In late April, TBR attended SoftwareOne’s inaugural Global Analyst Summit in Milwaukee for two days of presentations, break-out sessions, and — because it is Milwaukee — baseball. The following reflects the presentations and discussions in Milwaukee, as well as TBR’s ongoing research around SoftwareOne and its peers in the IT services, cloud services and VAR markets.

SoftwareOne exists at the intersection of IT licensing, IT advisory, IT services, IT management and commerce

On May 17, SoftwareOne announced its acquisition of Calgary-based ServiceNow boutique consultancy Beniva Consulting Group. According to SoftwareOne, the 75-person firm generated more than 70% of its revenue from Canadian clients and the rest in the U.S. SoftwareOne informed TBR that while Beniva focused on ServiceNow engagements, the firm’s revenue came from equal parts IT Asset Management (ITAM) and IT Operations Management (ITOM).

To set the stage, SoftwareOne is an approximately $1 billion per year technology company with revenues roughly evenly split between software value added reselling (“Software & Cloud Marketplace”) and services (“Software & Cloud Services”). With global headquarters in Switzerland and North America headquarters in Milwaukee, the 30-plus-year-old company has about 9,000 employees, 16 global delivery centers and 65,000 clients. The SoftwareOne leadership team repeatedly reminded analysts at the event that the company operates in 90 countries, stressing that lessons learned in delivering software across borders proved critical to overcoming data governance and compliance issues. Combined with a well-established track record, SoftwareOne has positioned itself as a trusted, highly capable technology partner, with both global reach and local knowledge, much like the Big Four tax, audit and consulting firms.

Further, SoftwareOne provides clients flexibility in commercial arrangements, a point made in all of SoftwareOne’s presentations. Neil Lomax, president of Software & Cloud Marketplace, in particular, highlighted clients being “able to buy any way they want, including directly” from SoftwareOne’s partners.

Intimate knowledge of clients’ IT

During every session, SoftwareOne executives stressed that their understanding of clients’ pain points and needs comes from deep, intimate knowledge of their clients’ complete technology architecture and environment. Bernd Schlotter, president of Software & Cloud Services, stated outright that SoftwareOne’s “services business is based on what we know about our customers through our [software reselling] business.” Chris Chesley, North America growth leader, Digital Workplace, explained to TBR that SoftwareOne’s Digital Workplace solution starts with “really knowing what’s being bought and used” currently and building on that knowledge to make recommendations.

CMO Susanna Parry-Hoey noted that SoftwareOne works with clients that are buying, building, and managing software and cloud across their enterprises, including procurement professionals, IT directors, business line leaders and CTOs. This defining SoftwareOne trait — which TBR describes as, “We know our clients’ tech better than anyone else” — could simply be a marketing pitch, but the company’s leaders repeatedly demonstrated how their approach fundamentally relied on a track record of steadily building and leveraging knowledge of their clients’ technology ecosystems.

The value of leveraging compelling events

Part of knowing their clients extremely well includes knowing clients’ software and cloud purchases, entitlements and contracts anniversaries and using the “compelling event,” as multiple SoftwareOne executives described it, to optimize their spend through improved terms, right-sizing and negotiated pricing, among other levers. In Lomax’s words, SoftwareOne helps clients “scope the best deal” for their software and cloud needs through SoftwareOne’s knowledge of current discounts and comparable contracts, as well as broader market trends. Funds the client saves through better relicensing can then be applied to the costs of SoftwareOne’s services, including cloud migrations, FinOps, SAP preparation for cloud and S/4HANA journey, IT Asset Management (ITAM) programs, or digital workplace enhancements.

Elliot Robia, global product manager MSFT 365, noted that SoftwareOne’s sales teams use “every compelling event to find ways to engage in a new conversation and unlock new opportunities,” looking at what business decisions their clients will face in 12 to 18 months. While not unique in the IT services space — every consultancy and IT services vendor probes for expanded footprint at existing clients — SoftwareOne’s approach begins with that relicensing or replatforming event, which few other players in the ecosystem either track or can match SoftwareOne in terms of the level of assistance in reducing clients’ software and cloud spend.

Organized to succeed in combining software VAR business with technology-centric services

SoftwareOne’s operational structure and go-to-market strategies reveal an important characteristic that has been fueling its success in growing services alongside a vibrant VAR business. The company organizes around five service lines: Cloud Services, Application Services, Software Sourcing & Portfolio Management, SAP Services, and Digital Workplace. Embedded across all five service lines, SoftwareOne brings Cybersecurity, FinOps, Data & AI, and Adoption & Change Management practices. This arrangement fuels what Schlotter described as SoftwareOne’s “Superpower No. 2, the SoftwareOne flywheel,” which essentially accelerates and maximizes clients’ return on investments by leveraging technology-neutral licensing and application rationalization to center SoftwareOne’s services around customer outcomes.

Software & Cloud Services: Half of SoftwareOne’s value proposition

Of SoftwareOne’s services business, Schlotter said many customers have realized they are paying higher-than-expected costs for IT infrastructure, IT services and cloud, and turn to SoftwareOne for help with “commercial excellence,” based on SoftwareOne’s broad ecosystem knowledge and experience. SoftwareOne provides services to roughly 30% of the company’s 65,000 customers, leveraging knowledge of pain points purchasing patterns, and cloud and software needs. For example, one client approached SoftwareOne for help consolidating SAP instances and moving them to the cloud, specifically Amazon Web Services (AWS). SoftwareOne’s success in this effort, according to Schlotter, came in part from being exceptional at SAP on AWS Advisory, particularly the consulting and preparation necessary before migration. Schlotter said SoftwareOne helps clients regulate how they migrate to cloud without compromising any freedom around what the client wants to do with its processes and data.

Going further, Schlotter said cloud advisory services is SoftwareOne’s “Superpower No. 1.” In TBR’s view, SoftwareOne’s assertion in its event materials that it has a “broad portfolio combining software and cloud buying, cloud financial management, cloud infrastructure services, and application solutions — our Digital Solutions—selectively provided to our most promising clients” gains credibility through the use cases SoftwareOne provided and the methodical, staying-within-strengths approach described by Schlotter and his colleagues.

Diving deeper into FinOps, SAP, ITAM and Digital Workplace

SoftwareOne’s FinOps practice, which cuts across all service lines, provides insights to “help measure and maximize value from cloud spend,” according to Dan Ortman, global director of FinOps. We see this practice as critical to SoftwareOne’s future success, especially as many IT buyers are realizing that using a cloud-based subscription model is not as inexpensive as originally promised, a sentiment confirmed by a CIO of a multinational electrical distribution company in a recent interview with TBR who said, “A year and a half back I was in the same situation where I thought that my monthly spend for clouds will be close to about $1 million. And what we were seeing based on how quickly we were transitioning our workloads to cloud, it was shooting up and it became $1.2 [million], it became $1.4 [million], it became $1.8 [million], and that’s where we felt like, ‘OK, this is going to blow out our budget.’

And, we really needed to rethink our cloud migration strategy.” The need for education and change management among organizational buyers on the value of cloud can elevate the role of SoftwareOne’s FinOps practice as the company relies on its legacy relationships to identify business optimization gaps throughout the cloud adoption life cycle. Deploying the FinOps Discovery framework, spanning diagnostic, platform experience, cost optimization proof of value, and results, recommendations and next steps through FinOps-certified bench, allows SoftwareOne to renegotiate client contracts for optimal value, but the company needs to stay vigilant about potential frenemy-type relationships especially with the hyperscalers, which often provide clients with credits for using their infrastructure that can be applied to improved contract pricing and workload optimization services.

SAP Services

The answer for clients looking to solve an IT challenge is far from horizontal and requires an understanding of a client’s current state and desired outcomes to effectively meet its needs. Service partners that do not simply default to recommending technology partners’ desired deployment strategy, but rather recommend the strategy that best aligns to the buyer’s objectives will be rewarded with clients’ long-term trust.

This is a mindset that Pierre-Francis Grillet, Global Service Line Lead for SAP Services, has sought to ingrain across his team of over 500 SAP consultants. SoftwareOne’s differentiation comes in the form of combined expertise around commercial licensing know-how and technical capabilities within the SAP services, with the depth of knowledge spanning the entire SAP catalog, from legacy on-premises software systems to a growing array of SaaS and PaaS assets.


Armed with this expertise, Grillet’s team of consultants first establishes buyer trust by taking a customer-centric approach to ascertaining what the best SAP technology strategy is for a prospective client. First, to both maximize the client’s existing SAP investment and place the client on a path to achieve the best possible TCO, the practice conducts an audit to understand the client’s existing SAP landscape and associated licenses. From there, the team can establish multiple well-defined business cases to understand the ROI and TCO across multiple SAP deployment scenarios, be it through the RISE with SAP program or stand-alone implementations of products like S/4HANA Public Cloud or Private Cloud. Given the current macroeconomic environment, the marriage of SoftwareOne’s SAP portfolio expertise with its IT audit and advisory business will be compelling to prospective buyers, particularly those in the upper midmarket — SoftwareOne’s sweet spot — that lack the budget and buying power to elicit the same degree of focus of Tier-1 IT services providers.

TBR feels SoftwareOne’s customer-centric, hands-on approach, which emphasizes client cost above all else, will allow the company to establish itself as a go-to partner for a growing number of organizations seeking to modernize their SAP landscapes. In one of the use cases Grillet detailed for TBR, he stressed that the initial preparation stage was too often overlooked by clients and their IT services partners. He advised that customers must “get fit before moving to cloud or S/4” and insisted change management, which SoftwareOne can advise on and assist with, “has to be owned by the customer.” TBR has previously reported on SoftwareOne’s SAP practice, noting: “TBR sees SoftwareOne as smartly leveraging its strengths, including 14-plus years of delivering pragmatic, incremental migrations that help clients with successful transformations.” The breakout sessions in Milwaukee confirmed TBR’s assessment.

Software Sourcing & Portfolio Management

In a breakout session, Shadi Khoshab, Global Service Line Lead for ITAM & Sourcing Services, described SoftwareOne’s ITAM Insights, a role-specific dashboard solution that allows clients to understand the ongoing value they are deriving from their software. The dashboards demonstrate “key data points, risks and opportunities, plus value realized from services” and will be built into every SoftwareOne services engagement going forward. The full extent of SoftwareOne’s capabilities around software sourcing and portfolio management came through in a use case presented by Khoshab. After responding to an RFP, SoftwareOne was engaged to conduct a cost-takeout project, which then funded the client’s add-on projects and broader ITAM and sourcing initiatives with SoftwareOne, around application rationalization and analysis as well as e-procurement and software catalog integrations. Further savings funded additional software integrations and eventually an entire suite of software life cycle services, including procurement and vendor consolidation.


In TBR’s view, this use case stood out for the clear and direct value SoftwareOne brought to the client and the methodical approach: know the customer’s pain points and where immediate cost savings can be found, then deliver incrementally (not a big bang transformation). By combining IT asset management and software sourcing and portfolio management capabilities with deep knowledge of the customer’s IT and software uses and needs, SoftwareOne brings additional value through technology-centric IT services. In the coming months, TBR will explore how clients see IT asset management and software asset management evolving and revisit SoftwareOne’s services.

Digital Workplace

One of SoftwareOne’s larger service lines continues to execute well on its go-to-market strategy rooted in understanding the pain points of its customers’ end users, creating a model but also a burden for the rest of the company to replicate. This is not an easy approach, but SoftwareOne Digital Workplace’s ecosystem of stakeholders allows it to address common pain points through industrialized frameworks centered on people, process and technology and enabled through high-performance workplace solutions. With the majority of Digital Workplace opportunities starting through Microsoft Advisory workshops and given the upbeat market sentiment around generative AI (GenAI) and ChatGPT, SoftwareOne has a strong starting point to accelerate its service line and the company’s performance provided it can bring in line-of-business-aligned use cases to the masses. This challenge and opportunity is not unique to SoftwareOne, but the company’s position within the ecosystem as both client adviser and software reseller arms it with the necessary insights to leapfrog many of its partners and competitors that might be disrupted by the ongoing noise around the implications of GenAI on staffing models and rightsizing of workplace solution portfolios.

Note: TBR also met with SoftwareOne’s SVP of Cloud & Application Services Craig Thomson and will publish a separate assessment on that breakout session.

Where it matters most: SoftwareOne’s clients

For the last session of the summit, Ashley Baird, president of North America, welcomed three SoftwareOne clients on-stage for a panel discussion around how SoftwareOne is helping them meet challenges they are facing. On the first point, all three clients agreed that recent buzz around GenAI and sustained interest in emerging technologies (such as 5G, edge, blockchain and others) will become more meaningful to businesses across a wide range of industries only when use cases get to scale.

TBR has heard similar sentiments in our Voice of the Customer research, putting a damper on enthusiasm around GenAI while confirming the opportunities for consulting around disruption. While adopting emerging technologies may be an emerging challenge, all three clients said cloud and software sprawl within the IT environments led to much higher spending levels than they anticipated. This trend, of course, opens the door for SoftwareOne, which provides clients with talent — through staff augmentation and subject-matter experts — and trust, which one client said came from having “no reservations about picking up the phone” to ask SoftwareOne for help. Further echoing comments TBR has heard from other IT services, cloud and software buyers, all three SoftwareOne clients talked about differentiation coming through a vendor’s willingness to bring in new ideas and solutions, not simply fulfilling orders and closing tickets. The featured clients all agreed SoftwareOne distinguished itself through its combination of VAR reliability and technology-focused consulting expertise.

One last note on the clients’ comments: TBR has often heard that automation within IT services creates an opportunity for a client’s IT personnel to focus on higher-value tasks. This assertion almost always comes from IT services vendors selling the benefits of automation and assuring clients’ IT teams that they are safe from redundancy and layoffs — something TBR has considered with growing skepticism, increasingly so as GenAI comes into the mix. One SoftwareOne client proved to be an exception, noting that automation allows IT staff to spend more time “in the field,” interacting with internal clients and understanding how IT gets used (or not used), looking for opportunities to enhance IT’s value.

TBR assessment: SoftwareOne is up for the challenge

Growing services alongside an established software VAR business should be difficult. Margins in each business are considerably different. The staffing models — including recruiting, retaining and compensating talent — are different. The brand promise does not easily translate from selling software to advising on cloud migrations. Even partnering across the technology ecosystem requires different approaches, expectations and contracts. In TBR’s view, few vendors have successfully married — at scale — a VAR business to IT services and technology consulting. SoftwareOne’s blueprint, therefore, must be exceptional for it to work. It certainly is ambitious, and, according to Schlotter, SoftwareOne is “redefining how the world buys, builds, migrates and manages everything cloud.” And SoftwareOne certainly faces competitors across the entire ecosystem; Parry-Hoey listed six different groups SoftwareOne meets head-to-head in various client segments, including global systems integrators and consultancies (which TBR covers extensively).

TBR anticipates SoftwareOne will increasingly face two substantial challenges. Neither is unique to the company, but together they could potentially limit growth. First, services fundamentally depends on people, even in the age of automation, AI and analytics. SoftwareOne has recruited some exceptional leaders, with the experience and credibility necessary to build a vibrant services business. The challenge will come in continuing to build professional staff, even as clients and competitors chase the same talent and as SoftwareOne builds its brand beyond being a VAR.

Second, TBR has noted IT services vendors and consultancies have increasingly invested in more smartly managing their technology alliances ecosystems, finding new ways to partner and building business groups dedicated to specific technology vendors. SoftwareOne remains steadfastly technology agnostic, even while developing market-leading skills and capabilities around SAP and AWS, Microsoft including Azure, and Google Cloud Platform. In TBR’s view, SoftwareOne may reach a point in the next few years when leadership must make a bet on a handful of strategic technology partners — a bet backed up by investments in talent and marketing.

Exclusive market intelligence invites, Q&A invitations and data visualizations
Subscribe today!

At a minimum, SoftwareOne will need to evolve its partnering strategies as services begin to bring in an even greater percentage of revenue than value-added software reselling. In addressing both challenges, TBR believes SoftwareOne will need to convince potential employees that the company does more than just sell software and convince clients that SoftwareOne has the skills and capabilities to deliver beyond relicensing and simple migrations. What Schlotter described as the SoftwareOne “optimize to modernize” journey — align, advise, purchase, migrate, modernize, manage — should resonate with every software, cloud and IT services customer, provided SoftwareOne can continue to both credibly make the case that it has the talent and scale as well as deliver results to clients.

Every software, cloud and IT services vendor and consultancy that TBR covers has evolved its brand and managed through massive change, either self-inflicted or market-driven. One key element separates SoftwareOne — and is perhaps what TBR would consider the company’s superpower — understanding “compelling events.” SoftwareOne has insights into clients’ compelling events, particularly software relicensing, that few other technology or IT services providers have. Being deep in the weeds of software contracts and having developed a foundation of knowledge around what technology and software is used, and not used, gives SoftwareOne a considerable advantage. TBR will continue watching closely as this company builds on its advantages and strengths and successfully merges its software VAR and IT services businesses.

TBR dives into predictions about  generative AI and its very real disruptions: Today, organizations are exploring ways to leverage GenAI to optimize how they operate the front lines of their customer service processes via contact centers, an industry that currently employs over 11 million individuals; and tomorrow, the technology will provide an alternative to enterprises’ IT departments, which must frequently tap third-party services partners for custom software development, a market that was valued at nearly $25 billion in 2022.

GenAI Will Optimize All Workflows and Disrupt Those Who Ignore It

Generative AI (GenAI) has supplanted yesterday’s technologies, such as the metaverse, in today’s global conversation, quickly blossoming into a new hype machine for the industry to follow with curiosity. While other recent hype cycles have failed to deliver, is this the one that will deliver on its promises? The short answer is yes. It will not be immediately used in the ways that sci-fi thrillers would lead you to believe, but business leaders across every industry will deploy AI to augment today’s workforce by eliminating mundane tasks, freeing up workers for high-value tasks and doing away with certain roles in the workforce over time. In fact, business leaders who fail to make GenAI deployment a strategic priority risk weakening their competitive position as peers streamline productivity and expand profitability, while at the same time improving employees’ experience by reducing the administrative burden.

 

Reflecting on early development, TBR predicts GenAI will bring about two very real disruptions:

• Today, organizations are exploring ways to leverage GenAI to optimize how they operate the front lines of their customer service processes via contact centers, an industry that currently employs over 11 million individuals.
• Tomorrow, the technology will provide an alternative to enterprises’ IT departments, which must frequently tap third-party services partners for custom software development, a market that was valued at nearly $25 billion in 2022.

 

These disruptions were brought to light following an interview TBR conducted with a technology leader, which is covered at length later in this report. The industry practitioner, Alexander Titus, vice president at Colossal Biosciences, stated that the use of OpenAI’s GPT-4 had immediately resulted in a 10% productivity increase across his software development team. Titus noted that as the technology matures, “we will all become code reviewers and writing editors, instead of raw generators.” Individuals who have used the technology may understand his sentiment. Today’s technology incumbents certainly have responded in a way that would lead one to believe that GenAI’s disruptive potential is real.

 

Technology Giants Invest Billions to Join the Race to Deliver GenAI

Technology vendors are recognizing the differentiated value GenAI capabilities can provide to augment their core offerings. Many of the largest cloud providers are making significant investments to capitalize on the opportunity, led by Microsoft (Nasdaq: MSFT), which has made the biggest splash. In January 2023 Microsoft invested another $10 billion into ChatGPT owner OpenAI, expanding its collaboration with the AI leader and earning Microsoft preferred cloud delivery rights. Through this agreement, GPT-4’s diffusion across Microsoft’s portfolio has already begun, affording Microsoft an advantage for the moment. Competitors, such as Google Cloud (Nasdaq: GOOGL) and Amazon Web Services (AWS) (Nasdaq: AMZN), must develop GenAI capabilities elsewhere, through either internal R&D or partnerships and acquisitions.

 

Microsoft Emerges as GenAI leader as it Infuses GPT-4 Across Core Catalogs

Microsoft has been involved with OpenAI since 2019, when Microsoft announced a $1 billion investment and agreed to collaborate on a platform to create and run new AI tools. Recently, the two organizations greatly expanded their partnership, with OpenAI awarding Microsoft preferred cloud delivery rights and Microsoft investing $10 billion. For Microsoft, the partnership represents a stake in the current GenAI leader and pioneer. Since the agreement, Microsoft has been busy embedding GPT-4 across its platforms through an expansion of its AI assistant, Copilot. Previously, Copilot served GitHub users by providing code recommendations and generation, much like GPT-4’s targeted use case.

 

Now, Microsoft intends to embed GPT-4 within Copilot, supercharging its capabilities, then deliver the feature across Microsoft’s portfolio of applications. Content generation represent one of the greatest emerging use cases for GenAI, and Microsoft’s leadership in productivity and developer platforms, through Windows 365 and GitHub, will complement this use case well. In addition, Microsoft will deliver the Azure OpenAI Service, allowing enterprises to design and train GenAI models around their proprietary data and workflows. With cost becoming a more prevalent customer concern, the efficiency gains from automated workflows will become more attractive, supporting adoption in the short to medium term. Controlling preferred rights to a leader in this space, Microsoft stands to benefit significantly from this demand.

 

Google’s History in AI and Machine Learning (ML) Will Benefit Product Development

Backed by Alphabet’s AI-first strategy, Google Cloud has opted to invest in internal R&D. The company has long been viewed as a leader in AI, known for funding research and contributing open-source projects. In fact, the Transformer architecture, a core component of large-language models like generative pre-trained transformers (GPTs), was largely pioneered by Google and released to the public. Additionally, from a cloud standpoint, the Google Cloud AI, Vertex AI and TensorFlow platforms are viewed highly within the AI community, and TensorFlow has developed a solid following since being made open source in 2016. Like OpenAI, Google has been working on large-language models and regularly touts the capabilities of its LaMDA (Language Model for Dialogue Applications) model.

 

To address ChatGPT specifically, Google has released Bard, a LaMDA model tailored to support similar use cases, such as question answering, text summarization, content generation, and AI-powered search. However, early reports have favored ChatGPT-4’s capabilities relative to Bard, which surely has Google growing its R&D budget for GenAI. TBR expects Google’s experience in the area will pay dividends in product development, allowing the company to remain competitive long-term. Still, with CEO Sundar Pichai declaring a “code red,” which will redirect developer teams toward GenAI tools, it is possible GenAI, specifically ChatGPT, poses one of the greatest competitive threats Google has navigated in a long time.

 

AWS responds to Microsoft by announcing Bedrock and CodeWhisperer updates

As TBR worked to publish this report, AWS burst into the GenAI conversation with several announcements around solutions that will allow enterprise customers to access this technology on its platform. AWS’ new cloud service, Amazon Bedrock, takes a blended approach relative to Google and Microsoft by offering foundation model services powered by ISV partners — initially AI21, Anthropic and Stability AI — and the company’s internally developed large-language models, referred to as Amazon Titan. These services will compete directly with Azure OpenAI Service by providing enterprise customers with a platform to develop GenAI tools tailored to their specific workflow needs. Additionally, the company also responded to Microsoft’s development of Copilot X with new CodeWhisperer updates that will embed GenAI functionality into its existing code development platform.

Will GenAI be Another Emerging Technology that Gets Stuck in Pilot Mode?

While ChatGPT is impressive, hype cycles in technology are frequently traps that obscure the true disruptive power of innovation, presenting overblown scenarios that fail to come to fruition. Industry 4.0, for instance, provides a great example of a highly regarded trend that, at least within the originally anticipated timeline, failed to deliver on the promised outcomes. Originally dubbed Industry 4.0 by a German government body in 2011, technologies like industrial IoT (IIoT) and automation have been touted as a mechanism for manufacturers to improve machine uptime, optimize output, and automate factories to improve operational efficiency and expand margins. However, the IIoT market has faced numerous development bottlenecks, many of which go beyond the required capital investment to either build net-new factories or retrofit existing factories with new technologies and machines to then digitize legacy processes.

 

For instance, a lack of standardization has prevented interoperability between the software layer and operational technology (OT), ranging from network protocols to data formats. As a result, organizations cannot simply deploy an intelligent manufacturing solution but must also modernize the adjacent first- and third-party systems included in the process. This is a costly endeavor that likewise necessitates new ways of designing ecosystems across the technology value chain, a dynamic that has delayed Industry 4.0 market development despite vendors converging on the opportunity for over 10 years.

Despite All Its Promises, GenAI Will Face Its Own Adoption Challenges

Unlike Industry 4.0, GenAI’s near-term use cases do not appear to face implementation challenges. Vendors like Salesforce can simply embed proprietary GPT capabilities across core offerings like Customer 360 and immediately grant their existing install base access to begin optimizing their productivity. For instance, in March 2023 Salesforce (NYSE: CRM) announced Einstein GPT for Commerce, a solution that provides tailored recommendations to users. Drawing from real-time data in Salesforce Data Cloud, the offering pairs Salesforce’s proprietary AI IP with ecosystem partners’ AI technologies. While this portfolio strategy allows vendors to more quickly proliferate GenAI in the market, it does not necessarily mean GenAI will smoothly sail into enterprise IT.

 

Data privacy, for instance, is already emerging as a problem for enterprise customers, evidenced by recent developments at Samsung. Three software engineers at Samsung reportedly pasted meeting notes and source code into ChatGPT, releasing confidential data and information to OpenAI. A core component of GPT models is their ability to train on input data to support its improvement, which means that enterprises looking to utilize the tool risk handing over valuable data to the AI provider. This will concern many enterprise customers, who will in turn demand privacy protocols that ensure confidential data remains private and protected. As a result of its mishap, Samsung announced its intentions to develop a GPT tool in-house to ensure security, and many large enterprises with the resources to fund such an initiative may follow a similar path unless data protection is ensured.

 

Outside of enterprise concerns, regulators in the European Union, which have long been stringent around data protections and sovereignty, may restrict the use of third-party GPT models. Italy has already banned the use of ChatGPT within the country, citing data protections as a core reason, and others may follow. More crucially, the nascency of GenAI will require vendors to clearly articulate potential use cases to drive adoption.

While content generation presents an easy-to-understand use case, deeper, specialized workflow automation will be more difficult to prove ROI on, as it will require greater time and money to tailor such automations to the enterprise. TBR believes this work, paired with previously discussed challenges such as data protection, will represent a significant consulting opportunity for the IT services community. Specifically, IT services firms possess not only the trust of buyers but also the knowledge of buyers’ businesses to educate clients and then help tailor GenAI tools to their business needs.

Biotech Pioneer Colossal Uses GenAI to Speed Up Woolly Mammoth’s Return

Despite GenAI’s nascency, business leaders are already recognizing the benefits of GPT-based tools, specifically GPT-4. In early April 2023 TBR spoke with Titus, who founded Bioeconomy.XYZ in 2020 after holding roles such as the head of Biotechnology Modernization for the Department of Defense and strategic business executive for Google’s Public Sector Healthcare & Life Sciences. Today, Titus is the vice president of Strategy and Computational Sciences at Colossal Biosciences, a genetic engineering and biosciences company that creates innovative technologies for species restoration, critically endangered species protection and ecosystem restoration but is most well known for its work to de-extinct the woolly mammoth, thylacine and dodo.

 

The discussion focused on the efficiency improvements Titus has seen using GPT-4. He stated that after his developer teams began using GPT-4 in their day-to-day workflows, he “immediately saw a 10% increase in my group’s productivity.” In one specific use case, which involved question answering and code generation, Titus had a “ML developer spend 45 minutes asking questions to GPT-4 about how to build a CRISPR (Clustered Regularly Interspaced Short Palindromic Repeats) ML model. He had no biology background but built a prototype, with example Git repos and prototype code, in 45 minutes. Without GPT-4, it would have taken him three days to do that.”

 

Titus continued, stating, “GPT-4 really takes the tedium out of things. I asked GPT-4 to connect to an open-source API, download the data, format the database and provide me with the documentation. It took 10 minutes.” After years of experience working with AI and ML across many disciplines, Titus today feels that “we will all become code reviewers and writing editors, instead of raw generators. As a practitioner of AI/ML, I cannot understate the impact of this technology.” And it is not just Titus; the productivity improvements he is seeing today are also being recognized elsewhere, such as in a recent study conducted by the Massachusetts Institute of Technology (MIT), which found that white-collar workers were able to complete tasks 37% faster using ChatGPT.

GenAI Is Already Being Tailored to Less Generic Enterprise Use Cases

The efficiency gained from GPT models drew attention quickly, and Reuters reported that ChatGPT has set the record for the fastest-growing user base among web-based applications.

This has translated into strong awareness among enterprise leaders, with many already allowing or even promoting the use of GenAI in day-to-day operations. The use of GenAI  today reflects the early stages of GPT models, displaying a generalized model capable of serving a wide range of topics. However, as model training data and parameters broaden, the ability to support specific use cases worsens in quality and accuracy. This will drive future development around niche GPT models specialized by vertical and line of business (LOB). These models will be designed and trained around industry and workflow-specific data, optimizing functionality within a niche.

Content generation will be embedded in existing platforms

The first GPT-powered applications are focused on embedding GenAI tools into existing platforms to provide users with question answering and automated content generation, as seen with Microsoft’s recent Copilot developments. Copilot, which previously provided developers with code recommendations in GitHub using OpenAI’s Codex model, has been turbocharged using GPT-4, leading to the announcement of GitHub Copilot X. This update will improve upon the application’s existing code-generation capability, as well as bring new chat functionality to the command line and pull requests to support question answering. The move will massively benefit developers, enabling users to access the productivity improvements seen by Titus and MIT. Microsoft will bring the updated Copilot to Windows 365, where it will provide similar capabilities in writing-based workflows.

As GPT Models Are Tailored to LOBs, Client Contact Centers Will Face Disruption

Developing on top of the existing capabilities, platform vendors will work to embed GPT models within their workflows to accelerate user productivity and improve ROI. Salesforce, through Einstein GPT, is showing how this will be done. Einstein GPT will be able to ingest real-time data stored within Salesforce to generate content that is continuously updated to reflect current customer information, such as personalized sales emails, automated responses for customer service agents and auto-generated marketing materials, improving productivity across CRM roles.

In some specific cases, the tool can transform entire roles. Customer-service call centers, for instance, have already seen significant automation, and the improved functionality provided by GPT models will take automation even further. Industry estimates state call centers employ over 11 million workers globally. If the 10% productivity improvement seen by Colossal Biosciences can be replicated within this function, the industry would be empowered to reduce staff meaningfully without jeopardizing customers’ service experience, which businesses may be more inclined to do as they look to cut costs in the current economic environment.

As GenAI Matures, It Will Not Just Disrupt Unskilled Labor Markets

In the context of enterprise IT departments, consider the earlier provided examples in which Titus and his developer teams used GPT-4 to expedite code generation. Organizations have often stated that IT can become a bottleneck to their innovation efforts, as IT departments become overloaded with basic requests across LOBs, taking their time away from higher-value projects. To mitigate this, many organizations turn to the IT services community to help handle their workload, which may be as simple as developing APIs across the disparate third-party systems in hybrid IT environments to support specific business processes.

 

What if AI and automation technologies like GPT-4 could mitigate these challenges for enterprise IT? For example, what if GPT-4 could assist junior developers as they work through a large backlog of LOB requests, thereby allowing an organization’s top developers to focus on higher-value work? This outcome would result in less need for support from IT services partners on day-to-day IT challenges, particularly around custom software development, a market that generated nearly $25 billion in revenue according to industry estimates in 2022. As with any technological disruption dating back to the industrial revolution, new opportunities arise in the wake of economic revolutions, driven by technological advancement. In the context of GenAI, where will a new $25 billion market arise if custom software development engagements for IT services entities are displaced?

We compiled this report by surveying our TBR client service teams in February 2023 to better understand what is going on within the CI/MI organizations they serve. We captured data inputs on approximately 50 large global technology firms, collectively representing billions of dollars in annual revenue and millions of total employees.

In this white paper, TBR uses its experience to dig into the trends driving GSI alliances and provide our recommendations to technology partners on how to approach building a GSI alliance strategy.

In TBR’s view, EY continues to operate through a global effort, complicated by regulatory and compliance requirements that vary by country as well as member firms’ different partnership structures. However, at multiple times during the discussion, EY leaders said the firm knew that cybersecurity services required being “local to be there with clients.”