching a three-year initiative that will be led by the school’s Engineering Professor Geoffroy Hautier and include researchers from the University of California, Berkeley, and the Lawrence Berkeley National Laboratory.

Funded by a $2.7 million grant from the U.S. Department of Energy, the initiative’s focus is to identify various materials that can be used as viable qubits for quantum computing. There are currently a handful of materials being used — depending on the compatibility of their properties with the architectural framework of the device — to create differing qubits, with the synonymous goal of storing quantum information. Some examples of these qubit foundations include Ytterbium ions (ion trap), silicon atom electrons (spin qubit) and photons (photonic), among many more. Research into the raw materials and those that are best suited for production will provide the long-term benefit of improving manufacturing yields at scale.

Digital transformation for market, competitive and strategy intelligence

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TBR is the first place we look for a foundational, normalized view to benchmark against core competitors in markets that are important to our firm. — Senior Manager, Strategy, Big Four


TBR dedicates a significant portion of our research to the technologies and company actions around digital transformation. We have found that the most impactful digital transformation action vendors take is the simultaneous transformation of their business process and business model. TBR has spent years analyzing the world’s leading IT services vendors and management consultancies as they practice the art of digital transformation, and in September 2021 we will proudly share the product of our own transformation with the launch of TBR Insight Center™.


The legacy market research company model of report building and data gathering was one of rigidity. Output, and the related analyst activity, was on a quarterly or annual cadence, which created a decreased ability for analysts to react and pivot to rapid changes in the market. TBR’s digital transformation first focused on modernizing our internal systems, including our research and modeling processes. The result is a proprietary, digitally enabled market, competitive and strategy intelligence platform that quickens time to insight, decision and risk mitigation for our clients.


Gone are the days of searching through multiple issues of the same vendor analysis to find the perfect quote, chart or actionable insight. With TBR Insight Center™, users will be able to curate an ongoing stream of real-time analysis, keyed to the vendors or topics of greatest interest.


Publicly released financials will continue to be the first step in the data gathering process for TBR’s empirically opinionated, bottom-up analysis, but it is just the beginning. TBR will leverage 26 years of financial modeling expertise, along with modern data science, among other methodologies, to derive a level of proprietary data unavailable via other sources. Users will be able to select their desired vendors, metrics, time periods, geographies and verticals, taking a syndicated — or “off the shelf” — stream of research and customizing it to the specific application and uses cases required. These views can be built, saved and distributed within your company with ease. Data can also be fed into Excel or directly to your own systems for internal modeling and report building. Beta users of TBR Insight Center™ have attested to saving dozens of hours per month with this simple, but dramatic, workflow transformation powered by our digital-first research platform.


Additionally, significant events, announcements and disruptions occur off-cadence, creating gaps in delivery of analysis within the legacy frameworks. TBR Insight Center™ will display our analysts’ real-time analysis of these events within users’ custom dashboards and reports. This workflow transformation, leveraging our digital platform internally, cuts the time needed to build market reports from up to two months to a matter of days.


Tools our industry experts used to accelerate collaboration during TBR’s internal transformation are now available to TBR Insight Center™ users. Clients’ teams can build custom dashboards with comments sections where they can pull in configurable, curatable and composable analysis from TBR content as a basis for their own internal company discussions of their business operations. This analysis is displayed on a private instance of TBR Insight Center™ via your firm’s existing licensing agreement.


During the recent change within TBR, not only did collaboration accelerate because of the efficacy of our digital transformation, but we also saw an overall increase in collaboration across the broader organization. As friction was removed through our digital transformation, we saw a multiplying effect; cross-practice analysis occurred faster and happened with greater frequency. This efficiency has enabled an already world-class organization to increase speed to operational intelligence. These same collaboration and distribution functions are native to TBR Insight Center™. The only question that remains is, how will your organization maximize our digital transformation and the delivery of TBR analysis within your firm?


De-risk and speed time to business decisions with the right data and the right analysis in the right hands, all while enabling collaboration on those insights and data. Multiply your firm’s operational intelligence with TBR Insight Center™, available September 2021.


Reserve your seat for the inaugural TBR Insight Center™ worldwide live demonstration

CompuCom and the 4 dimensions of employee experience

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The future of hybrid when your home printer runs out of ink

We recently met with CompuCom, an 8,000-person technology vendor providing hardware, software and services across the digital workplace, and discussed the company’s evolving role as the nature of how and where people work changes, especially for professionals inextricably linked to and dependent upon IT. To frame the discussion — and CompuCom’s place in the IT services ecosystem, which TBR’s Professional Services team tracks closely — one of the CompuCom executives asked, “What does hybrid work really mean going forward?” The question was particularly applied to professionals using home and personal technology for enterprise-level work. While everyone seems to be asking these questions and refining their answers based on pandemic-forced experiences, CompuCom has taken a broader view, suggesting employee experience (EX) is at the heart of the issue, rather than technology.

As described by CompuCom, employee experience fits within four dimensions: technology choice, self-sufficiency, well supported, and workplace flexibility. The first dimension is centered on technology that meets employees’ needs and “securely integrates personal technology” into the workplace ecosystem. Self-sufficiency is employees’ desire to be able to get their work done with minimal friction. And well supported and workplace flexibility most clearly align with hybrid work environments, with employees needing trusted technologies they can securely use anywhere, anytime. TBR has reported on other IT services vendors and consultancies shifting focus to the employee experience, particularly during the early months of the pandemic. This framework may not be new, but CompuCom has smartly articulated what many other vendors have been trying to provide, often with more offerings and less focus.

As small and midsize enterprises look to migrate to the cloud, the desire to take advantage of emerging technologies without investing heavily in IT staff may provide an opening for CompuCom to deliver its full end-to-end solutions, including hardware from trusted brands like Dell Technologies, without the higher-end services and support price tag. Delivering multivendor device support and addressing technology choice as a component of the employee experience will further resonate with SMB clients. Managing CompuCom’s ecosystem relationships while delivering value may depend on the second revelation from the company: experience-level agreements (XLAs).  

The future of IT services when XLAs replace SLAs

Building on this framework, CompuCom has begun measuring its value to clients by the employee experience delivered, rather than standard service-level agreements (SLAs). The company has even developed persona-based, experience-level indicators (XLIs), recognizing that at any one client, CompuCom will be serving multiple persons. TBR will continue tracking CompuCom’s efforts to transition XLIs into XLAs as a widely accepted standard for replacing SLAs among its clients and the larger IT services ecosystem. 

A second point about CompuCom’s approach struck TBR as noteworthy, especially as post-pandemic trends have pointed toward IT services vendors and consultancies rapidly expanding their offerings into areas such as engineering and legal services: CompuCom intends to stay in its own lane, deliver what it delivers well and grow through bringing technology to the workplace. That sounds unradical and almost boring. As one CompuCom executive said, “We’re focused on the workplace experience.” Having a clear focus and doing what you do well, in TBR’s experience analyzing IT services vendors and consultancies, have been key characteristics of solidly performing and growing companies.

According to TBR’s Digital Transformation: Voice of the Customer Research, in the early days of the pandemic enterprise buyers shifted priorities and budget spends from improving the customer experience (CX) to improving the employee experience by ensuring staff safety and productivity measures were in place. While the pendulum swung back a bit toward CX spend in early 2021, the shift toward everything hybrid will compel all parties, including employees, to seek and offer innovative ways to collaborate within the ecosystem, thus creating channels for robust EX and driving opportunities for companies such as CompuCom. 

In the coming months, TBR intends to revisit CompuCom’s portfolio and performance in the context of the larger IT services and technology vendor landscape, particularly in relation to the U.S. market and digital transformation. 

Quick Quantum Quips: Public investment, national rivalries, business restructurings and process innovation heat up

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Welcome to TBR’s monthly newsletter on the quantum computing market: Quick Quantum Quips (Q3). This market changes rapidly, and the hype can often distract from the realities of the actual technological developments. This newsletter keeps the community up to date on recent announcements while stripping away the hype around developments.

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

June Developments:

June quantum computing market activities illustrate the growing public sector interest in quantum as both a source of high-paying jobs and a technology vital to a company’s strategic sovereign interests. Legacy technology innovation has always hinged on early funding for “protection of the commons” initiatives, where the funding was essentially for scientific discovery that, once hardened, could be retooled for commercial use cases. Quantum systems are no different in that regard.

Similarly, the Honeywell spin-merger with CQC also enables the new entity to participate in several national initiatives around cybersecurity and national defense by combining U.S. and U.K. firms into one operating unit. Scientific discovery and manufacturing process innovation also merited mention this month as Rigetti announced a chip manufacturing process that it claims will facilitate the manufacture of highly scalable systems of hundreds, if not thousands, of qubits.  

  1. Federated Quantum System (FQS) announced during the G-7 summit that the U.S., U.K., Japan, Canada, Italy, Belgium and Austria will collaborate on a on a satellite-based quantum technology encryption network based on assets being developed by British startup Arqit. Companies from those countries will also join the initiative to help design and test the system. With ransomware attacks bringing cybersecurity to the forefront of the news, this multinational encryption initiative for military communications between allied nations represents encouraging signs for international cooperation that can potentially produce the funding necessary to advance quantum to a point where it is commercially advantageous.
  2. Germany formally announced its quantum data center facility, to be located near Stuttgart and  managed by prominent applied research organization Fraunhofer-Gesellschaft. The event underscores the strategic importance many nation states place on ensuring a center of gravity within the quantum world within their sovereign borders. German Chancellor Angela Merkel is a unique political figure in that her formal education is in quantum chemistry. While keeping a watchful eye on quantum developments in the U.S. and China and wanting to maintain and build quantum intellectual property indigenous to Germany, the quantum system is being installed by IBM, which maintains a dominant early lead in the nascent industry. The European Union (EU) has taken a leadership position in establishing policy legislation around data sovereignty. Integral to this installation will be the localization of the data within Germany.
  3. The EU loosened restrictions it had imposed on non-EU nations participating in its quantum research initiatives. Launched in February under the legislative banner Horizon Europe, which calls for funding of 95.5 billion euros in total, the initiative calls for curiosity-driven proposals from the European Research Council. Viewed as strategically important to the overall security of the EU, a month-long parliamentary debate occurred on whether to allow non-EU nations such as the U.K., Switzerland and Israel to participate. The final compromise allows for limited participation by non-EU nations provided they agree to special “assurances” regarding protecting the confidentiality of the technology. This agreement and the wrangling over who can participate underscores the growing political interest in a technology that, once hardened, will radically alter cybersecurity and military weapons systems.
  4. Honeywell and Cambridge Quantum Computing (CQC) announced a spin-merger combining Honeywell’s quantum assets with those of CQC. An early investor in the ion trap hardware stack, Honeywell will retain a majority stake in the combined entity, which will include CQC’s software stack as well. CQC will remain system-agnostic. Honeywell claims the impetus for creating a stand-alone quantum entity was to facilitate investment from various capital sources that may have been reticent to invest in the operation when it was a wholly owned Honeywell subsidiary. Each entity has been an early leader in the space. In addition to increasing funding opportunities, the combined entity also aims to create a consolidated talent pool of quantum experts at a time when human talent capable of scientific discovery in this domain is in short supply.
  5. Rigetti Computing held an early lead in full-stack quantum development but has struggled lately to keep pace with the investment funding necessary to compete with heavily capitalized firms such as IBM, Google and Microsoft. In June Rigetti announced it had developed a scalable manufacturing design process for quantum chips manufacturing in its fabrication plant in California. Rigetti claims it has a multichip approach that will allow the company to connect multiple identical dies into a large-scale quantum processor. Rigetti alleges connecting multiple smaller dies reduces manufacturing complexity and allows for accelerated, predictable scaling.  

If you would like more detailed information about the quantum computing market, please inquire about TBR’s Quantum Computing Market Landscape, a semiannual deep dive into the quantum computing market. Our next edition, publishing in July, will focus on evolving services and overall market maturation indicators.

Accountability comes for decarbonization: KPMG’s Climate Accounting Infrastructure

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Are you really cutting carbon emissions?

Not a day goes by without a new sustainability announcement, whether an offering or an acquisition or a commitment to becoming carbon neutral by 202X. Last month McKinsey & Co. announced a new sustainability practice built on an early 2021 acquisition (of U.K.-based Vivid Economics), and earlier this month PwC made a splashy $12 billion commitment to bolster its environmental, social, governance (ESG) practice. As TBR begins assessing IT services vendors and consultancies on both their internal decarbonization commitments and the success or failure of their efforts to draw revenue from clients seeking their advice and solutions implementations around the same, one key focus will be demonstrable, provable, reliably reported and transparent metrics. In short, can you prove you’re as green as you say?

To that end, we’ve been intrigued by KPMG’s Climate Accounting Infrastructure (CAI) offering (detailed in TBR special reports KPMG: Fundamentally what blockchain does is digitize trust and Innovation delivered at scale shapes the course of KPMG’s next chapter as well as our Digital Transformation Blockchain Market Landscape). During the most recent KPMG analyst event, the firm provided further details about CAI, raising new questions for TBR, specifically around CAI adoption and broader climate and sustainability issues. At its core, the blockchain-enabled CAI offering enables clients in the real estate sector and in oil and gas to accurately measure and report their greenhouse emissions. CAI addresses numerous high-priority issues for companies, their employees, regulators and investors, such as transparency, clear and trackable metrics, and has the brand-backing of a Big Four firm, KPMG. So, why haven’t clients jumped onboard quickly?

According to KPMG, most clients’ relative immaturity with respect to ESG generally, and accounting for ESG commitments more specifically, has hindered faster adoption. “Many clients are still in the nascent stages of either formulating or integrating their strategies across the various climate imperatives: decarbonization, energy transition, climate risk, reporting, accounting for Scope 3 (value chain) emissions, etc. Many of our largest, and generally most sophisticated clients, are still putting their ESG infrastructure and processes in place — installing Chief Sustainability officers and their teams, understanding how to operationalize enterprise commitments like net zero, and publishing their first ESG report.” As every aspect of ESG matures, KPMG believes its clients will “understand the value of putting those operational strategies in the context of demonstrating progress toward the enterprise goals with reliable reporting.” We believe this boils down to simply being able to prove you’re as green as you say you are.

Compounding client immaturity, according to KPMG, is regulatory immaturity, which may improve during 2021 if the SEC announces climate disclosure requirements. TBR notes that for the real estate sector in New York City, which is no small sector, regulatory certainty already exists, likely providing some of the early CAI wins for KPMG.

An ecosystem play, from blockchain to data to OT

On broader climate issues, TBR’s recent focus on industrial IoT raised the question for KPMG about its efforts to partner with OEM and OT vendors on filling out the ecosystem around climate accountability. As KPMG is collaborating with physical instrumentation providers, the firm recognizes that “there is a complex, bidirectional road map from policy to data collection and then back. Right now, we’re focusing our efforts within CAI on the ‘data engine’ — the ability to take the physical data, extend/supplement it with enterprise and 3rd party (paid or public) data, and feed that into a robust calculation engine that translates that data into the metrics required for voluntary or compliance disclosures.”

KPMG’s sentiments echo what we heard in the research for our recently published Digital Transformation: IIoT Market Landscape, including this quote from an industrial solutions provider executive: “The other big one, and I want you to put a big red circle on your radar for this, is compliance … there’s a lot of compliance-related activity happening in automotive. There’s a lot of compliance-related activity happening in even your typical industries, from your fresh produce to all the way to lumber.” And we all understand that compliance equals data (or, maybe more accurately, bad data equals bad compliance).

TBR has been seeing increased activity from technology providers, key partners to KPMG, and others in the IT services and consulting ecosystem. Earlier this year, Microsoft updated its January 2020 Moonshot decarbonization initiative with plans to use 100% renewable energy in all data centers by 2025. As TBR said in its 1Q21 Microsoft report, “As part of a 1Q20 update to Microsoft’s Supplier Code of Conduct, entities must disclose their greenhouse gas emissions, which Microsoft uses to assign a tiered carbon tax.”

Similarly, TBR noted in its 1Q21 Salesforce report, “Salesforce launched Sustainability Cloud Scope 3 Hub, a platform that enables businesses to input data on supply chain emissions to better understand how to decarbonize. The platform allows clients to track historical and real-time ESG data. The inclusion of data like ESG will be critical for businesses, especially if government mandates related to carbon emissions are enacted.” While the decarbonization opportunities remain nascent, in TBR’s view these kinds of initiatives benefit consultancies like KPMG, which have accounting expertise and insight on tax policy implications that should resonate with enterprises, particularly those supplying technology companies demanding carbon reporting.

In TBR’s view, KPMG’s CAI stands out as a concrete, easily understandable and likely readily applicable solution to an accelerating issue in ESG — transparently and repeatedly proving to clients, employees and investors that decarbonization promises are being met. As we continue researching vendors’ internal commitments and solutions for clients, we will track the success of KPMG’s CAI and similar offerings, separating the greenwashing from the real results.

Will bitcoin become the next gold?

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Cryptocurrency for trading: Speculation or disruption?

A recent article in the Economist has triggered a new round of questions about cryptocurrency in general and bitcoin very specifically. This comes on the heels of the EY Global Blockchain Summit where more detailed parsing out of the specifics around decentralized finance, or DeFi, brings greater clarity to the scope of the disruption bearing down on legacy capital markets and government policy objectives.

A prevailing view at TBR is that cryptocurrency trading values are simply too volatile at this time to compel large enterprises to agree to trade in those currencies. Quarterly discussions of the impact of foreign exchange rate fluctuations on the year-to-year results suggest a very limited appetite for conducting commerce in widely varying cryptocurrencies. As such, TBR believes that at least in the early developments fiat currencies will prevail.

Cryptocurrency for wealth stores: Speculation or disruption?

The Economist article posited another point of view worthy of consideration, and that is for cryptocurrency to be a wealth storage. Citing Nobel Prize-winning economist and game theorist Thomas Schelling, the article posits that the center of gravity forming around cryptocurrency means bitcoin could become a global wealth store against economic turbulence in much the same way the movement between stocks and precious metals have been used as a safe harbor hedge.

Gold, it is argued, has value because enough people tacitly agree that gold bars do, indeed, have value and therefore it is a wealth store as a hedge against inflation. This wealth store comes, essentially, from the group consensus that it is so.

Today bitcoin has natural value as a wealth store due to its scarcity and fame. In this way it is a natural hedge against inflation. The article further cites J.P. Morgan’s tracking of the uptick in exchange-traded funds (ETFs) investing in gold that took place as the recent bitcoin price roiling saw it drop from $58,000 a coin to $33,000 a coin in a matter of weeks.

Few people transact commerce by shipping and receiving gold bars, and few people transact business in bitcoin. Gold has maintained relevance as an investment vehicle due to the group consensus of its value as represented by gold bars. Oftentimes the gold bars are not even in the physical possession of their owners. There is something tangible there in the form of the bar itself. But that tangible, physical asset really feels like the only distinction in the analogy.

TBR can envision capital markets with various grade ratings for different cryptocurrencies. It is known that certain banks and major credit card brands ponder creating their own coins. We can envision buying networks growing that coalesce around specific social objectives likewise forming as the group consensus mechanism around enterprises working to reduce greenhouse gas emissions or to seek social justice spring up with the digitally born as they enter their earning years.

In this scenario the flow of wealth from bitcoin into gold or vice versa could be viewed as the overarching predictive indicator of the rate, pace and citizen comfort level with our pivot into a full- fledged digital economy. Ransomware attacks spike and money flows to gold, for example. New high-growth digital businesses proliferate with more crypto trading provisions and more money flocks back into bitcoin as a wealth store.

It’s definitely a concept for the outside edge of the Three Horizons model and likely on very few people’s radar, but the article posits a very compelling argument for bitcoin as a wealth store more so than as a trading currency about to revolutionize commercial payments as we know it.

So what do you think? Will bitcoin become the next gold?

OEM earnings roundup: Unpacking a quarter of ‘record growth’

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OEMs boasted revenue and profit gains in the first calendar quarter of 2021

“Record growth” was a frequently repeated phrase over the last week as Dell Technologies, Lenovo, Hewlett Packard Enterprise (HPE) and HP Inc. reported their earnings for the first calendar quarter of 2021. For these major OEMs in the PC and data center hardware space, record gains in revenue and profitability have been hard to come by in recent years due to several factors including slowed PC refresh cycles, stiff competition from cloud offerings, component shortages, and uncertainty about the  pandemic’s impact on businesses and consumers.

For all these reasons, it was a pleasant surprise to witness a series of positive earnings announcements. But as one company after the next reported breaking multiple growth records in revenue and/or profit, it led me to wonder the degree to which business growth was based on increased economic stability rather than major changes in the OEM’s go-to-market approach.

Comparing first quarter revenue figures from the last two years provides a good snapshot of how the hardware market has changed since the world was immersed in the COVID-19 pandemic. For Dell Technologies, HP Inc. and HPE, the earnings reported in the first quarter represent revenue from February to April. Looking back to 2020, this represents the time frame when many countries imposed lockdowns. Lenovo’s earnings time frame is slightly different — reporting on revenue from January through March — but remains a good comparison, particularly as Lenovo may have felt the pandemic impacts earlier than peers as a China-based company, especially given that Lenovo has a manufacturing facility in Wuhan.

All vendors but Dell Technologies saw a first quarter corporate revenue decline of at least $1 billion in 1Q20 compared to 1Q19. In 1Q21 all vendors exceeded their revenue levels from the start of the pandemic, and three of the four grew revenue by $1.9 billion to $3.9 billion compared to 1Q19. This is impressive revenue growth for these vendors operating in mature and, in some cases, declining market segments. But are all business units growing equally? The fact that HPE was the only vendor of the four to not grow revenue in 1Q21 compared to 1Q19 and is also the only vendor in the compare lacking a PC business suggests growth is not consistent across hardware segments.

PCs are the driving force in the revenue rebound

Demand for both consumer and commercial PCs has been strong throughout the pandemic as many people spent an increasing amount of screen time at home for work, school and socialization. Dell Technologies, Lenovo and HP Inc. have not only reported 1Q21 revenue gains of billions of dollars compared to 1Q20, but the OEMs’ revenue is also up significantly compared to 1Q19. In addition to pandemic-related demand for PCs, silicon supply shortages have also helped to stem the race to the bottom for PC prices. With limited chip supply available, Intel and peers have focused on producing higher-end chips for premium devices. OEMs are also less competitive on pricing while demand outweighs supply. Improving selling prices and shifting toward premium PCs benefit not only revenue but also profitability.

Data center is still not immune to the impact of cloud migration

OEMs’ data center business units tell a different story. While the three vendors all reported increased year-to-year revenue in 1Q21, both Dell Technologies’ and HPE’s data center revenues are down compared to 1Q19. This suggests that year-to-year revenue gains represent customers showing less pandemic-related spending hesitancy and resuming delayed data center projects, while declines compared to 1Q19 align to the overall trend of enterprise data center consolidation in favor of public cloud. Although with the smallest data center revenue base, Lenovo was the only vendor in the comparison that increased revenue from 1Q19 to 1Q21, possibly buoyed by its Cloud Service Provider customer segment, which has higher demand for data center infrastructure compared to the enterprise segment. Overall, the revenue trends suggest that a favorable year-to-year compare may be masking impacts of public cloud adoption, which have accelerated through the pandemic.

Looking ahead to the remainder of 2021, TBR expects the trend of favorable year-to-year compares to continue for hardware vendors as businesses gain confidence in resuming IT spend. Profitability will likely also remain strong as supply constraints on chips will lead to price premiums and a focus on selling high-end devices. The data center space will likely continue to benefit from pent-up demand, but will be offset to some degree by the ongoing trend of public cloud and SaaS adoption, leaving PCs to drive the largest OEM revenue increases in 2021.