A streamlined and growing IBM Consulting

IBM Consulting delivers business transformation with an emphasis on industries leveraging IBM’s technology capabilities and growing partner ecosystem

The new IBM Consulting that emerged on Nov. 3, 2021, following the spinoff of Kyndryl is a streamlined and growing company that is a key enabler for IBM’s expansion into hybrid cloud and AI. IBM Consulting, which accounts for one-third of IBM’s total revenue and more than half of IBM’s headcount, is utilizing its established consulting, business transformation and application services capabilities to support clients’ transformation initiatives. IBM Consulting is leveraging proven and emerging technology offerings from IBM, along with IBM’s broadening partner ecosystem, to deliver platform-enabled transformation and innovation.
 
A notable change for IBM is the shift from a historically closed company that largely relied on IBM technology products and solutions to one that is much more open to partnerships. This shift increases IBM’s and IBM Consulting’s value propositions and, according to IBM Consulting SVP John Granger, drives “a renewed interest and excitement about what IBM is doing in the marketplace.”

Integrating industry skills and security into IBM Consulting facilitates value creation

Granger shared during the opening keynote of the IBM Consulting Analyst Summit that from a go-to-market standpoint IBM Consulting has two growth platforms. The first one enables clients’ journeys to hybrid cloud through application migration, application modernization and managing cloud environments. The second platform focuses on the delivery of business transformation through intelligent workflows, process expertise, AI-enhanced methods, automation, business process outsourcing, and data and AI solutions. Both platforms are underpinned by IBM’s ecosystem of partners, enabling IBM Consulting to deliver business transformation and solve clients’ complex challenges.
 
IBM Consulting is also increasing its already strong industry expertise by tapping into IBM’s industry capabilities to drive specialization in segments such as telco, banking, consumer packaged goods, energy and resources, and the public sector. As security has become a key priority for and enabler of digital transformation, moving IBM’s security services capabilities from IBM’s products business into IBM Consulting improves IBM Consulting’s value proposition. IBM Consulting will be better able to expand sales of security offerings to its clients, use its operational services capabilities to improve clients’ security performance, and tap into IBM’s partner ecosystem to increase security solution variety beyond IBM technology.

 
IBM Consulting is positioned for growth and is investing in attracting talent and developing resource skills such as by increasing certifications in ecosystem partners’ platforms to address client demand and drive revenue growth, which ranged between 16% and 18% year-to-year in constant currency during the past four quarters. Changing the way IBM thinks about partnerships and establishing an alliances organization within IBM Consulting to better identify joint opportunities for solution development and expansion also positively impacts IBM Consulting’s revenue growth. Expanding IBM Consulting’s capabilities through tuck-in acquisitions enables the company to strengthen its digital transformation capabilities.
 
In September IBM announced the acquisition of Dialexa, a digital product engineering services company based in the U.S., which will expand IBM Consulting’s product engineering expertise and improve its ability to deliver digital transformations. Dialexa is IBM’s sixth acquisition in 2022 and third in the professional services segment following the additions of Sentaca around telecom consulting and systems integration and Neudesic around cloud consulting to IBM Consulting. Emphasizing the IBM brand and clearly identifying IBM Consulting’s capabilities will enable IBM Consulting to better attract talent and capture client engagements, positively impacting the company’s growth.

 

IBM Consulting increases its competitive position by tapping into IBM’s global footprint, balance sheet and technology skills, including Red Hat capabilities being used by 4,000 Fortune 500 clients moving to hybrid cloud with support from IBM Consulting. IBM’s strong incumbency with multiple clients, such as around managing their application estates, improves IBM Consulting’s ability to establish deep client relationships and drive business outcomes through industry expertise. Supporting collaborative innovation with clients through the IBM Garage approach, which is used in 70% of IBM Consulting’s deals, improves the company’s ability to drive cross-functional collaboration between business and IT functions and deliver business outcomes through short sprints while prioritizing value.

Strategic partnerships enable IBM Consulting to deliver solutions that meet clients’ needs

While it has taken some time for IBM Consulting to augment its ecosystem and bring multiple partners together on engagements, the company currently has 12 strategic partners including Microsoft (Nasdaq: MSFT), SAP (NYSE: SAP), Kyndryl, KPMG, Workday (Nasdaq: WDAY), Oracle (NYSE: ORCL), Celonis, AWS (Nasdaq: AMZN), Salesforce (NYSE: CRM), ServiceNow (NYSE: NOW), Adobe (Nasdaq: ADBE) and IBM. IBM Consulting is augmenting partner-related revenue and changing its relationship with partners to successfully deliver transformations. For example, 18 months ago 42% of IBM Consulting’s revenue in EMEA was generated jointly with partners. The revenue share increased to 60% in November, and the target is to expand partner share to more than 70% in 2023.
 
On the partner relationship side, 18 months ago IBM Consulting in EMEA had 1:1 relationships with partners as partnership deals were historically sequential; however, the relationships evolved in 2022 to 1:many and partnerships are now multidimensional with several vendors included in engagements as transformational solutions require technology from different providers. IBM Consulting’s goal for 2023 in EMEA is to have a partner orchestrator role that coordinates offerings from multiple partners to deliver seamless solutions to clients. While IBM is one of IBM Consulting’s strategic partners for technology solutions, it is important to note that IBM Consulting follows a client-first mindset when selecting partners for joint solution delivery and is open to working with other technology partners if IBM solutions are not the right choice for the client.
 
As Granger said, “We are the trusted advisor and intimately embedded in client [relationships] but with our point of view, bringing some of IBM’s technology and going where the client wants to go.” IBM also highlighted its relationship with Kyndryl around on-premises managed infrastructure services, which were moved to Kyndryl after the spinoff. While Kyndryl is a key part of IBM’s managed services provider ecosystem and supports IBM in delivering mainframe modernization and moving joint customers to the cloud, IBM has expanded the infrastructure services partners beyond Kyndryl to provide customers with options.

 

During the keynote presentation on the second day of the event, IBM had representatives from SAP, AWS and KPMG on stage to showcase its collaboration with different types of partners and the nuances of each relationship. IBM recently celebrated the 50-year anniversary of its partnership with SAP, a vendor with which IBM delivers services, solutions and technology. IBM Consulting is enhancing its portfolio with accelerators to speed up SAP implementations. AWS is a more recent partner for IBM, partnering since 2016, but is one of the fast-growing relationships in terms of resources and revenue generation.
 
Key success factors of the relationship include the cultural alignment between IBM and AWS, especially around customer-centricity and relationship development. IBM also combines the IBM Garage approach with AWS’ innovation mechanisms when working with clients around defining technology-agnostic models and prototyping joint solutions. IBM also recently partnered with KPMG to address clients’ needs around financial processes improvement utilizing IBM Consulting’s consulting, applications services and business process services expertise; IBM’s research and technology capabilities; and KPMG’s expertise in audit, tax and consulting. Through its partner ecosystem, IBM is seeking new ways to deliver solutions to clients that have compelling value propositions and attractive pricing.

IBM Consulting utilizes its data, AI, hybrid cloud, transformational consulting, and design and experience capabilities to capture growth opportunities

IBM is infusing data and technology across IBM Consulting’s offerings to enable clients’ business transformation

IBM Consulting leads with data and AI offerings to scale AI in organizations and uses technology to improve processes and help clients gain access to data. The company works closely with its industry sector leaders and its partner ecosystem to enable clients’ business transformations through data and technology, such as improving customer experience and driving customer intimacy across sales and services cycles. For example, IBM Consulting is enabling the U.K. healthcare industry, which according to Client Partner and UKI Data & Technology Transformation Leader Clare Mortimer is a “data-rich, but information-poor industry,” to better understand the value of data and adopt data-driven decision making.
 
IBM worked with the U.K. Health Security Agency, which had five data platforms and was challenged by massive data duplication and high costs to run the solutions, to help it understand the value of data. IBM and AWS established a single platform for enterprise data analytics to address protection and surveillance needs in the U.K.’s public healthcare sector. To implement the solution and stand teams quickly, IBM Consulting utilized a core team in the U.K. and its global delivery capabilities, including in Spain, India and Brazil.

Transparent and trustworthy AI solutions support talent transformation activities

IBM Consulting is also utilizing data and AI to enable clients to transform talent, gain skills and build an adaptable workforce. The company is integrating AI in process workflows to facilitate clients’ search for skills and improve accuracy of decisions such as around hiring skills, building skills, retaining skills, paying for skills and planning for skills. As Senior Partner and UKI Talent Transformation Leader Andi Britt stated during a breakout session on talent transformation, IBM Consulting utilizes AI solutions to provide recommendations for different levels of employees, including experts, managers and practitioners, who use their recommendations to make decisions.
 
AI solutions have to be transparent and trustworthy, so IBM Consulting emphasizes providing ethical AI that analyzes vast amounts of data and makes the best recommendation around ethical values such as individual rights, privacy, nondiscrimination and nonmanipulation. For example, IBM Consulting worked on a skills inference engagement with a multinational medical, pharmaceutical and consumer packaged goods corporation. IBM Consulting provided AI solutions to scan and analyze the client’s internal data using AI and build a competency framework that gives a sense of skills supply within the organization.

Regulations drive clients’ sustainability initiatives

According to IBM’s 25th edition of The CEO Study, which published in May 2022 and covers 3,000 surveyed CEOs across more than 40 countries and 28 industries, 81% of organizations have a sustainability strategy in place and 53% of the CEOs rated sustainability as a top priority; however, only 35% of the polled organizations have started executing sustainability initiatives. Approximately 63% of the surveyed CEOs expect digital capabilities and AI to help close the sustainability gap. IBM Consulting is well positioned to capture growth opportunities in sustainability. The company is leveraging its Sustainability Services portfolio and industry expertise; tapping into IBM’s broad capabilities in software and systems as well as Red Hat and IBM Research; and utilizing its partnership ecosystem to help clients become sustainable enterprises.
 
As IBM Consulting Partner and IBM DACH Sustainability Services Market Leader Elisabeth Goos stated during a breakout session on sustainability, while sustainability transformation is a complex business challenge, legislation is a big driver for sustainability, especially in Europe, which surpasses North America and APAC in sustainability initiatives. Stricter regulations and measures at the European Union and national levels — for example, punitive measures in Germany that amount to 2% of clients’ revenues and negatively affect profits — and customers’ desire to purchase sustainable products and their willingness to often pay a higher price are pushing IBM Consulting’s clients to accelerate sustainability initiatives.

Showing business use cases for the metaverse supports solution adoption

IBM Consulting provided a breakout session on the metaverse led by IBM Consulting Distinguished Engineer Chris Hay and IBM Consulting (in the U.K. & Ireland) iX-Customer Transformation Service Line Leader Suzanne Jones. Hay set the direction of the discussion by defining what is behind the metaverse, which is a rapidly evolving virtual world. According to Hay, the metaverse is not about one or two technologies; it is a promise to build on a new set of values — connections, commerce, consent, collaboration, community and copresence — and collectively drive the idea of a co-reality.
 
During the presentation, Hay shared multiple use cases for the metaverse across industries and noted that financial services organizations and telcos are showing increased interest in IBM’s metaverse-related solutions. For example, use cases could include metaverse commerce, in which IBM provides a 3D virtual storefront for VR and augmented reality (AR) that is connected to an omnichannel experience through the IBM iX Experience Orchestrator; metaverse workplace, where employees and customers could meet through secure web-, AR- or VR-based 3D virtual spaces; and metaverse branch, which provides optimized virtual spaces for real-time communication and tasks based on public platforms and virtual worlds.
 
An example of a metaverse branch is IBM Consulting’s work with a hospital in Japan where IBM Consulting created a digital twin of the hospital that is accessible to patients who want to learn what will happen during their stay, such as using simulations to see what the CT scan process looks like.
 
When asked during the session why clients should choose IBM for this type of work, Hay explained that IBM is a cloud, design and experience company and importantly IBM has an ethical point of view regarding hybrid cloud. For example, financial services companies face challenges when adopting public cloud platforms due to regulations around data protection and security. However, IBM provides broad options for partners and technology and is increasingly more open to working with an ecosystem of partners to address clients’ specific business needs. And notably, all work on the metaverse is done with business value, user value and a sustainable mindset in place, such as using web-powered solutions instead of pixel streaming, which usually is expensive from a cost and sustainability standpoint.

In conclusion

IBM Consulting is well positioned to continue expanding in the IT services and management consulting segments due to its clear focus on providing consulting and business transformation and application services capabilities augmented by industry and technology expertise. The global transition to a partner-friendly approach and a client-first mindset when developing solutions broadens and deepens IBM Consulting’s capabilities and increases its value proposition and attractiveness. IBM Consulting’s scale, global service delivery capabilities, established experience design resources through IBM iX, and ability to collaboratively innovate with clients through the IBM Garage approach enable it to successfully run and deliver transformations across the globe. Its emphasis on nurturing client relationships, along with its proximity to clients and understanding of industry nuances and regulations, enables the company to capture opportunities in the dynamic market environment, such as around sustainability and healthcare in EMEA.

 

IBM Consulting Analyst Summit: IBM Consulting held its first in-person analyst event in EMEA one year after the spinoff of Kyndryl into a separate managed infrastructure services company. The event took place in IBM’s new location for its Innovation Studio in London’s South Bank region. The goal of the two-day event was to provide an update on IBM Consulting’s strategy, capabilities and future direction; showcase how the company works with strategic partners such as SAP, Amazon Web Services (AWS) and KPMG; and dive deep into multiple IBM Consulting use cases.

PTC’s Corporate Experience Center: Experiencing software in a physical world

In September TBR toured the PTC Corporate Experience Center (CXC). The meeting space, located at the company’s Boston headquarters, serves as the demonstration showcase and is filled with examples of PTC’s (Nasdaq: PTC) work with a wide range of manufacturing and industrial clients.

 

In this review of PTC’s CXC, we describe an innovation and transformation center that breaks molds while building on previous lessons learned and sets a new standard for how a technology-centric demonstration center can excel. Critical to note: PTC’s CXC is not completely comparable to what TBR has termed “innovation and transformation centers,” as detailed in our Market Landscape of the same name. PTC intentionally changed both the name and the focus when the company shifted from a Customer Visit Center, which hosted client briefings and executive visits, to the CXC, described in full below.

 

 

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Breaking rules, partnering smartly, and separating today and tomorrow

Embracing the headquarters-based showcase model reflects PTC’s strengths

PTC broke three of TBR’s cardinal rules for designing innovation and transformation centers: The PTC CXC is physically colocated with the company’s main offices, designed as a showcase, and built to be a single entity, without plans to open similar centers closer to clients. But with all three, PTC has seemingly made the right decisions.

 

PTC’s CXC takes up roughly two-thirds of the 17th floor of the company’s corporate headquarters, stretching in a semicircle from a massive packaging machine demonstration to conference rooms to the xR wall to the Reality Lab, operated in concert with the Massachusetts Institute of Technology.

 

Since PwC first opened a stand-alone Experience Center in Hallandale, Fla., removed from PwC’s local offices, TBR has maintained that separation from corporate headquarters helps facilitate, for both clients and employees, a more creative mindset and an environment unconstrained by previous ideas about what clients can expect from the vendor. PTC made a different calculation. By colocating the CXC with PTC’s corporate global headquarters, the company can more easily bring business line leaders and subject matter experts into customer sessions and demonstrate to new and current employees the full breadth of PTC’s capabilities and the company’s value to clients. And reinforcing a critical success factor described below, keeping the CXC in the headquarters allows PTC’s CEO to drop in on any client session.

 

In another TBR truism, innovation and transformation centers cannot be primarily technology showcases. Relying on static displays or moderately interactive demonstrations too frequently limits clients’ perceptions of the vendor’s value and may not be consistently relatable in every client engagement. For example, a retail store mockup will not resonate with an oil exploration company.

 

Because algorithms, platforms and code do not display particularly well, PTC embraced demonstrating its core products through its clients’ use cases, allowing CXC visitors to see and physically touch, among other displays, connected taps, a Volvo truck engine, and, as mentioned above, a $1 million full-sized and fully operational industrial packaging machine. The showcases, intended to be rotated with enough frequency to ensure returning CXC visitors do not see the same demonstrations every time, allow PTC to effectively tell stories about the value of their solutions across a range of client use cases and industries (admittedly, with a focus on manufacturing and industrial applications). In every case, the client provided PTC with the necessary equipment, and PTC’s CXC leadership noted that clients frequently ask whether their use case can become part of the CXC tour.

 

Lastly, TBR has seen the most effective innovation and transformation centers replicate themselves across the globe, bringing the vendors closer to clients while building a talent pool of design thinkers, innovative technologists and consultants fully versed in digital transformation. For PTC, the COVID-19 pandemic provided an immensely valuable testing period for virtual delivery from the CXC to PTC offices globally as well as clients’ physical and virtual environments.

 

By refining effective virtual delivery — first by recognizing and facilitating the need for communication between all participants, whether in person or remotely — PTC realized it could maintain the quality and freshness of demonstrations without compromising the client experience. While PTC maintains large offices in other countries, the company has no immediate plans to replicate the CXC abroad and will instead maintain a strategy centered on delivering either completely in-person or completely virtual engagements from Boston.

 

For PTC, focusing on building CXC capabilities exclusively at the company’s headquarters reinforces company culture and ensures consistency in delivery. Long-term, TBR anticipates a steady accumulation of case studies, lessons learned and highly trained professionals will lead PTC to create a similar facility at another large PTC location, closer to clients in Europe or Asia.

Following proven approaches, but with a PTC twist

While PTC broke a few cardinal rules, the company also adhered to some of the core characteristics TBR has identified among the elite innovation and transformation centers, notably a willingness to embrace ecosystem partners, a dedicated staff, and an openness to the local community. TBR previously reported on PTC’s inclusion as a branded partner at EY’s Nottingham Spirk innovation center in Cleveland. At PTC’s CXC, the company includes partners as diverse as KPMG and Nokia (NYSE: NOK) as clearly branded logos when those partners have been integral to the solution on display.

 

Clients understand and expect every vendor they engage across the consulting, IT services and technology ecosystem — from McKinsey & Co. to Wipro (NYSE: WIT) to Nokia — will play a part in solving their business problems and delivering on digital transformation in some way. Including partners in innovation and transformation centers strengthens a vendor’s brand, a lesson many consultancies and IT services vendors took years to learn while PTC leapfrogged into implementing a partner-friendly approach.

 

  • An important tangent: PTC raised the concern that its technology at partners’ locations could be unintentionally misrepresented or improperly demonstrated if PTC’s professionals were not involved. TBR has considered embracing technology partners’ capabilities and brand to be a critical success factor at innovation and transformation centers, but PTC’s caution reflects an important nuance in how consultancies and IT services vendors incorporate alliance partners’ technologies into client engagements. PTC smartly relies on delivering up-to-date and high-quality demonstrations remotely from its CXC when the company believes the particular use case, the specific client and the partner require PTC’s intimate involvement.

 

PTC staffs its CXC with professionals trained to present the company’s technology and use cases while tailoring the storytelling elements to a client’s specific needs, industry or interests. Sales professionals prepare the client for on-site visits after the CXC staff, in coordination with PTC’s leadership, reviews the business case to organize one- to two-day sessions. Subject matter experts elsewhere in the building can be summoned to assist should a client raise questions beyond the assigned staff’s immediate knowledge.

 

In all, PTC’s CXC staffing model echoes that of similarly sized innovation and transformation centers and seemingly lacks only consulting specialists adept at drawing out business challenges and reshaping engagement sessions while they are happening. Further replicating successful strategies at other centers, PTC has embraced the local community, opening the CXC for social or less structured sessions outside of scheduled business hours. In Boston’s seaport district, PTC and the CXC benefit from the technology-oriented business community and easy access to universities and startups.

Delivering something different: PTC’s CEO, Hollywood and a view of tomorrow

In addition to breaking innovation and transformation center rules, PTC’s CXC contains a few unique elements. First, as noted above, PTC benefits from a CEO who wants to participate in every engagement at the CXC and a leadership team that resides in Boston should a client need to hear directly from the company’s decision makers.

 

In TBR’s analysis, while most innovation and transformation centers have used a variety of metrics to evaluate their effect on their company’s bottom line, the most successful centers have leveraged initial leadership commitments to sustain long-term strategies and investments, with or without counting the number of client sessions, pull-through revenue, or other measure of success. PTC’s CXC staff tracks the effectiveness of its client engagements, reporting quarterly to PTC’s leadership, while enjoying the attention – and pressure – of a highly engaged CEO.

 

In addition, PTC’s CX Studio and extended reality (xR) wall bring a Hollywood-level quality to virtual presentations and engagements. For a company that, according to its website, purports to “use digital technology to improve the physical world,” having a truly state-of-the-art capability to produce digital content and broadcast globally reinforces the company’s potential value to clients. During TBR’s visit, the PTC CXC professionals noted that the sheer technological prowess of the xR wall allowed PTC to punch above its weight in the crowded software and services market, allowing the company to deliver differently and meet emerging expectations around the quality, versatility and interconnectedness of virtual delivery.

 

  • A second important tangent: PTC will not engage in hybrid client engagement sessions. Everyone is either on-site at the Boston CXC or remote (typically in Europe or Asia). In PTC’s experience, every hybrid engagement includes a suboptimal experience for at least one group of participants. While a necessary compromise during the pandemic, PTC currently insists on one common delivery experience, with the xR wall greatly improving what can be done virtually. TBR predicted hybrid engagements would eventually become the norm as consultancies, IT services vendors, technology providers and clients adjusted to the post-pandemic world. PTC’s decision to jettison hybrid strikes TBR as in keeping with the company’s independent and practically minded culture, even as TBR believes many of PTC’s ecosystem partners will continue to rely on hybrid for innovation and transformation engagements for the near future. As the pandemic fades, PTC will likely prove to be ahead of peers as hybrid’s limitations fail to overcome convenience.

 

PTC’s final unique element comes from the physical and intentional separation between today and tomorrow. Most of the CXC’s space illuminates what PTC can deliver today, with demonstrations of clients’ use cases and ample room to engage with client decision makers, PTC subject matter experts and professionals, and PTC’s technology partners. In contrast to innovation and transformation centers that focus on the art of the possible, PTC’s CXC stays rooted in what can be deployed today.

 

But in a separate space and enclosed by glass walls, the PTC Reality Lab allows the company to experiment with near-future technologies and demonstrate for clients what could be possible in their IT and operational technology environments. In TBR’s view, this clear delineation between today and tomorrow solves one of the persistent challenges at these centers: bringing immediate value during a client’s on-site visit while positioning for transformation after the client returns to their home offices and facilities.

 

Over the last six years, clients have lamented to TBR that art-of-the-possible sessions imagining an incredible future state have not solved current business and technology challenges. PTC’s approach likely resonates with clients that have visited consultancies’ and IT services vendors’ innovation and transformation centers and walked away intrigued but unsatisfied.

Subtle key to success: Touching the hardware at a software vendor’s showcase

In TBR’s landscape of innovation and transformation centers, PTC’s CXC stands apart for a couple of reasons. First, the center’s focus on client use cases to showcase PTC’s technologies contrasts with consultancies’ and IT services vendors’ typical focus on solving business problems (although PTC tackles this as well). Even as many IT services vendors and consultancies move toward becoming software vendors — or at least selling software “as a Service” — the CXC reflects the core business model differences between those vendors and PTC and the resulting differences in value derived from running a client experience center. Second, the physicalness of the CXC’s use cases provide clients with a visceral experience, a hands-on-an-engine kind of engagement that is both uncommon at innovation and transformation centers and surprising coming from a software vendor.

 

Overall, PTC has addressed clients’ fundamental business needs — tell me what to do, help me do it, do it for me — by creating an experience center that shows what can be done through on-site physical demonstrations, proves that PTC’s solutions can be vital to solving business problems and be deployed immediately, and positions clients to work with PTC on future challenges. Further, the CXC helps PTC build trust and relationships across its entire ecosystem, from partners to clients to clients’ customers.

 

As part of ongoing research, TBR publishes a semiannual Innovation and Transformation Centers Market Landscape, which includes characteristics common to these centers, analysis of trends influencing vendors’ activities and investments, and profiles of a dozen or more leading consultancies, IT services vendors, and cloud and software companies. TBR will publish the next edition in mid-December and will include a special section on PTC’s CXC.

Capgemini betting on business outcomes to drive growth

Capgemini provides transformational services that drive business outcomes

In an early session at the Global Analyst and Advisor Summit, Capgemini CEO Aiman Ezzat declared Capgemini had become a business and technology partner to clients, helping them with their digital transformation and delivering business outcomes.

 

To make clear the change from years past, Ezzat said unequivocally that Capgemini is “not an IT services company,” a sentiment echoed throughout the day’s sessions and in many of TBR’s side discussions with Capgemini leaders and professionals.

 

In TBR’s view, Capgemini must shift more than just its approach toward clients if the company wants to bring a truly robust breadth of offerings, from strategy to core IT services to cocreation of shared IP. Capgemini must shift its culture, an effort TBR believes is well underway. Across a number of competencies, strategies and go-to-market motions, TBR saw examples of Capgemini bringing a new focus on value, such as the comment by Capgemini’s Group Chief Strategy and Development Officer Fernando Alvarez that Capgemini would be selling “value and delivering business outcomes,” not just basic IT services.

 

Given the global economic uncertainties, newly developing competitive pressures and accelerating commoditization of IT services, cultural and business model shifts might challenge Capgemini’s performance as businesses might cut back on discretionary spending on transformational projects; however, TBR expects the company to leverage Capgemini Engineering as the bridge between transformation and a new wave of outsourcing opportunities.

 

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Positioning as a strategic partner for clients enables value creation

Capgemini places value creation at the center of its strategy and creates value utilizing its technology background and software engineering skills. The company is looking for ways to help run clients’ businesses more efficiently and also establish new business models, such as by utilizing its development skills to build software architectures for e-vehicles. Pushing client centricity and selecting 10 focus industries to drive specialization improves Capgemini’s ability to create value and increase client reach.

 

While in the past Capgemini was not as vocal on being proactive on the topic of innovation, its leadership team is placing innovation at the core of its strategy. The company is running an initiative to increase perception with clients around innovation and is involving two-thirds of its strategic accounts in coinnovation activities in the Applied Innovation Exchange (AIE) network and labs to address areas of transformation such as around quantum computing, metaverse-related solutions and sustainability.

Capgemini attracts clients and talent by leading with value

Capgemini is positioning as a strategic partner for its clients to address their needs. Alvarez stated during his presentation that listening to clients is the rule for Capgemini and the company must communicate in a focused way by industry to better serve its clients. Delivering value to clients is driven by measurable business outcomes, industry expertise and data-driven industry solutions.
 
Creating new business models, harnessing the value of partners and data ecosystems, and supporting talent that has a passion for innovation are also value creation factors. According to Alvarez, Capgemini does not just address clients’ needs around cloud; it covers what runs on top of cloud. For example, data is a critical asset for clients, and Capgemini pushes to drive excellence around implementing data solutions and focusing on insights and business outcomes, and the data capability is coupled with cloud for scalability. Capgemini’s ability to build ecosystems to create value with partners by industry verticals and bring subject-matter expertise in engagements drives value creation and improves the company’s ability to price differently and position as a talent magnet.
 
Capgemini’s management team is no longer seeing the company as an IT services provider with outsourcing heritage sitting in Europe, but as a global digital and technology transformation provider that focuses on value creation, a strategic direction that will enable the company to continue to drive profitable revenue growth in the coming years.

Capgemini is shifting from selling capabilities to selling transformation

Establishing a proactive offerings development strategy and packaging offerings with clear value proposition and business outcomes improve Capgemini’s ability to expand wallet share with existing clients and approach new clients before they reach out with a request for proposal.

 

Capgemini’s corporate strategic framework, which has two pillars (data/AI and cloud) and three playing fields (customer first, intelligent industry and enterprise management), allows the company to support clients’ technology-based transformations. Investing in developing industry and domain expertise enables Capgemini to become a transformation partner for clients and drive revenue growth of over 20% year-to-year at constant currency in its three playing fields and 25% year-to-year in its two pillars.

 

According to Franck Greverie, head of Portfolio and Global Business Lines at Capgemini, connecting the dots by delivering end-to-end transformation that starts at the customer-first playing field and moves through intelligent industry and enterprise management is a key emphasis for Capgemini. Clients expect activities across the value chain, and engagements typically start with strategy services and work with clients on use cases and on transformation tasks to reach the endpoint. The strategy piece is key, so Capgemini is not only selling solutions but also providing transformation components and is partnering with clients to help them reinvent themselves. According to Greverie, two-thirds of Capgemini’s offerings were related to technology-enabled transformation four years ago while two-thirds are related to business-led transformation today, a shift that also contributes to Capgemini’s value creation.

Applying innovation at scale supports value creation

According to Pascal Brier, chief innovation officer, innovation enables clients to drive change, grasp opportunities, build value and separate from competitors. Placing innovation at the center of its strategy enables Capgemini to help clients change their status quo. Capgemini has a three-step approach to innovation that helps create value and deliver innovation at scale.

 

First, the company highlights what comes next and puts technologies to the test. Second, the company develops a tailored approach for each client, and third, it deploys innovation at scale. In the first step, the company conducts self-funded internal research and utilizes partnerships with academia to look at emerging trends and prepare capabilities. For example, Capgemini works with MIT around defining a framework for trust in AI and autonomous systems. The partnership with the MIT Initiative on the Digital Economy and joint research on B2B platforms was highlighted at the event.
 
Capgemini also participates in industry consortiums with government subsidies and conveys joint research with clients. Capgemini also cited the EcoSat R&D program, an initiative led by Capgemini Engineering to develop a solar balloon to conduct observations of the Earth and expand 5G capabilities. Capgemini’s labs, such as around quantum, 5G and edge, the metaverse and Web3, and autonomous systems, support the company’s research programs and thought leadership, improve its internal readiness and enable early business engagement.

 

In the second step, Capgemini’s global network of 22 AIEs across the globe enables tailored coinnovation with clients that is catered to specific industries and applies technologies to use cases. The key for innovation is that it is deployed at scale, and this is the way value is generated. Capgemini’s frog studios, ecosystem of technology partners and startups, Centers of Excellence and established network of global delivery centers enable scaling of innovation.

 

Capgemini Invent, the digital innovation, design and transformation business of Capgemini, highlighted two brands that drive technology-based innovation — Cambridge Consultants and Synapse.
 
Cambridge Consultants, which Capgemini acquired as part of Altran in 2020, is a specialist in identifying and developing breakthrough products and services that drive differentiation to clients. Headquartered in Cambridge, U.K., it has generated over 5,000 patents for its clients and comprises over 800 engineers, scientists, designers and consultants across offices and over 140 labs in the U.K., U.S., Japan and Singapore. Synapse, which is based in the U.S. and was a Cambridge Consultants company, is a product engineering company whose mission is to positively impact people and the planet through sustainable product development and improved user experience. Such expertise strengthens Capgemini’s transformation and innovation capabilities, enabling it to attract clients by reinventing their business models and generating business outcomes.

Industry expertise augments business outcomes delivery

Integrating the industry angle into its strategy and offerings, applying industry expertise with global accounts, and touting industry specialization through marketing messaging and branding supports Capgemini’s industry mission. Capgemini has selected 10 priority industries in which the company is building depth and investing in talent with the goal of helping clients offset pressures from external factors that negatively affect their business performance.

 

Capgemini shared six factors for disruption across industries, including geopolitical conflicts, energy crises, supply chain disruptions, economic factors, labor constraints and planet boundaries. For example, Capgemini stated that the consumer products and retail industry is challenged by labor crises and increasing labor costs, which are negatively affecting distribution centers that move daily household essentials. There is also approximately 35% employee attrition, on average, in stores and approximately 30% in manufacturing. To capture opportunities in consumer products and retail and help clients drive revenue growth, manage costs and operate sustainably, Capgemini is showcasing its capabilities around omnichannel commerce, advanced user experience, and solutions that combine physical and digital shopping.

 

Capgemini’s emphasis is to drive innovation in the sector and enable clients to improve customer experience and take costs out through a transformational effort, not a transactional effort, such as around changing store designs, addressing specific store employee needs and balancing activities with clients’ brand purpose. Consumer products and retail accounted for 13% of total revenue in 3Q22 and grew 14.5% year-to-year in constant currency in 3Q22 and grew 20.4% year-to-year in constant currency for the first nine months of 2022.

Capgemini creates new business models in the automotive industry

During the event, Capgemini augmented the sessions with multiple client representatives discussing their work with Capgemini on stage or connecting live through a virtual communication platform to show Capgemini in action and provide insight on successes and challenges during engagements. For example, Capgemini invited its client Lynk & Co, a global mobility company and part of Geely Auto Group, to talk about the journey around implementing an innovative and sustainable car-sharing service in Europe.

 

According to the presentation, cars stand still during their lifetime approximately 96% of the time, on average, while just 4% is spent on the road, or 6 hours and 43 minutes in a week and 14.6 days in total for the year. Lynk & Co is improving car usage by launching a car-sharing model in Europe, in which a person’s Lynk & Co car can be rented out while it is not used by its owner.

 

The Lynk & Co mobile app enables car owners to make their cars available to the community, including establishing rental pricing and requirements about parking the car when the rental time is over. The cars are built to be shared, with advanced telematics and connectivity to make the rental process secure. Community members receive star ratings from car owners based on their behavior to avoid vehicle misuse, while car renters get rated for the condition of the vehicle they own. The customer journey for purchasing a Lynk & Co vehicle is fully digital, with an online sales channel and no dealer involvement.

 

Capgemini was instrumental in the initial development of the business model and launch of the solutions and digital platform program with Lynk & Co in Europe. Capgemini was involved in the development and implementation of a custom-built platform, CRM solutions and mobile apps, and implementation of financial management software from SAP. The Lynk & Co client case highlights Capgemini’s capabilities around business and digital design consulting, along with its technology and systems integration expertise, which drives superior customer experience and new business models.

 

Intentionality and industry clouds: How EY’s Microsoft practice harnessed a dynamic market

  • EY has transformed from a legacy audit, tax, and consulting firm into a technology-enhanced digital transformation powerhouse. Its Microsoft practice currently ranks as the 4th largest Microsoft Dynamics 365 partner globally.
  • Its strategy aligns with two dominant trends in digital transformation: industry clouds and multi-enterprise business networks. Its all-of-the-ecosystem strategy aligns with digital transformation clients’ understanding that no vendor is a one-stop-shop.
  • EY is committed to bespoke, higher-value, innovative cloud professional services while leaving the commoditized work to global systems integrators, and it is well positioned to continue growing its Microsoft practice with Infosys as a potential partner for Microsoft-specific consulting opportunities.

It starts with context

EY’s robust and expanding Microsoft (Nasdaq: MSFT) practice exemplifies how steadily, quietly and persistently EY has transformed from a legacy audit, tax and consulting firm into a technology-enhanced digital transformation powerhouse. While media and competitor attention focuses on EY’s pending split into a legacy audit firm and an unfettered consulting and IT services vendor, the existing firm continues acquiring assets and talent, growing revenues, and delivering to clients and technology partners.

 

In October TBR met with leaders from EY’s Microsoft practice, including Jim Little, EY Global Microsoft Alliance leader. We discussed trends across the cloud and IT services ecosystem, EY’s Microsoft-related capabilities and growth, and EY’s expectations for 2023 and beyond. The following reflects that conversation and TBR’s ongoing research on EY, Microsoft, and both vendors’ ecosystems and competitive landscapes.

Building capabilities and influence by playing to strengths

EY continues to build, run and sell consulting services, including a Microsoft practice that Little and his team said currently ranks as the fourth-largest Microsoft Dynamics 365 partner globally. Among the facts and figures EY presented, a few stood out to TBR:

 

  • EY earned over 6,000 Microsoft certifications in FY22 and is an Advanced Specialized partner with Microsoft Solution Partner designation across all six domains.
  • Ninety percent of EY client service solutions are used on the Azure cloud.
  • EY has delivered over 16,000 Microsoft projects across over 4,000 clients globally.

 

Greg Jenko, EY Global Microsoft Services Group leader, noted that EY is a “business transformation firm” with well-established industry expertise and a long history of understanding back-office processes and change management, allowing EY to “deliver transformation on the back of Microsoft.”

 

While not competing with India-centric IT services vendors on cost-driven cloud migrations, EY has been building capabilities on top of the Microsoft stack, focused on six advanced specializations (in addition to broad Microsoft capabilities). EY’s U.S. member firm has a dedicated Microsoft team, while member firms in other regions with less scale operate as virtual business groups. According to EY, the firm’s global connected dedicated Microsoft Team is the first among the Big Four at its current focus and magnitude.

 

In addition to the firm’s size, scope and capabilities, Little also stressed EY’s flexibility, noting that his firm could examine business model and technology implications of a client’s strategy, leading to EY-assisted bespoke data-driven transformations. Kathy Hevland, EY Global Microsoft Relationship director, explained that the firm has “strong brand permission” in heavily regulated industries, such as financial services, based on EY’s heritage in audit and assurance.

 

Additionally, EY has found success working with clients in industries with critical supply chain challenges. Little summed up EY’s value in the Microsoft space by noting that “bringing EY specialists to bear allows clients to move faster,” which echoes TBR’s research around clients’ highest priorities for digital transformations and cloud migrations.

 

Shaping trends around industry clouds and ecosystem alliances

Looking ahead, the EY team’s comments about strategy and opportunities matched two dominant trends in digital transformation: industry clouds (aka smarter alliances) and multi-enterprise business networks (aka extended ecosystem plays). Little said EY has been partnering with Microsoft in “engineering solutions to ensure industry clouds are fit for purpose” at both the sector and subsector levels.

 

Further refining EY’s strategy, Little added that the firm has focused subsector industry cloud innovations on geographies where EY and Microsoft have already been jointly partnering to deliver to clients. EY has played to its own strengths, by both industry and geography, to maximize the benefits of its Microsoft capabilities (in contrast to peers and larger IT services vendors, which have remained more opportunistic and transactional). According to Little’s description, EY is also influencing Microsoft’s strategic road map for industry clouds. In TBR’s view, the hyperscalers’ increased push into industry clouds will both expose the ecosystem players lacking industry expertise and open opportunities for vendors (and especially consultancies) with established industry-centric capabilities.

 

In that evolving cloud and digital transformation ecosystem, EY’s strategic decision to stay committed to bespoke, higher-value, innovative cloud professional services, while leaving the commoditized “simple stuff” to the global systems integrators, further plays to the firm’s strengths and helps maintain the firm’s brand permission around business transformation enabled by technology. Further, Hevland noted that “80% of EY’s ecosystem partners” are also Microsoft’s partners, reflecting Microsoft’s “incredibly ecosystem-friendly” posture.

 

With a strategic technology partner committed to alliance relationships and well aligned to EY’s ecosystem, EY should be well positioned to continue rapidly growing its Microsoft practice, even as it leans on IT services partners for capabilities or headcount in areas where EY lacks scale. Little suggested that Infosys, in particular, could bring Microsoft-specific consulting opportunities to EY, and Hevland noted that EY considers ecosystems critical to the firm’s strategy, including evolving new alliances with nontraditional players such as smaller, independent software vendors. In TBR’s view, EY’s all-of-the-ecosystem strategy aligns with digital transformation clients’ understanding that no vendor is truly end to end and every vendor needs to play well in the consulting, cloud and IT services sandbox.

Reassuring talent stays focused to increase retention and aid recruiting

No discussion about digital transformation can ignore talent management, which TBR and the EY team explored at length. In a stark rebuke of consultancies’ decades-long insistence that they are technology-agnostic and rely solely on their clients’ technology preferences, EY stated that while they can still be technology agnostic, they believe Microsoft is clearly winning in the market and so EY has strategically chosen to align with Microsoft and consistently reinforces that dedication. Little said EY professionals know they “will be excellent at Microsoft” and will not be “bouncing around” between hyperscalers’ technologies, giving those professionals reassurances around maximizing their skills.

 

In recent years, EY has acquired Microsoft-only people, niche vendors, building capabilities breadth and extending into new geographies while continuing to recruit with a sustained pitch around Microsoft-focused training and development. Sarah Bingham, EY Global Microsoft Services Group Operations leader, explained that to facilitate recruitment and training at scale, the firm developed a “recruitment-in-a-box” tool kit for EY member firms in countries with smaller, less-developed Microsoft practices. Bingham stressed that intentionality, scale and integration of Microsoft into broader EY training underpinned the global firm’s overall talent strategy. Potentially separating EY from peers, according to Bingham and Little, was the firm’s decision to focus on six advanced specializations, reinforcing EY’s role in bringing higher value to cloud migrations and optimizations.



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Intentionality as a mindset for transforming challenges into opportunities

Throughout the discussion with Little and his team and upon reflecting on EY’s potentially highly disruptive change within the digital transformation landscape, the word “intentionality” stood out as succinctly encapsulating what EY has been doing with its Microsoft practice for the last few years and the challenge the firm has created for peers and competitors.

 

By concentrating on Microsoft Azure as a preferred cloud partner — whether by default or design — EY has wrangled three challenges and turned them into opportunities for growth. First, EY’s clients and ecosystem partners know EY’s strengths center on Microsoft technologies, diminishing any market confusion about EY’s core strategy and capabilities. Second, marrying EY’s established industry expertise with Microsoft’s emerging industry clouds provides differentiation in a crowded competitive landscape. Third, EY’s sustained focus on Microsoft gives its professionals additional reasons to stay with the firm, reducing attrition and potentially attracting highly skilled talent.

 

Whether or not the split happens, EY will need to sustain this intentionality and capitalize on these opportunities for growth. According to TBR’s 2Q22 Cloud Ecosystem Market Landscape, Deloitte — despite its audit relationship with Microsoft that precludes a formal go-to-market alliance — has at least 8,500 Microsoft certifications, surpassing EY’s 6,000. TBR does not expect EY to surpass Accenture’s (NYSE: ACN) 43,000 Azure certifications in the near term (or ever), but EY should be able to match and exceed Deloitte within a couple of years, provided that activities related to the potential split do not adversely affect the firm’s Microsoft practice and that EY can maintain the advantages embedded in its strategy.

 

With RPA market maturing, UiPath paves the way for enterprise automation opportunities enabled by partners

UiPath’s annual FORWARD conference provides a forum for the company to outline the next phase of its growth aspirations. TBR attended this year’s event, FORWARD 5, alongside 3,500 participants, including representatives from nearly 1,000 partners, and learned about UiPath’s goal to build on its position as a leading vendor in the robotic process automation market — in which it reportedly holds over one-third in market share — to become an automation platform capable of addressing enterprise transformation needs across all lines of business of an organization. To achieve this objective, UiPath’s ecosystem partners, from IT services and consulting firms like EY to cloud platforms like Microsoft, will be crucial. Similar to previous FORWARD events, UiPath reiterated its desire to scale within its existing install base — a number that now exceeds 10,500 global customers — by selling business outcomes.

Turning the corner from a pure play RPA vendor to an enterprisewide automation vendor compels UiPath to stay the course of its portfolio expansion

Three years ago, UiPath saw the opportunity to develop a platform that will help it build the de facto layer that will enable enterprises’ core processes from ERP to HR and finance to identify, gather and manage data with minimal human intervention. Fast-forward to 2022, and UiPath is adding modules to enable its Business Automation Platform (BAP) to meet its goal of departing from being viewed as purely a robotic process automation (RPA) vendor.

Combined with the purchase of the no-code AI communications vendor Re:infer, these elements will enable UiPath to provide support in high-volume communications channels — across email, chats, service desk and CRM notes — augmenting the task mining cycle and providing enterprises with key insights around how business gets done. As UiPath strives to bring together integrated discovery and automation to optimize enterprise processes, BAP provides the layer between enterprises’ processes and employees with three distinct functions enabled by UiPath’s portfolio and organized into three categories: Discover, Automate and Operate.


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While the majority of the opportunity remains within the Automate cycle, the acquisitions of Process Gold three years ago and now Re:infer have added the necessary modules and capabilities for UiPath to continually uncover opportunities throughout the cycles of process mining, task mining, communications mining and idea capture. We view these cycles as necessary steps for UiPath as it seeks to elevate the value of its platform and provide the enabling layer for enterprises to use automation for innovations and operations.

With cloud becoming the backbone of enterprises’ digital transformation programs, UiPath also seeks to find a spot in the otherwise crowded technology space. Developing a solution that will allow enterprises to migrate, automate and manage their cloud workloads provides the company with the necessary use case to demonstrate the value of its API-led automation and integration services, as these assets allow UiPath to standardize the opportunities around BAP. We believe the long-term opportunity around integration services for UiPath depends on the company’s ability to not just build connectors — which it has done quite well, supporting over 2,400 clients that have purchase integration services and over 5,000 active connections — but also extract the data that gets processed through the connectors.

We believe this data will be invaluable to UiPath’s partners as they seek to elevate the value of automation from a discretionary to nondiscretionary line item of IT and line of business (LOB) budget spend. Additionally, UiPath’s integration services supports multiple personas from Centers of Excellence and IT through RPA and app developers and citizen developers, which we believe will help UiPath to build the orchestration layer.

The technology partner ecosystem will be vital in supporting UiPath’s evolution from RPA incumbent to an enterprise automation platform at scale

Cloud platforms provide the infrastructure backbone and data center footprint to expand the addressable market of UiPath’s proprietary technology. Further, these same entities power the SaaS and on-premises workloads, enabling organizations’ business processes and workloads. UiPath must be able to reflect these workloads in its catalogs of prebuilt integrations to deliver on its promise of enterprisewide automation. By deepening its leverage of the technology partner ecosystem, UiPath will gain access to a wider variety of enterprise workloads and, more critically, provide customers with its growing array of Discover and Operate capabilities, to extract insights from the associated business process data being captured during the company’s Automate process.

While other cloud players are racing to build out their portfolios of automation capabilities, including RPA and low-code/no-code development assets, to support the growing customer appetite for workload customization, their capabilities lack the depth of UiPath’s and, in the near term, their value will be highest when used in conjunction with vendors’ first-party applications. This value-add does not align well with the reality of today’s enterprise SaaS environments.


Specifically, TBR’s 1H22 Cloud Applications Customer Research found that enterprise preference for best-of-breed SaaS deployment strategies is rising, with 40% of respondents stating they use three or more SaaS vendors today, and 60% of respondents stating the number of SaaS vendors they utilize will increase over the next two years. UiPath has an opportunity to exploit its position in the market and become the enterprise automation platform for tomorrow’s multi-enterprise business networks. In short, UiPath has the ability to provide customers with an automation platform capable of enhancing not only the processes corresponding to a single SaaS-workload like CRM but also the processes underpinning an end-to-end business outcome across workloads leveraging IP from multiple ISVs in areas like CRM, sales forecasting and marketing automation.


Over time, this approach will allow UiPath to achieve its goal of selling outcomes to clients, building libraries of process automations with cross-industry applicability and thus making its IP stickier across the enterprise landscape. In support of this aspiration, UiPath announced an expanded relationship with one of its largest partners, Microsoft (Nasdaq: MSFT). The two announced they will collaborate on a vision for the future of automation in the cloud; with Microsoft naming UiPath as a preferred enterprise automation partner and UiPath endorsing Microsoft Azure as its preferred cloud platform.


The pair, which have already developed 80 integrations available out of the box to joint customers, will further integrate UiPath across Microsoft Power Platform, Dynamics 365 in Business Applications, in addition to Microsoft’s Cognitive Services. While Microsoft has aggressively expanded the scope of Power Platform in areas like RPA and development, an IT services and consulting executive recently commented to TBR that Microsoft’s platform capabilities are not yet robust enough to support enterprises’ end-to-end automation projects. By further weaving UiPath across Microsoft’s vast portfolio, joint customers will be able to augment Power Platform with UiPath’s market-proven Automate assets, thus providing UiPath with a vast install base across Office 365, Dynamics 365 and Azure to drive traction of assets across Discover and Operate.


But to be a true enterprise automation company, UiPath will need to expand its current relationships with cloud platforms Amazon Web Services (AWS) (Nasdaq: AMZN) and Google (Nasdaq: GOOGL) to the same level and magnitude as that with Microsoft to position itself as a multicloud automation partner. Specifically, just as enterprises’ application environments increasingly consist of multiple SaaS vendors, so too do their IT infrastructures. Client preference for multicloud, hybrid cloud and hybrid IT deployments has steadily risen over the past few years as a means to reduce vendor lock-in, with TBR’s 1H22 Cloud Infrastructure & Platforms Customer Research finding that 46% of respondents plan to increase the number of infrastructure vendors utilized over the next two years.


This dynamic again presents UiPath with an opportunity to exploit client preference for multicloud environments, as the growing automation tool kits from AWS, Google and Microsoft will not be well served to automate the business processes and workloads spread across peers’ cloud infrastructure and legacy on-premises environments in the near term. In summary, UiPath’s ability to leverage the technology ecosystem — from cloud platforms, SaaS incumbents and the massive ISV community — will be critical to achieving the objectives laid out at FORWARD 5 around scaling, selling outcomes, and establishing itself as not just an RPA incumbent but also the enterprise automation platform market bellwether.

 

 

Partners provide access and use cases necessary for UiPath to scale adoption compelling the company to fine tune go-to-market efforts

To complement its technology ecosystem-led approach, UiPath will increasingly leverage services entities to gain access to enterprise LOBs. More critically, services entities today have the trust of C-Suite buyers, which will be needed to scale automation projects beyond single LOBs to achieve enterprisewide automation objectives. During the event, UiPath made several announcement highlighting the company’s efforts to strengthen relationships with services partners, recognizing the opportunity they offer when it comes to scale.



For example, EY unveiled that UiPath is now a Tier 1 alliance partner, a designation EY has only given to four other vendors and is often a confirmation of aligned vision, go-to-market efforts and client support. Accenture (NYSE: ACN) announced it will deploy UiPath automation to all of its employees (Accenture’s headcount stood at 721,379 as of 3Q22). Other partners like PwC held multiple sessions on stage, providing insights and sharing best practices from its collaboration with UiPath and the overall value of automation especially as it pertains to enabling its staff and creating capacity for higher-value tasks.


Given UiPath’s plans to pivot to selling outcomes, leveraging services’ partners vast benches of consultants will be crucial to clearly articulating its business cases across the industry continuum to secure the necessary enterprise budget to scale automation projects. Amid the growing macroeconomic uncertainty, UiPath’s promise of cost savings via automation — a mantra it touted endlessly at FORWARD 5 — may be well received by enterprises globally, but securing IT budgets is becoming more difficult as spending is increasingly scrutinized and will require the involvement of services partners that have the permission and trust of the budget decision makers.

Implications and opportunities

UiPath’s success lies in the company’s ability to evolve its value proposition as it executes on its three core pillars: technology, ecosystems and culture. With UiPath’s platform remaining open and easy to access, developing and integrating the focus of the co-CEOs has increasingly been focused on ecosystems and culture. We see the background of each CEO playing a key role in shaping leadership dynamics. We believe former SAP (NYSE: SAP) and Google executive Robert Enslin will remain largely focused on developing and executing UiPath’s sales and go-to-market strategy, which primarily revolves around its relationship with key alliance partners. Enslin understands the value of the ecosystem, especially as UiPath is trying to develop the next chapter of its client management strategy.



With UiPath’s roster of over 10,500 clients, Enslin knows that the company needs to develop a tier-based structure with large services partners and consultancies getting involved in relationship mining with the bigger accounts and also develop more self-service support mechanisms for smaller logos. Increasing expectations from partners will have to come with the necessary enablement framework. Providing access to clients and retuning incentive models will be key as UiPath strives to scale annual sales fivefold by capturing enterprisewide automation opportunities within the IT service management space.


In parallel, UiPath’s co-founder and CEO Daniel Dines’ humble beginnings provide the necessary foundation to ensure the company’s culture stays intact as it enters the next chapter of its growth strategy. Dines’ previous stint at Microsoft also helps him understand the value the partner brings to the relationship, evidenced by the two companies endorsing each other as preferred partners. Adopting an evolved sales and partner strategy while preserving culture will not be an easy task, but we believe UiPath’s leadership’s grounded vision and execution will help bring the company to the next level. Additionally, the incoming global downturn might even accelerate the transition for UiPath from a pure play RPA vendor to a subprocess platform enabler. With AI and automation providing enterprises with insights into how and where they can create efficiencies, we believe UiPath’s UI+AI+API framework around continual discovery mining will help elevate the value of its offerings.

Verizon Business showcases use cases highlighting ROI potential of 5G

TBR perspective

The enterprise market represents significant revenue growth opportunity for Verizon as the company expects the combination of multi-access edge compute (MEC), private cellular networks (PCNs), IoT and B2B technologies will grow to an addressable market exceeding $30 billion by 2025. Verizon also anticipates the aforementioned technologies will generate over $2 billion in revenue growth for the company from 2022 to 2025.

The Verizon 5G Innovation Session held in Boston showcased the opportunity advanced 5G use cases provide in attracting businesses seeking to improve operational efficiency, streamline headcount, optimize on-premises safety and security, and enhance customer experience. Verizon Business, as well as other telecom operators, will face challenges that will hamper 5G monetization, however, such as business models that require revenue to be split with other members of the value chain including hyperscalers, ISVs and network solution providers. Telecom operators will also face headwinds in the MEC and PCN markets from certain clients circumventing operators to work directly with hyperscalers and OEMs, limited recurring revenue opportunities, and customers’ limited awareness and budget allocation toward enterprise 5G solutions, especially among SMBs.

A prominent theme of the event was the value of partnerships, such as with Nokia, in bringing use cases to life while also coinnovating with customers to expand possible use cases into a variety of customer business units. Verizon is holding similar events with partner Ericsson (Nasdaq: ERIC), and Verizon also has a relationship with Celona for its private 5G solution. The event showcased several use cases that can be enabled by Nokia hardware and software combined with Verizon’s 5G connectivity and delivered by Verizon’s systems integration practice. Verizon’s mature partner ecosystem can foster additional symbiotic relationships with other network solution providers and ISVs in the 5G era, which is unique in cellular technology history. As Nokia Head of Cross Portfolio Solutions and Partners Jason Elliott noted, “5G is purpose-built for enterprise, whereas 3G and 4G were not.”

Impact and opportunities

A focus on improving business outcomes will position Verizon Business to attract 5G clients

Use cases demonstrated by Verizon Business at the event highlighted how 5G solutions can help businesses address operational challenges while providing opportunity to significantly reduce expenses, especially regarding headcount. Robotics and manufacturing solutions are a prime example of this strategy as Verizon demonstrated multiple use cases in which robotics solved businesses challenges, including placing an engine inside a vehicle at an automobile manufacturing plant as well as pairing robotics with video analytics to inspect and monitor parked vehicles, including for potential suspicious activity.

Frictionless shopping was a prominent use case as Verizon showcased an autonomous store leveraging 5G MEC and AI-powered computer vision applications to enable customers to purchase items without the need for an on-site human cashier. TBR believes this use case will be particularly appealing to national retailers such as convenience stores seeking to open smaller locations that require minimal headcount. Large venues such as stadiums and arenas are another targeted segment for Verizon as 5G solutions are helping to optimize processes such as crowd control and admission while improving the fan experience through benefits such as providing projected wait times for areas like concession stands as well as immersive smartphone applications offering capabilities such as showing multiple camera angles of an event.

TBR believes a focus on equipping sales personnel to help clients identify how 5G solutions can improve business outcomes will be paramount for Verizon Businesses in attracting contract wins. Providing systems integration (SI) services is also beneficial for Verizon Business as recurring revenue from MEC and PCN deployments will be limited by clients using their own or unlicensed spectrum, such as Citizens Broadband Radio Service spectrum. Notably, Verizon did not directly mention collaborations with traditional SI partners at the event, potentially indicating that Verizon aims to work with clients more directly in this area to maximize revenue opportunities. An increased focused on SI services will also strengthen Verizon Business’ existing bonds with its large client base, enabling Verizon to more successfully upsell customers to advanced 5G solutions in areas such as MEC and PCN while helping the operator differentiate and counter hyperscalers and network equipment providers seeking to attract customers in these areas, independent of telecom operators. Verizon Business would face challenges in growing its SI personnel, however, as Verizon will need to compete against leading SI firms to attract talent.


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Verizon and Nokia benefit from each other’s strengths

Nokia and Verizon work together across several domains, and Nokia places a high value on its partnership with Verizon, which owns relationships with enterprises to which Nokia can sell its MEC and PCN solutions, particularly the Nokia Digital Automation Cloud (NDAC). Verizon is also bringing to bear its SI capabilities in MEC and PCN engagements with enterprises, enabling Nokia to minimize investment in selling and service delivery while remaining true to its core competency of selling communications networking hardware and software.

Nokia’s NDAC solution is a part of a robust set of private cellular network deployment options Verizon has for its international private 5G platform for enterprises across the globe. The quickly deployable solution includes Nokia radios, switches, mobile core, and either a Hewlett Packard Enterprise (HPE) (NYSE: HPE) or Dell Technologies (NYSE: DELL) server. The switch, mobile core and server stack is highly compact and can support up to 100 Nokia radios. Nokia demonstrated a hologram use case at the Innovation Session leveraging only a Nokia small cell, switch and evolved packet core (EPC) in combination with an HPE server. Nokia and Verizon have a significant reference deployment of NDAC with Associated British Ports’ (APB) Port of Southampton, for which the companies have rolled out a 5G PCN and greatly consolidated the port’s wireless infrastructure. A Nokia representative told TBR the ABP deployment consisted of seven macro radios running over the aforementioned NDAC stack, condensed from 250 Wi-Fi access points.

Nokia’s long-term revenue growth depends in large part on diversifying its customer base to include more enterprises. 5G and enterprise go-to-market partnerships with operators such as Verizon are essential to Nokia achieving its goal.

Conclusion

The Verizon 5G Innovation Session showcased compelling use cases highlighting the potential of technologies including MEC, PCN, IoT, robotics and video analytics to improve business outcomes for enterprises. TBR believes large customers such as manufacturing companies, arenas and stadiums, and national retailers will account for the bulk of Verizon’s MEC and PCN initial target customers as they have a more tangible business case and path to ROI for deploying these technologies and also have higher budgets to support costly accompanying solutions such as robotics.

TBR expects Verizon Business will continue to focus on serving its smaller clients with mainly traditional network solutions, such as through its 5G Business Internet fixed wireless service and unified communications solutions including BlueJeans while targeting specific industries through existing portfolio offerings leveraging 5G such as transportation and fleet management companies via Verizon Connect and first responders through Verizon Frontline. The expanding availability of Verizon’s 5G Business Internet service also enables the company to serve new broadband customers outside of its FiOS footprint and target clients seeking cost savings over rival broadband companies, including cable and fiber providers.

Verizon Business will face formidable competition in the MEC and PCN markets as AT&T (NYSE: T) and T-Mobile (Nasdaq: TMUS) are likewise evolving their portfolios and partner ecosystems to capture market share, though Verizon will benefit from being the first U.S. operator to form partnerships with all three leading hyperscalers (Amazon Web Services [Nasdaq: AMZN], Google Cloud [Nasdaq: GOOGL] and Microsoft Azure [Nasdaq: MSFT]) to enhance its position in these segments. Verizon Business will also be challenged by hyperscalers and network equipment vendors positioning to serve clients independently of telecom operators. Fostering relationships with partners such as Nokia and existing clients will be paramount for Verizon Business in countering these pressures, while equipping its sales and SI teams to ensure clients realize the full ROI potential of 5G MEC and PCN will be vital for Verizon Business to compete as a leading player in these segments long-term.

A select group of industry analysts, media representatives and customers gathered at the Verizon Innovation Center in Boston to learn about Verizon Business’ 5G customer strategies and developing use cases leveraging emerging technologies including MEC and 5G PCN. The event was co-hosted by Nokia (NYSE: NOK), which is providing underlying infrastructure to support many of Verizon’s (NYSE: VZ) 5G enterprise solutions, and included use case demonstrations, speaker segments and panel discussions featuring leadership from several Verizon Business customers. Verizon is hosting a half-dozen similar events across the country. Key representatives who participated in the event included:

• Aparna Khurjekar, SVP and chief revenue officer, Business Markets and SaaS, Verizon Business
• Jennifer Artley, SVP, 5G Acceleration, Verizon Business
• Andy Brady, VP, Enterprise Sales, Verizon Business
• Mark Tina, VP, Business Sales, Verizon Business
• Danny Johnson, director of Product Marketing, Verizon Business
• David De Lancellotti, VP, Global Sales, Nokia
• Jason Elliott, head of Cross Portfolio Solutions and Partners, Nokia
• Michael Israel, chief information officer, the Kraft Group
• Samia Mahjub, VP of Business Strategy for TD Garden and Boston Bruins

 

 

 

 

 

 

 

 

 

 

 

 

VMware Explore touted as ‘center of multicloud universe’

VMware is heralding VMware Explore as “the center of the multicloud universe,” aligning its annual conference with the company’s ambitions to become the de facto control plane for hybrid, multicloud environments. During his keynote and subsequent breakout sessions at the newly named VMware Explore global cloud conference, VMware CEO Raghu Raghuram laid out the company’s case for why and how it will succeed in achieving these goals, focusing much of the discussion on product initiatives that add to its end-to-end platform and modernize legacy products.

These products target the growing need for “cloud-smart” infrastructure management, and VMware, with one foot in the cloud and the other on premises, continues to make a compelling case for many enterprise customers. Throughout the event, VMware management highlighted the importance of strong partnerships that support product integration as a key to execution, impacting not only its vSphere business but also multicloud products. The company was joined on stage by hyperscalers, such as Microsoft (Nasdaq: MSFT) and Amazon Web Services (AWS) (Nasdaq: AMZN), to discuss ongoing joint product initiatives that are expanding customers’ ability to preserve past virtualization investments while migrating these environments to the cloud.

Specifically, the new Azure VMware Solution fills a critical gap in the VMware Cloud Universal program, and new flexible consumption options are opening doors for smaller enterprises looking to utilize VMware Cloud on AWS. In multicloud, new integrations with rival IBM (NYSE: IBM) involving both its Red Hat OpenShift and IBM Cloud Satellite were announced, underscoring both vendors’ commitment to openness and flexibility to deliver on the promise of “any cloud, any Kubernetes.” With product launches and partner initiatives indicating an innovative future, VMware Explore 2022 felt entirely like business-as-usual, and one could be forgiven for forgetting the significant transaction that looms in the future.

Innovating to enable modern applications and cloud-smart IT strategies

vSphere 8 brings modern application capability to update the virtualization platform and support modern applications with new DPU functionality

In VMware’s opinion, cloud-smart strategies require enterprises to retain some workloads on premises due to cost considerations and performance requirements, pushing the company to continue to innovate with its popular vSphere platform. With vSphere 8, customers gain access to the long-promised Project Monterey. Originally announced at VMworld 2020, Project Monterey rearchitects vSphere to support data processing units (DPUs), providing far better performance when running data-intensive, modern applications in the cloud, on premises and at the edge.

Specifically, DPUs augment the power of the CPU or graphics processing unit (GPU) by providing a place to offload core infrastructure tasks like networking and data storage. This frees up core capacity up to 20%, allowing the CPU or GPU to focus on the specialized tasks present in modern applications like AI, machine learning (ML) and high-performance computing (HPC). Instrumental to Project Monterey, the company partnered with chipmakers NVIDIA (Nasdaq: NVDA), AMD (Nasdaq: AMD) and Intel (Nasdaq: INTC), and hardware OEMs Dell Technologies (NYSE: DELL), Hewlett Packard Enterprise (HPE) (NYSE: HPE) and Lenovo, relying on this ecosystem to support the hardware integrations necessary to offer DPU architecture support with vSphere 8.

TBR believes that with Broadcom as a major chipmaker itself, vSphere and future innovation around silicon architectures could be an interesting possibility. Regardless, the improvements in compute performance added through vSphere 8 are unlikely to change the long-term trajectory for the virtualization platform. Public cloud providers continue to invest heavily in specialized server chips to come to market with application-optimized instances capable of delivering superior performance in the cloud for many modern applications. Instead of differentiating, these updates prolong vSphere’s relevance by enabling customers to preserve their past virtualization investments.

 

Introducing hybrid, multicloud management with VMware Aria

At VMware Explore 2022, the most noteworthy announcement was VMware Aria, which, according to VMware, will represent the core of the company’s multicloud management strategy going forward. VMware Aria is a new hybrid, multicloud management portfolio built to alleviate modern IT complexity challenges, which VMware management accurately refers to as “cloud-chaos.” The portfolio includes a set of end-to-end solutions for managing cost-performance optimization and consistent policy implementation across any cloud. The foundation of the portfolio rests on the announced VMware Aria Graph and VMware Aria Hub. Customers will manage and apply policies within the graph via the VMware Aria Hub, the portfolio’s control plane, while the graph data store serves as the engine of the offering, providing a connection to an enterprise’s complete array of IT assets, from multiple public clouds to virtual private clouds and on premises.

VMware Aria Graph’s application mapping serves as the basis for newly announced end-to-end management services: VMware Aria Guardrails, VMware Aria Migration and VMware Aria Business Insights. Aria Guardrails helps enterprises automate policy implementation at scale to support multicloud networking, security and configuration through an everything-as-code approach. Meanwhile, VMware Aria Migration promises to accelerate multicloud migrations with automated assessment, planning and execution, and Aria Business Insights provides full-stack process analytics by leveraging machine learning and AI to support infrastructure optimization and security.

TBR believes VMware’s position as a virtualization provider could provide the company with an advantage in attracting enterprise customers. With many enterprises preserving their virtualization investments in the near term, tight integrations with vSphere could create meaningful value for complexity-conscious customers. Further, as VMware management claims, the expertise in infrastructure management VMware has accumulated over the years through the development of the company’s virtualization platform will serve it well as it builds products that reduce complexity in multicloud management.

However, VMware must execute on this promise by maintaining its investments in R&D, as well as its go-to market effort. As the fight for the multicloud control plane grows, any deviation from the company’s current investment path would likely be detrimental to adoption as others maintain their pace of innovation. Further, with headwinds to virtualization unlikely to abate, failure to remain competitive would have significant ramifications in VMware’s ability to generate sustainable long-term growth.

Partnering to deliver on ‘any cloud, any Kubernetes’

VMware Explore 2022 follows a year of transformation regarding the company’s relationship with its partner ecosystem, and commentary during the conference suggested this change of heart is here to stay. As VMware pivots toward the cloud, it will need to engage with not only hyperscalers but also professional service providers as the company looks to accelerate vSphere migrations and drive adoption of its cloud-native portfolio.

Over the past year, VMware has seen significant success in bolstering its relationships with services partners, a reflection of recent ecosystem investments that are adding technical resources to joint customer engagements. While management highlighted these recent successes, conference announcements focused on collaborative product initiatives and integrations, aligning with the conference theme of “any cloud, any Kubernetes.” Considering Broadcom management shares similar views on shifting the business toward the cloud, TBR believes that the momentum in partner engagement is unlikely to change following the acquisition, at least as it pertains to significant revenue generators like vSphere.

‘Any cloud’ achieved with the addition of Azure to VMware Cloud Universal

While multicloud offerings like VMware Aria and Tanzu represent a long-term growth opportunity for VMware, shifting vSphere customers to subscription-based consumption methods is a more near-term strategic objective for the company, requiring it to work with hyperscalers to provide the necessary infrastructure component. So far, the company has been successful in this pursuit, with subscription revenues growing over 20% year-to-year in recent quarters.

On track to its FY2023 subscription revenue goals, subscription growth is driven by vSphere migrations, which are supported by joint product initiatives between VMware and its hyperscaler partners. Adding to the VMware Cloud Universal program, the company announced the general availability of the new Azure VMware Solution, improving vSphere migrations to Azure’s public cloud. Over the past year, VMware’s partner initiatives with Microsoft have largely mirrored its efforts across the public cloud landscape, with its cloud-native applications recently becoming available on the Azure marketplace.

However, VMware continues to view AWS as its preferred cloud provider, emphasizing the partnership at VMware Explore with the launch of new consumption options for the VMware Cloud on AWS. VMware’s favoritism toward the company threatens its multicloud reputation, especially given AWS’ restrictive stance on multicloud environments. Going forward, this perception can be combated by accelerating development programs with its other hyperscaler partners, such as Microsoft Azure, to bring the same level of capability and the same breadth of consumption methods to all cloud environments.

Integrating with rivals to deliver on ‘any Kubernetes’ promise

As VMware positions VMware Aria at the core of its multicloud strategy, the underlying Kubernetes deployment platform is becoming less of a differentiator, with “any Kubernetes” integration taking precedence. Announced at VMware Explore, VMware will enable cross-platform container deployment with rival Red Hat OpenShift, a move that recognizes the likelihood enterprise customers will consume multiple Kubernetes platforms.

While “vendor-neutral” has been a common marketing phrase used to describe the lack of direct affiliation with a public cloud provider, this integration pushes platform openness further. Given VMware’s and Red Hat’s market share, TBR expects other vendors will be pressured to follow their lead, initiating an “any Kubernetes” approach across the industry. Outside of product integrations, IBM Consulting was named a global systems integrator (GSI) for VMware, adding to an expanding list of GSIs building their VMware-related business. IBM’s focus on executing on its hybrid cloud strategy makes its partnership with VMware more of a necessity based on the company’s enduring presence in the cloud.

Conclusion

With the conference emphasizing a multicloud future, VMware Explore 2022 felt like business as usual, an indication for TBR that strategy will remain unaltered post-acquisition. Led by its product-focused CEO, VMware’s ability to innovate was on display as the company pivots toward cloud-smart strategies. VMware’s updates for core products, like vSphere 8 and vSAN 8, are creating enduring value for enterprise customers, prolonging their secular decline. Meanwhile, VMware Aria takes the company into its next chapter of multicloud management. Now, VMware must execute on this pivot by maintaining its pace of innovation and the growth of its partner ecosystem.

With Broadcom (Nasdaq: AVGO) CEO Hock Tan watching from the front row, Raghu Raghuram and the rest of VMware management hosted the newly named VMware Explore global cloud conference, a change from its namesake VMworld. The rebranding, which is significant based on the prior event’s reputation as a go-to event, appears to be driven not by the pending change in VMware’s ownership but by the company’s efforts to position itself as a provider of more than its virtualization platform.

Major announcements emphasized VMware’s ongoing evolution from an on premises virtualization provider to a leading enabler of “cloud-smart” IT strategies, with launches for VMware Aria, vSphere 8 and vSAN 8 exemplifying the company’s ability to innovate. However, while an innovative spirit remains at VMware today, a feeling of uncertainty around future innovation existed among conference attendees this year as stakeholders grapple with the impending change in ownership. While much is to be determined, prior public statements by both companies describe the transaction as transformational to Broadcom Software Group, and TBR walked away with our prior stance unchanged, believing in incremental benefits for VMware if investments in strategic areas remain consistent.

KPMG takes purposeful design and commitment to talent to a new scale with Lakehouse

Emerging from the pandemic, a training facility in a class of its own

On July 20 and 21 TBR visited Lakehouse, KPMG’s purpose-built training facility in Orlando, Fla.’s, Lake Nona neighborhood. KPMG opened the facility in early 2020, closed it temporarily during the initial months of the pandemic, and reopened incrementally starting in late 2020, with operations now at full capacity. During TBR’s visit, three characteristics stood out among a wide range of thoughtful design details, strategic investments and fit-for-purpose spaces: Everything about Lakehouse reinforces KPMG’s commitment to the firm’s professionals: The environment itself minimizes stress and maximizes opportunities to interact in-person, and the place buzzes with an energy uncommon in a training and learning facility.

 

Seemingly reinforced by every design decision, Lakehouse was built by KPMG for KPMG’s professionals. Without clients or non-KPMG professionals roaming Lakehouse’s campus, conversations among colleagues can be more open and direct, without the need to check a name tag or remain circumspect. During TBR’s visit, multiple KPMG partners mentioned the freedom Lakehouse provides to have unplanned discussions with longtime colleagues and new acquaintances.

 

 

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By design, making interactions seamless, stress-free and purposeful

The sheer size of Lakehouse and the investment the firm made in the facility reinforce KPMG’s commitment to its professionals to expand their knowledge and develop their career paths while providing them with top-class amenities, support and services.

 

  • Centrally located classrooms, designed for large and small sessions, cement the idea that Lakehouse is not a showcase or a conference site but rather a learning center — a design emphasis that also reinforces KPMG’s culture.
  • Based on our observations of the classrooms and interactions with professionals on-site, the Lakehouse design facilitates intermingling across every level of professional experience, with an openness that allows for chance discussions. Multiple KPMG professionals — before, during and after TBR’s visit — brought up the social, genuine and supportive vibe that seems to permeate Lakehouse, sustained by KPMG’s overall culture.
  • With an all-inclusive design, from overnight accommodations, seemingly endless food options, a top-flight gym, and other amenities, the entire Lakehouse campus contains everything needed for a few days of learning and meetings, minimizing stress and maximizing the amount of time people can spend with each other, which is invaluable after two years of virtual meetings.

During a post-visit discussion, a KPMG professional echoed TBR’s highly positive experience by saying, “The staff at Lakehouse are truly amazing. They really make the whole experience incredible.” The same professional also brought up a seemingly small feature that made a large impression on us. During TBR’s tour, the gym staff were not at the desk or in the various workout rooms because they were making rounds through classrooms, leading get-up-and-move-around breaks. As the KPMG professional said, unprompted by TBR, “The wellness breaks that we had throughout the day were great. Those breaks included stretching, games or meditation.” In every interaction we had with KPMG professionals, both on-site and during discussions after our visit, people agreed the firm’s attention to detail creates a welcoming atmosphere at Lakehouse.

Improving clients’ Ignition Center experiences by colocating at Lakehouse

Given the emphasis on keeping conversations flowing freely among KPMG professionals and the overall atmosphere of learning, training and camaraderie, KPMG’s decision to include an Ignition Center at Lakehouse struck TBR as potentially problematic.

When management consultancies and IT services vendors first launched innovation and transformation centers — and TBR has visited more than 40 of these centers in the last five years — one of the defining features was location: The centers were separate from the main offices, sometimes even in a separate city or neighborhood, reinforcing that this space was built for discussions outside of clients’ normal expectations of these vendors. For example, clients would go to PwC’s Experience Center in Hallandale, Fla., a short drive from Miami, and would know they were not getting the old-school tax and audit PwC. Poorly designed centers typically failed on this point.

 

TBR once “toured” a one-room “Innovation Center” at an IT services vendor’s Dallas offices that became known within TBR as the “Digital Closet.” In that context, KPMG’s decision to place a new Ignition Center colocated within its massive internal training and learning facility seemed surprising. Once on-site, TBR realized clients will not see the traditional KPMG offices when they attend sessions at Lakehouse Ignition Center but will instead see and understand KPMG’s massive commitment to training and professional development. They will also see a relaxed KPMG, not the buttoned-up, suits-and-ties auditors, as well as the scale of the consultancy they are working with.

 

Previously, Big Four firms needed to take clients away from the traditional Big Four offices to show how much the firms were changing. Now, KPMG can say, “Hey, we’ve changed and you can see it all around you at Lakehouse.” Colocating an Ignition Center at Lakehouse does not eliminate other challenges common to innovation and transformation centers, such as knowledge sharing across centers and countries, bringing in the right clients at the right time for the right kinds of sessions and staffing, and incorporating technology partners. Further, a novel challenge with Lakehouse will be hosting clients on-site without compromising the freedom KPMG professionals feel when they are at Lakehouse. None of these challenges has been insurmountable, and TBR will closely track how well the Ignition Center at Lakehouse meets KPMG’s and its clients’ expectations.

Thoughtful. Purposeful. By design.

Without question, KPMG’s Lakehouse sits at the apex of training facilities, with an unsurpassed blend of purposefully designed major components as well as subtle elements that solidify the firm’s culture and commitment to its people. At the end of the tour, a KPMG leader pointed out the glass and light artwork in the main area, a place everyone staying at Lakehouse passes through multiple times a day. By design, over the course of the week, the lights slowly shift from a multitude of colors to just one color, quietly reinforcing that every individual is different, but everyone belongs to one firm. Thoughtful. Purposeful. By design. All of which sum up Lakehouse.

 

TBR’s ongoing coverage of KPMG includes semiannual profiles as part of the Management Consulting Benchmark and the Innovation and Transformation Centers Market Landscape, as well as analysis, when appropriate, within the Digital Transformation portfolio.

Project Everest positions EY to deepen the value it provides to clients

Overview

EY has evolved with the management consulting market, growing a sizable technology consulting practice and increasingly partnering with tech giants and niche software vendors to respond to client demand for advice and assistance infused with technology. The regulatory constraints around EY and the rest of the Big Four, however, have not evolved. As EY’s audit client base has increasingly included technology giants, limiting the firm’s consulting opportunities, internal pressures and external forces have reached a point where EY has had to consider a split. After evaluating client demand, its portfolio and market dynamics, EY announced plans at the beginning of September to move forward with a split — coined Project Everest — of the firm’s consulting and audit businesses. EY’s consulting business will go public and provide tax, business advisory, and technology adoption services while the remaining legacy EY will continue to deliver audit services.

 

To support the firm’s goal of driving business outcomes, EY will leverage four new areas following the separation. First, independence from audit constraints will allow EY to broaden engagements with new clients around technology, data, and environmental, social and governance (ESG) needs, on which the firm could not previously advise. Second, partnerships with technology vendors that were previously restrained because of audit engagements, such as those with Amazon Web Services (AWS) (Nasdaq: AMZN), Salesforce (NYSE: CRM) and Google (Nasdaq: GOOGL), can be deepened. EY has indicated it audits 25% of the Fortune 500 firms, which means the firm will have ample opportunities to deepen its technology-centric partnerships, such as developing scale through partner-oriented practices including both talent and platform-based services. Third, EY will leverage partnerships to create future-proof solutions on the cloud and deliver on a wider range of client needs. Lastly, to provide higher-value business advisory, EY will grow its tax and legal engagements to support clients’ additional needs that cross business segments and operations.

 

 

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Talent landscape

As with any major organizational transformation, EY risks losing talent through the shift, but efforts to include share compensation and allow individual countries to decide whether to take part in the split will help the firm retain and recruit staff to support the transition. Additionally, the opportunity to pursue new advisory and technology transformation engagements will serve as a retention point, enabling staff to expand their skills and move into newer areas. Growing technology platforms and solution development skills will remain a key part of EY’s business proposition, but the firm recognizes it will not become a technology hub and looks to strengthen its existing 80,000 technology-oriented staff to facilitate portfolio and client relationships expansion instead of greatly accelerating hiring to reach the scale of competitors such as Accenture (NYSE: ACN), which manages around 700,000 employees.

Partner ecosystem

As EY’s partner ecosystem evolves to include newer partners such as Salesforce, AWS and Google, the firm will look to combine existing advisory and implementation skills with partner cloud solutions and platforms. The partnerships will serve to build skills, facilitate interactions within centers of excellence, and ensure execution and delivery of technology solutions. For example, growth around industry clouds and capabilities associated with platforms will depend on ecosystem partners to develop solutions and address more specific business needs. Narrowing its capabilities by embedding partner expertise to support supply chain and data needs will allow EY to penetrate its client base and increase the contract value of existing relationships.

 

EY will not likely face pressures in forging partnerships with technology vendors that were previously off limits. While the partners have pre-existing relationships with other IT services vendors such as Deloitte and Accenture, EY’s reputation and project history with clients will validate the firm’s credibility, helping to provide additional opportunities for the partners as well as the firm.

Impacts for other vendors

As EY progresses through the split, the firm will look to expand its partner ecosystem, growing its breadth of offerings around technology and benefiting from increased scale within the cloud space. The lack of regulatory constraints around partnerships will allow EY to offer a broader set of solutions and services that can be integrated more seamlessly into clients’ existing IT environments. The ability to forge these partnerships will create pressure on peers such as Accenture, which can deliver on a similar set of services and has a similar reputation for quality and industry expertise. EY will retain its client relationships, focusing on deepening engagements around expanded capabilities with partners.

 

EY made the decision to split the firm in response to client demand for additional services beyond traditional audit or tax. Freeing the consulting business from regulatory requirements will help EY retain clients and potentially recapture clients that can now work with EY across a broader set of services. Emphasizing a focus on business value and outcomes for clients will enable EY to preserve its market reputation as the firm executes on the transition while also maintaining relationships with clients.

 

While EY will likely benefit from the additional opportunity around talent acquisition as well as an enhanced value proposition to compete for additional advisory and transformation engagements, the firm could also face some pressures within the market. Competitors such as Accenture and IBM (NYSE: IBM) that have pre-established technology backgrounds, paired with advisory talent and complemented by partner ecosystems, could pressure EY’s ability to grow outside of its traditional consulting engagements as it markets with a refreshed image. EY’s existing culture, which is relaxed and focused on entrepreneurial activities, will translate into a transactional sales approach at the new company that puts clients at ease.

SoftwareONE prioritizes reliability over innovation in clients’ technology and commercial journeys


On July 11, TBR met with SoftwareONE executives to discuss how SoftwareONE fits within the competitive landscape for SAP Business Suite 4 HANA (S/4HANA) software and IT services. The executives included Chief Marketing Officer Susanna Parry-Hoey, President of Solutions & Services Bernd Schlotter, Chief Technology Officer Mike Fitzgerald, and Global Analyst Relations Director Jochen Wolf. During the introductory discussion for TBR, the SoftwareONE team provided extensive details about the company’s size, strategy and performance. The following reflects both the July 11 discussion and TBR’s ongoing analysis of the software and IT services space.

Looking into clients’ current environments to understand the future

In TBR’s view, SoftwareONE’s business model and operations over time have positioned the vendor to understand software and IT services customers’ changing behaviors, in terms of how customers use technologies and complementary services as well as how customers adjust their budgets and spending patterns.

 

At a time when accelerated moves to cloud appear to be every enterprise’s top priority, SoftwareONE’s view into customer behavior provides a potentially differentiated approach to serving clients’ needs. Translating those views into analysis and shared knowledge and turning accelerated decision-making into growth of SoftwareONE’s own solutions and products will challenge the vendor in the near term, but TBR believes the executive team presented a compelling case for SoftwareONE’s potential in a highly competitive market.

 

In outlining the company’s approach, Fitzgerald said SoftwareONE provides clients a “safe pair of hands” and noted the vendor’s contentment with solving problems, “helping clients with the basics.” In TBR’s view, this grounded assessment of SoftwareONE’s place in the ecosystem reflects the company’s strategic decision to remain exceptional at what it can do, rather than trying to expand into adjacent or tangential areas, potentially compromising quality delivery and SoftwareONE’s brand.

 

Additionally, TBR believes many clients find “innovation” scary and unnecessarily disruptive when they are simply trying to keep pace with moving to cloud or retiring old software. Being reliable — a safe pair of hands — may be a greater strength than being perceived as innovative.

 

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A full-spectrum services, software and solutions vendor, deeply rooted in the ecosystem

To provide context, the SoftwareONE team walked TBR through some of the company’s key highlights, including a roughly 9,000 employee headcount, 65,000 clients across 90 countries, and 2021 revenues that topped $1 billion, split almost evenly between the Software & Cloud and Solutions & Services business units. The executives noted that 2021’s revenues represented a 16% increase year-to-year, with the Solutions & Services business unit growing around 38% in the same comparison.

 

Additionally, the team described core services offerings as focused on customers’ technology journeys and commercial journeys. Offerings for the former are grouped by application services, cloud services, SAP services, and digital workplace. For the commercial journey, SoftwareONE has capabilities around IT asset management, software digital supply chain, FinOps (cloud financial management), and software publisher advisory.

 

The SoftwareONE team provided details on the newly launched Goatpath by SoftwareONE brand of offerings, which are a blend of cloud-enablement software and a marketplace, described as an “E-commerce for buying, selling and managing software, services and solutions.” SoftwareONE executives described a company capable of meeting clients’ needs across the “advise & design, buy, implement & build, and optimize & manage” spectrum through both its own solutions and services and those of technology partners, including the hyperscalers and SAP.

 

The evolution of SoftwareONE’s strategy, from transactional to a true partnership model with customers, fills a clear gap for many end customers. As cloud technology becomes a larger part of most organizations’ IT strategy, the need for guidance, implementation and ongoing managed services is becoming quite clear. The largest enterprise customers can look to global systems integrators for that guidance, but midsize and smaller organizations need a partner that can match their scale and budgetary constraints. With more than 65,000 clients, SoftwareONE is serving organizations across a wide spectrum, filling the gaps end customers have in designing, procuring and managing their increasingly cloud-led IT strategies.

 

SoftwareONE has a huge client base to build on, and the company aims to offer net-new IP and unique value that support customers’ cloud transitions. Unique IP with the Goatpath brand and growing managed service capabilities illustrate that the company is about much more than just augmenting clients’ internal staff. Furthermore, SoftwareONE remains focused on ROI as it touts its cloud optimization and cost savings outcomes from more active management of cloud and technology solutions. In these ways, SoftwareONE is modernizing its value proposition in line with the IT strategies of its sprawling base of customers of different sizes.

3 key points: SAP, sales and SMEs

Considering SoftwareONE within the broader market, particularly for IT services, a few points stand out for TBR:

  • A fast-growing, well-staffed and experienced SAP practice gives SoftwareONE an advantage in a crowded market for SAP-related services. For instance, SoftwareONE’s expertise across both SAP and all public cloud providers (Azure, Amazon Web Services and Google Cloud) will strengthen its value proposition to enterprises considering running SAP in the cloud and moving to SAP S/4HANA. The growing adoption of public cloud infrastructure to replace on-premises or private cloud hosting as well as the closing window to replace the old ECC solution with next generation S/4HANA is driving higher demand for SAP services; yet organizations are less keen to embark on large and complex greenfield projects and prefer a more pragmatic and step-by-step approach for their journey toward S/4HANA running on public cloud. As such, by threading its SAP practice together with talent and experience with the hyperscalers, SoftwareONE is positioned to benefit from this trend and TBR expects SoftwareONE’s SAP revenue growth will continue to outperform that of peers.
  • With separate teams selling advisory and software, SoftwareONE has clearly learned a lesson many consultancies new to the SaaS game have only begun to understand: Sales motions for software — especially marketplace click-to-buy models — fundamentally differ from sales motions for consulting, and individuals or teams rarely excel at selling both. That being said, SoftwareONE is able to capitalize on both license renewals and cloud moves as triggers for cross-selling the two motions.
  • Small and medium enterprises account for around 70% of SoftwareONE’s clients, giving the company an exceptional presence in a marketplace increasingly eyed by the Big Four firms and other consulting-led IT services vendors. This presence, combined with SoftwareONE’s relationships with the hyperscalers and certified talent, will likely lead the Big Four and others to increasingly seek opportunities to partner with SoftwareONE, especially as SoftwareONE builds its talent and client base in Latin America, Europe and Asia Pacific.

Know Your Customer to be a better partner and play to your strengths

For TBR, SoftwareONE’s ability to see into its clients’ technology environments, buying behaviors and upcoming needs — akin to U.S. banks’ Know Your Customer requirements — provides the company an excellent opportunity to compete aggressively in a crowded and messy marketplace for services, solutions and software. TBR thinks SoftwareONE is doing three things particularly well by leveraging this position.

 

First, the company values partnering with the hyperscalers and SAP, even if that creates potential for competing with them.

Second, SoftwareONE works with clients where they are, not where they could or should be. Rather than direct clients toward services and solutions better suited to more technologically advanced or mature enterprises, SoftwareONE stays within a client’s space and immediate needs, perhaps reflecting that deep understanding of the client’s environment and budget. SoftwareONE can provide innovative thinking and road maps for transformations, but rather than lead with the imaginative future it emphasizes the safe pair of hands.

Third, SoftwareONE’s executive team has a firm handle on the company’s future, through strategic acquisitions, smart partnering with the hyperscalers and SAP, and investments in company IP to complement ecosystem partners’ offerings and expand value across the ecosystem. Play nice in the sandbox, listen to what your clients want, and play to your own strengths to build sustainable growth — a proven formula for success in the IT services and software marketplace.

 

TBR’s coverage of the software, cloud, IT services and management consulting markets includes vendor-specific reports, multivendor benchmarks and market landscapes, published quarterly or semiannually. Foundational research for this special report included the following:

  • Cloud Ecosystem Market Landscape
  • Cloud Professional Services Market Landscape
  • IT Services Vendor Benchmark
  • Management Consulting Benchmark