Traditional ports and quantum computing: The now and the future

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Principal Analysts Geoff Woollacott and Patrick Heffernan are each publishing a piece this week that touches on the business of digital transformation. Geoff focuses on the massive change expected from quantum computing as the business applications begin to catch up to the science. In his opinion, “Quantum is on the cusp of delivering economic advantage. The achievable impact is real today in what can be described as Horizon 1 application use cases. Horizons 2 and 3 will be as much a function of taking existing quantum algorithms that operate with a certain precision under the current fidelity of Noisy Intermediate-Scale Quantum (NISQ) Systems and applying them to different use cases requiring greater precision delivered from higher fidelity, and ultimately fault tolerant, quantum systems to deliver economic advantage to the activity in question.” Patrick’s blog looks at a specific use case for digital transformation, Port Oulu in Finland, where he notes, “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.”

Additional assessments publishing this week from our analyst teams

“DXC Technology’s leadership, headed by new CEO Mike Salvino, is actively pursuing strategic alternatives for three of DXC’s businesses — U.S., state and local health and human services; business process services; and workplace and mobility — that do not fit the company’s focused strategy for the future. DXC will leverage these three businesses, which account for roughly 25% of the company’s total revenue, to unlock value through potential divestitures to strategic or financial buyers or a spin-off.” —  Kevin Collupy, Analyst

“Cisco Customer Experience expands its partner network, particularly with technology-led vendors, to incorporate hardware solutions and support contract generation around these solutions. Integrating automation capabilities will enable Cisco Customer Experience to maintain profitability while increasing the delivery range of solutions to new clients. We expect the company to continue strengthening its partner relationships to accelerate its portfolio transition; however, Cisco Customer Experience could face challenges differentiating its offerings from those of its peers, as they also leverage partner technologies to grow market share.” — Analyst Kelly Lesiczka

“With markets, portfolio offerings and people at the center of its Strategy 2025 initiative, BearingPoint is expected to continue to grow its management consulting revenue beyond 2019 and gain opportunities in its five segments of focus: data-driven banking operations, unified commerce, automotive operations, next-generation public services and digital twin business. BearingPoint is developing its organization in Europe and establishing the foundation for its business development in the U.S. to address growing client demand and enable European organizations to become global companies.” — Elitsa Bakalova, Senior Analyst

Test bed for smart cities: One port’s potential

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At a recent event in Oulu, Finland, I heard about the local port’s efforts to undergo a full-scale digital transformation, to include everything from 5G connectivity to analytics to drones to enhanced customer experience, sparking a kind of epiphany, for me, on the potential for a relatively small port to serve as a test bed for smart cities. Unlike municipalities, ports have defined boundaries and clear, relatively straightforward missions (move stuff in and out). Similar to cities, ports have a widely diverse ecosystem: dock workers, trucking companies, shipping companies, construction workers, safety and security professionals, waste management and maintenance companies, the port’s own fleet (such as pilots and their tugboats), customs officials, emergency responders, government agencies, environmental impact authorities, and even neighboring businesses. If a port were to go through a digital transformation, the impacts would be felt across that entire ecosystem — so that entire ecosystem must be accounted for, engaged, bought in, and sustained.

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. In my view, 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. Oh, and Oulu happens to be the Silicon Valley of the Nordics, so the local technology ecosystem could support creative and breakthrough approaches to solving the port’s technology and business problems.

How does a port measure the return on investing in digital transformation? After accepting that a hard number would probably be impossible to determine, the port can look to increased efficiency of its current clients, the ability to attract new clients (to a better-run, more efficient port), and the potential to monetize the data generated. How would a connectivity vendor like Nokia, which has already begun working with Port Oulu on 5G, see a benefit? Or how about a consultancy or global systems integrator that develops the blueprint and a proven use case for the digital transformation of ports? Beyond the simple fact that the world has thousands of ports, the world has even more cities, many looking for digital transformations. Prove it within the confines of a port’s ecosystem, and you can scale it across a city.    

Traditional management consultancies continue evolving toward the digital transformation future

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This week TBR will publish recent insights on two of the management consultancies we cover: The Boston Consulting Group (BCG) and McKinsey & Co.

Regarding BCG, Analyst Kelly Lesiczkanotes, “Earning consistent rankings as a top employer and avoiding negative publicity enable BCG to attract and retain employees and to support innovation efforts and delivery of emerging technologies. As BCG works to increase brand recognition for its subsidiaries, such as the opening of a BCG Platinion center in Poland, it improves its value proposition to bridge new capabilities and offerings within clients’ legacy environments. Enhancing its core operations consulting services will continue to bolster BCG’s ability to develop and deliver solutions, particularly in mature vertical markets, such as financial services.

On McKinsey, Principal Analyst Patrick Heffernan puts a recent surprising physical storefront development into context of the firm’s larger strategy and vision, stating, “Clients’ expectations for transformation, including analytics, cloud, AI and other emerging technologies, match the capabilities and offerings McKinsey has developed in recent years, though the firm may need to begin offering implementation services along with its strategy consulting to withstand peers’ efforts in the space. In the wake of recent controversies, however, McKinsey is touting more internal transparency while exploring new ventures in verticals such as retail, specifically with its opening of a retail space in the Mall of America.”

Additional assessments publishing this week from our analyst teams

“AI will likely be the most controversial yet opportunistic emerging technology to impact the digital transformation continuum. There will be jobs that will decline as a result of automation, but more in toil as opposed to decision making or customer engagement. Overcoming the skepticism around the public perception that automation eliminate jobs is an ongoing task demanding enterprises and vendors increasingly educate the market on the broader ROI from the use of AI, including increased productivity, improved accuracy and compliance.” — Senior Analyst Boz Hristov, Digital Transformation Insights Report: Emerging Technology

“While TBR estimates T-Systems revenue growth will be flat through 2021, the company’s profitability will follow a positive trajectory. As T-Systems undergoes transformation efforts, including the establishment of one unit that will join Deutsche Telekom’s Business Customer segment and T-Systems’ Telecommunication services and Classified ICT businesses as well as the establishment of independent Security and IoT businesses, the company aligns its portfolio with client demand tied to higher-value services. Partnering with technology vendors provides T-Systems with digital and cloud platforms that scale its growth area offerings as well as lead to new opportunities. Building its offshore talent will help T-Systems sustain its portfolio improvements in the long term, benefitting from lower-cost delivery. While T-Systems historically is slow to execute and transform business operations, the company could potentially lose opportunities to competitors as transitioning businesses hinders its ability to generate consistent growth.” — Lesiczka

“Despite weak performance in 3Q19, Sprint is taking steps to become more valuable to T-Mobile ahead of the proposed merger’s closing. Sprint is optimizing costs through deeper digitization of retail and customer service channels as well as implementing more efficient network technologies. Inheriting Sprint’s evolving IoT portfolio would enable T-Mobile to become more competitive in the IoT market, while Sprint’s growing 5G footprint would augment T-Mobile’s coverage in major markets.”  — Analyst Steve Vachon

HCL Technologies’ onshore centers provide entry points for larger-scale upselling opportunities tied to cloud, AI and cybersecurity

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Vendors are strengthening offshore and low-cost talent, particularly in India, to offset investment costs related to infusing digital into their portfolios as well as to supplement delivery and innovation efforts. For example, Atos opened a delivery center in the city of Tirunelveli in Tamil Nadu, India, that is expected to house 2,300 software engineers, and Capgemini opened two Digital Academies in India. As HCL Technologies (HCLT) has an established network of delivery and production facilities in India, the company has invested in developing its presence in EMEA and APAC during 2019.

In October HCLT announced the opening of an innovation center in Paris to support its emerging technology offerings and increase interactions between local clients and data scientists and engineers. The company also opened an innovation center in Hamilton, New Zealand, focused on blockchain, cybersecurity, cloud and AI services.

Earlier in the year, HCLT opened a digital transformation center in The Hague, Netherlands (February), and established a Google Cloud Platform Center of Excellence within its existing Cloud Native Labs in London (April) to bring skilled experts to the region and help increase adoption of the company’s Mode 2 services and solutions, particularly cloud- and digital-based services.

All of HCLT’s centers help the company strengthen its global brand, increase its proximity to clients and enhance its relationships, leading to upselling opportunities. HCLT brings cloud, cybersecurity and AI offerings to clients in a collaborative and innovative environment that enables the company to drive business value for clients and provide long-term revenue streams. However, as European vendors such as Capgemini and Atos hold market presence in the region, HCLT could face challenges in expanding its addressable market, forcing the company to focus to look for additional selling opportunities within its existing client base.

Note: More detail can be found in TBR’S 2Q19 IT Services Vendor Benchmark.

According to TBR’s 2Q19 IT Services Vendor Benchmark, total headcount growth for the 29 vendors tracked in the benchmark continues to expand, with low-cost headcount accelerating ahead of onshore and total headcount to support offshore delivery and innovation efforts. Onshore headcount is also increasing as vendors use their emerging technology portfolios to expand client bases.

Federal IT vendors capitalizing on a growth-friendly spending environment expected to see healthy top-line expansion

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Senior Analyst  John Caucis reports on three federal IT services providers this week, each delivering robust, double-digit revenue growth amid the strongest federal technology market witnessed in many years. “The strongest performance was tendered by CACI, whose revenue rose 16.9% year-to-year to $1.36 billion in 3Q19, showing the tight alignment of its differentiated solutions with high-priority spending areas in the defense and intelligence markets. CACI is beating incumbents on large-scale program recompetes and defending its incumbency on its own legacy engagements, while the strength of its fiscal performance points to a high-value solutions mix highly relevant to its core customers. CACI’s $1 billion in acquisitions in 1Q19 is also boosting revenue, adding between $115 million and $120 million in inorganic sales in 3Q19 (by TBR estimates), though also generating margin pressures.

“Booz Allen Hamilton’s (BAH) revenue rose 12.7% year-to-year to $1.82 billion in 3Q19, consistent with the company’s plan to aggressively execute on its FY20 growth objectives during the first half of the fiscal year (calendar 2Q19 and 3Q19). BAH is realizing balanced growth across its government-focused business lines. Growth in BAH’s Global Commercial business has been more variable but has stabilized and is on solid footing for continued expansion in 2020. Finally, Leidos’ revenue rose 10.1% year-to-year to $2.84 billion in 3Q19. The company’s backlog continues to surge to new highs owing to a strong sustained pace of net-new contract bookings across the defense, civilian and, particularly, healthcare areas. Leidos also successfully defended its position on a handful of large projects, including the $2.9 billion, 10-year NASA End-User Services & Technologies (NEST) program and the $927 million IT and logistics support contract with the Transportation Security Administration.”

Additional assessments publishing this week from our analyst teams

“With the Syntel acquisition fully integrated globally, Atos’ next step is to explain Syntel’s capabilities to its internal sales and delivery teams and existing clients to successfully cross-sell its solutions and to effectively deliver services for cloud revenue growth and improved profitability. TBR does not expect the stepping down of Atos CEO Thierry Breton on Oct. 31 and appointment of Elie Girard, previously deputy CEO and CFO, to change the company’s strategic direction or negatively impact Atos’ performance. Girard will continue to steer the strategic direction of the company over the next two years around delivering business outcomes for customers utilizing Atos’ technology and services expertise in cloud and cybersecurity.” — Elitsa Bakalova, Senior Analyst

“Throughout 2019, Cognizant’s emphasis on evolving from its traditional roots to a digital transformation leader has resulted in multiple acquisitions and a flurry of restructuring efforts, such as the Digital Transformation Office. The Digital Transformation Office’s latest announcement is a two-year plan, 2020 Fit for Growth, which will result in additional layoffs and reskilling efforts around key technology areas such as data, IoT, digital engineering and cloud. The 2020 Fit for Growth plan is Cognizant’s furthest reaching plan so far in 2019, impacting 12,000 employees and resulting in the divesture of nonessential businesses to free up capital for digital growth and improve Cognizant’s cost structure. TBR believes the success of Cognizant’s restructuring and go-to-market realignment will require active involvement of its partner ecosystem to rapidly expand the scale of its new offerings and strengthen its positioning against competitors in the digital space.” — Kelly Lesiczka, Analyst

“Ongoing restructuring efforts to improve delivery and cost structure enabled Fujitsu Services to grow revenues and profitability in 3Q19 but could set the company back relative to peers. However, the speed of Fujitsu’s transition will dictate the extent to which its portfolio and delivery network can generate profitable growth in FY22.” — Lesiczka

“T-Mobile will end 2019 on a high note, with the company’s annual postpaid net additions and adjusted EBITDA surpassing initial guidance expectations. T-Mobile’s momentum will continue in 2020 regardless of the outcome of the proposed Sprint merger, as the company’s widespread 5G coverage and expanding portfolio and service options will attract new customers.”  — Steve Vachon, Analyst

“AT&T’s 3Q19 earnings highlight the challenges the company is experiencing as a result of extensive expansion over the past five years due to the acquisitions of Time Warner and DIRECTV and the launch of AT&T Mexico. Market challenges and shifting consumer preferences contributed to AT&T’s revenue declines in most segments, and the company remains debt-laden from its large-scale investments.” — Vachon  

Revving the engine in Stuttgart: Accenture in the heart of the German auto zone

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In July, Accenture announced a new Customer Experience Center in Stuttgart, Germany, focused on working with automobile manufacturers and their partners to accelerate the future of connected cars. With seemingly every IT services vendor and consultancy rolling out initiatives around automobiles, TBR spoke last week with Accenture’s Axel Schmidt, senior managing director and industry managing director, Mobility, about the new center to better understand why Accenture chose Stuttgart, how this center will differ from others, and what will be the core competencies and additional value the company brings to clients by having this new space.

According to Schmidt, customer behavior trends across the automotive industry, including increased specialization, expectations around connectivity, and even the number of times a buyer visits a dealership, have further emphasized the need for automakers to enhance their marketing and sales capabilities, a core consulting strength for Accenture. In combination with its manufacturing and supply chain expertise, the company can help carmakers understand what is possible with emerging technologies and what clients are increasingly demanding. In answer to the question, “Why Stuttgart?” Schmidt explained that an Accenture acquisition, Mackevision, was founded in the city and had strong ties to the automotive sector there. Schmidt anticipates Accenture will expand the center concept to other car hubs, and possibly other related industries such as travel and transportation, based on the company’s engagements with other manufacturers.

When pressed on how Accenture and its automotive clients have responded to the changing market for cars, including an increase in car sharing and the (hoped-for) emergence of self-driving cars, Schmidt noted that Accenture recognizes that “brand strength alone will not ensure future success in mobility.”  As Accenture has advised, clients that “want to gain relevant market shares in the market of mobility services need to act now and reposition their brand by using their sales reach.” In even broader terms, traditional manufacturers, according to Schmidt, “need to embrace new platform- and customer-centric technologies in order to remain successful. Furthermore, car manufacturers need to pivot their business model wisely from building and selling cars to offering mobility.” For some time now, Accenture has advanced the idea of “the new,” to include promising “the customer a seamless mobility experience by offering him in a comfy and affordable manner that kind of mobility he needs.”

Our discussion with Schmidt ended with a look to the future, when automobiles are essentially “software with hardware wrapped around it” and they become the “ultimate mobile device.” (TBR wonders if BMW will update its slogan.) Schmidt said the current 150 million lines of code per advanced automobile will be closer to 1 billion lines of code in an autonomous vehicle. Given everyday experiences with software in other elements of life — and the trend toward “low code” in some IT environments — I think a niche market will grow for no-code, unconnected, software-free cars. Keep that red Barchetta’s motor in working condition.    

IBM continues to separate itself from the pack

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Senior Analyst Nicki Catchpole reports this week on IBM’s cloud and software practice, noting: “While IBM’s 3Q19 overall results continued to experience a downward slide, its Cloud & Cognitive Software sector experienced immediate positive effects from the much-anticipated $34 billion acquisition of Red Hat. Red Hat’s OpenShift technology and channel-driven approach have boosted IBM’s cloud growth, expanded the broader IBM portfolio, and opened doors to new customers and markets. Post-merger, IBM is focusing on emphasizing its value proposition at the PaaS layer, with the intent to capture enterprise IT spend in the lucrative hybrid cloud market and position itself as the industry’s only true hybrid multicloud platform. While IBM still faces strong headwinds post-merger, TBR expects that another quarter of executing a cloud-native portfolio approach will position IBM for differentiation and continue to yield positive growth results in this segment.”   

Additional assessments publishing this week from our analyst teams

“Capgemini has sustained a midsingle-digit organic revenue growth trend over the past seven quarters, positively affected by strategic expansion into next-generation and industry-specific solution areas. Capgemini’s revenue growth will decelerate in 4Q19 due to potential softness in the banking sector and in the U.K. Capgemini indicated pockets of softness are developing, specifically in banking due to end-of-year budget management and in the public and private sectors in the U.K. due to uncertainty around Brexit. In September Capgemini’s board of directors chose Chief Operating Officer (COO) Aiman Ezzat to succeed Paul Hermelin as CEO in May 2020. While Ezzat will be responsible for the overall management of the company as CEO, Hermelin will remain chairman of the board. This will ensure a smooth transition in Capgemini’s top executive role. Ezzat has been with Capgemini for 20 years and has deep knowledge of the company from holding leadership roles, such as CFO and, most recently, COO.” — Elitsa Bakalova, Senior Analyst

“Atos’ new CEO, Elie Girard, will continue to steer the company’s strategic direction in the next two years, with a focus on delivering business outcomes for customers utilizing Atos’technology and services expertise in cloud, cybersecurity and emerging areas such as IoT and edge and quantum computing. Revenue and cost synergies from the Syntel acquisition will enable Atos to achieve its financial goals in 2019. Atos is positioned well to support its expansion in North America by cross-selling solutions to existing clients. TBR expects Girard, who has been with Atos since 2014, to emphasize execution of financial targets, especially around improving profitability through productivity and efficiencies.” — Elitsa Bakalova

“With its marriage to United Technologies on the 2020 horizon, Raytheon is on the cusp of a game-changing merger that will impact the federal IT and global aerospace sectors for years to come. In TBR’s 3Q19 Raytheon Intelligence, Information & Services (IIS) report, we will begin to examine the implications of the blockbuster, multibillion-dollar consolidation on Raytheon’s government services business. Despite early disruptions from the looming mega-merger and the loss of the Warfighter FOCUS contract, Raytheon IIS continues to post robust fiscal performance, owing to a steady stream of new classified projects in cyber and space, particularly in its core U.S. market but also overseas with its long-established roster of foreign governments the company counts as clients.” — John Caucis, Senior Analyst

“Leveraging its portfolio network to integrate cloud, digital and security capabilities as well as support delivery of software-driven services will help Cisco Customer Experience maintain growth and profitability. Additionally, Cisco’s increased acquisition activity will provide Cisco Customer Experience with access to a broader client base and enable it to more quickly develop cloud and IoT capabilities to bolster revenue streams in 3Q19.” — Kelly Lesiczka, Analyst

“HCL Technologies’ (HCLT) alliance and acquisition strategy helps the company enhance its portfolio to embed vertical and technical expertise and positions it for profitable revenue growth in 2020. Additionally, HCLT’s investments in talent, including fostering its ‘Employees First’ culture, supports the development of a digitally versed talent bench and will allow HCLT entryways into emerging markets.” — Kelly Lesiczka

“DXC Technology made several changes to its management team, including its CEO, following the retirement announcement of its current chairman, Mike Lawrie. New leadership across DXC will bring a fresh perspective and could help turn around its perpetual restructuring initiatives and financial underperformance. During the quarter, the company appointed Mike Salvino as president and CEO, and TBR believes his vision for the company complements DXC’s strengths and will align with much of his predecessor’s values, minimizing disruption, as Lawrie was involved in the selection process.” — Kevin Collupy, Analyst

“Azure has become a consistently strong revenue driver for Microsoft, but it is also notable that Microsoft has been able to sustain growth of its licensed Server software products by stressing hybrid IT environments and high-value use cases like expansive IoT deployments.” — Meaghan McGrath, Senior Analyst 

“Amazon Web Services’ (AWS) days of unrivaled public cloud PaaS and IaaS dominance may be numbered as key competitors such as Microsoft and Oracle rally together to unseat AWS. AWS is fighting to stem their progress, sacrificing margins to win customer workloads.” — Meaghan McGrath

“Comcast’s Cable Communications business remains in an enviable position in the U.S. telecom industry as it continues to sustain solid revenue growth despite increasing competitive pressures and shifting consumer trends. Central to Comcast’s success is the high subscriber growth spurred by the accelerated speeds of its DOCSIS 3.1 broadband services while being free of the burden of maintaining a legacy network portfolio, which is hindering wireline revenue growth for rivals such as AT&T and Verizon.” — Steve Vachon, Analyst

“The fruits of Verizon’s restructuring initiatives, which focus on eliminating nonessential costs while renewing emphasis on the strength of the company’s wireless business, were evident in Verizon’s improved subscriber growth and consolidated operating margin in 3Q19. Verizon’s emphasis on improving the value proposition of its unlimited data plans led to the company gaining its highest third-quarter wireless phone gross additions in five years, but churn is also rising due to stronger competition from T-Mobile and Xfinity Mobile.” — Steve Vachon

Betting on business model transformation through appointment of new leaders

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As companies must manage multidisciplinary and
multigenerational workforces, maintaining properly
trained leaders, with visions closely aligned to the
organization’s DNA rather than investor expectations,
will provide a strong foothold in a largely disrupted IT
services market. The impact on employee culture,
morale, purpose and other organizational behavior
largely depends on the CEO of the company, particularly
if a new one needs to be selected. Promoting from
within typically inspires employees, as is often the case
when a company is performing well, such as with
Accenture; external candidates are often brought in for
fresh, new ideas and are associated with a last resort
measure for companies in distress, similar to Conduent,
DXC Technology (DXC) and Cognizant, to an extent.
While changing a company’s DNA overnight is
impossible, with many examples of leaders who have
tried and failed, embedding new ideas to drive change
must start with a solid foundation. As the decade wraps
up and many ICT vendors place bets on appointing
and/or hiring new CEOs, the question about new ideas
and their execution has yet to be answered. CEOs who
can execute on their initiatives at scale, beyond the
marketing hype and PR, will most likely succeed.

A few recent highlights:

  • In TBR’s view, the CEO changes at Atos and Capgemini will not impact performance. They are both planned, and for Capgemini, the former CEOs will remain part of the board. Both companies will have former CFOs leading, so there will be very strict execution based on numbers. TBR does not expect the stepping down of Atos CEO Thierry Breton on Oct. 31 and the appointment of Elie Girard, current deputy CEO and CFO, to change the company’s strategic direction or to negatively impact Atos’ performance. Atos has been working on a CEO succession plan since the beginning of 2019, when it appointed Girard as deputy CEO. While Girard became CEO on Nov. 1 and will be responsible for the overall management of the company, the chairman of the board position was separated from the CEO’s responsibilities and filled by Bertrand Meunier as nonexecutive chairman of Atos SE’s board of directors. In September Capgemini’s board of directors chose Chief Operating Officer Aiman Ezzat to succeed Paul Hermelin as CEO in May 2020. While Ezzat will become CEO and be responsible for the overall management of the company, Hermelin will remain chairman of the board. This will provide a smooth transition in Capgemini’s top executive role and avert potential execution challenges if a future CEO was to step down completely. Ezzat has been with Capgemini for 20 years and has a deep knowledge of the company from holding leadership roles, such as CFO and, most recently, chief operating officer. TBR expects Ezzat to continue to implement Capgemini’s strategic plans in the coming quarters.
  • Accenture appointed Julie Sweet as CEO effective Sept. 1, 2019. Previously Sweet led Accenture North America operations, where Accenture Technology is a key contributor to revenue performance and the company has successfully executed on its 2017 initiative to recruit 15,000 employees and open 10 innovation hubs across the region by 2020.
  • On April 1, 2019, Brian Humphries took the reins as a CEO of Cognizant, succeeding company co-founder Francisco D’Souza. Shortly after the former Vodafone Business lead stepped in to head Cognizant, the company announced plans to provide voluntary separation to 300 top-level executives in late May. The layoffs, which are part of Cognizant’s efforts to improve its cost structure, have primarily been focused in the U.S. and India.
  • DXC Technology elected former Accenture Operations lead, Mike Salvino, to take over from Mike Lawrie as the company’s CEO. We expect Salvino’s background in operations and DXC’s recent purchase of Luxoft to further expand the company’s opportunities within the BPaaS space.  

Quick Quantum Quips: A call for quantum supremacy sends ripples through the market

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The quantum market changes rapidly, and the hype can often distract from the realities of the technological developments. In our new monthly newsletter, Quick Quantum Quips (Q3), TBR will brief readers on the latest market announcements, stripping that hype to dig deeper into how recent events will impact the market as a whole. To schedule a time to chat with Analyst Stephanie Long or another one of TBR’s quantum analysts about any of the insights below, contact her at [email protected].

October 2019 developments:

  1. Google claimed it achieved quantum supremacy in mid-October, sending ripples through the quantum community. Quantum supremacy is a key milestone many leaders in the quantum computing space have been working toward for years. If true, this milestone would mean that quantum theory has successfully been translated into practical applications, so such a claim has major implications for the industry overall. Google claims its quantum computer was able to perform a truly random number generation in 200 seconds — and that the task would have taken a supercomputer 10,000 years to complete. Further, truly random number generation is necessary for quantum-safe security solutions, making this announcement a multifaceted milestone in the quantum community. Critics of Google’s claim state that it is possible to achieve very similar results in 2.5 days on a supercomputer, although it would require 250 petabytes of storage to do so, potentially diminishing the size of Google’s “milestone” achievement but confirming it as an achievement nonetheless.
  • IBM has been in the news consistently during October for its strong claims against Google’s quantum supremacy claims. TBR believes that the strong opposition signifies the power being the first company to achieve quantum supremacy can hold as well as the damage to the industry an unrealistic claim can cause through false hyping of the technology. The industry already struggles with hype, which pushes C-Suite executives to invest in and expect quick results from a technology that is meant for the long game, and skewed claims only stand to increase the negative impacts of the hype. As such, IBM has made a significant effort to minimize the hype surrounding Google’s announcement to reveal the complete facts surrounding the achievement.
  • IonQ received its latest round of funding in October — to the tune of $55 million. Samsung and a sovereign wealth fund of the United Arab Emirates led the funding this round, while Google, Amazon and New Enterprise Associates re-upped their commitments from earlier funding rounds. The investments in IonQ are significant, as the list includes some potential competitors such as Google. TBR notes that Google is investing in superconducting quantum computing, which presently leads the charge in terms of advancements. However, IonQ’s theory of trapped ion quantum computing is unique in that it does not require cryogenically cold environments to function, making its approach seem more realistic in that it would have broader, more practical commercial applicability. TBR believes Google’s investment in IonQ demonstrates its strong cash position and focus on the applied uses for quantum over being wedded to any particular hardware structure. Google, like many enterprises, is more focused on application exploration rather than the sale of quantum systems.

  • In a true demonstration of the sheer power quantum computing can unleash, customers are jumping on the innovation train to accelerate the development of both the technology and related skills. Airbus announced that it has compiled a list of leading experts to act as judges for its quantum computing competition. The Airbus Quantum Computing Challenge launched earlier this year and is designed to encourage experts and those interested in quantum computing to tackle some of the more complex computational problems for aerospace. All proposals needed to be received by Oct. 31 and are now being reviewed by the team of judges that Airbus compiled. Jury members come from all geographies and from both industrial and academic organizations, including QC Ware, Horizons Quantum Computing, the University of Waterloo, the University of Technology Sydney, QuSoft, the University of California and more. The announcement is significant because a commercial enterprise is recognizing the value quantum can bring to its business and displaying an eagerness to contribute to the advancement of the quantum ecosystem.
  • QC Ware unveiled the list of speakers for its upcoming quantum computing event, Q2B. The event will take place in California in December. Program details can be found at the link provided.

If you would like your company’s announcement featured in an upcoming Q3, contact Geoff Woollacott to coordinate a conversation.

UiPath’s enhanced and expanded technology stack provides a solid foundation to reach scale

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In mid-October Senior Analyst Boz Hristov attended the annual UiPath Forward conference in Las Vegas, and recently, he published his thoughts on the event and UiPath’s role in the robotic process automation market.

He wrote, “UiPath’s position as one of the leading vendors defining the robotic process automation (RPA) market comes with responsibilities for managing expectations across stakeholders, and the company knows it. Enhancing its value proposition by adding the necessary layers of technologies and deploying business-led frameworks internally and with alliance partners helps it build use cases of scale, a necessary attribute to maintain growth momentum, as RPA is no longer a siloed, line-of-business-led initiative, but rather a node in an enterprisewide automation initiative.”

Additional assessments publishing this week from our analyst teams

“TBR’s quarterly full report on IBM highlights the strategic development in the hardware portion of IBM’s larger portfolio. In 3Q19 we discuss IBM’s quantum computing business as well as the positive implications of the September launch of the z15. Additionally, highlights of IBM’s more emerging capabilities such as around blockchain are also expanded on. IBM’s July finalization of its Red Hat buy has sent a wave of open source through the business, impacting Power Systems this quarter.” — Stephanie Long, Analyst

“IBM Services will continue to experience growth in business and technology transformation areas, such as advisory activities around cognitive technology, cloud application modernization and next-generation enterprise applications such as SAP Business Suite 4 HANA (S/4 HANA) and Salesforce. The growth will be driven by IBM Services’ portfolio realignment initiatives to deliver higher-value and higher-margin services that integrate technology and industry expertise and enable clients’ digital reinventions. Synergies with the Red Hat acquisition, which closed on July 9, will continue to generate application modernization deals for IBM Services involving the OpenShift hybrid cloud platform. However, lingering growth challenges in traditional IT service areas and ongoing transformation of the Global Technology Services business will stall IBM Services’ revenue growth and profitability improvement in 2019.” — Elitsa Bakalova, Senior Analyst

“While TBR expects T-Systems’ revenue growth to decelerate slightly in 3Q19, reorganization efforts combined with the company’s investments in cloud, IoT and security capabilities to align its portfolio with client demand will prepare the company to stabilize revenue in 2020.” — Kelly Lesiczka, Analyst

“Sprint’s 3Q19 performance highlights the necessity of the T-Mobile merger and the challenge of Sprint remaining a stand-alone company. Sprint continues to struggle to gain customers without aggressive pricing, while its elevated capex budget is limiting free cash flow and has yet to produce a significant improvement in network quality to lower churn rates.” — Steve Vachon, Analyst