COVID-19 necessitates data center investments, becoming a catalyst for digital transformation

COVID-19 shifts data center market demands as customers leverage the cloud to meet swift transformation needs

In 2020 IT decision makers around the world moved into highly reactive and tactical modes to mitigate COVID-19’s impact on their businesses, and data centers had to be provisioned rapidly for remote activities across all elements of the business stack, including IT. Although businesses’ initial response to the COVID-19 pandemic boosted certain on-premises provisioning, it also delayed large, services-laden transformation engagements. Economic uncertainty and uneven industry sector impact also saw some IT instances pivot to cash conservation. IT infrastructure vendors held strong against the murky IT backdrop, although some business shifted to ODMs more aligned to serving exascale cloud companies at the expense of more traditional or legacy technologies.

TBR believes this trend will continue through 2021. COVID-19 accelerated existing macro trends toward cloud-delivered technologies leveraging automation to strip away person-to-person contact from commerce. AI and machine learning (ML) will pull infrastructure along and push infrastructure deployments further to the edge.

Hyperconverged infrastructure (HCI) is the multifunctional building block for a lot of IT instances. HCI can sit at the ever-growing edge or in departmental or branch office data centers, and it can be used for modular scaling of private cloud deployments whether on premises or in colocation facilities. HCI growth, coupled with further cloud migration, pressures legacy and more traditional IT infrastructure. 

AI growth persists. Definition increases as emerging technologies become applicable to general use. Vendors and customers alike seek AI automation to strip labor’s hollow calories from all elements of business commerce and IT support. All these aspirations hinge on tight data governance rules and human compliance with those rules when putting data into the automation engine. That tight wrapper for consistent, shared information flows can be achieved through blockchain, described by EY Blockchain Head Paul Brody as the ERP equivalent for multienterprise business networks. 

This vision of the digital world also acknowledges the need for a new data engine to analyze the data and derive new insights to advance all elements of human existence. Quantum computing will be that new engine, and its performance will be to classical computing what the jet plane was to propeller airplanes. TBR expects 2021 to be a year with significant discoveries that push quantum computing further down the path to economic advantage. If deep scientific thought and “what if” analysis happen only when the world’s greatest minds can pursue their natural inquisitiveness, then it could be that COVID-19 generates the requisite science necessary for quantum computing to shift from discovery to emerging commercial application.

2021 data center predictions

  • Investments in 1H20 to modernize IT to meet COVID-19 requirements will lead to reduced data center hardware spend in 2021
  • Quantum computing advancements will persist, leading to an increase in M&A activity to consolidate capabilities
  • COVID-19 increases the presence of HCI in modern data centers

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.

EY 2021: Hybrid and omnipresent

TBR perspective

A few years ago in a wide-ranging discussion, TBR analysts and EY executives considered the future consulting business model, noting how most industries had been fundamentally disrupted by technology while consulting had seemingly remained unchanged. Fast forward to the current pandemic, and EY clearly anticipated where consulting was headed: hybrid engagements, delivered in-person and virtually, substantially aided by technologies, including big bets EY made on AI, blockchain and cybersecurity. In addition, EY has understood a significant shift in the IT services and consulting ecosystem, in which technology vendors’ needs have been supplanted by clients’ needs, making partnerships less about sales and marketing and more about delivery.

During the opening session of the Technology Analyst Summit, Dan Higgins, the firm’s Global Technology Consulting Leader, said clearly and definitively EY intends to become “the transformation consulting leader,” an ambition that requires best-in-class and scaled capabilities around technology, data, platforms, products and ecosystems. In Higgins’ view, one of EY’s strengths in tackling that ambition came from being able to bring the entire firm to bear at a client, from all aspects of consulting, as well as tax and strategy & transactions. The September Technology Analyst Summit and the one-on-one discussions with EY executives in the following weeks confirmed TBR’s assessment that EY’s evolution continues, undeterred by COVID-19.

In an expansive and informal discussion with TBR after the event, EY’s Global Vice Chair for Consulting Errol Gardner said the firm’s performance in the Asia Pacific region has returned to close to 2019 levels, adjusting more rapidly to the COVID-19 era than other regions. He predicted massive opportunities to consult with the government sector in Europe in the coming year as well as sustained uncertainty in North America (specifically the United States), all while noting that the current market does not favor new entrants or substantial account turnover, with most clients unwilling to take on additional risks associated with onboarding new consultants.

Gardner’s comments extended his Technology Analyst Summit opening remarks and provided some assurance that the radically changed business model for consulting would not lead to a radically changed EY, except in certain areas, such as remote working, diversity and inclusion, and resilience. Gardner also reinforced one of the overarching themes TBR took away from the entire event: The future is hybrid, which includes not just delivery but also how EY structures itself and continues to build its business. Beyond recruiting talent, building solutions and acquiring assets, Gardner reiterated the firm would be relying on ecosystem partners and expanding beyond traditional alliance structures to meet clients’ evolving demands. In TBR’s view, this approach to ecosystems has developed over the last few years as the firm has shifted from selective and limited alliances to a more expansive partnering model.

In a follow-up discussion after the Technology Analyst Summit, EY’s Global Business Consulting Leader Amy Brachio described an evolution of clients’ consulting needs and how EY tackles those changes. According to Brachio, clients previously brought EY problems that required a specific skill set or clearly defined capabilities to solve. As emerging technologies have forced changes to clients’ business models, EY has responded to more complex and transformational problems by bringing to bear the entire firm.

Frictions within the global firm that previously prevented more holistic responses have been minimized through resetting how EY looks at clients’ problems and how EY measures its own success. Rather than focusing on global total engagement revenue by competency (such as supply chain), EY has shifted to evaluating performance based on the buyer’s agenda and understanding which skills and capabilities the entire firm needs to bring to solve more complex problems. In TBR’s view, shifting from a traditional mindset around revenue metrics based on competencies to a client-centric, holistic understanding of EY’s role within a client’s ecosystem reflects the firm’s overall culture around purpose.  

Sticking to strategies and building alliances around security, AI and blockchain

Ever-expanding alliances with key technology partners have underpinned EY’s technology evolution over the past few years. Building on comments made during the Technology Analyst Summit, Global Alliance and Ecosystem Leader Greg Sarafin explained to TBR that the firm’s alliance remained grounded in joint solutions, integrated platforms and shared clients, not joint ventures or business groups. In contrast to other leading consultancies and global SIs, EY’s approach to partnering with technology vendors, particularly companies such as SAP (NYSE: SAP), IBM (NYSE: IBM) and Microsoft (Nasdaq: MSFT), revolves around definitive opportunities centered on EY-built platforms and solutions. For example, the firm has partnered with IBM Watson to create Diligence Edge, a due diligence platform that, according to Sarafin, substantially reduces the hours needed to “find the worms and the pearls … [to] accelerate the time to find issues and accelerate the time to value” for clients examining acquisition targets. Sarafin added that EY will “lean in on solutions” and “solve big problems” with EY-built solutions and platforms.

While EY may deliver some of these products as managed services, the firm’s primary business model will continue to revolve around the consulting, process re-engineering, integration and change management work necessary for clients to continue with their digital transformations. On that last element, Sarafin noted that COVID-19 brought religion to boards about the importance of digital transformation, ending the indecisive start-and-stop nature of many engagements and convincing EY’s clients they need to move to the cloud. As part of EY’s story on digital transformation, Sarafin shared with TBR that EY’s wavespaces would continue to evolve, becoming more tightly aligned with technology partners, such as Microsoft, or more industry-centric, such as around manufacturing in a to-be-opened wavespace in Ohio. (Note: TBR has written extensively on wavespaces and on innovation and transformation centers generally.)

EY Virtual Technology Analyst Summit: On Sept. 28 and 29, EY hosted analysts for a global EY Virtual Technology Analyst Summit, which showcased the firm’s technology-centric offerings and capabilities and included breakout sessions on functional areas, such as blockchain, security and analytics, as well as client success stories. The following includes information gathered during the event and in subsequent one-on-one discussions with EY executives.  

SAP and Ericsson in Egypt: Thriving in an expansive environment

Ericsson and SAP anticipate further expansion in Cairo

Ericsson has also leveraged this environment to support its global strategy, by tapping local talent in the fields of artificial intelligence, software development and digitalization. “It is the existence of the required competent engineers, with various backgrounds and capabilities, that makes it very attractive to operate in the country,” an Egypt-based Ericsson executive noted. Ericsson has been operating a digital services hub in the country to serve the Middle East and Africa region. The Ericsson executive stated, “Since we are covering the Middle East and Africa, Arabic is an advantage for working in Arab countries.

Egyptian professionals have relatively better English communication skills as well to add on top. Plus, Egypt provides reliable telecom infrastructure that can help different engineers to communicate and engage remotely with colleagues and customers.” According to Ericsson, the environment has been very encouraging to do more and serve on the global level as well. The Egyptian government has a strong focus on the ICT sector, is making more spectrum available to operators to improve mobile broadband experience, and has the aspiration to introduce 5G. In Ericsson’s estimation, Egypt is a firm believer in building a connected society and smart cities and is already executing on a solid national artificial intelligence strategy.

Notably, in October Ericsson announced the shipment of the first AI-enabled software developed at its Artificial Intelligence & Analytics Hub in Egypt to be used by Ericsson’s customers globally. According to the press release, “The AI & Analytics Hub has accelerated the execution of Ericsson’s focused strategy in Egypt by using AI and automation technologies to create data-driven, intelligent products and services.”

Looking ahead for SAP, Mansour explained that she hopes to hire more resources in digital marketing, digital sales, presales and services, and, if SAP’s management approves, to establish more partnerships with the headquarters of companies serving the region. For Mansour, a true coup would be to convince the Egyptian talent currently employed in Germany to return to Cairo and help “regain historic leadership of the region.” Potentially accelerating that effort would be SAP’s continued success with SAP Business Suite 4 SAP HANA (S/4HANA) implementations and expanded opportunities with IoT, analytics and other emerging technologies. Ericsson’s Egyptian future, according to its executives, depends on ever-increasing internet connection speeds, recruitment of local talent, and support of a wider array of Ericsson products and services.

Building on the company’s legacy in Egypt, which dates back to 1897, when the first Ericsson telephony equipment was introduced in the country, connecting Alexandria to Cairo, Ericsson believes 5G will be next significant step. Ericsson executives noted that the Egyptian government “took proactive steps in launching 4G in the country … a testimony that the country realizes the importance of technology in building economic development. From a technology point of view, [Ericsson is] ready to switch on 5G on the existing 4G networks, so it is all a matter of getting the 5G license in place. [Ericsson’s] focus area now is to offer the latest solutions and technologies to existing customers for their 4G networks while working together on paving the way to launching 5G.”

Earlier in 2020, TBR spoke with Egyptian officials about the country’s continuing efforts to build a robust alternative for companies looking to outsource their IT services operations. As part of a follow-up, TBR also connected with SAP (NYSE: SAP) and Ericsson (Nasdaq: ERIC) executives to understand why both technology vendors have chosen to expand operations in Cairo. The following reflects those exchanges and TBR’s ongoing analysis of offshore IT services centers.

Webscales will ultimately become more like competitors than partners to operators to capitalize on 5G-era opportunities

Webscales are not the telco’s friend

The Big Nine have various initiatives underway that will disrupt aspects of the telecom business model and pose a direct threat to operators’ existing connectivity businesses and their ability to capitalize on new value created from 5G.

Though webscales are posturing like they want to partner with telcos on new opportunities, they actually need to disrupt telcos’ core business (i.e., providing connectivity) to realize their digital ecosystem goals.

Webscales ultimately need to become more like competitors, rather than partners, of telcos because they need access to new types of data, and realizing their digital lifestyle goals will require them to take control over the network rather than be beholden to telcos. Both of these needs are satisfied by owning greater portions of the network.

Webscales already own significant portions of long-haul transport, cloud data centers, SD-WAN and communications platforms globally, and TBR believes the next step will be for webscales to take over the mobile core and the last mile of the network. This is already occurring in the enterprise network domain, but TBR expects webscales will increasingly delve into the consumer domain as spectrum is increasingly democratized and key technological advancements make it much easier, faster and cheaper to build and operate greenfield networks.

The webscale companies (hyperscalers or internet content providers) covered in TBR’s Webscale ICT Market Landscape invest in ICT and related digital infrastructure to drive their core businesses, which can include, but are not limited to, advertising, cloud services, e-commerce, financial services and media. In some cases, webscale companies will also invest in and provide telecommunications services, such as broadband access, to accelerate their digital businesses. This report focuses on the nine webscales (the Big Nine — Alibaba, Alphabet, Amazon, Apple, Baidu, Facebook, Microsoft, Rakuten, Tencent) that TBR believes will own the largest, most comprehensive end-to-end digital ecosystems in the digital era. Additionally, the report includes key findings, market size, customer adoption, operator positioning and strategies, geographic adoption, vendor positioning and strategies, and acquisition and alliance strategies and opportunities.

HPE continues to evolve technical solutions for a dispersed workforce

HPE’s VDI portfolio is not new but is increasingly valuable to its customers as remote work looks like a more permanent situation than initially anticipated

As of April HPE had rolled out a series of VDI solutions that enable customers to adapt to the growing workforce and garnered a significant number of new customers. This week’s announcement at Workplace Next rides the momentum that highlighted use case-specific VDI offerings, allowing customers to customize their experience based on the type of worker and the size of the remote workforce. With these inputs, HPE can optimize newly designed VDI configurations that are dependent on each type of worker and customize pricing, billing and delivery.

Kaddoura explained that customers “need access to their data centers in a very secure way, and in a highly cost-optimized way as well,” and highlighted GreenLake as the cloud that can be implemented in a customer’s data center, colocation facility or edge. Additionally, she noted that what HPE has done is “brought together the best of our Pointnext Services, our software management layer, as well as HPE’s rich portfolio of hardware to create that cloud experience.”

While the announcement of HPE’s GreenLake virtual desktop cloud services was the banner topic woven throughout the event’s discussions, HPE’s rich ecosystem of partners was highlighted as key to optimizing the rollout of these latest features. For example, in addition to offering VDI from Citrix (Nasdaq: CTXS), HPE can now include VMware (NYSE: VMW) Horizon as well as NVIDIA (Nasdaq: NVDA) virtual GPU (vGPU) technology for more cumbersome workloads. The extension of HPE’s partnership with Wipro was also announced, enabling delivery of hybrid cloud and VDI solutions “as a Service” through HPE GreenLake.

Yadavalli expanded on the partnership between Wipro and HPE explaining how the relationship will allow Wipro to leverage HPE GreenLake across its managed services portfolio, offering a pay-per-use model that is subscription based and easily consumable. The aim, said Yadavalli, is to “bring hyperscaler capabilities to customers on-premises or on hosted infrastructure,” which will enable customers to “fast track their workplace transformation efforts by eliminating the need for upfront capital investments and provisioning costs while enjoying the benefits of on-premises control, security and compliance.”

On Nov. 10 HPE sponsored Workplace Next, a series of discussions on the trends and impacts of the reimagined workforce as a result of the COVID-19 pandemic, featuring a cross-industry panel of experts and executives. During the virtual broadcast, business leaders from various industry roles, including human resources, real estate, healthcare and manufacturing, discussed not only the workplace challenges and trends resulting from the pandemic but also highlighted the opportunities a remote work mandate have unveiled. HPE is a prime example of an enterprise that has addressed the challenges of remote work internally while reorienting its portfolio of solutions to enable as seamless a shift as possible for customers. Additionally, with the discussion of the reimagined workplace as the backdrop, HPE notably leveraged the event to announce expansion of HPE GreenLake VDI cloud services, which included several updates to its workforce strategy for the digital economy.

NFV and SDN are transformational technologies, and even leading CSPs are in the early stages of evolving

Despite market and complexity challenges, CSP spend on NFV/SDN will grow at a TBR-projected 32.4% CAGR from 2019 to 2024 to nearly $147B

NFV/SDN spend will increase at a CAGR of 32.4% to $146.9 billion between 2019 and 2024, compared to nearly flat overall communication service provider (CSP) spend (capex plus external opex) for the global market. NFV/SDN spend will scale through the forecast period as leading CSPs broaden their transformation initiatives and as additional CSPs begin their transformational journeys.

5G will be a key catalyst that will push more CSPs to adopt and broaden their NFV- and SDN-related initiatives. COVID-19 will serve as a catalyst for digital transformation, which implicates NFV and SDN, as operators will increase investment in the technologies to improve network cost efficiencies long term and support shifting data usage trends arising from the increased number of work-from-home employees and remote learners. Rakuten, along with China- and U.S.-based CSPs, will be key drivers of the spend increase in the early years of the forecast. TBR expects lower-tier CSPs in developed countries and key CSPs in emerging markets will ramp up NFV/SDN spend in the later years of the forecast period, driving continued spend growth in the overall market.

Most CSP spend on NFV/SDN to date has been on virtual machines, but this will increasingly transition to container-based and cloud-native, microservices-based spend through the forecast period as CSPs continue their evolutionary journeys.

TBR’s NFV/SDN Telecom Market Forecast details NFV and SDN trends among the most influential market players, including both suppliers and operators. This research includes current-year market sizing and a five-year forecast by multiple NFV and SDN market segments and by geography as well as examines growth drivers, top trends and leading market players. TBR’s NFV/SDN Telecom Market Landscape includes key findings, market size, customer and geographic adoption, operator and vendor positioning and strategies, and acquisition and alliance strategies.

Enterprise interest in 5G has greatly increased since the pandemic began, pulling forward adoption timelines

Global 2000 companies and governments will drive the vast majority of spend on private 5G infrastructure

Global 2000-sized companies and governments have the scale, financial resources and technical acumen to handle the complexity of 5G and realize its full benefits. TBR estimates over 90% of private 5G investment will stem from these entities through mid-decade, at which point network slicing, solution maturity and lower price points will enable SMBs to participate more pervasively in the 5G opportunity. TBR expects most SMBs seeking 5G will leverage public infrastructure for their needs as the cost and complexity of private 5G will be too much for many of these smaller companies to handle.

Leading enterprises intend to fundamentally transform their operations by converging IT and operational technology with 5G, edge computing, AI and machine learning, and IoT.

Manufacturers and governments are expected to be among the largest investors in private 5G networks through mid-decade.

Software upgradability of private LTE systems to 5G will enable some enterprises to accelerate their migration to 5G

A large portion of the global private LTE install base is software upgradable to 5G, which will hasten some enterprises’ move to 5G, but the timing of these upgrades will be contingent on 5G device readiness.

TBR expects leading enterprises will upgrade their private LTE systems starting in 2021 as compatible devices and 3rd Generation Partnership Project (3GPP) features from Releases 16 and 17 become available. This upgrade cycle is a key factor in why the private 5G market size will be able to scale in the early years of the forecast period.

TBR’s Private Cellular Networks Market Forecast, which is global in scope, details private cellular network spending trends among enterprises and governments, particularly as it pertains to 5G. The report includes current-year market sizing and a five-year forecast of the private cellular networks opportunity by vertical, by provider type and by region.

DMS market will return to growth in 2021 as vendors explore new ways to engage audiences

After a major slowdown in 2020, largely due to vendors’ inability to conduct face-to-face workshops and buyers’ hesitation to invest in new proof-of-concept areas, demand for strategy services will gradually rebound. Growth will come from two primary areas. First, buyers will continue to orient any advisory spend toward brand awareness, as creating business value that addresses brand health challenges and/or helps brands integrate digital into offline experiences remains a critical connection, especially as COVID-19 widens the gap between brands and consumers. Second, buyers that are further along the digital transformation maturity continuum will seek guidance to implement customer experience (CX) frameworks enabled by emerging technologies, including AI and machine learning, to optimize their back-office and supply chain operations. Vendors with broad-based relationships across the C-Suite will be positioned to win as long as they can overcome internal politics, particularly around data sharing.

While creative services, like strategy, will face initial headwinds, in the long run it will remain the fastest-growing service line. Marketers will remain true to their core and constantly test new ways to provide personalized, human-centric messaging. While the trend is nascent, we believe creating short documentaries will overtake traditional advertising and marketing campaigns. Connecting human experiences through a short story while incorporating behavioral, professional, purchasing and social data will become a way to generate brand awareness without sounding like a traditional ad.

TBR’s Digital Transformation: Digital Marketing Services Benchmark addresses changes in leading digital transformation vendors’ strategies and performances as well as their investments and go-to-market positions within marketing and advertising segments. The report includes use cases; analysis of agencies’, IT services’ and consultancies’ management of their technology partnerships and acquisitions; and a forward-looking view around key market trends, implications to customers and vendors, vendor performance, and associated technologies enabling digital transformation opportunities. Region-specific market trends are also highlighted in the report.

HPE’s array of hybrid workplace offerings provides silver lining for customers amid the pandemic

HPE bundles its existing portfolio in a GreenLake wrapper

When CEO Antonio Neri initially announced in June 2019 that HPE (NYSE: HPE) will offer everything “as a Service” by 2022, many were skeptical that the plan would resonate with the market as a whole. It was clear that pockets of customers would buy into this offer, particularly in the SMB space, where pricing can have a greater impact. But for major customers, the conversation often boiled down to something as trivial as where to put the expense on the balance sheet for stakeholders. However, considering the changing market dynamics over the last six months due to the pandemic, this aggressive marketing campaign could not have come at a better time. Because HPE has been pushing GreenLake hard since 2019, the vendor is now serendipitously ahead of peers on its “as a Service” offerings.

HPE’s “as a Service” push is directly related to increases in IT sprawl. “Sprawl” is a concept the IT industry has grappled with for decades. Prior to distributed IT environments, the term was used to describe the increase in the variety of workloads in each environment. Now, it is used when describing a single-pane-of-glass management console to ease the burden placed on IT personnel when managing a diverse environment of IT infrastructure. Sprawl is now the upshot of the increasingly diverse application of technology to business, or digital transformation. Diverse applications lead to diverse IT requirements, from the edge to the core to the cloud, making cloud an integral piece of the story and establishing the importance of bundled solutions that provide business outcomes, which is precisely what GreenLake can provide.

GreenLake does come at a premium, as software and services are baked into hardware deals consumed through this model in many cases, but pricing it as a monthly subscription makes these solutions more available and affordable to firms with less capital support. HPE GreenLake clearly resonates with customers, as key competitors Dell Technologies (NYSE: DELL) and Lenovo both formalized their own consumption-based pricing offerings after GreenLake began to gain traction, although Dell Technologies did have informal offerings emerge around the same time as GreenLake initially. With COVID-19, the edge becomes increasingly more important as organizations deploy new workloads in their factories, office spaces and retail locations to ensure public safety while returning to work.

HPE’s workplace portfolio of solutions is attractive for several reasons. HPE’s existing infrastructure portfolio is augmented by HPE Aruba’s connectivity engine and associated services through HPE Pointnext Services, which combines expertise across workplace networking and IoT. The combined offering is then layered with GreenLake and sold as a use-case-based package to end customers, the primary benefits being the efficiencies gained in conjunction with the fact that the solutions are positioned and sold as business outcomes. Essentially, HPE takes care of the grunt work normally weighing down the end user but offers increased manageability and increased control at a reduced effort through GreenLake, leveraging the existing expertise within its organization to reimagine how the world of knowledge-based employees works and what is necessary to make it operate seamlessly in a hybrid model.

IT vendors are poised to solve the challenges that have arisen in the wake of the COVID-19 outbreak, and Hewlett Packard Enterprise (HPE) is a prime example of a vendor that, in response to the pandemic, is addressing previously unforeseen challenges by formalizing offerings pertaining to the workplace. Hybrid working was a pre-existing trend that COVID-19 has accelerated. However, for those individuals working in a knowledge-based field or with school-aged children, how they work and learn has fundamentally and permanently shifted. Further, people with non-knowledge-based jobs, many of whom lost work due to COVID-19, will find in-person work again, and these jobs will also see a fundamental shift in how they are performed to ensure safety and productivity. HPE’s announcements today at Workplace Next highlight how the company’s portfolio can be leveraged to ease customers’ COVID-19 mandated digital transformations.

Vendors’ ability to develop nonlinear revenue growth model will be tested once again as COVID-19 sets the stage for demand in ‘as a Service’ sales

Market overview

The 14 benchmarked vendors continued to hire and acquire resources, albeit at a much slower rate in 1H20 than in 1H19 due to COVID-19, a trend we expect to accelerate in 2H20. 1H20 was a tale of two quarters as vendors had to swiftly change priorities and mobilize their staff to work remotely while continuing to provide support to ongoing digital transformation (DT) projects. As COVID-19 accelerated in late March and April, buyers paused many of their DT programs and increased focus on run-the-business projects, compelling vendors to adjust their hiring and reskilling programs and demonstrate capabilities in cloud, cybersecurity and workplace solutions management. Vendors can learn from their own experience three years ago when revenue contracted much faster than they were able to adjust hiring before rebounding back to maximize productivity and ROI.

Automation and profitability

As vendors went into damage-control mode amid the pandemic, most deployed legacy, proven, cost-rationalization methods, including layoffs, salary freezes, and limited SG&A spend to protect profitability. Automation also continued to play a role in this effort but was not, as many had hoped, the single most important variable in offsetting top-line and cost of services pressure associated with the legacy labor arbitrage model. With the consulting model most challenged due to limited face-to-face interaction, we expect vendors to begin exploring new channels to increase share of profitable sales. Vendors could either accelerate bringing consultants back to clients’ sites to increase higher-value advisory opportunities or begin to add digital routes as a sales channel to attract new buyers, particularly in the SMB space. Either scenario carries its challenges and opportunities, but in the long term, as vendors strive to increase “as a Service” sales, KPIs and expectations must also be aligned.  

The Global Delivery Benchmark provides efficiency comparisons, assessments and insights into global delivery strategies and investments across 14 leading IT services firms. The research highlights overarching resource management market trends, discusses implications to operations from increased labor automation and examines disruptors that shape new business models and KPIs.