It’s time to stop calling IoT a technology

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Yes, we all do it. Every analyst, vendor and customer has referred to Internet of Things (IoT) as a technology. I have done it countless times, and so have my extremely talented and informed peers. However, it’s a misnomer, a shortcut, and a cop out, and if we actually think of IoT as a technology, it’s ultimately harmful to the adoption of IoT. IoT is actually a technique for solving business problems using a combination of technology components and services, rather than a technology in and of itself.

No one vendor does IoT alone ― it’s not a deliverable, self-contained technology solution. Rather, it often involves a “leader” company, generally a consulting company or an ISV, assembling a solution sourced from software, services and hardware components from partner companies. My colleague Ezra Gottheil likes to use a construction analogy. A general contractor will shop at Home Depot (the wide and increasingly saturated IoT marketplace) for all the components he or she needs to build a structure. The general contractor will also hire subcontractors (partners and specialized vertical ISVs) who have certain expertise. Even as we move closer to prepackaged IoT or shrink-wrapped solutions, multiple vendors will continue to be involved in delivery.

Some of these components can be grouped into the “new technology” bucket. As TBR closely monitors use cases and fills our use-case database, which currently has more than 360 entries, IoT projects are increasingly linked with augmented reality/virtual reality, blockchain and analytics. All of these new components, including IoT, are enhanced when used in cohesion.

But many of the components, such as servers, routers, mobile devices, sensors, connectivity, IT services and business consulting, have existed for decades. IoT is a new shiny label slapped on a technique IT companies have been using for decades: pulling together IT components to build solutions and help customers achieve their goals.

TBR believes when a vendor tells a customer “you should adopt this new transformational technology,” it is usually met with eye-rolling. IoT is no different. As soon as the “new technology” discussion comes to the table, customers instinctively rock back on their heels. It sounds like a large and long-lasting commitment, which leads to rip-and-replace cost fears, technology lock-in consternation due to a rapidly evolving market, and a general lack of understanding about the benefits.

TBR believes vendors should change the message. Begin with discovering what a customer’s business problems are, then suggest using the technique of IoT to begin strategically solving them in a stepwise manner. It’s not a rip-and-replace approach; it’s seeing where improvements can be gradually made to increase connectivity throughout an organization and ultimately deliver improved insight. It might mean adding sensors to legacy equipment, using IoT components and new analytic tools to tie together legacy data and create new insight, or implementing tangential technologies such as blockchain to better inform customers on their supply chain. Eventually, it could mean all of these combined.

At a recent vendor event, the CEO of a Boston-based IoT solution vendor asserted that IoT is now passe. True customer evolution, including problem solving comes from the bigger picture ― using the technique of IoT, tangential technologies, and internal and external data sources to supercharge efficiency and gain insight.

IoT as a technology is a lazy oversimplification. Let’s start messaging how the technique of IoT ―a new way of thinking about and applying technology ― can help solve current business challenges in an agile and cost-effective manner.

 

Predix is looking for a new owner

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Reports surfaced on July 30 that General Electric (GE) has contracted an investment bank to auction off the company’s GE Digital unit.

When former CEO Jeff Immelt aimed to diversify GE into the software space to take advantage of the synergies between Internet of Things (IoT) and the company’s industrial machinery footprint, GE Digital was created. The unit got some things right. It was one of the first IoT vendors to message the importance of operational technology (OT) inside the IoT technique, emphasizing that IT vendors couldn’t do it alone. It was also one of the first companies to highlight the digital twin, allowing engineers to run simulations or see the effects of an asset via its digital doppelganger, a technique now utilized by most IoT solution companies. It also promoted the idea that almost everywhere across a customer’s organization, from light fixtures to robots on the manufacturing floor, the addition of IoT could deliver insight. The unit carved the path forward for its OT peers, most of which were fast followers that gained an advantage by first witnessing GE’s successes and challenges.

TBR believes there were a few missteps. GE Digital made one of the more fatal mistakes among early IoT companies caught in the hype wave: It advertised that it was able to provide solutions for everything from manufacturing to healthcare and from utilities to transportation. It is understandable that GE Digital wanted to mirror GE’s wide industrial reach, but it led to a jack-of-all-trades, master-of-none messaging. In actuality, GE Digital likely focused on its Oil and Gas, Manufacturing, and Energy and Utilities segments, however, TBR believes the pivot to specialization in specific industries was too late.

This phenomenon of overextending can also be seen in the mechanics of Predix, which was marketed as a broad, do-all, edge-to-cloud platform with analytics. In reality, Predix was a do-all generic platform that needed a lot of expensive customization and developer time to build tailored solutions for customers. Because of this complexity and platform breadth, GE Digital had problems messaging what it was best at and how it could help customers. We believe the company overemphasized the platform’s  wide set of capabilities and underemphasized packaged IoT applications that solved real business problems. Ultimately, messaging of the platform got mired in discussions of technical features and functions, rather than the outcomes and differentiation of the company’s analytics and platform versus those of competitors such as IBM.

However, what tripped GE Digital up the most was that it wasn’t a great partner in a market that thrives on partnerships. Large IoT deployments will often have a multitude of vendors involved, all with expertise in a specific component of the holistic solution. Instead of focusing on enhancing areas where IT companies are weak, such as OT knowledge, GE Digital tried to do IT and OT. Because GE Digital wanted to do it all, it didn’t play as well as it could have with IT companies boasting deeply established roots in customer companies.

GE’s initial go-it-alone stance also had the company building from scratch, with its tools, such as analytics or cloud platforms, and feature sets always playing catch-up with IT companies that have been building these technologies for decades. For example, GE Digital initially tried building out its own cloud services mirroring Amazon Web Services (AWS) and IBM Bluemix. It ultimately ended up partnering, but we think the company’s initial focus on creating a PaaS cloud kept the company bogged down in services that didn’t add a lot of value. Ultimately, GE Digital proved to be an unattractive partner to bring into an IoT solution, and its platform failed to differentiate it enough to remedy partner apprehension. The platform was also much more expensive to build from scratch than just partnering with peers, making running-at-a-loss GE Digital look like a huge drag to GE leadership, which ultimately sealed its fate.

Where are GE’s Predix assets going? It’s hard to say for sure. As my colleague Ezra Gottheil noted, GE Digital announced it was standardizing on Microsoft less than two weeks ago. Microsoft has been looking for ways for Azure to outpace AWS in IoT and other emerging technology, and being a long-standing IT company, improving its OT expertise would make it more attractive in the industrial space. Perhaps Microsoft, or a Microsoft partner, such as Rockwell Automation or ABB, may be a purchaser.

TBR is seeing other large OT companies, such as Siemens, thrive as they focus on their strengths as OT-whisperers and enhance, not compete with, IT brethren. We are also seeing vertically specialized small ISVs pop up, in the OT and IT domains, that are focusing their expertise on a narrow set of business problems and are being brought in as essential partners. GE Digital blazed the trail for these peers, but also became a cautionary tale for those following in its wake: Enhance partners, don’t compete; be interoperable, not closed; message and provide expertise in your strengths, don’t provide a broad generic solution.

Earnings recap: Amazon, Microsoft and Google grow fast and keep hold on the market — for now

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Although the market is consolidating around AWS, Microsoft Azure and GCP, the trailing vendors are unable to match AWS’ quarterly revenue gains

Consolidation is occurring across cloud segments, with the most notable convergence occurring around the five leading PaaS and IaaS players, blending the lines between PaaS and IaaS. Customers and applications vendors are flocking to the leading players Amazon Web Services (AWS), Microsoft Azure and Google Cloud Platform (GCP). This is evidenced by these three vendors collectively growing 58% year-to-year in 2Q18, while the total PaaS and IaaS market is expected to grow only 16% year-to-year in 2018. This consolidation is helping the largest players continually capture greater market share and, as a result, largely dictate the growth of the PaaS and IaaS markets.

With the leading vendors’ CY2Q18 earnings results now public, it is clear that AWS continues to rule the PaaS and IaaS spaces, sitting at almost three times the size of second-place Microsoft Azure and sustaining greater quarterly revenue additions. Google sits in third place in mindshare for many customers, but trails AWS and Microsoft Azure in revenue by a large margin. These three vendors face increasing competition from Alibaba, which continues to expand its global reach, and IBM, which has seen more success in private cloud and hybrid IT.

 

AWS maintains its public cloud lead through continuous innovation, but faces growing opposition as new and existing competition strengthens

AWS accelerated revenue growth for the third consecutive quarter in 2Q18, up 48.9% year-to-year to $6.1 billion, further extending its lead in PaaS and IaaS. AWS’ position as the far-and-away market leader causes the competition to fiercely innovate and expand to challenge the vendor. However, AWS’ mindshare has been secured, and paired with its portfolio breadth, innovation pace and global availability, inserts the vendor into the bulk of customer and partner evaluations. AWS’ determination to innovate with and ahead of customer needs continues to drive service and feature releases, aimed at winning new workloads without compromising profits. Halfway through 2018, AWS has released 800 new services and features, an accelerated pace of service innovation from 2017’s record level.

Microsoft Azure continues its fast-paced growth, but will remain behind AWS in revenue for the foreseeable future

Microsoft’s Commercial Cloud revenue, which includes public cloud and private cloud versions of Office 365 commercial, Dynamics 365 and Azure, approached $6.9 billion as Microsoft nearly doubled the number of Azure agreements worth $10 million or more over the last year. Azure revenue grew 89% year-to-year to $2.2 billion in 2Q18.

Microsoft’s combination of traditional software, public cloud and on-premises private cloud positions the company to be the backbone of customers’ hybrid environments — a label few competitors, especially AWS and Google, can claim. As such, Microsoft is uniquely positioned to help customers extract the value from their integrated data and has put itself at the forefront of innovation and commercialization of emerging technologies such as artificial intelligence (AI) and Internet of Things (IoT) to capitalize on this leading position.

Google will be unable to retain its third-place position as it fights to shift market perception and fend off strengthening competition

Relative to AWS and Microsoft Azure, GCP is far behind in the PaaS and IaaS space but is trying to prove to customers that it is as enterprise-ready as its main competitors. As Google solidifies its cloud portfolio and builds out key offerings, the company has also prioritized improving its large enterprise go-to-market efforts under its One Google strategy. Google Cloud, which consists of G Suite and GCP, increased revenue by an estimated 56% year-to-year, nearly reaching $1.42 billion. TBR expects Google Cloud revenue will increase to $1.6 billion in 3Q18 as the vendor continues to execute its One Google strategy.

While Google is investing in its go-to-market activities and shows progress through growth, its overall reputation in the market has been slow to adapt from consumer-grade to enterprise-ready. To combat that market perception, Google Cloud focuses its innovation on mastering four areas of expertise: machine learning and analytics, security, application developer tools, and connected business platforms. Recent investments in hybrid enablement and improved rendering capabilities demonstrate Google’s ongoing commitment to becoming a leading cloud vendor in differentiated areas of high-growth opportunity. While Google will succeed in these discrete areas, TBR expects Alibaba to emerge as the third-place general-purpose PaaS and IaaS provider.

Google goes after IHVs with Cloud IoT Edge

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Google’s Cloud IoT Edge hardware-software package for edge devices, announced on July 25, aims to be a comprehensive bundle for the edge ― for devices and for gateways. In this offering, Google leverages its two big assets in machine learning, TensorFlow software and the tensor processing unit (TPU) processor, to stake a position in edge hardware and software.

TBR believes the edge is the leading edge of Internet of Things (IoT) growth. There is competition for both edge hardware and edge software, but few vendors can offer both. There will be consolidation in hardware and software, and the companies left standing will have large and growing businesses and opportunities to expand. In the case of Google, as well as Microsoft and Amazon, capturing the edge helps drive the core cloud offering. By staking a big claim on the edge, Google is better positioned to compete with the other big clouds.

TensorFlow and the TPU processor are the keys to Google’s offering. TensorFlow is one of the most popular machine learning software libraries while the TPU processor is optimized for machine learning. Google claims advantages of the TPU over GPUs for machine learning tasks include lower power consumption and better performance on inference as well as learning tasks. These two benefits, power consumption and inference performance, are critical on the edge. Power consumption is important in edge devices, especially mobile and remote devices. Machine learning training is best suited to the cloud; edge devices need fast inference.

Google is targeting this offering to companies making IoT hardware, devices and gateways, ranging from narrowly specialized to broadly applicable, from custom-built to off the shelf. Companies producing off-the-shelf products are independent hardware vendors, and their offerings range from components for IoT solutions to end-to-end hardware and software solutions. Google’s Cloud IoT Edge is attractive to this market; it is a hardware-software solution with differentiating hardware and familiar software.

In the enterprise market for custom-built devices, Microsoft will often leverage its incumbency. However, there remain many market opportunities, especially in off-the-shelf smart devices with built-in machine learning. Video is a likely market for this technology, and Google will continue to make it easier and less expensive to build smart cameras.

Google’s Cloud IoT Edge is a well-conceived response to the challenge of the edge, and there is potential additional upside. The new Edge TPU is very small, and Google claims very low power consumption. Google will introduce tools and applications that leverage the processor to provide tangible benefits on smartphone, tablet and PC platforms. If successful, Google could own the IP to be a necessary component of edge computing.

It’s hard to grow up in IoT

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One of the most important governing factors in the adoption of Internet of Things (IoT) is the maturity of the companies considering, buying and implementing IoT. Vendors can improve their go-to-market (GTM) tactics by varying their approach to potential customers with different degrees of maturity. Assessment of maturity helps in predicting and targeting growth opportunities in vertical and geographic market segments.

A mature process for a single IoT solution is easy to describe but challenging to carry out. A team including members with business knowledge, operations technology knowledge and IT knowledge works together through the process of problem selection, solution design, solution implementation, and ongoing solution operation and refinement. As most IoT implementations present opportunities for enhancement and further integration, the team continues to work together indefinitely.

For an organization to be mature in IoT, it must be able to sustain multiple projects, at different phases in different parts of the organization and at varying levels of scale. The projects must be compliant with company and regulatory policies, secure and, ideally, scalable and efficient, leveraging to the extent possible organizational resources and standard practices. The data generated by the IoT projects must be secure, but it must also be visible and available to others in the organization who could benefit.

Additionally, the mature IoT organization keeps the process of continual distributed innovation going, with employees throughout the organization actively looking for opportunities to improve operations using IoT, as well as other innovative technologies. While encouraging broad innovation, the organization manages, prioritizes, allocates resources for and socializes the projects.

The organization described above is an ideal, but comparing an organization with this standard helps us know at what level a business is operating in IoT. This ideal process applies not only to IoT but also to all projects leveraging new technologies.

For vendors, IoT maturity can help with identifying potential customers and approaching prospects. With mature customers coordinating multiple IoT projects, there is the opportunity to be included in the company’s portfolio of vetted preferred vendors or products. With a less mature customer, the best outcome is engagement in a single IoT project. These two different scenarios demand different messaging, sales tactics and, sometimes, offerings.

In a growing market — and IoT will be growing for a very long time — the trailing edge is always much larger than the leading edge. Even as the average level of maturity increases, most target customers will be on the less-mature end of the spectrum. Vendors and offerings that fit the needs of the target market, including simplicity, extensive support and membership in robust partnerships, will have an advantage. Offerings that help develop the customer, moving them up the maturity ladder, will also have an advantage.

IoT maturation isn’t about the technology of IoT; it’s about businesses developing their capability to leverage technologies and techniques that are increasingly applicable to an increasing number of business problems. The same maturation encompasses things like analytics and artificial intelligence, blockchain, edge computing, and mobile computing. Looking at customers and prospects in terms of maturity in leveraging technology helps in selling and delivering technology products that drive businesses forward.

GE and Microsoft are getting more serious

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General Electric Co. (GE) and Microsoft have been strengthening their Internet of Things (IoT) partnership for at least a year, and a July 16 announcement documents a new, closer stage in their relationship. TBR believes this partnership benefits both parties. GE makes its Predix IoT platform more attractive to the growing number of customers standardizing on Microsoft Azure for cloud services. Microsoft improves its industrial IoT (IIoT) and operational technology (OT) credentials, as well as its ability to go to market in the IoT world where the collaboration of IT and OT create challenges for IT companies.

GE and Microsoft announced their “largest partnership to date,” according to a Microsoft press release, with GE standardizing its Predix solutions on Azure, and both companies integrating the Predix portfolio with Azure’s capabilities, including Azure IoT and Azure Data and Analytics. The companies will also co-sell and go to market together. GE will deploy Azure across its business for additional IT workloads. This latest partnership builds on last year’s announcements in July and October of closer cooperation between the two companies.

GE first introduced Predix in August 2015 as an end-to-end cloud IIoT solution. While the Predix cloud was interoperable with other cloud platforms, the emphasis was on a complete solution. Following a large investment and marketing effort, it became clear that competing directly with general-purpose cloud platforms was both unnecessary and counterproductive. Providing a complete platform wasted GE resources and placed the company in direct competition with huge cloud vendors. In 2017 GE adopted a strategy of focusing on its differentiated capabilities and highlighting Predix’s interoperability. The July 16 announcement makes GE’s relationship with Microsoft much stronger than its partnerships with other vendors.

While the newly announced partnership helps GE, the future is not clear for GE Digital, the division that offers Predix. In November 2017 the company announced cuts of more than 25%, about $400 million, within GE Digital. Predix development is increasingly focused on GE’s primary businesses — aviation, power and renewable energy — but as of April, a company spokesperson said only 8% of GE’s industrial customers were customers of GE Digital. TBR believes that a sale of GE Digital to Microsoft is likely, as GE narrows its focus and Microsoft expands its footprint in IoT and IIoT.

Hybrid, multicloud, reunited partners featured in TBR’s upcoming cloud & software research

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Going into the second half of 2018, TBR’s Cloud and Software Practice anticipates providing additional research around a few issues that have been top of mind among TBR’s clients and our analysts. The common theme across the three issues highlighted in this report is the growing focus on how cloud and software are jointly being used to deliver real solutions for customers. Highlights of the research center on how establishing hybrid capabilities is a primary challenge for enterprises and a growth driver for vendors, from the initial design and integration through to the ongoing management and optimization of the increasingly complex environments. Additionally, offering multicloud is the first priority for customers and creates opportunities for vendors other than category leaders such as Amazon Web Services (AWS) and Salesforce. Lastly, partnerships that were previously threatened by cloud are now realigning for new opportunities created by on-premises hybrid delivery and solution bundling. Look for more insight into these topics in our upcoming research.

Hybrid enablement is an increasingly critical predictor of vendor success
There is no question that cloud and software solutions are being increasingly deployed into hybrid environments and have been for some time now. The real customer pain point in regard to a truly hybrid environment — one or more cloud assets integrated with one or more on-premises assets for the seamless flow and sharing of data — is around enabling each of the solutions to fit into the environment and integrate with the others for optimal utilization.

Cloud and software vendors alike are investing to capitalize on this growing opportunity around empowering enterprise IT departments to integrate sprawling environments on their own, with the help of automated tools and platforms. Salesforce’s acquisition of MuleSoft is one of the more noteworthy examples as it has vast implications for both Salesforce and the market. This is because MuleSoft offers licenses alongside its subscription offerings despite Salesforce’s “No software” mantra, and because many organizations utilize one or more of Salesforce’s cloud offerings, which will soon feature and/or be integrated with Salesforce Integration Cloud, a solution that will be based on MuleSoft’s well-known Integration Platform as a Service (iPaaS).

Software vendors are making similar investments, such as Red Hat announcing its own iPaaS — Fuse Online — and VMware’s continued updates to the vRealize cloud management suite. Additionally, many continue to expand their partnerships with cloud vendors and systems integrators to improve their hybrid technology and hybrid enablement portfolios, increasingly going to market with a software-led services approach.
Cloud brokerage and hybrid integration pure plays continue to generate buzz as well, providing attractive solutions for enterprise IT departments struggling to keep pace with integrations, orchestration and skill sets. We expect some of these vendors to be acquired over the next couple of years as cloud and software vendors look to quickly build out their hybrid integration and enablement tool sets.

Consolidation around leading PaaS & IaaS vendors does not reduce competition
The public cloud IaaS market, substantially made up of businesses that complement scalable infrastructure with general purpose PaaS, has consolidated around the four leading U.S.-based cloud vendors — AWS, Microsoft, IBM and Google — and one international vendor, Alibaba, which has been successful in the highly exclusive Chinese market and is diligently focused on effectively competing with these U.S.-based vendors on an international stage.

Among the insights gleaned from TBR’s upcoming Cloud Infrastructure & Platforms Customer Research, it is becoming evident that even in discrete use cases and niche industries, the general-purpose nature of these vendors has enabled them to be considered across needs. Many customers agree that there is a delicate equilibrium yet to be found in first balancing on-premises and cloud deployments, and then balancing vendor lock-in concerns, usage volume discounts, vendor specializations and multivendor environment complexity. TBR will closely watch and assess how each vendor overcomes its perceived downfalls and positions itself to help customers best weigh the benefits and drawbacks of increasing cloud adoption.

In particular, customers almost universally recognize Google Cloud as the third option behind AWS and Microsoft Azure, citing TensorFlow as a key technology that will drive Google’s growth into a more prominent cloud vendor, but in the same breath identify that Google’s enterprise vision has not matured from “talk the talk,” particularly outside of the executive office of Google Cloud CEO Diane Greene. Meanwhile, Azure has become a viable alternative to AWS for many customers that note general ubiquity in each vendor’s ability to support various enterprise needs. TBR expects the closeness in AWS and Azure functionality, strained by the maturation of Google’s enterprise vision and Alibaba’s increasingly competitive entry into Western markets, will cause the converging market to grow quickly around this competition.

Partnerships are being both stressed and created as the cloud market evolves
The increased focus on cloud delivery methods has certainly stressed many long-held partnerships between traditional hardware, software and service vendors. The model of solution creation, distribution, installation and support was one that had multiple participants in the traditional model but became more focused on the cloud provider in the transition to cloud. Cloud is also an opportunity for new or nascent vendors to take share in markets such as business applications, where SAP and Oracle have been dominant. SaaS vendors fill portfolio gaps and augment vendor offerings for verticalized use cases, enabling legacy players such as Microsoft and SAP to adapt and compete with born-on-the-cloud providers. An example of this shift in vendor landscapes comes with the release of Dynamics 365 Business Central, which will help Microsoft gain footing over SAP in the SMB space for business applications and provide new opportunity for Microsoft’s SaaS partners. However, as each vendor expands its cloud portfolio, its respective ecosystem will be required to adapt. SAP’s acquisition of CallidusCloud will improve the vendor’s position in the cloud front-office space, but it also places SAP in direct competition with its ecosystem of Configure, Price, Quote (CPQ) providers. Now more than ever, the market will see vendor shares susceptible to ongoing changes as the market for core business applications remains relatively immature for cloud.

Hardware and services partners were previously hard hit in the transition to cloud but will have more opportunities with a growing mix of public and private cloud options becoming available. Microsoft will continue to leverage hardware and services partners to deliver and implement its hosted private cloud, Azure Stack, which has already doubled its geographical reach in recent months. This new opportunity for longstanding hardware partners such as Dell EMC and Hewlett Packard Enterprise to collaborate in delivering Microsoft’s Azure Stack offering does little to offset the erosion those vendors have seen as Microsoft built out its own Azure public cloud offerings, reducing customer demand for hardware.

Note: TBR provides extensive, sustained coverage of the strategies and select performance metrics of all the vendors mentioned above, as well as their competitors and key technology partners. Contact the authors for additional details.

By Allan Krans, Practice Manager and Principal Analyst; Cassandra Mooshian, Senior Analyst; Meaghan McGrath, Senior Analyst; and Jack McElwee, Research Analyst

Telecom operators drill down on IoT opportunity in logistics

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Despite the hype to the contrary, in commercial Internet of Things (IoT), not all verticals are created equal in terms of opportunity. There is near-term opportunity in some verticals, while opportunity in other verticals will take a few years to mature. The verticals with the longest and deepest histories of using IoT are oil and gas, utilities, manufacturing (including automotive), and logistics. Because these verticals have a long history of using primitive IoT, mostly in the form of telematics, customers in these areas are more familiar with what IoT can offer, how it can be applied to their businesses and where measurable ROI can be found. Unsurprisingly, segments that have most experience with IoT continue to generate the greatest amount of IoT-related revenue.

Telecom operators were early to advertise that they were leaders in the verticals mentioned above. However, now that the chips are down, TBR believes operators are focusing on real, mature IoT opportunity, leading to them drilling down on logistics. Logistics aligns well with telecom operators’ capabilities due to the mobile and distributed use cases. Verticals such as manufacturing provide less opportunity to telecom operators due to the more static and condensed nature of factories. Here are some examples of commercial logistical moves from leading operators:

  • In March 2017 Verizon announced the combination and rebranding of its Verizon Telematics, Fleetmatics and Telogis acquisitions into Verizon Connect. Verizon notes that the rebranding completes the integration of its connected vehicle division with its acquisitions of fleet and mobile workforce management companies Fleetmatics and Telogis. TBR believes the rebranding of Verizon’s telematics businesses into Verizon Connect was a smart move because focusing its IoT business around connecting mobile workforces differentiates Verizon, letting customers clearly know what they can use Verizon Connect for, highlighting its expertise and also making it more partner-friendly. Verizon Connect is now a module that can enhance a broad IoT platform such as Azure IoT.
  • In May 2018 AT&T entered into a partnership with operational technology (OT) behemoth Honeywell to develop IoT solutions for aircraft and freight deployments worldwide. AT&T delivers Honeywell worldwide connectivity, and Honeywell gives AT&T a larger door into industrial engagements.
  • In February AT&T launched two comprehensive solutions with Geotab’s fleet tracking platform, AT&T Fleet Management for Enterprise and AT&T Fleet Management for Government, to provide customers with a holistic view of their transportation assets to improve costs, productivity and safety.
  • TBR believes Telefonica, Vodafone and Orange are also competing for logistics engagements using well-populated landing pages touting their ability to provide logistics-based IoT solutions. Orange, for example, signed a three-year multimillion-euro agreement with Finland-based Cargotec in 4Q17 to codevelop an IoT-based cargo solution.

While vendors will compete for logistics business opportunities worldwide, TBR believes Verizon will try to consolidate and win share of the field service and trucking industries in North America; AT&T will focus on air and sea shipping or asset tracking worldwide and leverage its advantage in connected car gained through multiple contracts with leading automakers; and Telefonica, Vodafone and Orange will battle it out for EMEA and LATAM share.

 

EY, SAP and Microsoft: A powerful triad for the Business of One era

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Attending several EY analyst events in the past month has been a real eye-opener to the changing dynamics of a company that has traditionally been viewed as an advisory-led firm with strong credentials in the tax, audit and advisory domains, yet until recently offered precious little in the way of IT-centric services. This is not your father’s EY, as the company has been investing heavily in partnerships and in automating its IP in ways that radically reduce “run the business” IT costs while continuing to excel at “transform the business” advisory engagements.

A large part of EY’s accelerating performance can be laid at the feet of its partner ecosystem where the company has deepened partnerships with technology providers such as SAP and Microsoft, whose own services firms lack permission to play in the C-Suite or are just taxed based on current workloads and the industrywide skills shortage.

In short, the “axis has flipped” on what works with respect to ecosystem participation in the Business of One era, and this partnership triad appears to have many of the emerging bases covered. Figure 1 outlines the way in which TBR segments services portfolio options in one of its core market landscape constructs. TBR segments services into several different components, and it is through this kind of analysis that the power of the EY, Microsoft and SAP relationships truly come to life.

At the top of the triangle (A) sits the advisory-led services, where EY has competed successfully for decades. Here is where board and C-Suite objectives get clarified and then codified for execution by the IT practitioners in the front-office (C), middle-office (T) and back-office (B) layers. While both SAP and Microsoft have some advisory offerings, EY has the account credibility and existing relationships with the C-Suite, especially with the CFO through the company’s audit and tax services. In this way, EY can pull SAP and Microsoft into accounts where they have previously not had much visibility.

 

The front- and back-office technology segments are where Microsoft and SAP, respectively, have strong brand credentials. Microsoft has essentially owned the business productivity space for decades through Microsoft Office and has done an excellent job pivoting that business over from license to subscription software in the move to Office 365. SAP, likewise, has been a long-term premier provider of the core back-office systems of record now being migrated to the cloud as adoption there accelerates.

Lastly, and most importantly, is the middle-office integration layer, where the power of the partnership will bear the most aggregate benefit, as each participant has valuable domain knowledge to contribute. SAP has tight rules and policy guidelines by industry, Microsoft has the platform and tool sets to rival any competing cloud platform through Azure, and EY has the skills in translating business objectives into IT policies and rules for process optimization. The end result for enterprise customers is a faster, more economical and more agile use of IT for digital transformation.

The assessment by no means says that collectively EY, Microsoft and SAP will become Business of One de facto standards, but it does suggest these three working together in major accounts will give many of their competitors pause.

Letting your clients pick you: Tweaking the digital transformation center model

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“Start with a new space, furnish it with funky chairs, nontraditional work spaces and all the latest technologies. Recruit creative talent, mixed with some data scientists and wonder-tech folks, plus seasoned strategists. Bring in current clients and consult on digital transformation.”

The last time I talked about getting leadership right at digital transformation centers, I made the comment above and also mentioned three other critical elements: client selection, talent management and technology partner cooperation. I’ve seen the steady evolution on client selection, but an event last week showed me how much room exists for consultancies to play around to find a winning formula. IT services vendors, led by consultancies, initially designed these centers to cement relationships and expand their footprint with existing clients, often by demonstrating capabilities and services beyond the current engagements. For example, PwC’s supply chain management clients learned the firm also offers cybersecurity, and companies contracting Accenture for BPO could immerse themselves in that consultancy’s digital marketing services. Because initial investments drove the need for cost justification, most consultancies began by opening their doors to any and all clients, with predictably mixed results.

Consultancies learned the most efficient use of these centers included only clients on either end of a simple digital transformation spectrum, forcing the firms to spend additional sales time and effort ensuring clients came prepared. Consultancies stopped wasting half of a one-day workshop resolving a client’s internal political dysfunction or just beginning to scope core business problems and cemented processes around client selection and preparation.

Which leads me to what I saw last week. We will soon publish a special report, but it was strikingly different from every other event, as the consultancy intentionally stayed in the background — a self-described footnote at its own event — allowing clients and non-clients the space and time to collaborate, share cross-industry struggles, innovate and, in many cases, realize the combination of confidence in the ability to change and ambiguity about how to do so led to epiphanies around the need to hire a consultant. Very likely the one who had been in the room for the last two days. Subtle, smart, maybe possible only because the event was off-site for everyone and intentionally a mix of Fortune 500 companies and small to midsized enterprises.

So, a curious twist. Instead of centering on existing clients and ensuring the right ones come to the right collaboration/digital transformation center at the right time, this consultancy allowed clients and potential clients to self-select how much more advice they needed. I don’t expect a wholesale adoption of this by other vendors, but believe I will see elements of this repeated as everyone continues learning what works and what doesn’t, always looking for what’s best for the client and what starts returning some investment on these centers.