The rise of quantum components vendors

TBR research shows that quantum components vendors are gaining steam, even though a commercial-grade quantum system has not yet been made available. This is atypical and highlights the fact that the quantum computing market landscape is one in which discoveries are made in tandem across hardware, software and services — unlike the classical computing market. The variety of smaller firms working on quantum computing components indicates that once a commercially viable system is developed, scaling will be faster than if system vendors had to develop all unique components in-house.

Collaboration still has roadblocks

While the quantum community is working to remove communication barriers to increase the speed at which scientific discoveries can take place, there are roadblocks to fully open communication, such as governments incentivizing working locally and imposing barriers to exports such as tariffs. While you cannot place a tariff on thoughts, these types of actions could also hamper collaboration and information sharing.

The race for qubit volume continues

Qubit volume remains the key measuring stick of progress in the quantum computing community, and as a result, increasing qubit volume is a common goal across quantum system vendors’ road maps. However, physical qubit volume alone does not predict success. Achieving an increased volume of logical qubits will be the ultimate way that quantum system performance will improve.

TBR’s Quantum Computing Market Landscape, which is global in scope, deep dives into the quantum computing-related initiatives of key players in the space. It lays out the vendor landscape, details current leaders and laggards, and discusses the differing strategies of vendors in the market. The report discusses alliances as well as the tie-ins between quantum computing vendors and their nonquantum computing counterparts. Predictions around use cases and workloads that will benefit initially from quantum computing are explored as well as current customer sentiment around the technology.

Here comes hybrid

Hybrid engagements, in which IT services vendors and consultancies deliver both virtually and face-to-face, did not first arrive in 2020, but there has been one dramatic change from pre-pandemic days: universal acceptance that hybrid engagements will be necessary and can be a valuable way to conduct business. In 2021 vendors and consultancies with the perfect hybrid engagement model will outperform peers and accelerate consolidation across the IT ecosystem.

We always come back to the idea that services is fundamentally about people delivering value to other people. And for years, we have heard IT services vendors and consultancies extol the values of connecting humans and machines, expanding human experiences with artificial intelligence, and improving human work with robotic process automation. The human + machine future is here now, and it is hybrid. For many IT services vendors and consultancies, accelerating that digital transformation journey to hybrid engagements will require retraining talent, reconvincing clients of value and partnering differently across the ecosystem.

Maybe the best example of the hybrid engagement model for IT services vendors and consultancies is the application of hybrid in American schools as a reaction to COVID-19. U.S. elementary school teachers — whose average age is over 40 — have become more technologically adept and better at delivering lessons to both a camera and a classroom. Teachers have learned to manage virtual breakout pods and gauge virtual interactions. Students know the social benefits of being in the classroom but now understand that remote learning can include more depth and detail and a more concentrated learning process. (Of course, this is not true for all students and teachers, just as hybrid IT services and consulting engagements have not been perfect for all IT services vendors and consultants.) IT services professionals and consultants can now become far more adept at delivering both in person and remotely and have made collaborative technologies a natural extension of the job. Clients now receive services and adapt to different ways of working, recognizing the value, cadence and duration of services relationships can be sustained without face-to-face encounters. And just as everyone wants students back in the classroom full time, everyone also realizes on some level that some things have changed forever. No more snow days, ever. Business travel will never be the same. Digital transformations will accelerate and emerging technologies will increasingly permeate every aspect of IT services and consulting, bringing newfound speed and adoption both virtually and in person.

The following predictions examine how hybrid engagements might develop further in 2021, the potential impact of hybrid engagements on IT services vendors’ and consultancies’ technology partner ecosystems, and the revival of industry clouds across the entire IT market.

2021 Predictions

• Hybrid selling and delivery replaces face-to-face as the standard — and preferred — engagement model
• Emerging technologies necessitate more complex ecosystems, pressuring all players in IT services to partner differently
• Industry clouds return, with competitive consequences for it services vendors and consultancies 

Register for TBR’s 2021 Services & Digital Predictions webinar, Hybrid engagements will become necessary and valuable in 2021, Jan. 20, 2022.

Technology Business Research 2021 Predictions is a special series examining market trends and business changes in key markets. Covered segments include cloud, telecom, devices & commercial IoT, data center, and services & digital.

Certain uncertainty will accelerate cloud adoption in 2021

Despite living with the COVID-19 pandemic for most of 2020, so much remains uncertain. The timing and impact of a vaccine, whether or not there is additional government stimulus, and the changing economic environment will all have a profound impact on what occurs in 2021, and those are just the factors we know about. This uncertainty is reflected in TBR’s survey of 200 IT decision makers. When asked when they expect the business impacts of COVID-19 will subside, 78% of respondents expect the effects to subside sometime in 2021, but the responses diverge in terms of which quarter of 2021.

As a result of this continued uncertainty, flexibility in business operations and the IT resources that support them is more valuable than ever. Cloud was sought out based on necessity during the initial outbreak of COVID-19, but that behavior will persist in 2021 for two main reasons: flexibility and innovation. The ability to shift resources, enable more remote work, and scale cloud services up and down as needed are value propositions that resonate especially well in the current environment. Innovation is a broad concept and can cross analytics, integration and security realms. More generally, customers see value in the ongoing investments their cloud providers are making and in their ability to seamlessly access those enhancements. For these reasons, customers expect to accelerate their cloud adoption in 2021, regardless of exactly when the effects of COVID-19 subside. They may not know exactly what the business climate will hold, but they understand the flexibility and innovation that come with cloud-delivered solutions will play a role in helping them weather 2021.

2021 Cloud Predictions

• Industry clouds become the norm
• Partnership models support cloud demand in new era
• Containers will challenge the legacy virtualization model

Technology Business Research 2021 Predictions is a special series examining market trends and business changes in key markets. Covered segments include cloud & software, telecom, devices & commercial IoT, data center, and services & digital.

New realities lead to improved skills in engaging and delivering remotely

To start the session, Mohamed Kande, PwC vice chair and U.S. and global advisory leader, made two key points, which echoed throughout the rest of the session. First, Kande noted that after seven months of working through a pandemic, PwC had honed its skills in working remotely and delivering virtually, confident that the value PwC brought to clients had not been diminished by pandemic-induced disruption. Second, Kande explained that the firm had been honing its technology capabilities, looking at solutions that could be upgraded to improve virtual delivery, particularly around cloud, based on the spike in client demand for cloud-based platforms and applications. Shifting from global to regional, PwC’s David McKeering, Australia consulting leader and ASEANZ Consulting CEO, noted that challenges in emerging markets and mature markets had converged around similar themes, reflecting the international impact of the pandemic and the ubiquity of trends in technology, particularly around digital transformation. He added that PwC’s clients had moved quickly to adjust to the new realities caused by COVID-19, such as a nearly all-remote workforce, and, as they had begun to understand some of the benefits of new operating environments, were now looking to PwC to help make those changes around technology, productivity and resilience sustainable. McKeering optimistically commented that clients across the Asia Pacific region were talking about recovery and anticipating a return to growth in 2021.  

Building on the positives wrought by the pandemic

Regarding Australia, Tom Seymour, CEO of PwC Australia, said local clients, including business-to-consumer enterprises and government agencies, understood the need to interact digitally and accelerate customer-centric transformation strategies. He further noted that a more volatile M&A market drove opportunities for PwC to assist in stitching together various IT environments and digital transformation initiatives. Looking at the current market and anticipating trends around technology adoption and business model changes, Seymour predicted that execution on digital strategies would begin to separate winners and losers across the Australian economy. Julie Coates, PwC Australia’s managing partner and financial services industry leader, extended Seymour’s comments, noting that the firm has begun working differently with clients, including shifting from traditional time-and-materials commercial arrangements to collaborating on outcomes, a signal to clients that PwC has bought into their digital transformations. Coates highlighted the value of the BXT (Business, eXperience, Technology) framework in the way PwC engages with clients, noting in particular how the eXperience element frequently leads to broader discussions around digital transformation.

From their offices in Australia, PwC executives hosted a couple dozen regional and global analysts on Nov. 24 for a two-hour virtual session, highlighting local and regional leadership and a marquee client story. Notably for an analyst event, PwC spent less than half the time presenting and instead turned to the analysts for extensive question-and-answer sessions. TBR’s summary of the session is also informed by its ongoing research and analysis of PwC.  

Slack fits within Salesforce’s historical growth strategy

Salesforce (NYSE: CRM) has increasingly relied on inorganic growth to accelerate top-line revenue performance, such as its acquisitions of MuleSoft in 2018 for $6.5 billion and Tableau in 2019 for $15.7 billion. The addition of Slack (NYSE: WORK) would allow Salesforce to augment its robust, customer-focused products, including Sales and Service clouds, with Slack’s internal collaboration and communication platform, which contains a robust ecosystem of third-party integrations. Speaking about the acquisition during Salesforce’s 3Q20 earnings call, CEO Marc Benioff stated, “More than 90% of Slack’s enterprise customers are also Salesforce customers, but we also see how much further they can go.”

How much further Slack’s clients can go on their deployments will be contingent on Salesforce’s ability to articulate the value of the Customer 360 vision to the acquired clients. Execution of this portfolio strategy will be critical to complementing Salesforce’s inorganic growth by driving demand of existing front-office suites like Sales and Service clouds, in addition to broadening the company’s presence beyond the front-office with recent product launches like middle- and back-office-focused suite Revenue Cloud.

Integrating Slack’s value proposition with existing go-to-market efforts

The acquisition of Slack would bolster Salesforce’s Customer 360 portfolio strategy by adding a robust collaboration product at the center of the platform. This tactic mirrors recent investments by Microsoft (Nasdaq: MSFT) around Teams, such as tighter integrations with products like Dynamics 365, which, combined with enterprise needs as a result of the pandemic, accelerated Teams’ daily active user growth by a reported 53% from April to October. Further, the acquisition will increase the competitiveness of Slack in larger-scale multiproduct engagements, a dynamic the company struggled with in the past, given its lack of portfolio breadth compared to Microsoft. This is evidenced by Slack’s July filing of an antitrust lawsuit against Microsoft in the European Union, citing unfair market competition as the company frequently included Teams as a free trial within multiproduct bundles, such as Microsoft 365.

With this in mind, TBR believes the planned acquisition’s success will be contingent on Salesforce’s ability to integrate Slack’s value proposition as an internal collaboration into its customer-focused suites, thus allowing Salesforce to generate cross-sale opportunities within the acquired install base. For instance, Salesforce used investments around Work.com, a platform the company released in May in response to the pandemic, to create revenue opportunities from support for remote workforces. Specifically, Salesforce launched updates in September around employee engagement and productivity, including Employee Workspace, which provides users with a central hub to access and manage resources like learning platforms, payroll systems and collaboration applications, providing a clear path for integration with the capabilities that will be acquired from Slack. Aligning Slack capabilities with products like Work.com could help Salesforce differentiate Slack and use it to strengthen the Customer 360 portfolio strategy with clients.

After a week of market speculation, Salesforce confirmed ahead of its 3Q20 earnings call the company’s intent to acquire Slack for $27.7 billion, which would be the largest acquisition in the company’s history. The deal, which is expected to close in 2Q21, will be funded by a combination of new debt and cash on hand. The planned acquisition would inject an estimated $600 million in revenue in 2021, supporting Salesforce’s 2021 revenue guidance of approximately $25.45 billion to $25.55 billion, representing a yearly growth of about 21%.