Key findings from TBR’s 2H18 Hyperconverged Platforms Customer Research

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  • TBR forecasts the HCI market will reach $15 billion by 2023, representing a significant growth opportunity for data center vendors.
  • Survey incidence data indicate that the majority of potential customers have not yet begun their hyperconverged infrastructure (HCI) journey.
  • Emerging solutions, such as Lenovo’s TruScale Infrastructure Services and AWS Outposts have the potential to shake up the HCI market.

Opportunity for successful HCI vendors is great, as the market will rapidly expand through 2023

The HCI market evolves to meet customers’ changing demands. As customers embrace digital transformation, the opportunity in HCI increases, and vendors invest and adapt to become agents of change for customers. TBR estimates the HCI market will increase from $4.6 billion in 2018 to $15 billion by 2023 as customers leverage HCI for a wide array of needs, both traditional and emerging.

A majority of potential customers have not yet purchased HCI, creating opportunities for all HCI vendors to gain customers. Incidence data from TBR’s research show that only 27% of companies surveyed purchased HCI. This demonstrates the massive opportunity that remains for vendors to gain net-new customers in the space. Converged infrastructure (CI) leaders Dell EMC and Cisco have a distinct advantage over other HCI peers, as their CI legacies have afforded them incumbent status with existing CI customers. Despite the incumbent advantage, there is opportunity for any vendor to capitalize on emerging buyer preferences. For example, software is an increasingly central piece of the HCI story, and with 79% of respondents indicating that they would consider consumption-based HCI purchases, strategic marketing and investments can enable any HCI vendor to rise through the ranks.

While Lenovo is not a leading vendor at this time, 30% of respondents indicated they considered Lenovo for their HCI purchase. Lenovo’s restructured portfolio, its recent unveiling of TruScale Infrastructure Services, and the rapid positive changes in its overall data center business are likely to bolster gains for the vendor in HCI as well. Although Dell EMC’s and Cisco’s leadership in the HCI space has been established, the opportunity in HCI remains vast, even for fast followers in the space. Digital transformation only stands to reinforce this trend as HCI becomes more widely adopted.

Customers leverage HCI for private and hybrid cloud installments as security remains a top concern with public cloud adoption

It is clear the private and hybrid cloud value proposition is a benefit HCI buyers are looking to achieve, with 80% of respondents indicating they leverage HCI for private or hybrid cloud installments. A majority of customers (60%) leverage their HCI for database management, and many of these customers indicated their database management use was for mission-critical purposes. This underscores the need to protect critical and sensitive data. TBR’s research showed that buyers are making additional investments in security in conjunction with HCI, particularly network security.

 

Going forward, the emergence of AWS Outposts in the market will challenge current HCI deployment trends as Amazon Web Services (AWS) messages its Outposts offering as being able to seamlessly integrate with AWS public cloud, addressing a key driver behind HCI adoption for private cloud installments. AWS Outposts are expected to hit the market in 2H19, so it will take some time before the impact of Outposts is known. However, that AWS is making its Outposts offering available as a managed service will improve ease of use, and will likely increase demand, especially among existing AWS customers as the underlying hardware of Outposts will resemble that of AWS’ public cloud environment.

Lenovo unveils TruScale Infrastructure Services, consumption-based data center pricing

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In February Lenovo’s Data Center Group (DCG) unveiled TruScale Infrastructure Services. A Hardware as a Service (HaaS) solution with subscription-based pricing, TruScale makes DCG’s entire ThinkSystem and ThinkAgile portfolio available to customers “as a Service” through both Lenovo sales associates and channel partners. For a monthly fee, customers will gain access to data center infrastructure, which can be installed at the customer’s location of choice. Cost will be based on power consumption, as power consumption is a relatively accurate way to measure usage without compromising infrastructure security. The hardware remains Lenovo-owned, -maintained and -supported, and with no minimum usage requirement, customers gain the financial flexibility available through public cloud offerings without the risks associated with taking data off premises. Further, the monthly pricing structure includes installation, deployment, management, maintenance, remote monitoring, system health checks and removal of the hardware once the subscription expires. Pricing details of the solution have not yet been disclosed and are likely to be determined case-by-case. The solution is currently available only in English and priced in USD and Euros.

DCG’s late-to-market status will be advantageous in the consumption-based pricing realm

DCG is a fast-follower in consumption-based pricing, as Hewlett Packard Enterprise (HPE) and Dell Technologies have offered consumption-based pricing for over a year. While these offerings have greater market longevity, as they are typically multiyear agreements, customer adoption remains relatively nascent for consumption-based pricing models. These deals are more complex than traditional hardware sales, and therefore require a mindset shift in some ways to promote adoption, just as cloud did initially. DCG’s entrance into the market times well with customer interest, and the vendor’s later arrival to the space will not prove to be a major inhibitor to growth.

The total inclusion of DCG’s channel partners, in addition to its direct sales force, in providing TruScale, is an asset and distinction for the group. Because Lenovo’s services portfolio is not as mature as that of vendors such as Dell EMC, providing channel partners with this opportunity will prove to be a win-win as it enables channel partners to sell attached services while affording Lenovo a more passive revenue stream. Involving the channel has been an initial challenge for some vendors offering consumption-based pricing as the partners need to be incentivized to pursue it over a traditional hardware sale, in which they would get a lump sum payout versus a subscription-like payout. TBR believes that because Lenovo has arrived to market later than peers with its consumption-based pricing offerings, it was able to work out channel partner challenges before going live with the solution.

Reconsidering TCS’ SWOT assessment: M&A comes alive

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In November our detailed report on Tata Consultancy Services’ (TCS) performance and strategy included a SWOT slide with the following item in the Threat category: “Competitors are building assets and scale quickly through acquisitions; TCS retains a conservative M&A stance.” Just a couple of weeks into 2019, we’re seeing a change from the company: a willingness to attack this threat head-on. As noted in our Jan. 10 initial response on the company’s 4Q18 earnings, “TCS’ purchase of London-based digital design atelier W12 Studios will be integrated into TCS Interactive beginning in 1Q19.” BridgePoint, a Georgia-based consultancy, and W12 Studios are TCS’ first acquisitions since 2014, ending a four-year hiatus in M&A for the largest of the India-based IT services majors TBR tracks.

While the acquisitions of BridgePoint and W12 Studios represent a commendable departure for TCS from its traditional aversion to inorganic growth, neither will significantly move the needle for TCS in revenue, added human resources, or market reach. It also remains unclear how much, if any, intellectual property or new client access TCS will obtain from either acquired company. In the digital marketing space, TCS gains no meaningful or material ground on any of its chief peers, particularly Accenture, which generates over $8 billion a year in digital marketing services revenue.

Reflecting these developments, we will update our SWOT slide in the coming full report.

 

We fully expect TCS will continue down the M&A path, particularly in the Consulting & Services Integration (C&SI) and Digital Transformation Services business lines, as both businesses built a war chest for acquisitions and need to enhance their offerings to continue to compete. Our most recent assessment describes the company as having “successfully repositioned, recalibrated and revamped its solution suite to go beyond operations optimization and deliver scalable, digitally based growth and transformation enablement for its global clientele. All of its internal delivery processes have also been completely renovated to support a growing volume of Agile-based projects in the company’s pipeline, while nearly three-quarters of TCS’ workforce has been upskilled in Agile methodologies. Digitally based engagements continue to constitute an ever-expanding share of TCS’ revenue base and order book, driving a strong deal pipeline that is well balanced across multiple geographies and vertical industry sectors.”

Look for our complete analysis of Tata Consultancy Services Feb. 1, 2019.

Services Weekly Preview: January 14-18

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As the first quarter of the new year gets rolling, TBR’s Services team will be reporting on IT services vendors’ 4Q18 earnings, evaluating their performance and strategies, and pulling through trends across the entire IT services space.

A recap of TBR’s 3Q18 findings can be found in the IT Services Vendor Benchmark, now available for download in TBR’s Client Portal.

Here’s what’s you can expect this week:

Wednesday: 

  • In 3Q18 we estimated Accenture’s revenue would expand 9.6% year-to-year in 4Q18 due to Accenture’s ability to convert bookings to cash and established delivery frameworks. Seasonal softness and headwinds among Financial Services clients in Europe and U.S. Federal caused bookings to decelerate and consulting book-to-bill ratio to drop under 1, at 0.99, for the first time since 3Q15. Accenture reported revenue growth of 7.3% year-to-year in 4Q18 due to some of these headwinds. However, we expect Accenture’s ability to execute on its consulting-to-operations approach will help it gain traction and expand wallet share among its 182 Diamond clients, including the 13 clients it gained in FY18.
  • In our Accenture Healthcare IT Services report, we note Accenture’s M&A ambitions in the healthcare sector seem to have cooled. Accenture finished 2018 without making a major healthcare-related acquisition, despite large companies, both inside and outside the technology services sector, leveraging M&A to enter the digital healthcare space and accelerate investment in healthcare IT innovation. While a continued robust volume of M&A activity in healthcare IT is expected in 2019 and will only serve to further inflate the valuation of healthcare IT acquisition targets, Accenture’s fiscal health surpasses most competitors’ and it could compete vigorously for these acquisitions. Because Accenture is focused on using M&A to enhance nonhealthcare-related growth initiatives, high-quality healthcare IT and consulting assets are falling into the hands of competitors with aggressive M&A strategies. TBR expects Accenture will stop allowing peers (especially smaller peers) to snatch up high-quality assets, IP and capabilities and will narrow the healthcare IT capabilities gap, as it has done in the digital market space.

Friday: In 3Q18 we estimated Wipro IT Services’ (ITS) revenue would remain flat from the year-ago quarter as weaknesses in core services and solutions offset expansions in the company’s digital business. Wipro ITS’ ability to upsell its clients helped extract additional wallet share from its top five clients; however, the company faces pressure in client retention, as its total number of active clients dropped during 3Q18. We expect these challenges combined with the elimination of Wipro ITS’ data center hosting business will have negatively impacted revenue performance during 4Q18.

Last week TBR rolled out its initial assessment of Tata Consultancy Services (TCS). In 3Q18, based on TCS’ historical conservatism regarding acquisitions, TBR predicted TCS would likely remain quiet on the M&A front in 4Q18: The company “has demonstrated a strong preference for expanding its portfolio and global delivery resources organically rather than through M&A.” Over the last two years (driven by the digital wave), we have observed TCS earmarking free cash flow and investment capital to internal R&D and co-innovation with clients at regional innovation hubs rather than making acquisitions (unlike more acquisitive peers, such as Accenture and Cognizant). However, TCS surprised us with not one but two acquisitions in November: BridgePoint Group (financial services consulting) and W12 Studios (digital and creative design). Given TCS’ four-year hiatus from M&A and that these acquisitions are small-scale and will not impact TCS’ revenue substantially (TBR estimates they will contribute only $10 million to $20 million in new organic revenue annually, compared to TCS’ $20 billion in sales expected in FY19), we do not expect TCS to acquire again until these new assets are fully and successfully integrated. Given TCS’ four-year hiatus from M&A, and even though these acquisitions are small-scale and will not substantially move the revenue needle for TCS (we estimate both companies will only contribute between $10 million and $12 million in new inorganic revenue on an annual basis – TCS will generate over $20 billion in sales in its fiscal 2019), we expect TCS will not make further acquisitions until the newly acquired assets are fully and successfully integrated.  We believe this quiet period could end, however, by 2H19, as TCS is compelled to shed its traditional aversion to inorganic growth to keep from losing more addressable market to peers such as Accenture, which has acquired its way to the top of the digital marketing space. For additional information on TCS, contact Senior Analyst John Caucis at [email protected].

 

In the next few weeks we will issue our initial 4Q18 reports on each vendor in TBR’s Services portfolio.

Deeper convergence of mobility, broadband and video services creates revenue opportunities and disruption for CSPs

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The digital era is bringing fundamental, disruptive changes to traditional business models for communication service providers (CSPs), including telecom operators and cable providers, as the mobility, broadband and video industries converge more deeply. These shifts are driven by the following trends, which will gain further traction over the next several years:

  • The rise of cable mobile virtual network operators (MVNOs) — New entrants including Xfinity Mobile and Spectrum Mobile are attracting wireless customers via low price points and the convenience of being able to enroll in multiple services through a single provider.
  • Preference for over-the-top (OTT) video — The popularity of OTT services including Netflix, Hulu and HBO Now are contributing to video subscriber losses for cable providers and bundling opportunities for wireless operators.    
  • Wireless as a broadband replacement — Over the next several years, customers will gradually substitute traditional fixed broadband connectivity with wireless-based services due to enhanced 5G and LTE-Advanced coverage, fixed-wireless services, and increased data allotments for mobile hot spots.

These trends create both revenue opportunities and disruption for CSPs as cable providers have opportunity to take market share from telecom operators and vice-versa. Cross-selling multiple services enables CSPs to maximize revenue opportunities per customer while also helping to reduce churn. Conversely, the deeper convergence within the telecom and cable industries will create greater challenges for CSPs as broadband and video access will become more commoditized, which will make competitive pricing more crucial to attracting and retaining customers.

 

Cable MVNOs are disrupting the mobility industry

Comcast’s Xfinity Mobile has emerged as a stronger player within the U.S. wireless market as the brand has garnered over 1 million customers since launching in mid-2017 and has been able to consistently outperform AT&T and Sprint in postpaid phone net additions the past several quarters. Contributing to Xfinity Mobile’s success is the low price of its unlimited data plans, which are currently undercutting prices from all Tier 1 U.S. operators, for the underserved market of single-line customers. Xfinity Mobile is also attracting customers by offering pay-as-you-go pricing for $12 per GB, which provides price-sensitive customers who consume minimal data an alternative amid the market’s emphasis on unlimited data plans.

Xfinity Mobile will become a stronger competitor in the U.S. market over the next several years as it expands its retail footprint and Comcast gains additional broadband customers to which it can cross-sell wireless services. Spectrum Mobile, which became available across Charter’s footprint in September, will also disrupt the U.S. wireless market by offering similar pricing incentives as Xfinity Mobile. Additionally, Altice USA plans to launch an MVNO offering in 1H19 that will focus on serving bring-your-own-device customers, giving the company the opportunity to cross-sell mobility services to its current residential base of over 4.5 million customers.

 

To counter disruption from cable MVNOs, operators can capitalize on the value proposition offered by their unlimited data plans, which bundle in popular OTT streaming services as well as other incentives including high-speed data tiers for mobile hot spots. Telecom operators are also relying on the discounts provided to multiline unlimited data accounts, which are not currently offered to Xfinity Mobile and Spectrum Mobile customers, to undercut cable MVNOs.

 

Wireless begins to disrupt the traditional fixed broadband market

Significant enhancements in wireless technology over the past few years, such as the inception of 5G, which makes millimeter-wave spectrum viable for commercial use, as well as the inventions of carrier aggregation, 256 QAM and massive MIMO, have made it economically feasible for CSPs to offer mobile broadband as an alternative to traditional fixed broadband services.

Though Verizon was a major driver of this trend with its early use of 5G fixed wireless, TBR expects more CSPs will begin to leverage their wireless assets to provide similar services in 2019 and beyond. AT&T, with its Netgear Nighthawk 5G Mobile Hotspot, essentially provides a nomadic ultra-high-speed broadband connection leveraging 5G. T-Mobile is also looking to jump on the bandwagon, arguably in a much bigger and more market-impactful way, especially if its proposed merger with Sprint is approved. Regardless of whether the deal goes through, T-Mobile intends to leverage its mix of low-, mid- and high-band spectrum assets with the aforementioned wireless technologies to provide its own mobile broadband as an alternative to fixed broadband services.

A new phase of price competition for internet service could come to North America due to wireless. TBR also expects this trend to unfold in other developed and developing markets, especially where fixed access is not widely deployed. Offering wirelessly delivered, high-speed internet services could become a major new business for telecom operators that are in countries where internet penetration is relatively low.

Consumers will reap the greatest benefits from cable and telecom industry convergence

Though CSPs have the opportunity to create new revenue streams from the deeper convergence of mobility, broadband and video services within the cable and telecom industries, these benefits are largely outweighed by the competitive challenges spawned by industry convergence. Consumers will reap the greatest benefits from cable and telecom industry convergence as they gain more flexible service options as well as the ability to enroll in additional services from a single provider. The competition created from cable and telecom industry convergence will also spur CSPs to become more competitive in their wireless, broadband and video pricing to maintain market share.

HCL Technologies’ reinforces technical and engineering roots with the addition of IBM Software products

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HCLT’s acquisition provides entry into emerging areas

Building off its long-standing partnership with IBM, on Dec. 6 HCL Technologies (HCLT) announced the acquisition of seven IBM Software products for $1.8 billion. The acquisition, which is expected to close in February 2019, includes IBM’s AppScan, BigFix, Notes/Domino, Connections, Digital Experience (DX), Unica and Commerce as well as 10,000-plus existing clients. Each product falls into one of three focus areas: security (AppScan, BigFix); multichannel e-commerce (Commerce, Unica, DX); and collaboration (Notes/Domino, Connections). While these offerings directly tie to HCLT’s Mode 3 products and platforms, they mostly complement Mode 1 and Mode 2 services and solutions, creating the opportunity for HCLT to upsell and cross-sell new services as Mode 2 includes the company’s emerging technology portfolio offerings (i.e., Digital & Analytics, IoT WoRKS, Cloud Native Services, and Cybersecurity & Governance, Risk and Compliance [GRC]).

In August 2017 HCLT and IBM announced an expansion of their partnership, creating five IP products around automation and DevOps solutions, supported by HCLT’s $780 million investment. The partnership intended to shift HCLT’s infrastructure into emerging areas while maintaining growth. The five products developed through this extension of the partnership were included among the seven announced in the planned acquisition. HCLT’s engineering team supported the original product development and will now support the integration of the acquired assets into the HCLT portfolio as well as the development of additional emerging technologies.

Compare to peers

HCLT acquires peers that enhance and build out its core capabilities around emerging technologies. For example, HCLT acquired H&D International Group (June 2018); Butler America Aerospace LLC (January 2017); and Geometric Limited (April 2016) to improve its engineering and R&D skills. HCLT further expanded its business process services offerings and systems integration capabilities by purchasing C3i Solutions (March 2018) and Alpha Insights (September 2017); and Urban Fulfillment Services LLC (April 2017). The acquisitions also support HCLT’s shift from legacy technologies. HCLT’s planned acquisition of the product sets from IBM will elevate the security, commerce and collaboration expertise in HCLT’s portfolio. Peers such as Cognizant, Infosys, Tata Consultancy Services (TCS) and Wipro have also been executing an active M&A strategy in areas such as digital design to support transformation engagements (e.g., Wipro’s acquisition of Syfte and TCS’ acquisition of W12). Additionally, Cognizant purchased Advanced Technology Group (ATG) and SaaSfocus to add Salesforce advisory and integration services.

What does this mean for HCLT?

Short term

Pending the acquisition’s close, HCLT integrates the solutions within its Mode 3 products and platforms business and onboards new clients. Following the addition of IBM’s salesforce around these products through the acquisition, HCLT will benefit from a more seamless transition for clients currently under the IBM brand as it gains the specialists and salesforce maintaining the client relations as well as a quicker sales turnaround. Further, HCLT will focus on pursuing new client relationships using Unica, AppScan, Commerce and Big Fix to create additional revenue streams from the products formerly under the IBM umbrella. However, HCLT will seek to cross-sell the application capabilities of Domino/Notes to its existing client base.

Long term

HCLT plans to enhance Mode 1 and Mode 2 services and solutions using the acquired products by adding its security, commerce and digital marketing expertise. The products will enable HCLT to leverage a SaaS delivery model for its infrastructure management engagements, supporting the company’s shift into higher-profit software-driven services. HCLT will also improve its position within a variety of vertical markets as the products will bring existing product users, building its expertise around environment management. While the products will add SaaS capabilities, HCLT could benefit from pursuing a strategic partnership with a consulting vendor, such as PwC, or further expanding its relationship with IBM to access consulting services. The addition of services would improve HCLT’s ability to integrate the acquired products within its existing client relationships and transition clients into a different delivery model. This would allow HCLT to increase its client-facing expertise, enabling the company to work more closely with clients and coinnovate within transformation engagements. The additional client base creates the opportunity for HCLT to increase the volume of transactions and accelerate revenue growth, but HCLT will need to quickly onboard new clients and effectively communicate new offerings to transition engagements with existing clients and capitalize on the additional products and market.

DXC Technology lands award in the Middle East, highlighting long-standing core strengths of its solution suite for the health payer sector

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In 2016 United Arab Emirates (UAE)-based insurer United Insurance Co. (UIC) hired a new CIO and tasked him with digitally transforming the company’s IT infrastructure and operations to a cloud-based infrastructure (see below for a snapshot of UIC). Within the CIO’s first five months, UIC migrated its core IT applications (e.g., Office 365) to the Microsoft Azure cloud. The initial digitization of UIC’s IT foundation was successful, and the insurer then proceeded to seek out systems integration vendors capable of fully deploying its core insurance applications, additional elements of its IT infrastructure, and other workloads to the cloud.

UIC eventually selected DXC Technology (DXC), citing DXC’s wide range of insurance-centric platforms, products and services as key differentiators that made DXC the optimal choice. UIC also noted DXC’s insurance solutions have been developed and used in the insurance market for several decades, including in many different geographies, further emphasizing how the breadth and depth of DXC’s insurance sector expertise are deeply woven into its industry platforms and make it a compelling choice for insurers seeking digital transformation. UIC chose Integral, DXC’s open standards-based, end-to-end insurance solution spanning the entire insurance life cycle, and was able to quickly deploy core functions to the cloud, including customer and agent administration, proposal capture, claims and policy processing, and accounting. DXC’s Integral Life application has already been deployed, and in 2Q18 UIC announced that DXC’s Integral Health solution will soon go live.

In TBR’s view, DXC offers payer clients a robust suite of solutions developed over a long tenure serving the insurance sector, but despite strong insurance sector offerings DXC does not appear to be replicating the success with UIC with other insurance clients in its core U.S. market. While global payer IT spend is accelerating as insurers digitize operations to enhance connections with policyholders and increase customer loyalty, DXC risks losing out to competitors with similar scale and experience in the insurance IT sector if it fails to stabilize operations in its central markets.

 

 

UIC is a Dubai, UAE-based insurer established in 1998. UIC provides retail and commercial insurance products in areas including life, health, automotive, property, engineering, liability and marine to commercial enterprises and government entities in the UAE and the Middle East. UIC saw digital transformation as critical to its ability to differentiate in a highly competitive insurance market while ensuring that the company was prepared for the inevitable industry embrace of digital insurance.

Cyber-sweet Carolina: Capgemini’s new SOC

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Last month my colleagues Bozhidar Hristov and Elitsa Bakalova joined me for a chat with the Capgemini executives who are leading the company’s new security operations center (SOC) in Columbia, S.C. Drew Morefield and Ninad Purohit explained that the new SOC will become part of a global network of 10 SOCs and close to 4,500 cybersecurity experts. Listening to Morefield and Purohit explain the firm’s offerings and capabilities, starting with an acknowledgement of the overwhelming volume of data and existing, often fragmented, cybersecurity programs and policies enterprises have in place now, we gained an appreciation for Capgemini’s approach to digital strategy and end-to-end cybersecurity capabilities.

We also discussed scale and global reach. In North America Capgemini has a satellite R&D-centric SOC in Dallas that is used as a technology incubator and an experience center. Morefield and Purohit noted that Capgemini will further expand its SOC resources and security services capabilities in North America in the coming months with facilities in Foxborough, Mass. (home of the New England Patriots) and San Diego that Capgemini will gain after the acquisition of Leidos Cyber is complete (subject to anti-trust and Committee on Foreign Investment in the United States approvals expected this month).

So why Columbia, S.C.? Quite simply, a combination of prime real estate and readily accessible talent. In a previous acquisition, Capgemini took over a physical structure ideal for a SOC and a new Advanced Technology Development Center. Perhaps more importantly, Columbia itself hosts the University of South Carolina, a natural pipeline for young talent, and the area includes three military installations, a perfect source of experienced cybersecurity veterans. In Capgemini’s words, “high-quality people, a central location, and the best technology.”

OK, so will Capgemini use the new SOC as a draw for new clients, not just new talent? Morefield and Purohit said the security practice would mirror strategic efforts across the global company by focusing on expanding its footprint with existing clients, particularly those that “already believe in Capgemini, have trust with” the company, and are looking to change their cybersecurity services vendor or posture.

Does this new SOC set Capgemini apart from the competition? Maybe not, but so what? The company does not need groundbreaking or unique security offerings to win new work with existing clients, the target market for the Capgemini security practice. The company needs talented people, excellent facilities and access to the best technology through alliances, all complemented by global scale and global delivery. Cementing those fundamentals, building partnerships with the university through recruiting and with the greater Columbia community by investing in veterans, and continuing to expand capabilities and scale globally should sustain double-digit growth and reward Capgemini’s decision to invest in cyber, along with digital and cloud.

Now we need to go visit. (For additional insights, read our blog on EY and special report on Accenture.)

Telecom IoT and edge computing: Developing focus areas in the telecom industry

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As we look to 2019, TBR’s Telecom team has completed some insightful brainstorming sessions where we discussed industry trends and topics. We identified two nascent areas about which we are receiving increased questions and will spend more time researching as we move into the new year: telecom IoT and telecom edge compute. We welcome input, ideas and discussion as we dive deeper into these focus areas in 2019.

Coverage of these markets will be global in nature and will include insights on both operator and vendor positioning and strategies. Additionally, TBR will examine where companies are making money and spending money in these markets. Research will focus on business models and how they are evolving for Internet of Things (IoT) and edge compute, operator and vendor sophistication, and traction of IoT and edge compute businesses. There will be particular emphasis on leading companies: how they are making money in the market and where they are investing to position for success. We will examine market use cases and verticals to identify areas of opportunity.

Telecom IoT

The IoT market will scale up over the next five years as module prices decrease, IoT-optimized networks are built, and businesses and consumers realize the benefits of connecting their “things.” Communications service providers (CSP) will play an integral role in the IoT ecosystem as it is built out, and their revenue from IoT will grow as they pursue traditional and new business models in this market.

Telecom edge compute

Edge computing has become a major area of interest and investment in the telecom industry, driven by the need to improve user experiences as well as enable and support new business models. CSPs are also keen to invest in edge computing as a cost-efficient solution, with 5G as well as the cloudification and virtualization of networks driving the build-out of edge compute environments.

When your car becomes your smartphone, who handles your cybersecurity risk?

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In discussing EY’s recently released Global Information Security Survey with the firm’s Americas Cybersecurity leaders, TBR heard a compelling case for an industry-led approach to anticipating the future of cybersecurity and overall risk. The EY leaders noted the firm echoes its overall industry-led go-to-market approach in cybersecurity, adding that understanding security gaps to be addressed by a company in contrast to security gaps necessarily tackled by the industry as a whole could be the key to properly meeting clients’ current and future cybersecurity risks. Anticipating future cybersecurity needs within the context of an industry’s specific emerging trends — think cars becoming connected, forcing auto manufacturers into the software and connectivity business — could help clients answer their most frequent question, “How do I make smart capital allocation decisions with respect to cyber?”

Echoing sentiments TBR has heard from other consultancies, most notably PwC and Accenture, the EY leaders added that clients increasingly want to know more than just what is best in breed and what minimally meets regulatory requirements. Clients ask what cybersecurity startups and technology-centric companies have developed, what best practices can be learned across multiple industries, and, tellingly for EY and its competitors, what EY can bring to the table. On the last point, TBR has seen a substantial shift in the way EY develops and deploys technology, particularly cross-practice solutions (such as cybersecurity within a supply chain engagement). As we reported from Toronto this summer and the previous year in New York City, EY has fully embraced consulting in an assets-based digital transformation age.

Still to come: How EY will utilize the findings from its survey to move the needle on boards allocating more resources to cybersecurity, and how the firm will attract, train and retain cybersecurity talent, particularly as nontraditional vendors increasingly move into EY’s cybersecurity space.