Executive change at Accenture portends changes for the market leader

/by

With Julie Sweet appointed the next CEO of Accenture and David Rowland named the executive chairman of the board, the company doubles down on its proven go-to-market strategy and delivery frameworks. However, as Accenture strengthens its core as a technology organization and Accenture Technology plays a pivotal role in North America’s performance (Sweet was previously CEO of Accenture North America), TBR Senior Analyst Boz Hristov says a couple of questions remain:

  • Will Sweet bring a clear vision and execution strategy for the company’s IP, in particular around monetizing it?
  • Should Accenture consider spinning off its Accenture Software business as a separate entity and launch a mature startup-like software organization?

We do not expect major changes in Accenture’s strategy and/or performance in the short term; however, as with any new CEO, one should always expect some degree of change. Only time will tell if that change will be minimal or involve a 180. As TBR recently noted, Accenture delivered record-breaking quarterly revenue, with growth increasing 3.8% year-to-year in USD (8.4% in local currency) to $11.1 billion in FY3Q19, as the company’s aggressive investments in “the new” are paying off, as the segment now contributes over 60% of total sales and expanding at double digits in constant currency. While many of the new opportunities for Accenture stem from investing in innovative offerings (e.g., Industry X.0) and building out relationships with new buyers, demand for application services in connection with adopting intelligent ERP systems, enabled by key partners such as SAP, Oracle, Microsoft, Salesforce and Workday, drove double-digit revenue growth in local currency, with the segment generating 40% of sales.

Additional assessments publishing this week from our analyst teams

Ericsson has made significant progress in its latest restructuring initiative, leading to higher margins and a more focused go-to-market strategy. The company has also lately been helped by the ongoing deployment of 5G and 5G-ready networks in the U.S. and, to a lesser extent, South Korea. U.S. spend on 5G will accelerate as operators aim to gain a competitive advantage, and Ericsson is positioned to capitalize. In our 2Q19 Ericsson Initial Response, we will examine Ericsson’s continued restructuring progress and monitor its status as a leading 5G RAN supplier. — Michael Soper, Senior Analyst

TBR will publish its 2Q19 Oracle Cloud report on Thursday, discussing where Oracle sits in its quest for cloud dominance, the status of autonomous database adoption and the expected impact of Oracle’s alliance with co-AWS-rival, Microsoft Azure. — Meaghan McGrath, Senior Analyst

Application software vendors continue to realize healthy growth of subscription revenues, accompanied by accelerating declines in licensing, as reported in the upcoming Applications Software Vendor Benchmark. Application vendors aggressively pursue cross-selling of subscription solutions to generate scale and protect operating margins as the cloud sales mix increases. This is particularly true for multiline vendors with substantial legacy license bases, though these vendors are well positioned to upsell existing customers to cloud alternatives by emphasizing the value of deploying managed, unified suites between the front and back office. — Meaghan McGrath

SAP will release its 2Q19 earnings on Thursday, uncovering the near-term impact of its highly transparent restructuring effort. TBR will discuss this, as well as portfolio developments related to C/4HANA and Qualtrics application releases, in our SAP Cloud Initial Response, which will publish on Friday. — Meaghan McGrath

IBM’s acquisition of Red Hat officially closed on July 9 and will impact the trajectory of the business for the remainder of 2019 and beyond. TBR’s Initial Response report will touch on this and other developments at IBM in 2Q19, including within the company’s Systems Hardware business. — Stephanie Long, Analyst

IBM Services continues with its portfolio realignment initiatives to deliver higher-value and higher-margin services that integrate technology and industry expertise and enable clients’ digital reinventions. While IBM Services’ activities around advising, building, moving and managing next-generation technology solutions are increasing, it will take time before the shifting business mix returns sustainable revenue growth. — Elitsa Bakalova, Senior Analyst

On Friday TBR’s 2Q19 IBM Cloud Initial Response is publishing, detailing the company’s last full quarter without Red Hat. Recent and ongoing portfolio investments, particularly at the platform layer, are expected to help boost IBM’s cloud revenue in the second quarter. — Cassandra Mooshian, Senior Analyst

TBR’s 1Q19 Hosted Private Cloud Benchmark discusses how vendors with hybrid PaaS and IaaS portfolios that span vendor and customer data centers are well positioned to capture additional hosted private cloud market share. IBM and Google continue to enhance their Kubernetes-based platforms to be increasingly infrastructure and environment agnostic while Amazon Web Services and Microsoft focus on hybrid cloud stacks, with emphasis on the IaaS layer. — Cassandra Mooshian

IBM and Red Hat close the deal — will it be red washing or blue washing?

/by

On July 9 IBM held a 30-minute Q&A with industry analysts, led by Red Hat EVP of Engineering Paul Cormier and IBM SVP of Cloud and Cognitive Software Arvind Krishna. The discussion confirmed the overarching strategic benefits both parties see in the union while stressing the intentions to keep Red Hat vendor agnostic. Around three-quarters of Red Hat’s revenue is generated through its channel, suggesting Red Hat is viewed as a valuable and highly sought-after partner. Despite the fact that IBM and Red Hat executives continue to echo the necessity of maintaining all of Red Hat’s existing alliances, these relationships could come under review by the partners themselves now that the acquisition of Red Hat by IBM has been approved by regulatory boards globally and finalized.

Indeed, when queried about industry concerns that Red Hat would be “blue washed,” Krishna said, “[Blue washing] would be a bad thing for both [companies],” and suggested the exact opposite — that there could be some “red washing” of IBM that results, which has also been an opinion TBR has offered in various commentary as this deal moved toward closure.

Red Hat almost single-handedly commoditized the enterprise software space before taking aim to do the same thing with the platform layer through OpenShift. Commoditization is not something IBM necessarily has liked to see over the years at it rapidly eroded the transaction-oriented hardware segment of the industry as IBM pivoted to software and services. The developer community can now accelerate innovation through this open foundation layer, which is how Red Hat will remain autonomous from IBM. Red Hat’s best practices around subscription monetization of essentially free IP generated by the open-source community will likely be the best practices brought forward to red wash IBM as it moves further into the automated services arena, with Watson Anywhere and Blockchain Anywhere as two recent examples of these moves.

How can IBM scale Red Hat’s best practices?

IBM will bring its technical skills to the union to bridge the legacy world with the open-source world underpinned by Red Hat Enterprise Linux (RHEL), OpenShift and Kubernetes containers. Both Cormier and Krishna highlighted the breadth of IBM Services’ that can be brought to bear for enterprises looking to migrate the 80% of workloads that have yet to migrate to cloud, according to IBM. Through OpenShift, this migration can extend beyond just moving from legacy applications to one public cloud, to encompass nimble and secure migration to and between multiple clouds and on-premises instances.

Red Hat will still operate with multiple vendors while also maintaining the robust and expansive developer community that has been described, with some legitimacy, as almost a cult-like following. Indeed, it can be argued that this merger will in retrospect be viewed as a milestone event in the ongoing march to consumerize IT to simplify the technology side of business operations and focus more on business objectives than on the technical challenges. DevOps and security practitioners will have one platform cemented by Kubernetes containers to work within a true multicloud environment.

What tactical steps must be achieved to implement the strategic vision?

The teleconference had TBR analysts pondering many of the as-yet-unanswered questions that IBM and Red Hat stated will be addressed in the upcoming weeks. Principal among those TBR questions are the following:

  • How successful will IBM be at operating Red Hat as a stand-alone unit — an acquisition model it has yet to take on? Typically, acquired companies are blue washed, and it has been common to see executives from acquired companies resign. Will that be the case with Red Hat? Will Red Hat CEO James Whitehurst stay on, and better yet, will he succeed IBM CEO Ginni Rometty in coming years?
  • How will IBM Cloud Private (ICP) and OpenShift coexist? The move to multicloud with OpenShift underpinning the DevOps and security communities begs the question: How much emphasis will or should be placed on ICP? Will ICP be joined, or will OpenShift supplant that technology, with IBM Services maintaining the implementation based on trust from years of account control in the large enterprise?
  • What will be the development road map for IBM middleware assets? How will these assets align with, merge with, or remain distinct from the Red Hat portfolio?
  • How will IBM blend Red Hat best practices, technology and personnel into its own developer ecosystems, programs, and the IBM Garage method? This issue will be more of a cultural shift.
  • How can IBM and Red Hat increase share in the midmarket enterprise? Developer satisfaction will be closely monitored, but open platforms also mean access to cutting-edge technology by smaller enterprises. That go-to-market motion is radically different from the traditional enterprise motion where IBM has excelled for decades. In the era of multi-enterprise business networks, small enterprises and large enterprises interoperate more frequently through automated systems. IBM’s brand at times works against it within the midmarket, which perceives the offers to be too costly and likely too complex for its requirements. To gain scale with multi-enterprise business networks, this issue will be a critical area to improve upon.

All the right words were spoken, and the strategic vision appears sound. As always, the devil will be in the details, and those details will be laid out in the ensuing weeks and months around one of the most important acquisitions in IBM’s — and the industry’s — history.

Authors: Senior Analyst Cassandra Mooshian ([email protected]) and Senior Strategy Consultant & Principal Analyst Geoff Woollacott ([email protected])

IoT and quantum emerge as new growth frontiers in IT services

/by

Data is exploding, and vendors are preparing to accommodate this trend by effectively managing, storing, securing and analyzing data and by driving business results through next-generation solutions. During Atos’ Technology Days, held May 16-17 in Paris, Atos CEO Thierry Breton stated that while 80% of data is currently stored in data centers and in the cloud, that percentage is forecast to shrink to 20% by 2025 as clients seek ways to analyze data in real time at the edge, where it is created. Pioneering emerging technology development, such as IoT, edge computing and quantum computing, enables vendors to expand their addressable market and cross-sell and upsell their services offerings.

While traditional IT services remain key revenue contributors for many of the 29 IT services vendors that TBR covers in its IT Services Vendor Benchmark, portfolio innovations create new areas of growth. Gaining a first-mover advantage in emerging segments enables vendors to attract clients with practical use cases for new technologies across industries.

Technology partnerships and acquisitions enable vendors to expand IoT portfolios and capture new areas of growth during 2019

While IoT solutions will often span several services, they are usually confined to one vertical, guiding vendors’ IoT-led partnerships and portfolio development. IoT intrinsically cuts across both vendor and customer categories, transforming and connecting business operations. Vendors expand their portfolios to guide customers on how to implement and manage IoT solutions. However, some vendors lack portfolio depth around critical IoT capabilities, such as operational technology (OT), and predictive analytics and data management, that allow customers to proactively manage equipment and reduce costs associated with downtime. To fill these portfolio gaps, we expect vendors to forge relationships and make acquisitions that support development of vertical-oriented IoT solutions.

Examples of Vendors’ Recent Activities

Fujitsu partnered with Coast Research Engineering Co. to develop an IoT solution for aquaculture and marine clients. The solution will monitor water quality and temperature from aquamarine tanks to support aquaculture. Fujitsu RunMyProcess partnered with IoT.nxt to improve data collection and analytics within Fujitsu’s high-productivity application PaaS (hpaPaaS) and to automate operational processes. The partnership will improve Fujitsu’s ability to collect and analyze data from various devices and sensors by standardizing and filtering data.

Wipro announced the opening of its third Industrial IoT (IIoT) center of excellence in March in Kochi, India. Wipro is using the centers, which are also located in California and Bangalore, India, to develop proofs of concept and market-ready solutions for IIoT customers. Further, Wipro has been leveraging the centers to attract local talent from universities through various initiatives such as hackathons.

The acquisition of Altran announced on June 24 expands Capgemini’s engineering and R&D services capabilities and complements the company’s established consulting and IT capabilities. Capgemini is positioning as an “intelligent industry” vendor that can provide solutions around Engineering 4.0 and Industry 4.0. and expand in smart technology-driven segments such as IoT, AI, 5G, cloud, edge, data and cybersecurity. The key for this transaction is that while Capgemini has well-established IT expertise as well as digital transformation and design and innovation consulting capabilities in Capgemini Invent, the company gains Altran’s OT capabilities, a competence that was not developed for Capgemini but is a key component in IoT models. TBR notes that Capgemini is catching up with some of its peers in IoT. For example, Capgemini’s direct competitor Atos already has a history in OT as a result of its acquisition of Siemens’ IT Solutions and Services business and its global strategic alliance with Siemens AG has given it a head start in IoT; Atos has increased its investment in current joint efforts with Siemens in IoT. In February Capgemini partnered with Idemia, a provider of AR solutions, to develop an IoT device management platform that strengthens security and connectivity of devices and data. The platform will be based on Capgemini’s IoT device management platform, X-IoT, which securely connects and manages gateways and protocols to the cloud, and on Idemia’s M-Trust solution.

Vendors are competing to gain a first-mover advantage in the early commercial stages of quantum computing to diversify revenues

Quantum technologies remain in the nascent stage, with vendors increasing R&D practices to develop technologies such as computing. IBM has the technology expertise to accelerate commercial use of quantum computing as its investments date back to 2016. However, competitors such as Atos and Accenture are picking up speed. A key inhibitor to quantum computing adoption will be the impracticality of having the hardware on premises due to the very specific environmental conditions needed to function properly, creating opportunities for vendors to help customers take advantage of quantum computing without negatively impacting hardware sales.

Examples of Vendors’ Recent Activities

IBM released an integrated quantum computing system for scientific and commercial use. IBM Q System One tackles complex problems that are challenging for classical systems to handle while enabling quantum computers to operate beyond research labs. In 2019 IBM is opening its first IBM Q Quantum Computation Center for commercial clients in Poughkeepsie, N.Y., expanding the IBM Q Network commercial quantum computing program, which already includes systems at the Thomas J. Watson Research Center in Yorktown, N.Y. The center will enable IBM to work with a community of enterprises, startups, academic institutions and research labs to advance quantum computing and explore practical applications for business and science.

Accenture Labs, three of which contain dedicated quantum computing R&D practices, engage in projects that have customer sponsors to solve real-world business or economic problems. Accenture maintains nine quantum computing offerings and has identified 150 use cases across its Operating Groups, the most prominent being pharmaceutical vendor Biogen.

Atos also continues to enhance its quantum computing capabilities. As TBR wrote in its May 2019 Digital Transformation Insights Report: Emerging Technology, which focused on quantum, “Atos took its strengths in design computing for appliances and programming and emulation environments and announced several quantum research initiatives, including the opening of a global R&D lab in Yvelines, France, and Atos QLM [Quantum Learning Machine] implementations in Europe and the U.S. to enable clients to experiment with disruptive technologies, tackle the explosion of data and accelerate the number of practical use cases across industries. Additionally, about a year ago, Atos developed a consulting practice around quantum computing to educate and advise clients on whether it is possible to use quantum to accelerate business applications. During Atos Technology Days 2019, Atos announced myQLM, a light version of a QLM, which is an on-premises environment designed for quantum software developers. Users can download myQLM on their desktops and use a set of algorithms to train at home or at a university and simulate the actual QLM. A Phyton-based language, QLM allows students and researchers to develop and share code within the community, creating additional entry points for Atos’ broader services portfolio. With customers ranging from universities and research centers to high-performing computer ecosystems and commercial clients, Atos … is building one use case at a time. For France-based oil and gas company Total, Atos is using a QLM simulator to accelerate the analysis of seismic activities, helping Total stay ahead of competitors. Atos is also working with Bayer and RWTH Aachen University in Germany to evaluate the use of quantum computing to research and analyze human disease patterns.”

Enterprises leverage disruptive emerging technologies within their operations to improve processes and accelerate digital transformation

/by

Extension remains the most natural jumping-off point for digital transformation (DT) initiatives, as enterprises can experiment with disruptive technologies within familiar business operations, see their value in generating new business insights, and then use those insights to re-imagine processes. TBR’s Digital Transformation Insights Report: Voice of the Customer shows that vendors need to orient toward development of pointed, industry-centric solutions to retain mindshare. This report, authored by Senior Analyst Boz Hristov, shares survey results across a spectrum of DT issues as well as excerpts from extensive, in-depth discussions with clients currently purchasing DT services.

Additional assessments publishing this week from our analyst teams

While trailing 12-month IT services revenue growth decelerated from 4Q18 to 1Q19, according to TBR’s IT Services Vendor Benchmark, year-to-year growth in 1Q19 of 2.6% surpassed that of 1Q18, which was 2.2%. Vendors are investing in niche digital design areas and industry expertise to drive advisory services activities with C-Suite executives. They are also leveraging established footholds and trust with new buyers to pursue managed services around clients’ application and infrastructure estates. Improving profitability provides vendors with flexibility to invest gains in high-growth and high-value technology-enabled solutions. — Elitsa Bakalova, Senior Analyst

In TBR’s 2Q19 Accenture Initial Response we continue to assess if scale and appetite for innovation still define and shape Accenture’s success as it becomes a solutions broker. We will also look into how platforms supporting omnichannel architecture will underpin Accenture’s efforts to capture custom work and reach $47 billion in sales by 2020. — Boz Hristov

In 1Q19 Dell EMC’s Infrastructure Solutions Group faced year-to-year revenue declines across all segments, including storage, servers and networking, due to a combination of seasonality headwinds and go-to-market challenges. As Dell EMC’s cloud revenue is largely tied to hardware sales, these same challenges compromised its cloud top-line performance. An increasingly strategic partnership with VMware coupled with the new Dell Technologies Cloud portfolio will help boost performance in coming quarters. — Cassandra Mooshian, Senior Analyst

TBR’s Hyperconverged and Converged Market Landscape explores the vendor landscape of these two markets, including leaders and laggards, and the existing and emerging disruptors in the space. This report details recent announcements in the space made by key vendors as well as the disruptive dynamics of emerging hardware trends from nontraditional vendors, such as Amazon Web Services (AWS) with its AWS Outposts.— Stephanie Long, Analyst

TBR’s Hyperconverged Platforms Customer Research surveys hyperconverged customers to analyze purchasing patterns, spending habits, adoption trends and the evolving drivers behind vendor selection. Key highlights of this report include customer desire to leverage hyperconverged infrastructure (HCI) for private cloud environments and the ongoing shift to consumption-based pricing. We also surveyed current HCI customers to determine their likelihood of adopting AWS Outposts, along with where customers will pull funding from to support this new hardware model. — Stephanie Long

SAIC officially began its integration of Engility’s nearly $1.9 billion in revenue and 7,500 employees in 1Q19, aiming to leverage Engility to accelerate its expansion with a more balanced, diversified and lower-risk portfolio and an enhanced competitive stance in markets adjacent to its core Department of Defense and federal civilian sectors, particularly space and intelligence. A new leadership era is also beginning at the top of SAIC’s executive management, as CEO Tony Moraco will retire effective July 31 and will be succeeded by COO Nazzic Keene, who was elected to the CEO post by SAIC’s board of directors in March. Keene has already implemented numerous changes during the CEO transition period as part of the broader initiative she has spearheaded to flatten SAIC’s management pyramid and streamline operations amid the integration of Engility.— John Caucis, John Caucis

TBR’s 1Q19 Booz Allen Hamilton (BAH) report details how the company completed its fiscal 2019 with strong top-line expansion and record revenues, better-than-anticipated earnings, and its largest quarterly dividend increase in years. BAH’s performance throughout its last fiscal year reflects a soundly differentiated market position and multilayered alignment of the company’s technology and advisory portfolio with the primary missions of its federal customers. In May 2015, when BAH launched its Vision 2020 strategy, industry and company observers criticized the plan over concerns BAH would be investing ahead of demand, which had yet to materialize. BAH has sustained a top-line growth CAGR of nearly 6.2% and an average operating margin of 8.5% (both in excess of peer averages for these metrics in TBR’s Public Sector IT Services Benchmark) since Vision 2020 was enacted, affirming the strategic framework was well conceived and has been well executed. — John Caucis

Tune in Wednesday at 1 p.m. EDT to hear Stephanie Long share highlights from TBR’s HCI research including exclusive recent findings from TBR’s Hyperconverged Platforms Customer Research. The webinar will highlight how the HCI market has shifted over the last few years and where TBR sees it headed. Additionally, this will be a great opportunity to ask our analysts your questions about the HCI market. Sign up today!

Deloitte’s willingness to go into unorthodox markets supports growth

/by

“Broad-based investments including low-cost resources and platform-based solutions are among the recent examples of Deloitte’s efforts to expand its addressable market, resulting in improving non-management consulting revenue performance,” says Senior Analyst Boz Hristov.

“While Deloitte is far from reaching revenue diversification compared to the likes of Accenture, the firm is making inroads in unorthodox markets such as outsourcing services. To succeed, though, Deloitte will need to showcase pricing flexibility as it deploys new ways of engaging with clients.”

In his recent assessment of Deloitte’s management consulting practice, Boz noted that augmenting legacy services through investments in legal services, as well as technology partnerships with the likes of Google and ServiceNow, will play a critical role in building and solidifying trust with new and existing buyers, especially as the majority of them fall within the Extension stage of Deloitte’s digital transformation initiatives. Teaming consulting and analytics experts with solutions architects as a core go-to-market strategy will likely not differentiate Deloitte much from rivals. However, the firm’s dedicated investments in regions such as Germany, where consulting sales revenue share surpassed that of legacy audit services, will help build the globally integrated, diversified portfolio Deloitte needs to protect its No. 1 position among TBR’s benchmarked vendors.    

Additional assessments publishing this week from our analyst teams

In 1Q19 VMware experienced another healthy quarter of revenue growth, which increased 12.8% to $2.3 billion. Late 2018 acquisitions helped buoy revenue, as did double-digit cloud management bookings and the reported success of CloudHealth in the quarter. — Cassandra Mooshian, Senior Analyst

In its 1Q19 Hewlett Packard Enterprise Cloud report, TBR discusses the company’s modest 2.8% cloud revenue growth, to an estimated $1.9 billion, and how that underscores Hewlett Packard Enterprise’s (HPE) focus on and commitment to cloud-based hybrid and emerging technologies. HPE GreenLake continues to play a crucial role in HPE’s success, as GreenLake orders grew a reported 39% year-to-year in 1Q19. — Cassandra Mooshian

TBR’s Dell Technologies report deep dives into the performance and strategies of the vendor’s Client Solutions and Infrastructure Solutions groups, while painting the picture of Dell Technologies’ bigger overall strategy. Deeper analysis of some of the announcements that emerged from Dell Technologies World will also be highlighted as well as the ongoing strategic positioning of VMware. — Stephanie Long, Analyst

And sign up now for TBR’s next webinar, Where will hyperconverged infrastructure fit in the modern data center?

Salesforce to acquire Tableau as the market moves to no-code and low-code environments

/by

Salesforce’s acquisition of Tableau Software would make additional data visualization and analytics capabilities available to business users

Salesforce announced its intent to buy Tableau Software in an all-stock deal valued at $15.7 billion, in which Salesforce will exchange 1.103 shares of its common stock for each of Tableau’s Class A and Class B common stock. Salesforce has been improving its Einstein analytics capabilities with functionality such as preconfigured templates and drag-and-drop analytics that enables users to create data visualizations without code. Tableau would expand Salesforce’s data visualization and analytics capabilities, as its data sorting and no-code and low-code data visualization capabilities will enable business users to manipulate data and create new data visualizations without a data scientist. While Tableau would continue to run as an independent company, TBR expects Salesforce would create integrations between Tableau and Customer 360, Salesforce’s app that connects data from its sales, service, marketing and e-commerce offerings. Since data from Customer 360 can also be pulled into Einstein analytics, the integration of Customer 360 with Tableau would enable Salesforce customers to leverage Tableau’s technology from a central touch point. If finalized, the acquisition would also increase Salesforce’s value proposition as a front-office provider for Tableau’s 86,000 customers, creating new cross-selling opportunities.

Salesforce’s front-office provider partners and competitors develop no-code- and low-code-enabled data visualization analytics as the industry trends toward codeless data manipulation

Salesforce’s announcement comes four days after Google announced its intent to acquire Looker, an analytics and data visualization company. While it is unlikely that Salesforce’s planned acquisition of Tableau was in reaction to Google, these developments further highlight the increasing importance of data visualization in the public cloud market. TBR does not expect Salesforce’s partnership with Google would be significantly impacted by the vendors’ recent investments, as Salesforce’s broader SaaS portfolio still targets a larger front-office audience and Google remains a strong IaaS partner. However, Salesforce’s acquisition of Tableau would improve Salesforce’s position against Oracle in the front-office space. Oracle is improving its own analytics capabilities and unifying its data through CX Unity, its offering akin to Salesforce’s Customer 360. Additionally, the same day Salesforce announced its intent with Tableau, Microsoft announced AI Builder, which makes it easier for its PowerApps and Microsoft Flow customers to manipulate data to create AI models. Microsoft’s Power BI is in the same Power Platform product family as PowerApps and Microsoft Flow, showing Microsoft is trying to make it easier for customers to manipulate data as well. However, Microsoft’s Power Platform solutions still require a layer of coding and technical knowledge that exceeds the skill set of the typical business user. Given Salesforce’s and Google’s announcements, TBR expects Salesforce competitors such as Oracle and Microsoft may acquire data visualization companies to quickly enhance their capabilities in the space and level the balance of power in the public cloud front-office market.

TBR’s Quantum Computing Market Landscape details emerging uses cases, economic disruption and alliances

/by

TBR’s first Quantum Computing Market Landscape focuses on multiple facets of the quantum computing market, exploring the vendor landscape of a variety of competing hardware vendors with differing quantum theories, as well as software services and security vendors playing in the quantum computing space. Emerging customer sentiments, as well as recent alliances, emerging use cases and economic disruption are all themes explored within this first iteration of the report. A previous TBR special report by Analyst Stephanie Long looked at the “economic advantage” of quantum computing, and our May Digital Transformation Insights Report: Emerging Technology put the consulting and services around quantum in the context of digital transformation. The new market landscape builds on all TBR’s research and analysis to date.

 And don’t forget to sign up for Stephanie’s July 24 webinar, Quantum computing leaps into customers’ transformation-centric conversations.

Additional assessments publishing this week from our analyst teams

TBR’s Hewlett Packard Enterprise’s (HPE) full report, scheduled to publish June 14, further explores the vendor’s quarterly performance and deep dives into HPE’s infrastructure strategy amid recent and ongoing changes. The report provides greater details on themes covered in the initial response, which published May 24, including how commoditization continues to take its toll on infrastructure vendors’ bottom lines, increasing competition and encouraging more nuanced strategies to get ahead. It also talks about competitive changes in the server landscape hindering HPE as well as its peers and touches on the various strategies playing out in the consumption-based pricing realm, which is a key strategic focus for HPE. — Stephanie Long, Analyst

TBR’s Hosted Private Cloud Market Forecast, publishing Wednesday, details how growth will persist up and down the hosted private cloud stack despite the relative cost-effectiveness of public cloud options. IBM remained the vendor to beat overall in 2018, while Microsoft is expected to take on significant additional market share through 2023 as it expands its portfolio of hybrid delivery options and migrates its legacy Office and Dynamics customers to cloud-native versions. — Cassandra Mooshian, Senior Analyst

TBR is publishing the 1Q19 DXC Technology (DXC) report June 14. DXC reported revenue of $5.3 billion, a year-to-year decline of 5.4%, pressured by the completion of several large contracts without replacement and ongoing headwinds in legacy applications work. DXC continues to execute its aggressive cost-cutting initiatives including headcount reduction and facility rationalization, which are being reinvested into funding its active M&A strategy, optimizing service delivery, and developing standardized and automated service delivery capabilities.” — Kevin Collupy, Analyst

HPE Pointnext report will publish June 14 and will discuss how HPE is beginning to reap the benefits of its Next initiative, reducing its global footprint to focus on profitable regions. Pointnext continues to act as a key profit generator for the company, enabling investments both internally and through acquisitions to generate new innovative solutions around its core infrastructure offerings.” — Kevin Collupy, Analyst

On June 13 TBR will publish its semiannual Alibaba Cloud report. This report discusses the current investments Alibaba is making to win share from public cloud leaders, namely Amazon Web Services (AWS), and the progress the business is making in doing so. TBR also discusses recent changes to Alibaba Cloud’s leadership structure and the growing importance to the broader Alibaba Group that these changes signify. — Meaghan McGrath, Senior Analyst

TBR’s upcoming 1Q19 Booz Allen Hamilton (BAH) report details how BAH wrapped up its FY19 with robust top-line expansion and record revenues and solid earnings, which in turn enabled BAH to reward shareholders with the largest quarterly dividend increase in recent memory. BAH’s performance reflect a soundly differentiated market position and close alignment of its technology and consulting solutions with the missions of its federal customers. BAH is well positioned to sustain its FY19 performance in FY20 in a federal IT market burgeoning with opportunities for IT modernization and the integration of advanced technologies. — John Caucis, Senior Analyst

Lastly, if you haven’t already, sign up now for the this week’s webinar, The Makings of the Telecom Edge Compute Market.

Integration challenges ahead for Perspecta and SAIC as federal sector IT services vendors position for the rest of 2019

/by

Publishing this week from TBR’s federal IT research program are our initial assessments of SAIC’s and Perspecta’s 1Q19 earnings performances. Perspecta is wrapping up its first complete fiscal year as an independent business entity. Its inaugural year has been characterized by significant challenges integrating a trio of large-scale legacy federal IT competitors, and we expect this will be reflected in its fiscal performance for 1Q19 and its FY19. The company won major contract extensions and successful re-compete bids to close out its FY19, setting the stage for improved performance in an increasingly growth-friendly federal IT market in its FY20.

SAIC will fully integrate Engility and its nearly $1.9 billion in revenue and 7,500 employees during the year, finishing a process that started in 1Q19. SAIC will leverage Engility to further accelerate its expansion with a more balanced, diversified and de-risked portfolio and an enhanced competitive stance in markets (space and intelligence) adjacent to its core Department of Defense and federal civilian sectors.

Read more of Senior Analyst John Caucis’ assessment of federal IT services vendors through the quarter and the upcoming quarterly benchmark.

Additional assessments publishing this week from our analyst teams

Wednesday

  • Salesforce continues to expand its global reach with new infrastructure investments and local partnerships in key regions. These developments, alongside ongoing improvements to its core portfolio in recent quarters, will enable Salesforce to deliver $3.68 billion in revenue for CY1Q19, according to TBR estimates. — Jack McElwee, Analyst

Thursday

  • TBR’s 1Q19 Cisco report explores how Cisco sustained revenue growth momentum in 1Q19 despite a significant slowdown in its Service Provider customer segment, where communication service providers are focusing much of their investment on the RAN layer and software-defined networking is causing disruption. Outside the service provider segment, however, Cisco’s refreshed product lines and strong brand are resonating across SMBs, large enterprises and public sector organizations. Cisco completed the refresh of its enterprise switching lineup with the introduction of the latest Catalyst product in 1Q19, which will help drive continued growth across non-service provider segments. — Michael Soper, Senior Analyst
  • Cisco Customer Experience’s use of partners to develop its portfolio around analytics, IoT and security as well as supplement delivery enables the company to maintain profitability and generate growth, as highlighted in TBR’s 1Q19 coverage of the company. Its pursuit of partnerships with technology-led vendors, including Microsoft Azure, Amazon Web Services and Google Cloud, will help Cisco Customer Experience generate additional advisory, implementation, and software and solutions support engagements. — Kelly Lesiczka, Analyst

And sign up here for the next TBR webinar, The Makings of the Telecom Edge Compute Market.

Booz Allen Hamilton keeps winning, even when the government shuts down

/by

TBR’s initial response to Booz Allen Hamilton’s (BAH’s) 1Q19 earnings published on Tuesday, and we expect another strong quarter from BAH to close out its FY19. BAH boasts a soundly differentiated market position and multilayered alignment of its technology and advisory portfolio with the primary objectives of its federal customers. Consulting-led offerings are increasingly interwoven with an innovative technical capacity designed to enable federal clients to meet operational challenges and security threats ever-increasing in sophistication and volume. BAH even emerged from the recent 35-day temporary government shutdown with minimal fiscal damage, further illustrating the resiliency of its solutions model and fueling its confidence about 2020. We further expect the company will issue strong guidance for its upcoming fiscal 2020, with revenue growth in the high single digits and margin performance sustained at current levels.

Read more of Senior Analyst John Caucis’ assessment of federal IT services vendors through the quarter and the upcoming quarterly benchmark.

Additional assessments publishing this week from our analyst teams

Tuesday

  • In our 1Q19 Hewlett Packard Enterprise Cloud Initial Response, we discuss how the company’s margin improvements resulted from a more software-defined portfolio and improved operating efficiency as the HPE Next initiative enters its final year. — Cassandra Mooshian, Senior Analyst
  •  

Wednesday

  • Cost-cutting initiatives including headcount reduction and deeper integration of digital sales and customer service channels enabled Sprint to reduce $1.2 billion in gross operating costs in FY18, but this was largely offset by reinvestments in network and other operational initiatives. Sprint’s financial position will remain challenged long term due to its high debt load and struggle to generate positive net income and free cash flow, highlighting why the T-Mobile merger is in the best interest of the company. — Steve Vachon, Analyst

Thursday

  • Now with its third CEO in two years, Rackspace rebrands Fanatical Support to Fanatical Experience as it commits to providing ‘unbiased expertise’ and a more total support system.      — Cassandra Mooshian, Senior Analyst

Friday

  • We expect VMware to report another quarter of strong, above-average growth in comparison to its software peers. Ongoing portfolio investments, partnerships and tuck-in acquisitions position the company for continued customer attraction and retention. — Cassandra Mooshian, Senior Analyst
  • Portfolio and talent developments equip HCL Technologies (HCLT) to sustain revenue growth through 2021. HCLT needs to quickly scale its investments and market presence to solidify growth. Kelly Lesiczka, Analyst
  • https://tbri.com/blog/hclt-aquires-ibm-software/Despite enhanced efficiencies in traditional IT operations, T-Systems could not offset pressures on profitability from reorganization and adoption of IFRS 16. Expanding its portfolio in growth segments will enable T-Systems to benefit from a more flexible business model to adapt to and address client demands. Kelly Lesiczka, Analyst

And if you missed the May 22 webinar, Bringing the best: Talent and technology in management consulting, check out the replay here.

TBR Weekly Preview: May 20-24

/by

Before the long weekend here in the U.S., our teams will be publishing deeper analysis on some of the vendors that released earnings earlier this quarter. As always, our approach starts with the individual companies, then builds to an understanding of the larger market.

Additionally, don’t miss this Wednesday’s webinar Bringing the best: Talent and technology in management consulting. Register today!

Tuesday

  • The combination of Atos’ integration and technology capabilities with Google Cloud technologies, made possible by the pair’s global partnership, which marked its first year on April 24, is expanding Atos’ cloud client reach and driving revenue opportunities in secure hybrid cloud orchestration, data and AI, machine learning, and digital workplace solutions for enterprises. The acquisition of Syntel expanded Atos’ cloud advise-build-run portfolio and client reach, notably in North America, and provided critical scale for Atos’ Business and Platform Solutions division, which will accelerate Atos’ cloud advisory and implementation activities. Integration of security services and products into cloud solutions, enables Atos to transform clients’ IT and business models and securely support and manage both cloud and legacy IT environments. — Elitsa Bakalova, Senior Analyst
  • The most recent edition of TBR’s Colocation Benchmark highlights how hybrid IT adoption is a driving force behind colocation adoption as colocation providers offer both data center space and connections to leading cloud providers. The availability of hybrid PaaS and IaaS offerings such as Microsoft Azure Stack and, soon, AWS Outposts provides additional opportunities to extend enterprise colocation environments. — Cassandra Mooshian, Senior Analyst
  • TBR’s Cloud Professional Services Market Forecast details how healthy growth will persist across cloud professional services markets despite automation’s downward pressures as hybrid IT sprawl proliferates. Accenture and IBM remained the top two vendors overall in cloud professional services in 2018, while Accenture is expected to take on significant additional market share through 2023 as it benefits from its C-Suite exposure and position as a technology-agnostic third-party expert. — Cassandra Mooshian, Senior Analyst

Friday

  • TBR’s initial look into Hewlett Packard Enterprise’s (HPE) 1Q19 performance deep dives into HPE’s infrastructure strategy amid recent ongoing changes as HPE enters the final year of its Next initiatives. Commoditization continues to take its toll on infrastructure vendors’ bottom lines, increasing competition and encouraging more nuanced strategies to get ahead. — Stephanie Long, Analyst
  • The 1Q19 Fujitsu Cloud report deep dives into Fujitsu’s cloud strategy amid recent changes. As the company no longer competes for new IaaS opportunities outside of Japan, Fujitsu is leaning on partners and their expansive customer bases more significantly and strategically amid the company’s own strategic shift. — Cassandra Mooshian, Senior Analyst

Finally, publishing this week from John Caucis are 1Q19 assessments of federal IT majors CACI and Leidos, including key developments from the quarter and detailed analysis of each company’s fiscal performance. Nearly a year after losing out to General Dynamics in the competition to acquire CSRA, CACI aggressively jumped back into the M&A fray, spending nearly $1 billion on acquisitions during the quarter to deepen its capabilities in C4ISR, cybersecurity, signals intelligence and electronic warfare for the U.S. Department of Defense and intelligence community. In the past, CACI’s MO regarding acquisitions was often paying a premium to scoop up differentiating solutions capabilities, and after paying $225 million to acquire N.Y.-based Mastodon Design and its 50 employees, it appears CACI retains an aggressive, but judicious, M&A posture. CACI delivered 12%-plus year-to-year growth during 1Q19 — more than half inorganic in nature. Federal IT peer Leidos delivered strong organic growth in its first quarter following its “year of transition” in 2018, suggesting its revamped growth strategy, which hinges on effective leverage of the information systems and strategic solutions assets acquired from Lockheed Martin nearly three years ago, is working. With its operational and organizational revamp around its core markets complete, Leidos is beginning to turn its attention to adjacent market opportunities, including in the U.K., where it plans a significant ramp up of recruiting activities in 2019.