At its customer conference, Informatica unifies cloud-agnostic data management

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TBR perspective

According to TBR’s December 2020 Digital Transformation: Voice of the Customer Research, 61% of respondents indicate cloud computing is the leading technology they purchase as part of their central digital transformation (DT) initiatives. Over the course of the next five years, enterprises will continue to lead with cloud-first strategies — a trend that will be accelerated due to lessons learned from the COVID-19 pandemic. As customers move outside the data center, control over IT assets rapidly changes, as by no longer owning their hardware, customers can focus on data to drive innovation. Since cloud migration is the first step in unlocking data insights, Informatica is positioning its new solutions, most notably Intelligent Data Management Cloud (IDMC), as the foundation for true digital transformation. While maintaining strong ties to technical specialists, such as data scientists and engineers, Informatica’s ability to enable DT with a cloud-first approach positions the company to expand its applicability to nontechnical influencers and evolve its portfolio for a data-driven economy, which will be underpinned by cloud infrastructure.

By unifying data management with the cloud, IDMC will serve as the connection point for Informatica’s entire portfolio

Historically, Informatica’s Intelligent Data Platform (IDP) has underpinned much of the company’s core portfolio and provided customers a landing spot for their data management, integration, quality and security services. However, as cloud continues to dominate the technology landscape, Informatica’s strategy and market messaging are evolving to address customers’ challenges around storing data in the cloud. While leveraging the same underlying technology as IDP, IDMC takes data integration and management to the next level, offering customers over 260 services natively built into the platform, which can be deployed in the public or private cloud and consumed in a pay-as-you-go manner. Meanwhile, at the core of the platform remains Informatica’s embedded AI engine, CLAIRE, which acts as a system of record for metadata and helps customers derive insights across assets and product modules. The launch of IDMC reaffirms Informatica’s commitment to the cloud and modern applications, as IDMC serves as a complete replacement of IDP, which largely supported traditional software. Nonetheless, with a more scalable delivery model, the release mirrors the modular approach Informatica has always applied to data, offering customers choice and flexibility when it comes to the services that can be deployed on top of the platform, and their underlying data sources. For example, during the event’s opening remarks, Informatica Chief Product Officer Jitesh Ghai discussed how the company’s services are agnostic across infrastructures and data processing methods. An example of this impartiality is highlighted in services like Database Ingestion, which allows customers to take data residing in an Oracle database and move it into storage with an Azure data lake, for example. Informatica’s Data Integration service on IDMC is another example of how customers can leverage Informatica to integrate data across leading public clouds as an alternative to using three competing services from each cloud provider.

Supported by the cloud, Informatica’s platform services and capabilities meet customers’ specific business needs

Customer experience (CX) also remains the cornerstone of digital transformation efforts, and customers are adopting CX frameworks backed by emerging technologies, including AI and machine learning (ML) to complement their back-office operations. CX remains integral to Informatica’s strategy, evidenced by the January 2021 launch of Informatica Customer 360 as a SaaS solution. Customer & Business 360 is one of the core capabilities supported by IDMC in providing customers with a single-pane view of data across key business functions. Other capabilities of the platform that are in line with the main benefits of cloud computing include data discovery, ingestion, preparation, cleansing, records, delivery and governance. Throughout the event, one of the customer highlights was from Peloton (Nasdaq: PTON), a born-in-the-cloud company that has adopted IDMC to support its daily volume of roughly 10 million to 15 million records. Further, the New York State Department of Health adopted Informatica’s platform and leveraged the benefits of cloud-native analytics to support decisions and drive efficiencies during the height of the COVID-19 pandemic. Emphasizing data-driven business initiatives is a key gap IDMC aims to fill, as the platform not only supports customers’ IT initiatives, such as data engineering and warehousing, but also targets core business functions, such as e-commerce and finance. TBR suspects these core capabilities delivered through IDMC will provide Informatica with a strong competitive position, as the company unifies IT teams and line-of-business leaders through a cohesive data platform. 

What would have been a large gathering in the heart of Las Vegas became Informatica’s biggest virtual event, which hosted over 10,000 registrants and featured talks from customers, partners and industry experts on their experiences with data and the critical role it is playing in the digital economy. Informatica World 2021’s theme of going from “Binary to Extraordinary” speaks to Informatica’s main announcement — the launch of its Intelligent Data Management Cloud — as the company looks to support a variety of data-centric use cases, which are positioned for success when built in the cloud. While Informatica’s neutral standing — as the “the Switzerland of data,” as CEO Amit Walia puts it — remains unchanged, a cloud-first approach positions the company to meet a unique set of challenges enterprises face in the cloud, regardless of underlying infrastructure or deployment method.

Spinout will soothe some ailments for Dell and VMware

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After over a year of discussions about the future of the Dell-VMware relationship, on April 14, 2021, it was confirmed that Dell (NYSE: DELL) will spin off its 81% majority stake in VMware (NYSE: VMW) to create two independent companies, effective CY4Q21. Evidenced by the market’s immediate reaction, the spinoff will be an overall positive move for both companies, giving Dell the chance to reorganize as a leaner, more targeted organization while offering VMware more go-to-market flexibility. Of course, as independent companies, Dell and VMware will face challenges, but increasingly differing portfolios, revenue models and market views will position both companies for longer-term success as separate entities. 

While mostly beneficial to VMware, the spinoff will offer stand-alone Dell some pockets of opportunity

While it is true that VMware has been Dell’s secret sauce for years, the announced spinoff will not necessarily cost Dell a long-term competitive advantage. Given the investments VMware has made in the last five years to accelerate its cloud strategy and position itself as more than a virtualization software company, it makes sense for VMware to operate separately. This is true even from a branding perspective, given Dell EMC’s play in many legacy markets.

However, there is also a potential upside for Dell, as the separation could enable the company to be less reliant on VMware and move beyond the big bets it placed on software-defined hardware solutions, which have generally performed below market expectations over the past few years. TBR suspects this strategy will allow Dell to become more focused on capturing the roughly 80% of enterprises that continue to operate on premises by providing them with access to cloud services and flexible pricing within their own data centers. There are already signs of this strategy developing.

While this release could be viewed as Dell giving the market a sense of what its post-spinoff portfolio could look like, at issue for the company is that it will now be more directly aligned with competitors such as Hewlett Packard Enterprise (HPE) (NYSE: HPE), Cisco (Nasdaq: CSCO) and Lenovo. Given HPE’s head start in the market through its GreenLake brand, Dell will be forced to explore new avenues for differentiation with Project APEX, and this could largely come down to Dell’s still unique five-year go-to-market agreement with VMware and any potential influence from Dell Technologies CEO and Chairman Michael Dell, who will remain VMware’s chairman of the board post-spinoff.

Apart from the near-term impacts and challenges in the competitive landscape, the spinoff is best viewed in opportunities. Following the sale of RSA and current speculation regarding Secureworks (Nasdaq: SCWX), Dell has recently focused on shedding underperforming brands to become a leaner organization. TBR suspects the spinoff of VMware, along with potential sale of integration PaaS (iPaaS) subsidiary Dell Boomi, will present an opportunity for Dell to streamline its operating structure and support the large investment it made in legacy EMC.

Additionally, TBR believes Dell has in many ways backed the innovative concepts and ideas that have emerged from VMware, namely intrinsic security, but have not been fully executed. As such, this spinoff could help Dell become more selective in which markets it wants to innovate and truly scale in, which may include enabling enterprise hybrid cloud, edge computing and data management. TBR expects Dell will turn to its partner network as an immediate avenue for growth, yet as the company more aggressively pursues new growth areas, tuck-in acquisitions that complement the EMC software cannot be ruled out and, down the road, could be essential to competing on par with peers.

Corporate structure does impact performance

In theory, the ownership structure and model of firms do not impact their business model, but in practice they sure do. The evolving case of Dell and VMware is one of the most — if not the most — complicated in the history of the IT market. VMware has grown accustomed to operating under a complex and dependent ownership structure; the firm has not been fully independent since EMC acquired it in 2004 for $635 million.

Since that time, VMware has been an embedded gem within both EMC and Dell, driving growth and profitability well above the traditional hardware segments that made up the majority of both firms. VMware’s consistent performance over the past 15 years is driving this latest change in ownership structure, with VMware set to be spun out of Dell and have its most independent ownership structure since 2004. For VMware, the change is all positive, giving the firm a single-minded clarity to operate in its own best interest, without the weight of supporting the corporate performance of either EMC or, more recently, Dell

EY’s Strategy and Transactions practice: Long-term value in the post-pandemic world

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Investing more than $1B in technology, people and ecosystems  

According to EY Global Vice Chair for Strategy and Transactions Andrea Guerzoni, the firm is investing $1.5 billion in technology and people, with four specific goals. First, EY aims to improve the breadth and depth of its skills and expertise and accelerate innovation through a comprehensive learning program and acquisitions. Second, the firm seeks to prioritize reusable assets and technology tool kits across Tax, Assurance, Consulting, and its Strategy and Transactions practice. Guerzoni described this effort as focusing on “new client-facing technology” designed to help EY “get closer to and bring more value to clients.” Third, the firm works to establish strategic alliances, including a robust startup ecosystem and enhanced engagement with academia. Finally, EY spotlights the 25-plus wavespaces globally that provide an “immersive digital intense experience,” where clients can “rethink business, connect dots and look at reality differently.”

In TBR’s view, encompassing technology assets and ecosystems of people and partners as part of the $1.5 billion investment reflects the firm’s broader evolution to a more expansive player in the digital transformation space. EY also boasts a million-person alumni network that it can tap for ideas, introductions and opportunities, boosting its ability to influence the market.

Differentiating in an urgent, critical and complex space

At different points during the virtual Strategy and Transactions: Enabling CEOs to Navigate the NextWave event, members of the EY team presented their view on the firm’s differentiation in a professional services strategy consulting market, including new entrants such as investment banks, which stood out to TBR as an indication that EY views placing the transactions advisory component inside its overall consulting practice as something uniquely differentiated in the market.

Additionally, EY leaders specifically mentioned clients choosing the firm for holistic strategies with enterprisewide impact focused on long-term value and grounded in reality, sector and functional expertise, and the ability to both advise and enable change. Speaking directly about why clients seek out EY-Parthenon, EMEIA EY-Parthenon Leader Falco Weidemeyer said the firm brought experience and scale and delivered results. He cited a number of characteristics, such as outside-in sector experience and a focus on delivery, with the most significant and differentiating, in TBR’s view, being EY’s emphasis on transformational leadership “in urgent, critical, and complex situations to help [EY’s] clients create, preserve and recover value.” Combining strategy, leadership and expertise around transactions – and recognizing that long-term value will depend on optimal resource allocation – strikes TBR as an approach not frequently taken or delivered by EY’s peers.

Strategy and Transactions: Enabling CEOs to Navigate the NextWave — EY’s three-hour analyst event featured senior leaders from the firm’s Strategy and Transactions practice, including Global Vice Chair Andrea Guerzoni and Deputy Vice Chair for Strategy and Transactions Nadine Mirchandani. This assessment draws from presentations made during the event, as well as Q&A and breakout sessions between EY leaders and TBR analysts that took place immediately after the event. 

Demand for digitization to support European economies drives IT services vendor investment

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Dramatic need to shift to contactless payments

Prior to the pandemic, demand for digitization services and deals in the European financial, public and retail verticals grew at a generous rate. Europe-focused vendors covered by TBR, including Accenture (NYSE: ACN), Atos (Nasdaq: ATOS), Capgemini, Deloitte and T-Systems, consistently expanded services and contracts surrounding related capabilities, such as cloud, blockchain and automation, feeding these healthy verticals. However, vendors and clients faced numerous challenges as the pandemic hit, such as the need to shift to remote work environments and the need for digital, e-commerce and contactless solutions. In 1H20 most vendors focused on client retention and headcount management, rather than entertaining expansionary strategies. Europe, which felt the impacts of the pandemic in its early months, was among the first to experience a need for digital alternatives, evidenced by accelerated demand for digital infrastructure, banking and payment solutions, benefiting IT service vendors and the struggling European economy.

As consumers faced pressures to go cashless, demand for contactless payment alternatives increased dramatically. While the financial and public sectors had been prioritized in 2020, as they typically make up a large percentage of IT service vendors’ revenues, the retail vertical contracted drastically as lockdowns and supply chain challenges impacted inventory levels. So, while tailoring contracts and generating solutions to attract clients in the financial and public sectors was imperative in the thick of the lockdowns, addressing challenges in retail will complement vendors’ efforts in other verticals as well. From an influx of credit card and debit card usage to increased demand for Apple Pay and other tap-to-pay capabilities, retail clients of IT service vendors were transitioning their client-facing solutions to meet the demand to go digital.

For example, in 4Q20 Atos announced it will use the Atos Codex Internet of Things solution to develop and run nutrition company Goli’s cashless and contactless vending machines, which will be deployed in numerous environments such as shopping malls and airports. The solution also leverages cloud technology to connect cashless payment alternatives and digital wallets to the network. Additionally, Atos holds shares in Worldline, a payment and transaction services company that offers a strong digital payments and contactless solutions portfolio, along with a collaborative partner network. In December Worldline partnered with P3 Financial Group to bolster the real-time digital commerce and e-payments ecosystem in much of Europe.

Other vendors have taken similar action; T-Systems Hungary drove real-time payments on a single platform for ACI Worldwide (Nasdaq: SCIW) in September, strengthening regional initiatives to meet expectations for safer and more secure vertical operations, and Capgemini partnered with SharpEnd and The Drum to develop CornerShop, a retail innovation store that is helping brands, retailers and shoppers utilize technologies to transform their shopping and customer engagements in preparation for the post-pandemic world. Further detail and analysis on the store are available in TBR’s 4Q20 Capgemini report.

Previous investments in emerging tech like blockchain paved the way

Going back about 10 years, digitization drew consumer attention in the mid-2000s, when in-house cloud computing caught fire and distributed ledger technologies emerged. Leveraging blockchain, cryptocurrency entered the market as a private payment alternative that offered greater security and cut out banks altogether. Bitcoin, arguably the poster child of cryptocurrency, quickly became an investment tool for many users, though its position as a go-to currency in the black market and, more importantly, its price volatility made its use an unpopular choice for the average consumer.

Changing regulations related to IT technologies, such as blockchain and digital assets, have challenged Europe-centric vendors despite the opportunity to capitalize as consumer preference shifts to digital. IT services vendors covered by TBR will likely face new contract and deployment challenges in the region, alongside pre-existing obstacles related to the COVID-19 pandemic. TBR believes a greater focus on digital and contactless payments, e-commerce, and digital banking and currencies from vendors will be an important aspect of economic regrowth in Europe and lead to adjustments in financial, public and retail verticals to better complement one another.

Digital twins, innovation and Godzilla: 3 IT services trends for the rest of 2021

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Digital twins, supply chains and IoT fuel near-term opportunities

Increasingly in 2021, IT services vendors and consultancies will expand their offerings around digital twin solutions, reacting to both the maturation of the technology enabling digital twins and the heightened awareness, brought on by the pandemic, of the value of digital twins, particularly in the manufacturing space. Vendors that have acquired manufacturing sector expertise or can build on legacy capabilities around product engineering services should be best positioned to expand within existing clients and grow market share.

As digital twins become part of the supply chain, consultancies will likely use IoT-enabled solutions to mitigate some of the challenges brought forward in the pandemic, when manufacturers over-rotated on supply chain optimization without sufficient consideration for broad-based ecosystem risk. As technology vendors, such as Microsoft (Nasdaq: MSFT), strike new partnerships to bring cloud-enabled analytics to shipping, opportunities for IT services vendors and consultancies will expand for interoperability across supply chains, orchestration of technologies and data, and change management. This will be especially true as manufacturing clients with legacy machinery look to move to the cloud following the pandemic-induced stampede by all industries to cloud.

Key marker for TBR as 2021 unfolds: The number of IT services vendors’ and consultancies’ SAP-specific engagements in the manufacturing sector

Notable recent vendor activities:

  • As cloud becomes Accenture’s (NYSE: ACN) de facto technology driving services opportunities, the company is also building relationships with local leaders to create alternatives to widely adopted supply chain channels that COVID-19 highly disrupted. For example, the purchases of REPL Group and GRA will bolster Accenture’s supply chain consulting and operations capabilities across the U.K. and Australia. At the same time, Accenture collaborated with data intelligence vendor Ripjar to jointly support Royal Dutch Shell’s efforts to enhance its supply chain screening capabilities.
  • In 1Q21 Tata Consultancy Services (TCS) launched the Autoscape Autonomous Vehicle (AV) Solutions suite, which provides data services and tools to accelerate AV development for OEMs, startups and other players in the AV ecosystem. Establishing itself as an innovative partner in spaces such as AV development and leveraging deep domain expertise help TCS pursue high-value business advisory services.
  • Enterprises in the manufacturing sector weathered the worst of the pandemic at the beginning of 2020 and made the necessary run-the-business operational changes to improve operational efficiency and reduce costs. As such, Atos (Nasdaq: ATOS) evolved its relationships and is currently working with clients to ensure their IT environments and workforce processes are modernized, secure and digitally enabled, and their operations are resilient. Atos is offering the benefits of cloud infrastructures through the Atos OneCloud portfolio initiative aimed at modernizing clients’ applications and improving business processes through industry-specialized cloud solutions and acquisitions, such as that of Maven Wave, which added cloud and technology consulting capabilities, notably around Google Cloud, and Miner & Kasch, which added AI and machine learning capabilities.

For additional information, see TBR’s upcoming IT Services Vendor Benchmark in June, which will contain a special section on manufacturing, as well as TBR’s quarterly reports on the vendors mentioned above.

Give me innovation, not transformation — or maybe the other way around

As dramatic operational fluctuations stemming from the pandemic — with companies scrambling to first ensure employee safety and well-being, then secure productivity and push for a return to growth — begin to level off and move into more normal cadences and reliably predictable financial performances, enterprises forced to be resilient and innovative in 2020 have begun expecting increased innovation and transformation from their IT services vendors. Run-the-business and cost-cutting engagements, paired with cloud adoption, drove revenues through the second half of 2020; innovative strategies to take advantage of a massively disrupted market and transformation to take advantage of the cloud will drive revenues through 2021.

After a year of risk and worry and a period focused on optimization and stabilization, enterprises have returned to pilot projects aimed at internal disruption and capturing new market opportunities. This trend increases consultancies’ stickiness with clients in the short term, while opening those consultancies to risks of losing market share as more technology-centric IT services vendors use cloud and an entry to IT transformation. In the words of one IT services vendor senior executive, “Innovation is strategy; transformation is a repeatable framework. Get the expensive consultants for innovation and the cheaper offshore-centric services vendor for transformation.”

Every quarter, TBR’s Professional Services and Digital Transformation teams consider trends across the IT services industry, expected impacts on leading vendors, and opportunities for further competitive differentiation and separation. We then fold these trends into our ongoing research and examine how each vendor responds, often through speaking directly with the vendors to assess their positioning against these trends and expected opportunities.

Know your consultancy: EY’s FinCrime practice and the future of compliance

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Be the frictionless provider of FinCrime services

Ron Giammarco, leader of EY Global FinCrime Managed Services, described EY’s foundational principles for the financial crime practice in both technology and business model terms, noting that the firm has been committed to making every new offering cloud-native, but still deployable on premises. EY’s FinCrime practice, which was established 20 years ago, generates $1 billion in annual revenue, and there are over 30 clients on the firm’s FinCrime technology platform. To further its business, EY is determined to own the technology ecosystem, including all the intellectual property within the practice and every aspect of the relationship with clients.

In Giammarco’s view, EY should provide “frictionless” experiences for clients using its different platforms and solutions, with EY smoothing out any underlying technology or partnering issues. To offer those platforms, Giammarco noted, the firm has decided to acquire and partner as much as possible, building assets internally only when needed. In TBR’s view, these foundational principles reflect a shift in EY’s approach to technology and the firm’s overall ecosystem.

Embracing the business model shift and the substantial financial investment needed to be a technology company — at least to the degree EY is now — requires reorienting around the current competitive and partnership landscape, not the more siloed and opaque environment of several years ago, when digital transformation emerged as a challenge to the traditional consulting business model. Among the significant changes, Microsoft (Nasdaq: MSFT) and SAS now list EY’s offerings within their own services catalogs, and EY expects those partners to not only provide technology support but also engage in sales efforts and the onboarding of new clients.

EY’s differentiation: Expertise, discipline and global standards

Within this changed competitive and partnering environment, EY has been challenged to differentiate from peers, an effort TBR has tracked across Strategy and Transactions, Blockchain and other EY practices. For Nic Bastable, leader of EY Global Financial Crime Managed Services Delivery, the firm’s uniqueness has coalesced around three main characteristics. First, EY has developed deep domain expertise, which continues to evolve. Bastable explained that every FinCrime interaction, even through a managed services arrangement, has eventually led to an analyst helping a bank make a financial crime risk decision, which has involved more than just following simple procedures.

EY has invested in its professionals, building career tracks for FinCrime analysts and providing ongoing training, which led the firm to have, in Bastable’s opinion, differentiated expertise. Second, within the complex environment of helping banks make decisions about risk, EY has exhibited tight operational controls — essential at the global scale of EY’s services and to meet clients’ needs. Third, over years of providing FinCrime services, EY has created a global standard operating model, distilling best practices from dozens of engagements, by thousands of professionals, across more than a million events. Underlying all this, according to Bastable, EY brought automation and efficiency to the firm’s operations and delivery, further differentiating the value of EY’s services.

In TBR’s view, while each of the core elements of EY’s FinCrime practice does not separate the firm from specialists or niche services providers, the combination, particularly with global reach and substantial scale, gives the firm a compelling story. Overall, EY’s FinCrime practice does not depend on setting itself apart from peers, especially as professional services firms rarely differentiate from one another; instead, EY succeeds through solidifying trust by offering domain depth and delivering.

With Nuance, Microsoft buys into healthcare and more

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Microsoft announced its second largest acquisition in company history on April 12 with its intent to purchase Nuance Communications for $19.7 billion. Nuance’s presence in the healthcare vertical was touted as driving the move, but TBR believes much deeper and broader strategies were behind Microsoft’s decision.

Buying Nuance gives Microsoft an opportunity, but not a guarantee, to sustain growth

The announced acquisition of Nuance is the culmination of multiple elements of Microsoft’s recent performance, strategy and growth plans. On performance, Microsoft has benefitted from the COVID-19 pandemic perhaps more than any other technology vendor. Technology demands of businesses and consumers reacting to the pandemic boosted nearly all of Microsoft’s sprawling businesses, aside from an initial downturn in advertising spend that negativly impacted the LinkedIn business. From a strategy perspective, industry specialization has been a growing focus for Microsoft over the past five years, which is a shift in its mostly horizontal technology approach throughout its long history. Healthcare has been a frequent focus, but so too have retail, manufacturing and financial services specialization.

Lastly, in growth, Microsoft has been searching for the next $10 billion plus growth business. Microsoft Office 365 and Azure are clearly carrying Microsoft’s financial performance to date, but new addressable markets are needed to carry corporate growth and profitability for the next decade. While Nuance itself cannot assume that burden, the capabilities Microsoft will acquire will make many of its core technologies relevant to a much wider audience and set of use cases. In this way, the purchase of Nuance is similar to that of LinkedIn, with the full value of the investment hinging on successfully leveraging the technology to benefit as many other business units as possible.

Healthcare is large and ripe for IT investment

Unsurprisingly, healthcare has a profound impact on modern society, with an industry size to reflect that. In the U.S. alone, healthcare spending was $3.8 trillion in 2019, representing 17.7% of total gross domestic product (GDP). Furthermore, healthcare spending increased by 4.6% in 2019, a rate far outpacing growth of the overall economy.

Those facts are only part of the reason healthcare is such an attractive market for IT companies. While many verticals have fully embraced technology-driven transformation over the past decade, healthcare has been much slower to change. While technology has fundamentally changed the retail experience and business model, healthcare’s core operations and customer experience have remained much the same. Delaying this maturity in part are the strict regulations, such as the Health Insurance Portability and Accountability Act (HIPAA), which healthcare entities in the U.S. must meet, creating substantial risk for any IT budget decision makers planning to modernize their environments with cloud, let alone pursue innovative technologies such as IoT to improve the care they provide to patients.

There are glimmers of promise that the healthcare vertical is ready to begin transformations driven by increased technology adoption. Part of the shift is a generational change in doctors and providers. The influence that doctors have within the healthcare industry is one of the attributes that makes the healthcare vertical unique. Generational change among the physician ranks is having an outsized impact on the acceptance of technology within healthcare, but that is only one of the factors pointing to an increase in technology adoption.

Outside of shifting perception, the impact of COVID-19 has forced hospitals and patients alike to embrace solutions that have been around for years but are now a necessity to maintaining the patient-doctor relationship and safety, such as telemedicine. And with all major cloud technology providers offering HIPAA compliance, along with an ecosystem of partners that can leverage those delivery platforms, the aforementioned regulatory requirements are now less of a barrier in slow technology adoption.

COVID-19 will fade, but cloud reliance will remain

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The COVID-19 pandemic and its wide-ranging effects forced businesses to adjust in 2020 and now into 2021, but these changes will persist much longer than the pandemic. Most businesses made a wide range of changes to their IT strategies over the past year, but there are a number of commonalities. The first commonality is that technology is at the heart of how organizations have adjusted to COVID-19’s effects, to service their own employees and the changing needs of their customers. Cloud-delivered technology, in particular, has been core to providing the speed and scalability needed to support these adjustments in the most agile manner possible. The other commonality in COVID-19 responses is that organizations found a way to support increased technology spending, even in a time of much economic uncertainty. Cloud investments were prioritized during the course of 2020, which is reflected in the overall stability and continued growth of the market throughout the year.

Figure 1

AWS, Microsoft Azure and Google Cloud Platform are even more critical to the IT industry

While the market continued to grow and leading firms maintained their momentum, they were not unscathed by the effects of COVID-19. Vendors experienced a dip in revenue growth rates during 2Q20, at the height of uncertainty and pessimism. The dip was driven by businesses pulling back spending in anticipation of a pronounced economic slowdown. Even though COVID-19 infection rates grew worse through the end of 2020, economic expectations recovered and the uncertainty around how COVID-19 would impact business results diminished, putting cloud revenue growth from the leading vendors back on previous trajectories. Though the business strategy and dynamics were much changed, the continued growth of the leading firms was back on track.

In many ways, COVID-19 accelerated but did not actually alter the course of cloud technology’s impact on the IT market. As a delivery method, cloud was already eroding traditional IT and far outpacing the overall growth in spending. Most customers had some level of cloud investment prior to 2020, with many using cloud solutions for mission-critical elements of their enterprises. After a year of dealing with pandemic-driven disruption, cloud utilization has grown significantly. Cloud adoption happened faster than most organizations planned moving into 2020, as business changes forced customers to overcome cultural, budgetary and technological barriers in making adjustments to their operations. The good news for cloud vendors is that this change in behavior should last well beyond the direct impacts of COVID-19. The challenge is how to meet this enhanced level of demand, which requires investment now to get additional data center capacity and services online ahead of increased needs. The market may have reached this place eventually, but both customers and vendors are accelerating their cloud strategies to account for the more prominent role cloud will play in the overall IT market moving forward, even as COVID-19 fades, hopefully sooner rather than later.

Atos firing on all cylinders as it overcomes COVID-19 headwinds and expands in North America

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Building industry-specialized expertise increases Atos’ value proposition around delivering business outcomes to clients

While Atos’ (Nasdaq: ATOS) revenue growth and profitability in 2020 were negatively affected by the pandemic, the crisis pushed the company to strengthen its focus on clients and industries. Atos is working with clients to enable business continuity, such as by facilitating work-from-home environments, providing agile infrastructures and tackling cybersecurity challenges, and to address client priorities, such as cost optimization, deployment of digital workplaces, and acceleration of digital transformation. The company’s pivot to an industry-aligned go-to-market approach to better address clients’ specific business challenges and its consistent acquisition strategy over the past year to gain niche capabilities in segments such as digital security, cloud and applications consulting, systems integration, AI and big data consulting, and decarbonization services improve the company’s ability to alleviate external revenue growth pressures due to tight spending.

Atos reached its financial targets during 2020 despite the challenging pandemic environment

Market uncertainty and volatility brought on by the COVID-19 pandemic forced multiple IT services vendors to forgo setting financial objectives for 2020. However, Atos was confident about its performance and, in April, established its 2020 revenue, operating margin and free cash flow objectives, which the company achieved by the end of the year. Atos estimated that revenue would decline between 2% and 4% organically for 2020 due to the negative effects of COVID-19 and reported a 2.3% year-to-year organic revenue decline, in line with the company’s projection. Operating margin before other expenses decreased to 9% of revenue in 2020 from 10.3% in 2019, an anticipated contraction due to pandemic-driven revenue declines; however, the metric was within the targeted range between 9% and 9.5% of revenue for the year.

The company’s efforts to reshape its portfolio, including by expanding its offerings around digital, cloud, security and decarbonization, and align its go-to-market approach to six industry groups positively affected commercial activity. Atos’ highest quarterly bookings level since 1Q19, continual emphasis on digitally certifying its employees, and investment in 12 bolt-on acquisitions since February 2020 will support revenue growth improvement in 2021. Atos’ goal is to grow revenue between 3.5% and 4% year-to-year in constant currency in 2021, and TBR expects Atos to meet its revenue growth goal as the company expands its portfolio, such as through the OneCloud initiative; continues it active acquisition pace; and maintains a strong deal pipeline.

2021 Atos North America Analyst and Sourcing Advisor Event: Social distancing, country lockdowns and travel bans due to the pandemic pushed Atos to continue hosting the virtual analyst event series the company initiated in June 2020 with its first global Atos Analyst Days event. Focusing on Atos’ North America regional business, the March 2021 event provided analysts with rich content through prerecorded executive presentations on topics such as strategic priorities, sales and business development, talent advancement, and Atos|Syntel business updates as well as deep dives on six regional industries: the media, the public sector and defense, retail, manufacturing, healthcare and life sciences, and financial services. The sessions were augmented by live one-on-one meetings with Atos’ executives, which enabled TBR to gain a deeper understanding of the topics and valuable insights from Atos’ executives as well as provide our own view and assessment on the covered topics. Having access to prerecorded presentations several days prior to the one-on-one meetings allowed TBR analysts to watch the videos at our own pace.

Aiven’s managed services capabilities bring the best of open-source data technologies to multicloud enterprises

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With a core portfolio of platform services, Aiven meets the needs of developers, partners and the cloud-native enterprise  

Aiven was founded in 2016 by a team of open-source and cloud experts based in Helsinki who sought to develop a data management platform that capitalizes on the needs of more mature customers who are increasingly leveraging open-source software. As such, many of Aiven’s clients come already knowing what they want in terms of stream processing frameworks, databases, search engines, visualization and analytics. The core driver of value is Aiven’s ability to orchestrate data on a single management platform, which entails getting customers up and running with minimal deployment lag and enabling the integration with existing tool sets on any cloud. The dedication to a robust support model and transparent pricing with lower costs than many competitors are additional underlying factors that position Aiven to continue growing on pace with the expanding Database as a Service market (DBaaS); for reference, in just the last eight months the company has doubled in size to about 150 employees and is backed by a strong venture capital engine, including the company’s latest round of Series C funding worth $100 million, as well as solid new and recurring revenue streams.

Despite coopetive dynamics, Aiven benefits from allying with leading hyperscalers to support clients’ need for multicloud

As multicloud is a core component of its value proposition, Aiven provides customers availability by partnering with all three major cloud service providers (CSPs), including Amazon Web Services (AWS) (Nasdaq: AMZN), Microsoft (Nasdaq: MSFT) and Google Cloud (Nasdaq: GOOGL). In addition to Aiven’s services being made publicly available on the marketplaces of both Google Cloud and AWS, these relationships allow Aiven to provide enterprises with a way to build the services and applications that are enabled by databases on leading public cloud infrastructures, as well as offer a simple migration path for legacy customers. TBR notes that over 10% of Aiven’s customers are provisioning different services to multiple clouds and that many of Aiven’s adopters come knowing specifically which databases or monitoring tools they want to use and where they want to deploy them. While many customers often start with a preferred cloud partner, they ultimately seek to expand to other platforms for greater development autonomy and to avoid vendor lock-in. As a result, TBR believes Aiven’s role as an orchestrator for multiple database services across clouds positions the company uniquely in the market, as Aiven provides customers the degree of neutrality and third-party support required to navigate and manage various dispersed open-source projects.

However, as Aiven offers nine core services — including the widely deployed open-source platform tools Apache Kafka, PostgreSQL, MySQL, Cassandra, Redis, Elasticsearch, InfluxDB, M3 and Grafana — there is a large degree of coopetition as Aiven’s partners offer related services on their clouds and, in some cases, the clouds of other CSPs. The increasingly open, hybrid multicloud approaches of vendors like Google Cloud and even IBM (NYSE: IBM) will prove competitive, yet TBR believes Aiven still challenges its partners when it comes to enabling open-source innovation and helping enterprises deliver this innovation at scale. Meanwhile, as customers increasingly look for a partner to avoid vendor lock-in, Aiven is well positioned to challenge many vendors that trail the market in providing a degree of vendor-agnosticism.  

Open-source technology has become less of a value differentiator and more of a foundational attribute that customers in the cloud database market have come to expect. Vendors in the space must now embed other feature sets and functionality to stand out and navigate the common challenges faced when it comes to modern app development and operational management in the cloud. However, customer expectations go beyond avoiding vendor lock-in, one of the known benefits of open-source technology, to include reducing TCO while improving time to market, security and reliability. Aiven is a managed cloud database services vendor that delivers a unified data platform for both traditional and cloud-native customers looking to deploy data architectures seamlessly and across multiple clouds. By capitalizing on managed cloud services, Aiven has created a way for customers to build, deploy and manage various open-source database management and analytics tools in a self-service manner. With a variety of deployment methods available to customers in conjunction with the benefits of automated security, scalability and resilience, Aiven has demonstrated this value proposition by building a customer base that crosses multiple industries and highlights both customer-facing and back-office analytics use cases.