TELUS International: Purpose built to be digital first responders

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Accelerating success through successful acquisitions integration

TBR recently had the opportunity to catch up with TELUS International President and CEO Jeff Puritt, two years after the company’s inaugural analyst summit in Las Vegas and two $1 billion acquisitions later. Right from the start it was clear that the company has been able to preserve its most valuable asset, its culture, despite massive portfolio expansion and operating model transformation (TELUS International went public on Feb. 3).

The purchase of Competence Call Center (CCC) in February 2020 and subsequent acquisition of Lionbridge AI in December 2020 have not only provided the company with the breadth of offerings necessary to navigate an increasingly complex ecosystem bolstered by the advent of AI and consumer-generated content, but have also enhanced its value proposition; as Puritt positioned it, “Purpose built to be digital first responders.”

CCC added over 8,000 employees, mostly across European operations. Lionbridge AI provided access to both IP and a crowdsourcing community of over 1 million trained professionals with skills ranging from speaking multiple languages to holding, in some instances, advanced degrees. Integrating large-scale acquisitions such as these is not an easy task, but Puritt and his team are successfully executing on these transactions, guided by principles focused on employee engagement and customer satisfaction. In its first full quarter as a publicly traded company, TELUS International reported 57% year-to-year revenue growth to $505 million in 1Q21, with strong contribution from these recent purchases; absent that contribution, TELUS International’s growth was 20% on an annual basis during the same period. For comparison: In TBR’s IT Services Vendor Benchmark, we estimate on average total revenue for the 30 benchmarked vendors will expand by low single digits in 2021.

Mixing AI into employee culture at scale is not easy, but TELUS International seems to be mastering it

With AI permeating consumers’ everyday lives and enterprises’ IT and business operations, TELUS International has an opportunity to become a household name as an automation-enabled organization with human capabilities. The purchase of Lionbridge AI could serve as a catalyst of that transformation at scale, given the company’s AI platform and access to 1 million trained professionals that can support TELUS International in providing data annotation services for text, images, videos and audio.

While the future promise of AI depends on its ability to adapt and recommend with minimal human intervention, we do not anticipate the need for human support to evaporate any time soon. The increasing volume of user-generated content and the complexity and sophistication of systems will continue to necessitate the development, integration and management of algorithms and human involvement, which TELUS International can deliver. Managing quality and ensuring privacy and security requirements are met while tapping into the crowdsourcing pool is not an easy task, but TELUS International continues to build a human-centric culture that empowers both full-time team members and crowd community members to take charge of their careers while also acting as brand ambassadors in their local communities.

TBR witnessed this culture firsthand during visits to TELUS International facilities in Las Vegas and Sofia, Bulgaria, where the company has grown roots not only to expand its recruitment reach but also to build local trust, reflected in its extensive corporate social responsibility program.

Next phase of success will depend on managing the ecosystem

As TELUS International executes on its road map as a publicly traded company, managing stakeholders’ expectations through a well-grounded vision will be key to success. Alliance partners such as Google Cloud will play a critical role in TELUS International’s ability to scale performance, especially as the company strives to win AI services and solutions opportunities, an area Google enables through its Contact Center AI solutions.

TBR, along with Puritt, recognizes that TELUS International still faces opportunity areas where the company can continue to strengthen its value proposition, one of which is consulting and advisory services. While we do not anticipate the company will double down on becoming a management consultancy, we expect TELUS International will continue to pursue a more pragmatic approach toward building domain expertise through strategic partnerships. The company has an opportunity to deepen expertise around close-to-the-data annotation and moderation services similar to the way telcos offer consulting to their telco box. Maintaining trust within the ecosystem will also support TELUS International’s move to the next phase of opportunities, especially as the company increasingly relies on AI-enabled systems. As TELUS International elevates its brand and value proposition within the highly competitive digital customer experience market, trust will come from within, starting with successful employee management.

Will Boomi’s strategy succeed with new management?

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It is always hit or miss whether a blog post will solicit dialogue from readers. TBR’s recent blog post Who is going to want Boomi? certainly struck a chord. The blog focused on the actions of the private equity firms intending to acquire Boomi, which ultimately led Boomi to provide TBR with deeper insight into its most recent achievements, activities and aspirations as the company moves to new corporate ownership. Boomi has a sound growth strategy with a high chance of success, assuming the company and its new owners are in strategic alignment.

Evaluating the business using an inside-out/outside-in construct provides a reasonable framework for the market implications Boomi ― and really any integration PaaS (iPaaS) vendor ― will face in the years ahead. The situation starts with a universal fact: Digital businesses gain a competitive advantage against peers if they automate the flow of data across their organization. Any step where a business has to add labor when a peer does not is a cost disadvantage. In this respect, Boomi’s value is twofold: 1) automations can be built into the process and tightly integrated so that they don’t break as applications evolve, and 2) organizations can create even greater advantage when they are discovering data from all of their sources and understand the data and applications involved in the automation process.

Figure 1

Outside in: The rise of data management and asymmetric competition

Our initial blog on the sale of Boomi referenced UiPath and startups Kong and Entefy as potential asymmetric challengers to Boomi’s core value proposition. Additionally, you have the basic PaaS offerings from the exascale cloud platforms providing prebuilt connectors and myriad additional services for security, data protection and data management. SaaS players, as mentioned in our prior blog, offer prebuilt integrations to popular, adjacent applications. Numerous vendors vie for what they generally call single-pane-of-glass management in multiple forms, with all vendors stressing analytics and automation in some manner.

Just as paramount is the economywide war for talent. Qualified talent versed in new technologies and tools are sought virtually everywhere, making it an employee’s market. As is the case with any acquisition, talent retention and recruitment will be key to the innovations Boomi has charted out in its development road map. In acquisition parlance, it is called putting “the golden handcuffs” on essential personnel to ensure they do not jump to a competing firm. Locking down key engineering talent will be critical.

Situationally, iPaaS tool sets can be acquired either in best-of-breed fashion or by standardization on one platform that is expansive enough to solve an immediate need and evolve with the organization. In large enterprises, there could be a mix of tools based on those brought into the organization via acquisition. In this way, iPaaS brands can be pigeonholed for what they have been offering and not necessarily given consideration for their go-forward innovations. In turn, tool purchases are often a derived decision as part of a broader initiative. The cost is justified in terms of the time savings for the business initiative rather than how the purchase will make the life of the IT department easier.

It is for this reason Figure 1 references “Strategic Alliances; ‘White Label.’” Externally, many global systems integrators (GSIs) are pivoting to managed services offerings, especially the advisory firms with deep tax and audit credentials, whose distinction comes from the tax and audit knowledge base they can automate to address data management, governance and compliance rules.

By underpinning GSI software development with its own tools, Boomi can gain a distinct selling advantage into large enterprises as it will have these influencers and quasi sellers  at its disposal. Tighter relationships will also help Boomi keep an ear to the ground on the emerging technology vendors that GSIs and early adopter enterprises are considering and those that pose an asymmetric threat to the Boomi core.

Furthermore, Boomi made clear it does not aspire to substantially grow its consulting and services operations. GSIs will find this clear swim lane delineation refreshing considering the ways in which traditional services and software firms are beginning to encroach on one another’s core offerings.

Inside out: Transforming direct selling and creating new demand through ‘add to cart’

As a technology firm selling technology to IT departments, Boomi has sound, traditional selling motions. Increasingly, however, we hear the clarion call of selling business outcomes, and that move to consultative selling to lines of business will be necessary, given technology matters less and less while people and process matter more. In turn, studies show buyers want to self-research products and then self-provision those products from online portals.

Boomi has made steps in that regard with the availability of its AtomSphere Go edition, which aims to give customers a frictionless buying experience, at an early entry price point of $50 per month. AtomSphere Go also gives Boomi a way to disaggregate the various services in the existing offer to allow Boomi to move down market to reach late-majority enterprises. Additionally, Boomi recently announced AtomSphere Go is available on Amazon Marketplace, the mecca for seamless, add-to-cart ordering.

That type of selling, often called “land and expand,” has a very different set of operating best practices than traditional direct, or blue suit, selling. The aspiration of this kind of selling is lifetime customer value (LCV). It requires a different type of telephone support that is part technical advisory and part consultative selling for cross- and up-sell opportunities with smaller enterprises.

It is also a business model where revenue and expense do not align to the 90-day quarterly reporting cycle. This requires a leap of trust to embark on such selling approaches, as costs will far outweigh revenue until scale is achieved and the “flywheel effect” kicks in. For startup operations it is a very prominent challenge, and for Boomi the challenge will come more from setting up the operations with different motions and finding a way to balance investing in selling motions with awaiting payoff of the new add-to-cart operations.

Situation analysis: Never confuse a clear view for a short distance

TBR has laid out Boomi’s situation analysis levers as 1) talent retention and ongoing innovation to continue evolving a traditional space (iPaaS) that is being encroached upon by startups and established vendors on all sides, 2) heightened partner selling, and 3) a challenging shift to the add-to-cart selling model primarily to move down market, which requires fiscal patience. Provided there’s a vision match with the new owners, Boomi has solid platform depth and breadth with a reasonable innovation road map to survive and thrive in this ever-accelerating business pivot where automating data management, seamlessly moving data and empowering the right users to engage with data are paramount to maintain a persistent competitive advantage no matter the standard industrial classification (SIC) code.

So, what do you think? Will Boomi’s strategy succeed with new management?

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

U.S. federal IT stalwart Leidos fortifies its foothold in Australia

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Leidos expands in Australia with a defense IT modernization award and the launch of a new software development facility

Leidos will join APAC-based partner Fujitsu and U.S.-based partner KBRWyle on a three-year, AU$175 million program to upgrade and modernize IT and communications systems for the Australian Department of Defence (DOD). The enhancement will include service desk support for end users as well as workstations, VoIP and email upgrades, the implementation of new collaboration tools, and network infrastructure services and management.

Leidos has a 20-plus-year history serving clients in Australia, including the national government and provincial authorities, the nation’s healthcare sector, the intelligence community, and the country’s border defense agencies. In 2020 between 45% and 50% of Leidos’s $1 billion in overseas sales revenue derived from Australia. Leidos’ 2020 increase in international revenue, up 17.5% year-to-year, was driven largely by aggressive growth in Australia, and the company is primed for continued rapid expansion in the country and across APAC more broadly as Leidos leverages Australia as a staging point and case study for future regional expansion. The recent award with the Australian DOD comes on the heels of an AU$21 million contract with the agency for IT systems consolidation in 2020.

Leidos is also opening a new software development factory in Melbourne that will create 100 or more IT jobs and will be the company’s first such facility outside the U.S. — another sign the company expects steady growth in Australia for many years. In 2020 Australia Prime Minister Scott Morrison affirmed over AU$270 billion (about $190 billion) in new defense outlays over the next decade, including defense IT modernization and upgrades to weapons platforms. Australia’s relations with China have become increasingly strained in recent months, and government officials have also noted a sharp increase in regional economic and strategic instability. Leidos is ideally positioned to capture a large share of the expected budgetary investments to modernize defense platforms and civilian IT infrastructures.

Leidos’ Australian operations make the company relatively unique among top-tier federally centric IT integrators and professional services vendors, at least regarding the scale and tenure of its business in the ANZ region. Maximus provides business process management solutions, mostly employment services for the Australian government’s Disability Employment Services program, but the company has no presence in the Australian defense sector. Conversely, Raytheon Intelligence & Space (I&S) derives nearly 40% of its $19 billion backlog from international markets and 12% of its total revenue (about $800 million in 2020) from APAC (not exclusive to Australia), but does not provide traditional enterprise IT services to the Australian government or other foreign government clients in the region.

Leidos is among the 13 vendors covered in TBR’s quarterly Public Sector IT Services Benchmark and one of eight IT services companies primarily serving the U.S. federal government TBR analyzes in depth in semiannual reports featuring financial performance, go-to-market approaches, and alliance and resource management strategies. TBR’s Public Sector portfolio focuses primarily on IT services vendors’ work with U.S. federal government agencies. The international public sector market continues to attract investment from TBR’s covered vendors and remains an important, if small, revenue stream.  

Maritime ports serve as a natural test bed for blockchain ecosystems

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

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

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

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

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

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

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

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

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

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

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

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

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

Who is going to want Boomi?

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

What Happened

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

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

Customer Situation

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

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

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

Buyer situation

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

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

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

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

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

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

April 2021 Developments:

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

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

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

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

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

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

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

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

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

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

Is it time for the Big Four referees to educate the public sector on the benefits of rules changes?

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

Adoption accelerated as innovation stalled

Last year’s pandemic-induced changes across the technology space and society overall led TBR to consider how the pandemic accelerated existing technology adoption trends. From an emerging technology perspective, we increasingly believe private sector adoption will remain stalled until public sector actors with scale and influence rethink operating practices and enact and enforce regulatory governance. Several years ago, our “wallet versus will” special report argued that the public sector used to lead in technology adoption when funding was the decisive factor but lagged in technology adoption when consensus on common business rules proved elusive. Add in a pandemic, and we’re questioning whether private sector innovation has hit a roadblock that will be resolved only when there is greater public-private partnership and, more importantly, an ability for our political leaders to come to some consensus. Consider the following:

  • Our latest research around blockchain suggests a current period of disillusionment. Reaching the scale technologically feasible to generate business returns requires better automation and regulatory agility or the networks won’t achieve scale through broader ecosystem participation.
  • Globally, poor international cooperation related to the sharing of information and the movement of people between countries contributed to the spread of COVID-19. Imagine a blockchain-enabled universal product code (UPC) on a smartphone functioning as an international system of record regarding vaccination history.  

Early in the pandemic, supply chain disruptions made headlines and every consumer felt the impacts. Blockchain-enabled smart supply chains, tied into ports and international transactions, could have smoothed out some of these disruptions if the distributed ledger technology had been broadly embraced by countries and their import/export hubs. The Republic of Venice once ruled commerce, reaching the pinnacle of its power from 1425 to 1500. It’s no coincidence that general ledger accounting was invented in Italy during that same period.

Moving from city-states to countries, nations fundamentally seek to protect their citizens through sovereign laws, with many regulations revolving around property, currencies and finances. Cryptocurrency purportedly separates currency from nations. In one potential scenario, China’s newly launched digital yuan topples the U.S. dollar as the de facto international currency trading standard, greatly reducing the impact of economic sanctions from the U.S. foreign policy tool set. Venice’s grip on the Mediterranean loosened for many reasons and while blockchain wasn’t among them — needing another 500 years to be invented — the parallels to the U.S. can be unsettling.

Private sector initiative proved emerging tech-enabled practices are essential; now comes public sector education

Out of necessity, the private sector accelerated emerging technology-enabled use cases to address the pandemic’s impact. This highlighted gaps in how the public sector operates and responds to significant changes in the commercial space. For newly enhanced technological tools to deliver tangible business and social benefit after these proofs of concept, government must accommodate new ways of working while still providing expected regulatory benefits to its citizens against moral hazards. Not surprisingly, advisory firms with the tax and audit knowledge essentially acted as referees within the free-market systems that frantically developed the workarounds to sustain business operations in 2020, exposing the ways in which the public sector decreases, rather than increases, the efficiency and viability of emerging technology-enabled operations.  

So, what do you think? Is it time for the Big Four referees to educate the public sector on the benefits of rules changes?

Quick Quantum Quips: The quantum industry introduces its first public company

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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.

March 2021 Developments:

Quantum developments this month saw IBM score its first on-premises quantum computer deal, Honeywell push the ball forward by achieving a record quantum volume (QV), more newcomers join the IBM Quantum Network, and the first pure-play quantum computing startup to sign a deal to go public.

IBM: IBM announced a partnership with Cleveland Clinic, dubbed Discovery Accelerator, to utilize quantum computing for scientific research and discovery. What makes this partnership particularly unique is that IBM will supply Cleveland Clinic with a quantum machine on premises — a major milestone as the first order for an on-premises quantum installation. Other quantum engagements up to this point have utilized quantum computing through cloud infrastructure providers such as IBM, Amazon Web Services and Microsoft Azure.

Despite the nascency of quantum applications in real-world scenarios, the IBM-Cleveland Clinic partnership makes sense for multiple reasons. For starters, “wet labs” for scientific and novel drug discovery are one of the hypothesized earliest use cases as healthcare organizations have the means to purchase and house the popular superconducting quantum computer architectures, which require extremely cool environments, much like the Pfizer vaccine does, albeit at considerably lower temperatures. Additionally, the practical compatibility of early quantum applications for optimization problems creates large incentives such as increased scientific discovery efficiency, which reduces time & materials and labor costs. Moreover, the sharp increase of investments into the healthcare and quantum industry, catalyzed by COVID-19, put the two industries on a collision course.

IonQ: IonQ officially announced a deal to became the first pure play quantum computing company to go public, via a merger with dMY Technology Group III, a special purpose acquisition company (SPAC). The entity has an estimated combined market cap valuation of $2 billion. It is a significant milestone for the still-nascent quantum computing industry. Notably, however, IonQ did not choose the IPO route in going public, which may indicate wariness to test the public appetite for not-yet-commercially-ready quantum. Additionally, merging with a SPAC has several advantages, including bypassing the arduous IPO process, securing a prequantifiable cash infusion and gaining experienced guidance from leadership of the SPAC.

Honeywell: On the hardware system side, Honeywell achieved a QV of 512, a new record in the industry, on its latest form factor, System Model H1. QV is a metric developed by IBM in the pursuit of a better way to measure quantum computing performance, in place of the less-than-objective measure through qubit count. This achievement by Honeywell’s System Model H1 is notable as it debuted in September with a QV of 128.

On the commercial side, BMW announced a dual partnership with Honeywell and Entropica Labs to run a quantum proof-of-concept for BMW’s supply chain. The presumed role of Honeywell is as the supply-side quantum hardware vendor, while Entropica Labs provides the demand-side algorithms required for BMW to reap the benefits of quantum computing tied to the automaker’s bespoke problem set.

Cambridge Quantum Computing (CQC): On the scientific discovery side of the quantum industry, CQC published a paper demonstrating that quantum machines can employ machine learning (ML) techniques to “learn to infer hidden information from broad probabilistic reasoning models. The implications of these findings open the door to quantum applications in previously unconfirmed use-case scenarios. The biggest near-term beneficiaries are expected to be quantum hardware and software developers as well as ML scientists.

Phasecraft: This U.K.-based quantum software company joined the IBM Quantum Network, a global consortium of hundreds of quantum computing companies, startups, academic institutions and research organizations in the name of wholistically advancing quantum development from physical systems to algorithms and applications. Phasecraft currently develops algorithms aimed at optimizing and utilizing near-term quantum computers.

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

Note to readers: As of the March edition of Q3, Stephanie Long, the creator of this blog, has moved on from TBR Inc. and bestowed this series to me, Jacob Fong. TBR and I would like to thank Stephanie for all her phenomenal work and analysis at the company and through this blog series on the ever-fascinating industry that is quantum computing.

A Roaring ’20s for the Middle East?

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PwC on post-pandemic digital transformation in the Middle East

On their March 23 webcast, “Transitioning to the New Normal,” PwC’s Middle East leaders discussed the results of their 24th annual CEO survey, focusing on findings specific to their region. Guided by Middle East Clients and Market Leader Stephen Anderson, the conversation highlighted four themes: growth, lessons learned, transformation, and threats, particularly around cybersecurity and talent. In addition to the respondents’ overall confidence that 2021 and 2022 will be growth years for the region, one highly notable findings was that 59% of Middle East CEOs surveyed are planning double-digit increases in their investments in digital transformation this year. Not only does that percentage track closely with TBR’s Digital Transformation: Voice of the Customer Research, but it also far outpaces any other area for investment, at least among Middle East-based CEOs.

The PwC leaders noted that while 2020 put considerable revenue pressure on most regional businesses, companies also used the pandemic as a catalyst to cut costs. But for 2021, cost-efficiency trails digital transformation as a priority. Again, this tracks closely with our own research, which found that companies are prioritizing investment in cloud and managed services over digital transformation for this year. Cloud demand stems directly from the pandemic and the move to remote working, while the increase in demand for managed services has been building for years.

In TBR’s recent survey, over two-thirds of respondents are planning to increase their budget for managed services over the next year, which will create opportunities for vendors that can tie cost savings to managed services solutions. Also echoing TBR’s research around global delivery and automation, PwC’s survey found that “productivity through automation and technology” ranked as the top “workforce strategy” in 2021, jumping from 6% of respondents in 2016 to 46% in 2021.

The twin threats of cybersecurity and talent

In discussing threats to growth in 2021, the PwC team described the Middle East as being ahead of the rest of the world in terms of both reducing headcount early in the pandemic and now rehiring to meet returning demands. The challenge, shared globally based on TBR’s discussions with IT services vendors and consultancies over the last year, remains finding skilled talent, upskilling current talent and managing the overall talent base, especially in a highly competitive market for digitally versed professionals. PwC’s Middle East team suggested closer cooperation between commercial entities, local governments and higher education providers would be key to regional companies being able to recruit enough skilled talent in the near term. (Quick side note: PwC has a product that may be instrumental in tackling that talent shortage.)

As for cybersecurity, the PwC team acknowledged the reality that the 2020 rush to the cloud, sparked by the move to remote working, opened the doors to new cybersecurity vulnerabilities, leading over 40% of Middle East CEOs in PwC’s survey to rank security as a threat to growth this year. According to TBR’s Digital Transformation: Voice of the Customer Research, 26% of the surveyed respondents in Europe see regulatory compliance risk as an impediment to successful digital transformations. In the same study, 50% of the respondents overall said the most critical attribute for vendor selection remained working knowledge of digital-related security, risk and privacy issues.

But we made it through together

Thankfully, the webcast didn’t end on the pessimistic note of threats and talent shortages. Instead, the PwC team observed that the region’s people — across all businesses and professions — had been “stress tested,” had become more adept at new ways of working, had found a new appreciation for “others’ well-being,” and were poised to build on the lessons learned and change atmosphere and, perhaps, welcome in a new Roaring ’20s.

Throwing a bit of a black cloud on that optimism, in the PwC CEO survey, the widest gap between Middle East CEOs and the global respondents occurred on the subject of “geopolitical uncertainty,” which CEOs from the Middle East saw as a far larger threat to growth. In contrast, Middle East CEOs were markedly less concerned than their global counterparts about overregulation as a hindrance to growth, perhaps pointing the way toward what TBR believes could be a path to success in the region in 2021: follow the Dubai, United Arab Emirates, promise of no new government fees until 2023 and the Omani shift toward more access for investors. Using competitive pressures within the region to continue to make the Middle East as a whole more attractive to global investment and trade will likely remain a key strategy for local CEOs and government leaders.

TBR has tracked developments in the region through special reports on Egypt and other nearby countries and IT services vendors’ investments as well as the financial and performance metrics of management consultancies published semiannually in TBR’s Management Consulting Benchmark.