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.)

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.  

As we wrap up the quarter, just a few key items are left including the four reports listed below, the Management Consulting Benchmark and predictions for 2019.

Here’s what’s coming this week:

Thursday: Our semiannual deep dive on DXC Technology’s healthcare IT services (HITS) practice includes our assessment that DXC’s long-awaited return to HITS growth remains elusive in the face of stubborn post-merger disruptions and poor contract performance. However, we had expected the company’s recent traction in APAC and select European markets would work in concert with rebounding IT spending patterns in the U.S.-based payer sector, the ongoing bull market in life sciences IT investment, and DXC’s acquisition of Molina Medicaid Solutions to launch a period of renewed HITS revenue growth. The report also includes scenarios on DXC’s acquisitions and the company’s activities in the Middle East.

Friday:

• In our mid-November initial report on Cisco Services, TBR noted that the company sustained growth in 3Q18 by attaching services to Cisco’s growth initiatives around next-generation solutions. Our full report will explore the drivers behind that growth and include scenarios around streamlining headcount in the Customer Experience business, which includes Cisco’s software, subscription and services activities; transforming clients’ IT operations at speed and scale utilizing predictive services powered by artificial intelligence and machine learning; and expanding cloud-related offerings by partnering with Google Cloud, SAP and Amazon Web Services.
• With SAIC’s earnings release slated for Friday, TBR will be looking to see if the company conformed with our July assessment that SAIC needs to address federal priorities as a low-cost alternative in IT modernization, platform integration and training, as well as expand into underpenetrated areas of the federal market organically and/or through acquisitions.
• Finally, our semiannual look at NTT DATA’s HITS practice will acknowledge that the 2017 acquisition of Dell Services’ healthcare assets was a major undertaking, but is now complete and has significantly enhanced NTT DATA’s capabilities across multiple healthcare segments. In addition, the report includes scenarios around alliances and virtualization in the healthcare IT space.

Big mergers bring big risks: Compaq and Digital Equipment Corporation, a tragicomedy

Compaq proved in the early 1980s you could buy non-IBM hardware and not get fired in the process by creating a portable PC that could be lugged around by weightlifters. Ultimately, Compaq struggled trying to move up the stack into the peer-to-peer networking space, as Dell and Gateway undercut Compaq’s undercutting of IBM PC price points, and made a big acquisition of Digital Equipment Corporation to buy enterprise server direct sales and services. But culturally, Compaq choked off the very assets the company desired by imposing volume business sales cost controls onto an enterprise-selling organization. In the end Compaq wound up being absorbed by Hewlett-Packard Co. (HP), which has acquired many hardware companies over the years.

What are the lessons learned for IBM-Red Hat?

IBM has decided to invest one-third of its market cap in acquiring Red Hat for $34 billion. Essentially IBM bought the ecosystem engine necessary to create the flywheel effect of IP services and support. There are synergies, to be sure, on the support of open foundations that have accelerated product commoditization in ways that benefit customers and pressure technology vendor business models across the entire technology spectrum. At issue will be which pieces of two different cultures and business best practices prevail, for, as Peter Drucker famously said, “Culture eats strategy for breakfast.”

What can IBM learn?

Red Hat pioneered the business model of monetizing services around free products. This stands diametrically opposed to the best-in-class blue suit selling model made famous by IBM and increasingly less relevant in the digital economy. Red Hat generates 75% of its revenue through the channel. Given that scale matters less, IBM has to improve its downmarket selling motions. Red Hat best practices should be imported into the current IBM selling motions as quickly as reasonably possible.

Red Hat also has near-zealous support among the developer community. Again, allowing Red Hat leadership to help shape new developer programs, run the Red Hat way from the wealth of IBM assets, will be critical lest those supporters migrate to another Linux distro such as Suse or Canonical.

What can Red Hat learn?

IBM has enterprise trust to solve critical technical integration problems soundly and securely. It likewise has access to more CxO decision makers in the enterprise. Success of the proposed acquisition will be as much adding more product to an existing sales channel as it will be to tailor messages to the decision makers while preserving the uniquely ardent support Red Hat has with the teams writing the code.

More to follow from TBR

A more extensive TBR Business of One special report, IBM-Red Hat economic implications: Is disruptive state the new steady state?, will be out shortly, written with Professional Services Practice Manager Patrick Heffernan. Recent commentaries are also available by Cassandra Mooshian, Big Blue opens its arms, and its wallet, to Red Hat; and Michael Soper, Red Hat can save CSPs from themselves.

In this magical time between Thanksgiving and Christmas, despite racing to get as much analysis and as many predictions published before the new year, we’re able to enjoy a slight pause in the usual news cycle and company activity to reflect on 2018 and predict what will be coming in 2019. In two upcoming webinars, we will be looking at many marketwide trends, starting with an assessment of management consulting in the digital transformation age.

Here’s what’s coming this week:

Thursday: Last quarter when we looked at DXC Technology, we noted the company’s spike in revenue growth following its formation last year normalized to single-digit growth in 2Q18. The underlying businesses of both legacy CSC and Hewlett Packard Enterprise’s (HPE) Enterprise Services are still experiencing pressures around commoditized legacy services. This quarter TBR will highlight and discuss DXC’s recent M&A activity and its resource management strategy, anticipating similar growth results and performance.

Monday: In our full report on T-Systems for this quarter, we will note that strict execution of efforts to become an efficient organization will sustain the company’s slightly improved performance. New offerings in cloud shift T-Systems’ portfolio away from traditional IT services and increase its opportunities in a segment with growth potential.

Coming in the next few weeks: the Management Consulting Benchmark and 2019 IT Services Predictions.