A proven strategy: Start, test, build, evolve internally

In early November, TBR spoke with PwC’s Procurement on Demand Services team, including Scott Boruff, Becky Mackin, Michael Giguere and John Fafian, to better understand how their offering has evolved and what challenges they are facing as 2022 approaches. According to Boruff, PwC’s internal procurement professionals implemented a version of the firm’s procurement solution over five years ago, then continually refined it before rolling the solution out to clients over the last 18 months. In TBR’s view, numerous PwC peers have successfully deployed this customer zero approach, particularly as consultancies and IT services vendors have drifted into the software space.

When pressed if implementing a solution internally resonates with clients, Boruff, Giguere and Fafian confirmed that PwC’s clients appreciate this approach and that the firm included former PwC procurement professionals in the Procurement on Demand Services team. Fafian noted that the range of spend categories within PwC’s procurement team — for example professional services, facilities management, software and hardware — reassured clients PwC’s solution could withstand massively scaled deployments.

In explaining why PwC launched Procurement on Demand Services, Boruff noted that the COVID-19 pandemic highlighted long-standing tensions between procurement officers seeking the best quality and conditions and internal customers, who often bring different priorities to a procurement process. Solving the people problem — the dissatisfaction with each other and with the process — requires developing, cementing and sustaining trust across an entire enterprise, a theme that resonates with PwC’s overall strategic shift.

In addition, by leveraging PwC’s products and accelerators for its clients, Boruff said his team has “the people and the technology” to help clients “jump the line” on turning around their procurement processes, improve outcomes and satisfaction, and drive hard value to the bottom line. An enterprise trying to transform its procurement function, in Boruff’s assessment, would need 12 months to find qualified staff and 12 more months to build the technology, before finally realizing the value — an overall timeline Boruff said PwC could reduce to three months. In TBR’s view, the combination of a pandemic-induced appreciation for procurement challenges and a robust, tested solution currently operated globally by PwC made for excellent timing. As we discuss below, execution becomes the new challenge.

Meeting the vast variety of clients’ needs requires PwC flexibility

Detailing the PwC offering, Boruff explained that PwC’s clients look for three kinds of services: 1) curated tech enabled-services in a specific functional area that support upskilling and progression of maturity of the entire procurement function; 2) managed services, with PwC taking full responsibility for category management, analytics and any ongoing procurement issues; and, 3) enhanced staff augmentation, typically around a specific spend category, an acquisition assimilation or a major sourcing event.

Across those three areas, according to Boruff, PwC can bring the right procurement subject matter experts, particularly for specific spend categories, and scale up to meet clients’ demands. In addition, PwC’s flexibility around the consulting business model allows the firm to bring a blend of services, including procurement strategy, project management, contract negotiations, metrics and reporting, risk management, and even a SaaS procurement platform. In TBR’s view, while this offering does not sit within PwC Products, the evolution through internal development and deployment and the approach to bringing this to clients reflect the firm’s commitment to PwC Products and to a full pivot to business models that more fully support their clients’ transformation needs.

While PwC’s Procurement on Demand Services offering currently exists in the “walk” stage across the crawl-walk-run spectrum, the firm has begun exploring what comes next, beyond simply greater scale. Mackin noted the current procurement analytics package within some clients’ deployments allows PwC to anticipate and explore opportunities for additional client savings through enhanced procurement strategies and services. In TBR’s view, as more managed services clients permit PwC to monitor existing deployments and analyze trends, the firm will develop an increasingly robust procurement offering, accelerating the flywheels of value to clients and revenue for PwC. Looking further ahead, Boruff called blockchain “aspirational” in the procurement space, noting that too many client contracts have not been digitized from paper. Boruff also acknowledged the firm may need to complement existing talent and capabilities with acquisitions of both intellectual property and procurement-trained professionals to meet PwC’s internal growth targets over the next few years.

Red Hat aspires to be the technology glue for the digital enterprise

Red Hat rose to prominence simplifying technology stacks, with a mission to break the chokehold proprietary operating systems had on the enterprise via Enterprise Open Source, then extending that out to the various cloud developer platforms through its products. For this product strategy, Red Hat developed simple monetization strategies that have been replicated throughout the industry in what are now commonly called “as a Service” business models.

Red Hat recognizes it needs to do more to solidify its position as the glue, or virtual mortar, for digital business. The march to edge, driven by ubiquitous, economical compute, means that Red Hat has to expand beyond its horizontal strategy, which caters to the IT developer community, to also incorporate a more nuanced strategy that provides the requisite workflow and industry wrappers to simplify developer remits even further.

Red Hat quite correctly cites its dominance in the enterprise, with over 90% of the Fortune 500 using Red Hat products and solutions. This share dominance positions the company well for legacy application modernizations for an inside-out expansion strategy. Legacy vendors increasingly expose internal data through a series of different use cases and business constructs, whether it be to deploy internal data for marketing initiatives or to modernize the transfer of permissioned information among other business entities in a multi-enterprise business network.

But outside-in data utilization from customer-facing applications, often built cloud natively, is a different story. Many of the technology startups targeting those business use cases have become enamored with hyperscaler marketplaces as a key attribute when settling upon their development strategy. While developers may still be king, customer parliaments have greater and greater influence over the way the business policies are determined. Simple add-to-cart trials can trump the developer efficiencies associated with writing once in OpenShift to deploy anywhere.

Red Hat has moved to fill that gap by stating it will meet customers where they want to buy. IT procurement, Red Hat rightfully argues, is being consolidated on hyperscaler marketplaces, and Red Hat is developing — across much of its portfolio — more co-selling situations with Microsoft Azure (Nasdaq: MSFT), Amazon Web Services (AWS; Nasdaq: AMZN) and Google (Nasdaq: GOOGL) around OpenShift, SQL and SAP technologies.

Red Hat makes the last-mile connection to the workflow seamless

Red Hat can mask the technological complexities of the hybrid multicloud world. Through Ansible OpenShfit and the Red Hat portfolio, the company can also streamline the DevSecOps processes to allow software development to focus on the business value, while Red Hat addresses the infrastructure deployment layer that will become increasingly important as edge deployments proliferate.

Presently, Red Hat has honed its offers for telco, financial services and what is broadly defined as Industry 4.0. Red Hat’s telecommunications and financial services market share has been a solid underpinning of the company’s install base for decades. Similarly, these two verticals are also pushing hard for edge build-outs to bring compute and networking functionality as close to their end customers as possible.

Through Red Hat’s automation and open-source curation competencies, the company is able to create what it calls validated patterns for the edge. The validated patterns will consist of publicly available reference architectures Red Hat certifies for its various version releases. Validated patterns, in essence, shorten the development time for the broader Red Hat community by addressing the underlying infrastructure connections and interactions necessary to work in the hybrid multicloud world.

At Red Hat’s virtual Analyst Day event, held on Nov. 18, company representatives delivered a rapid-fire presentation on Red Hat’s three-year vision and the company’s efforts to pivot its initiatives to a more vertically focused set of go-to-market motions. The presentation was led by a succession of Red Hat senior vice presidents, including Mike Ferris, Corporate Development and Strategy; Ashesh Badani, Products; Stefanie Chiras, Partner Ecosystems; and Marco Bill-Peter, Customer Success, in addition to Global Partners and Alliances leads Terri Hall and Maryam Zand and Global Industries Chief Strategist Ian Hood. Rounding out the event was a customer testimonial from Deloitte Senior Manager Ashley D’Souza on the ways Red Hat technology enabled Deloitte’s healthcare solutions for the state of Washington.

Hyperscalers are poised to disrupt the private cellular networks market through their ecosystems, platforms and marketplaces

Hyperscalers (especially Amazon, Google and Microsoft) intend to standardize, modularize and verticalize private cellular networks (PCN)-related solutions inside their ecosystems, platforms and marketplaces, especially as it pertains to 5G and edge computing. Hyperscalers are focused on hiding the complexity of private networks and edge computing, enabling end users to more easily procure and consume these resources and unlock the value of data.

Enterprise and government consumption of networking resources will ultimately come to resemble how IT resources are consumed via the cloud, and solutions will be outcome-based. Early manifestations of this trend can be seen with Microsoft’s packaging of its 5G core with Azure Private Multi-Access Edge Compute (MEC) to enable and drive enterprise digital transformation with on-premises private 5G MEC. Microsoft is also building a range of vertical-specific use case solutions spanning smart factory, defense, retail transformation, and healthcare. Amazon and Google are following Microsoft’s lead in this domain.

Ultimately, TBR believes a large portion of activity in the private cellular networks and edge computing markets will be conducted inside hyperscalers’ ecosystems. CSPs and vendors will increasingly have to play inside hyperscalers’ ecosystems in some way to stay relevant in the market as it evolves.

TBR’s Private Cellular Networks Market Landscape deep dives into the market for private cellular networks. This global report covers enterprises that are investing in private cellular networks as well as all of the major vendors and some nascent players that supply infrastructure in this space. The research includes key findings, key market developments, market sizing and forecast, regional trends, technology trends, vertical trends, use cases, and key customer deals that are occurring in the market. TBR’s Private Cellular Networks Market Forecast, which is global in scope, details private cellular network spending trends among enterprises and governments, particularly as it pertains to 5G. This research includes current-year market sizing and a five-year forecast of several private cellular networks market segments and geographies.

Vendors respond to customers’ accelerated IT transformations​

Hardware vendors will race to further entrench themselves in customers’ ecosystems

While storage, hyperconverged infrastructure (HCI) and servers are the main products being sold by data center vendors, they are hardly noticeable in the go-to-market messaging that is being pushed out to customers. These vendors are more focused than ever on selling the outcome over the hardware itself,  whether that outcome is building a hybrid cloud environment to serve remote workers or deploying an edge solution on a factory floor. Data center vendors are looking to capture more of their customers’ environment, from managed services to hybrid cloud enablement, to diversify their revenue beyond hardware and create more reliable revenue streams.​

Building ecosystems is at the forefront of data center vendors’ go-to-market strategies to add value and create stickier offerings. This ranges from building management consoles and expanding software capabilities to refining “as a Service” offerings rolled out over the past 18 months. For leading vendors, this is done with an eye toward helping customers reap the same benefits they seek in public cloud alternatives — agility and simplicity — while also providing flexibility and cost control. ​

The road to a more diversified revenue stream is not without hurdles. Customers have already developed preferences for management tools and development platforms from cloud providers and ISVs. Markets like edge compute are complex with customization and industry nuance. Selling subscription models requires sales and delivery transformation for not only vendors but also partners, and a sales strategy that delivers on values that resonate with customers. In 2022 TBR expects to see further proliferation of the journey vendors embarked on in 2021, building out solution portfolios one use case at a time by identifying areas ripe for transformation that also benefit from on-premises hardware.

2022 data center predictions

• Infrastructure vendors’ “as a Service” offerings will gain traction as the offerings are refined for specific use cases
• Hardware vendors embrace the ecosystem
• Vendors will carve out niche specialties under the broad banner of edge compute

 

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Telecom Business Research’s 2022 Predictions is a special series examining market trends and business changes in key markets. Covered segments include cloud, telecom, devices, data center, and services & digital.