The journey to capitalize on the edge is rooted in deep telco experience, coupled with a passion for breaking boundaries

A brief history lesson is important to understand how mimik came to be. It was during her tenure as CEO of Vodafone xone that mimik CEO and founder Fay Arjomandi realized the growing importance of decentralizing data analytics and processing to the edge. Through the testing of capacity improvement and utilization of network traffic, Arjomandi noted the inherent delay that occurs when traffic hits a data center, causing extensive issues such as bottlenecks as data struggles to reach the back end of the application. This was all occurring in the context of the rapid evolution of devices themselves, increasing not only in sheer volume but also in sophistication.

Arjomandi came to the realization that the existing architecture of the time was not equipped to support the ongoing shift to a hyperconnected digital world where almost every object can be smart. The future is not about vertically integrated devices that communicate in a linear fashion to the cloud or on-premises data center environments, but rather will be rooted in horizontal platforms where data can be processed and exchanged across diverse networks, platforms and systems. Created in the context of IoT but viewed with new eyes as the Internet of Systems versus “things,” mimik pioneered a new architecture in the form of a hybrid cloud edge solution that enables any computing device to act as a cloud server with the ability to communicate autonomously and locally and to make decisions across and within networks. 

Empowering local systems to make autonomous decisions is mimik’s core value 

By virtue of placing enterprise applications closer to where data is created and where insights are actionable, edge devices have always maintained some degree of autonomy. That said, there has also been an underlying perception that the cloud has an umbilical-cord-like function in that it ultimately serves as the main governing force and point at which most of the data is processed, analyzed and housed. mimik has cut the cord, recognizing that as IT becomes increasingly decentralized, localized servers and sensors are evolving beyond mere endpoints and becoming part of powerful systems that can function independently of the cloud. mimik’s Hybrid edgeCloud application development platform was born out of the realization that applications can interact locally with the power to function as clusters of communities that communicate, inform and analyze data at the source.

The edge has traditionally been viewed as a localized extension of the cloud, providing a 1+1=3 opportunity to capitalize on the inherent benefits of the cloud with localized data processing and reduced latency. In the context of an increasingly hyperconnected world, the devices and sensors that interact at the edge are taking a central role, driving more and more use cases, rather than acting just as add-ons to amplify the value of the cloud. By focusing on what devices can accomplish as part of interconnected systems at the edge, mimik, a Canada-based technology firm, has emerged with an advanced out-of-the-box solution, Hybrid edgeCloud, which enables any computing device to act as a cloud server. The multiple positive implications include lowered latency, reduced constraints on network bandwidth, heightened security and decreased cost of cloud hosting — all due to the reduction of traffic traveling to and from the cloud and the enhanced connectivity within and between systems of devices.

In February TBR virtually attended the Global Technology & Business Services Council’s Global Series: Open Talent conference and heard from leaders across the technology and crowdsourcing industries about emerging themes and trends. While it is not a new phenomenon, crowdsourcing is becoming a compelling delivery model in the IT services space as enterprises increasingly embrace remote services during the pandemic and seek out new ways to fill skills gaps, drive cost savings and accelerate engagement turnaround time. Platform-based crowdsourcing companies such as Topcoder and Freelancer.com, which TBR heard from during the conference, are rapidly expanding their communities of technology-oriented freelancers and driving new use cases with large enterprises that would have traditionally gone to IT service vendors. In TBR’s view, vendors that are not embracing this shift stand to lose the most. At the same time, we question whether those that bring this model to market are really positioned to gain much.

Existential threat or just a piece of the puzzle?

Now more than ever, crowdsourcing and open talent models are proving to be significant disruptors in how services are delivered, and technology appears to be an area that can benefit the most from this trend. Prior to the Global Technology & Business Services Council (GT&BSC) event, our understanding was that organizations engaged with the aforementioned crowdsourcing platforms mostly around the ability to tap large pools of talent much faster and cheaper, but largely for low-value, task-oriented services. To our surprise, during the event TBR learned about use cases in which Fortune 500 companies and renowned research institutions turned to “the crowd” for sophisticated software and data services, which led to significant improvements in speed, cost and even quality. For instance, a coalition between several enterprises and academic institutions such as Harvard and the Massachusetts Institute of Technology (MIT) opened up a project to the Topcoder community around the optimization of a DNA sequencing algorithm, with the goal of surpassing what had been regarded as an “impossible” threshold. Dozens of submissions crossed the threshold within 24 hours. At first glance, the use of these platforms for high-value services poses a threat to IT services vendors, but TBR notes some caveats.

White-labeling labor

It is necessary to point out that the majority of IT services vendors’ activities in the crowdsourcing space happened pre-pandemic. For example, Wipro (NYSE: WIT) made a splash in the industry when it acquired Topcoder in 2016. And in the years following this, other vendors such as DXC Technology (NYSE: DXC) and Deloitte pursued partnerships that enabled the vendors to launch crowdsourcing services by tapping into Topcoder’s labor ecosystem. First, this distorts the image of crowdsourcing platforms as competition and instead reflects a more symbiotic relationship. Second, while Wipro might be able to take a small commission on engagements done through Topcoder, it lacks a significant competitive advantage over peers that partner with it or other similar platforms.

Security and trust

Soliciting bids from unknown global technologists presents obvious risks. This model is not suited for workloads involving sensitive data and therefore is not gaining the same traction in industries such as financial services or healthcare, where data security and privacy are top concerns. IT services vendors that cater to this clientele will be much more capable of steering clients away from crowdsourcing services and commanding profitable revenues. Similarly, many firms’ value propositions revolve around the reputation of the company and its quality of services, helping them garner more trust-based relationships. Clients seeking this level of service will largely be uninterested in crowdsourcing. This concern will also put pressure on services providers that partner with crowdsourcing platforms, as well as the platforms themselves, to establish guardrails against potential leaks or security breaches, but it remains no easy task to vet millions of global freelancers.   

Bottom line

These platforms are intended to optimize costs and speed. While IT services vendors likely do not want to miss out on any opportunities to engage with potential clients, partnering with a crowdsourcing provider and delivering the cheapest possible services will limit margin growth. Instead, we see opportunities for vendors to embed this open talent model into their organizations to improve utilization and more efficiently deploy staff. We learned during the GT&BSC event, for example, that Deloitte partnered with Freelancer.com in 2019 to develop an internal marketplace for Deloitte’s employees to join open projects within the firm and integrated the solution into the Freelancer.com ecosystem so Deloitte could extend its pool of external resources if needed.

What the future holds

If anything has stood out during the pandemic, it is that incumbents in every industry must be prepared to quickly pivot and adjust to new and nontraditional ways of doing business. In the IT services space, TBR believes disruptions such as the gig economy and crowdsourcing pose the biggest threat to management consulting firms, where generational and technology shifts are creating instances in which enterprises may opt to collect third-party opinions and advice through these types of platforms instead of via expensive consultancies, which can be as enigmatic as unidentified, crowdsourced respondents. In general, IT services vendors that have established pathways into this type of model will benefit from bringing new logos into account ecosystems, which will provide opportunities downstream to upsell higher-value services. We anticipate crowdsourcing will continue to play a supplementary, but necessary, role in IT services as a way for companies to easily scale services at the expense of security and margins. But much like organizations’ hesitation to fully embrace the cloud for their IT ecosystems, taking a hybrid approach to “the crowd” will likely remain the preferred method for most enterprises to minimize risk while still reaping the benefits of scalability and speed that the crowdsourcing model offers.

TBR’s Professional Services practice will continue to monitor the trends outlined above and provide analysis across our syndicated vendor reports and benchmarks, notably the IT Services Vendor Benchmark and Global Delivery Benchmark. The next iterations of these two products, which synthesize TBR’s in-depth analysis and data across covered vendors, are set to publish in April.

Not everything about business is technology, but every business has to leverage technology everywhere

Over the last few years, executives discussed redesigning their businesses for the safe, secure and accurate flow of actionable data with as little human involvement and oversight as possible, a change Google describes as removing the “human toil” from economic activity. Business leaders called this process optimization, a process often resisted by employees which in turn slows an organization’s digital efforts. Organizations big and small have been forced to embrace a cloud- and digital-first posture to maintain business continuity and participate in everyday economic activity. In short, these efforts are being done to maintain relevance. As a result, nontechnology-savvy executives and employees will exit the workforce exponentially over the next five years.     

In this transformative period, future managers train now at new entry-level IT jobs, even as IT services vendors and other players in the technology ecosystem complain about a shortage of STEM talent in the hiring markets. The talent that does come on in new roles spread across a digitally savvy enterprise understands application interfaces, which align human interaction with technology and data platforms. By entering the business in this capacity, the incoming talent gains experience across the various elements of the business operation that executive managers require while also ensuring they are fully digitally versed for the Business of One.

Adding further complexity has been the disaggregation of business functions or value among different business entities. In technology we see this as the IP-centric elements of a business being split away from the labor, or task-centric functions. Looking at semiconductors, for example, some on Wall Street are calling for Intel to be split between the IP-laden aspect of chip design and the capital-intensive aspect of fabrication plants capable of manufacturing those designs reliably at scale. They are two businesses with entirely different rhythms and economic drivers, yet neither can thrive without the other.

The work-around to this business disaggregation taking place is to establish a network of businesses with complementary value propositions. This network is increasingly being called the multienterprise business network (MEBN). Many technology-centric firms describe this as their platform. But platforms are a stage on which something is performed, and that performance is the outcome enabled by multiple different parties. As such, viewing MEBNs from solely a technology-centric view can miss the point entirely.

As the Business of One evolves, legacy technology vendors selling on technical merits, or speeds and feeds, and selling just to IT face tremendous market pressures to pivot to selling business outcomes. Today’s reality requires understanding customers’ busines objectives and speaking directly to business decision makers.

For Technology Business Research’s (TBR) Digital Practice, this necessitates taking our core value proposition of vendor-centric business analysis of technology companies across a standard technology business value chain and combining it with additional considerations about industries and the operating best practices of business ecosystems that tie back to the specific use case and the personas integral to that use case. After having established those core frameworks, the analysis then ties back to time horizon and MEBN participant. In short, what is in it for the MEBN participant at what stage (commonly referred to as Horizon 1, 2 and 3 in today’s frameworks) in the MEBN product road map.

To illustrate the intent here, consider the creation of an MEBN for the utilization, storage and maintenance of autonomous vehicles. Having autonomous vehicles moving about a defined geography would clearly be the Horizon 3 aspiration, which is nowhere near commercial reality today.

Horizon 1 would be delivering an immediate level of business value creation to entice the participants necessary for that Horizon 3 aspiration. For example, gas stations, mechanics and parking garages, at a minimum, will need to be recruited into the MEBN for autonomous vehicles. Later, additional services for the auto owner could be added such as online ordering with brick-and-mortar pickup across various nontech-centric small businesses providing localized services. Creating a buyer network in Horizon 1 for today’s cars and owners has to provide sufficient business value for enrolling participants.

The capital investment in the technology infrastructure likely must come from the Horizon 3 business benefactor and be viewed as a long-term investment to facilitate the recruitment of the necessary member participants. In the end, those autonomous vehicles will need the fueling, maintenance and parking services to function and the adjacent human services of pickup and delivery to increase their utilization rates beyond a source of human transport. Yes, it requires a technology value chain as its backbone, but nontechnology participants are just as necessary to flesh it out into a thriving MEBN of buyers and sellers who may not even concern themselves with the technology underpinnings at all.

More colloquially, few singer-songwriters would have the capital necessary to build the technology assets for downloading music over the internet. But once Apple took a long view to their investment posture, it was able to build out a robust MEBN that profited many artists, disrupted traditional nontechnology businesses, and delivered value to many customers in the form of the iTunes platform, which itself has been disrupted by streaming services such as Spotify and Pandora.

TBR’s Digital Practice remit is to take its core value proposition of discrete company business model analysis and apply it to the MEBNs by isolating the different components through a series of frameworks. In doing this, we will then be able to assess the financial impact for the different member participants across the near-term, mid-term and long-term horizons.

Industries have different automation leverage points, enabling different personas; inexpensive tech makes possible a myriad use cases

Compute ubiquity has been well documented. The multimillion-dollar supercomputer performance of yesteryear is now contained in smartphones. The first IBM PC chip, the 8088, is now matched by CPUs the size of a grain of sand that cost $0.10 to produce. Historically, the heavily regulated industries of financial services and healthcare were early technology adopters, given the risk exposure of noncompliance with government regulation. As the cost of compute was brought down to incredibly inexpensive price points, compute expanded from those back-office functions into front offices. Today, we are at a point where, as on EY executive summed it up in analyst interaction when peppered with multiple questions: “We can do whatever you want; you just have to make up your minds.”

Making up our minds translates into codification of standard business results to digitize activity in a consistent way, and this sits at the heart of multiple game-changing technologies including AI, machine learning and blockchain. And these are horizontal technological capabilities that cascade through a variety of industries. Retail, once cost-conscious, was one of the later industries to adopt technology. Amazon, as we know, has disrupted this sector at the detriment of many high-profile brick-and-mortar brands of yesteryear.

TBR will use this construct to incubate standard coverage of markets, facilitating a way to bring analysis of that market to a vendor-centric view. TBR’s Digital Transformation research portfolio will serve as the vehicle to introduce these frameworks. The inaugural Digital Transformation Blockchain Market Landscape is set to publish in April 2021 and Digital Transformation IIoT Market Landscape will be published in June 2021. These reports will follow a semiannual publication cadence.

Scale is king

Peraton’s purchase of Northrop Grumman’s (NYSE: NOC) IT services business and pending acquisition of Perspecta (NYSE: PRSP) are clearly aimed at obtaining the scale necessary to compete for large enterprise and digital transformation deals, which have become common in the public sector IT services market.

Peraton is hardly the first in this space to make such transformative purchases. SAIC (NYSE: SAIC) made two large acquisitions in two years with Engility and Unisys Federal in 2019 and 2020, respectively; General Dynamics IT (NYSE: GD) purchased CSRA in 2018; and Leidos (NYSE: LDOS) perhaps started the trend with its purchase of Lockheed Martin (NYSE: LMT) Information Systems & Global Solutions (IS&GS) in 2016. As federal agencies seek to modernize and transform their operations to take advantage of emerging technologies such as cloud, 5G, AI, machine learning, and AR and VR, large monolithic deals, such as the Next Generation Enterprise Networks Recompete (NGEN-R), Defense Enterprise Office Solution (DEOS), Global Solutions Management – Operations II (GSM-O II) and Joint Enterprise Defense Infrastructure (JEDI), among others, illustrate the importance of being able to deliver these technologies and surrounding services at scale.

Companies such as Leidos, General Dynamics Technologies (GDT) and Booz Allen Hamilton (NYSE: BAH) have come out as the clear winners on the vast majority of multibillion-dollar deals like the ones mentioned above, thanks largely to their ability to deliver digital transformation at scale and proven past performance. TBR believes this trend is only going to become more pervasive in 2021 as the federal government pursues continued IT modernization across defense, intelligence and civilian agencies. Alternatively, if the federal government begins to move toward smaller contracts in terms of total value and/or duration, Peraton’s newly acquired scale would no longer be an asset. However, this is likely only a long-term concern, as the federal government shows no signs of ramping down contract sizes or duration for the foreseeable future.  

Why Perspecta had to die

Perhaps nothing illustrates the importance of scale more than the death of Perspecta. When the company was formed from the merger of DXC Technology’s (NYSE: DXC) public sector business with Vencore and KeyPoint Government Solutions in 2018, the clear intention was to create a federally focused contractor of scale that could compete for the large transformative deals that have become commonplace. Most important among these was the NGEN-R contract, whose predecessor, the NGEN contract, was held by Perspecta and represented nearly 20% of the company’s total revenue.

Despite this, Perspecta was unable to win the $7.7 billion NGEN-R, which was awarded to Leidos and will begin to ramp up in 2H21, leaving Perspecta with a loss of 19% of its total revenue, which cannot be replaced quickly enough to avoid steep losses year-to-year.

Losing the NGEN-R bid put Perspecta in a very difficult place, beyond the obvious financial burden. The company’s leadership has fielded tough questions from Wall Street about where the company is headed without NGEN-R. Perspecta has been unable to win any comparable deals, such as DEOS or GSM-O II, on which it has bid in the last year or two. Additionally, the company does not have as strong of a portfolio in emerging technologies as many of its competitors, and it is highly unlikely Perspecta on its own could have returned to growth quickly enough to appease its stakeholders. In this context, it is clear that Perspecta needed to die. With its pending sale to Peraton, there is opportunity to reemerge as a more formidable competitor in the federal IT services market, free from the burdens associated with its past failures as part of Peraton.

On Jan. 27, Perspecta announced its purchase by Peraton, a Veritas Capital portfolio company, for an all-cash price of $7.1 billion. This acquisition comes on the heels of Peraton’s purchase of Northrop Grumman’s IT services business, which closed Feb. 1 (outlined in TBR’s special report End game for Northrop Grumman’s IT services business). The resulting company, which will retain the Peraton name, will be a $7.6 billion to $7.9 billion business on a pro forma basis with approximately 24,300 employees, in TBR’s estimates.

EY’s blockchain world

EY’s Asia-Pacific Blockchain Summit started with the firm’s Global Blockchain leader, Paul Brody, making three clear points. First, EY is committed to China and to the region, seeing huge potential for blockchain growth. Second, EY is committed to public blockchain as the long-term solution for most business and governments. Third, Brody’s concept of blockchain as the bridge between enterprises — as the tool to tackle the previously uncrossable chasm between different enterprises’ data and business processes — remains a driving force behind how EY sees the future of blockchain, in Asia and the rest of the world.

TBR’s December 2020 special report EY 2021: Hybrid and omnipresent discussed these latter two points: “Public blockchain, in Brody’s words, ‘will do for networks of enterprises and business ecosystems what ERP did for the single company.’ Brody added that conducting B2B [business-to-business] transactions over a public blockchain increases transparency and compliance with commercial terms.” The February event carried that discussion further, and specifically into Asia. 

EY and public blockchain in China  

Brody outlined a few major developments for EY in China, with all his comments reinforced by the subsequent panel speakers and EY professionals who provided additional color, both for the China-specific elements and developments impacting the entire region. In short:

• EY has formerly joined the Financial Blockchain Shenzhen Consortium (FISCO) and made the firm’s EY OpsChain solution available on the FISCO BCOS (Be Credible, Open & Secure) platform.
• EY intends to deploy its entire Ethereum suite of solutions to users in China.
• EY has fully localized its blockchain entrée — blockchain.ey.com — for the Chinese market.

In addition, Brody touched on the opportunity blockchain presents in Asia, highlighting China and the Chinese market’s emphasis on digital payments as a precursor to blockchain adoption as well as a robust startup scene. He also highlighted three sectors where EY has been “making exceptionally large” investments: financial services, supply chain and the public sector, which underscored one of Brody’s main points around the importance of public blockchain as the core, foundational building block. He noted that “money and stuff are tokens … contracts are a mix of legal agreements and business processes,” so all business could be conducted on the public blockchain, which is EY’s focus on enterprise solutions. 

On Feb. 2, EY hosted an Asia-Pacific Blockchain Summit, a virtual event run by the EY Blockchain practice based in Singapore that included EY professionals and clients, startup executives, and industry experts who are primarily, but not exclusively, based in Asia. The three-hour event included a keynote from EY Global Blockchain Leader Paul Brody, a blockchain solution demonstration, and panel discussions covering the technology, including the challenges and opportunities associated with blockchain and the broader emerging technology space. The following is TBR’s commentary on noteworthy announcements and participants’ assertions made during the event as well as EY’s overall blockchain strategy.