Secureworks: A force for good in an unsafe world

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Taking a holistic fight to the enemy

Over the two-day Secureworks Analyst Event, multiple Secureworks (Nasdaq: SCWX) executives emphasized the company’s broad vision of belonging to, and leading, a larger cybersecurity community dedicated to helping customers, in the words of Secureworks CEO Mike Cote, “outpace adversaries.” Through a strategic shift toward providing platforms and software, Secureworks has begun repositioning itself within that larger community, becoming a more holistic provider of security offerings for its clients. In TBR’s view, this new emphasis on enabling “the right response rapidly,” as Cote said, and bringing the cybersecurity community together around shared challenges may set Secureworks apart in 2021.

Security at scale to meet customer needs  

Framing Secureworks’ place in the cybersecurity ecosystem, President of Customer Success Wendy Thomas said the company’s new cloud-native security software platform, boosted by embedded machine learning and workflow automation, has positioned Secureworks to be the security platform of choice. With 20-plus years of security operations experience, a global security brand, a scalable network effect, and market-leading threat intelligence, the company is, in Thomas’ estimation, “uniquely positioned to democratize access to security at scale” and meet its mission of securing “human progress by outpacing and outmaneuvering ever-evolving adversaries.” Thomas substantiated the assertions, noting that Secureworks’ experience and expertise enabled the company to bring significant cybersecurity-specific research to its shift into platforms and software. Secureworks, Thomas said, had embedded threat researchers into its software development teams, ensuring that the company’s software was purposefully built by security experts and security operators. To address customer needs, Thomas said Secureworks had begun transitioning existing customers to a cloud-based platform, starting with a standard consulting approach that focuses on building a journey map to demonstrate how well Secureworks knows the customer and its security environment. According to Thomas, Secureworks then develops a solution as “turnkey as possible,” while creating the feeling, for the client, of “an upgrade to first class,” with optimal security coverage and hygiene. In TBR’s view, Secureworks’ understanding of its own role in the cybersecurity ecosystem and evolving appreciation of its customers’ needs underpin the company’s pivot from a standard MSSP to a consulting-led platform and software provider, which could help Secureworks become a leading vendor across the cybersecurity market.  

Over two days of virtual sessions, Secureworks executives, partners and customers presented to analysts the company’s pivot toward a platform and products company, detailing changes to Secureworks’ offerings, go-to-market strategy and sales structure. The event included extensive interaction with the broad Secureworks team and individual sessions for TBR with the company’s leadership. The following includes TBR’s assessment of the event and perspectives from ongoing analysis of Secureworks; the cybersecurity space; and Secureworks’ primary shareholder, Dell Technologies.  

2021 will bring more demand, more partnerships, more industry innovation to cloud

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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.

End game for Northrop Grumman’s IT services business

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On Dec. 7, Northrop Grumman announced the sale of its federal IT services operations to an affiliate of Veritas Capital, confirming rumors that began in late October with a report that the company had retained a strategic adviser to review a potential divestiture of its technology services group.

The ‘spin-merge’ will create a $3B-plus federal IT services competitor

The transaction will net Northrop Grumman (NYSE: NOC) nearly $3.4 billion in cash and involve the merger of Northrop’s federal IT and mission support businesses with Peraton, the former IT services group of Harris Corp. Peraton was acquired by Veritas in 2017 for nearly $700 million. After the deal closes during 1H21, the new entity will have an initial revenue base of between $3.2 billion and $3.4 billion, by TBR’s estimates. Northrop indicated in the Securities and Exchange Commission filing accompanying the divestiture notice that the consolidated IT operations included in the transaction would account for roughly $2.3 billion in revenue in 2020, spread across three of its four principal business groups: $1.6 billion from the Defense Systems unit, $500 million from the Mission Systems unit, and $200 million from the Space Systems segment. Peraton generated just over $1 billion in revenue in 2019, according to TBR research. Veritas has not indicated plans for an IPO for the entity, and we expect the new company will initially remain privately held but eventually be taken public.

2018 blockbuster space acquisition, 2019 restructuring, and 2020 strategic defense contract bred speculation Northrop’s IT unit was losing relevance

One might trace the genesis of the announced sale of Northrop’s IT services business back to the company’s $7.7 billion acquisition of Orbital ATK in 2018. Buying Orbital ATK expanded Northrop’s addressable market in the space and missile defense sector with capabilities in small space systems, launch vehicles and propulsion, and missiles and advanced precision munitions. Orbital ATK was rebranded as Northrop Grumman Innovation Systems following the acquisition. At the time, the bulk of Northrop’s IT services operations resided in the former Technology Services (TS) group, which was eventually folded into the larger Defense Systems (DS) unit when the company restructured its business lines in late 2019. Adding Orbital ATK generated cross-selling opportunities for TS in large-scale sustainment, logistics, cybersecurity and operations services, but a similarly expanded opportunity set for the legacy enterprise IT services segment of TS remained unclear. Likewise, it was uncertain if the $13.3 billion phase of the Ground Based Strategic Deterrent (GBSD) program that Northrop won with the U.S. Air Force in September 2020 would avail enterprise IT-related opportunities in systems integration or other offerings to the company’s TS group. GBSD will clearly generate multibillion-dollar revenue streams for the company’s Space Systems unit — evidenced by the segment’s 50%, or nearly $12 billion, sequential increase in backlog in 3Q20 that is attributable almost solely to GBSD. There may be additional pull-through opportunities for mission-enhancing capabilities provided by Northrop’s Mission Systems unit as part of GBSD. GBSD may also offer occasions for Northrop DS to provide integrated air and missile defense solutions, integrated battle command systems, training and simulation, and sustainment services.

PwC Australia: Trending in all the right directions

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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.  

COVID-19 changes everything: What’s next for devices and IoT?

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In pandemic recovery, IoT will contribute to organizations’ resilience, while PC sales will suffer from saturation

The COVID-19 outbreak has had two effects on pre-existing trends: In many cases, such as the migration to remote working, it has accelerated them, and in others, like the deployment of voice solutions in workplace environments, it has interrupted them. Where trends are accelerated, we can expect a slowdown or temporary rebound as the economy recovers from the impacts of the pandemic, followed by a resumption of the trend. Where trends are interrupted, resumption will often be delayed until later in the recovery, when there is less uncertainty.

Under these circumstances, it is worthwhile to look back at last year’s predictions:

  • There will be less talk of IoT, as it will be increasingly viewed as one technique among many for delivering digital transformation.

This trend was accelerated by the pandemic, as organizations focused on operating in the crisis and preparing for greater uncertainty during and following the recovery. In a sense, once IoT was better understood by customer organizations, including IT, operational technology (OT) and business management, it no longer required special attention. The focus shifted from the enabling technology, IoT, to the problems to be solved using all techniques including IoT.

  • AI in IoT will increasingly be encapsulated in specific functions like recognition and detection.

This trend was also accelerated by the pandemic, as organizations focused on point solutions that included IoT and strategic solutions that incorporated data from all sources, including from IoT. At the edge, AI is aimed at improving operations by increasing efficiency and reducing errors as well as recognizing things like anomalies and patterns that imply a need for service. IoT-generated data contributes to AI-enabled business analysis, but that is as part of a larger body of data, including data from other sources, and is typically done either in the cloud or in on-premises data centers.

  • Conversational user interfaces, based on voice or typed communication, will play an increasing role in business solutions.

Many natural language processing (NLP) projects have been deferred or slowed due to pandemic constraints as well as organizations diverting attention and dollars to more pressing needs or to husbanding resources for a more uncertain future. A minority of NLP projects, especially ones already in use, have been accelerated because they reduce dependency on human operators. While conversational solutions remain in the digital transformation tool kit, TBR believes NLP will remain a lower priority for the first stages of recovery, as organizations look to solutions that increase resilience and transparency.

This focus on digital transformation for resilience and transparency, giving organizations the flexibility to adapt to changing conditions in the pandemic recovery and economic unpredictability, is, TBR believes, the next phase in the evolution of commercial IoT. At the same time, the PC industry faces a saturation-driven reduction in demand following a pandemic-driven surge in 2020.

2021 Devices & Commercial IoT Predictions

  • The emergence of the chief data officer role will increase organizational clarity, accelerating IoT adoption
  • Packaged solutions and components will become more important
  • Despite enjoying an increase in TAM, PC vendors suffer from market saturation, a weak global economy and demand for resale units

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.

Microsoft Teams in crosshairs as Salesforce announces acquisition of Slack to bolster its Customer 360 vision

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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%.

COVID-19 pandemic forces telecom industry to go all in on digital transformation

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CSPs face brave new world; government stimulate market

The COVID-19 pandemic is expected to persist through at least 2021 as vaccines and other virus mitigation efforts take time to make their way through societies globally. In the meantime, the global economy remains in a state of suspended animation following unprecedented injections of fiscal and monetary stimulus by governments across numerous countries, which total over $20 trillion (or 23% of global GDP in 2019). The amount of stimulus is expected to continue growing steadily through 2021 and potentially beyond as governments aim to fully offset the impact of the pandemic on their economies as well as build a foundation for sustainable economic growth.

After weathering the first phase of the pandemic in 2020 relatively well, communication service providers (CSPs) will enter 2021 facing a brave new world and many tough decisions. The unrelenting virus is forcing economies and societies to fully embrace digital transformation as they adjust to the new normal, and it is forcing CSPs worldwide to take a hard, holistic look at their operational, business and growth models, and to adjust and accelerate their digital transformation road maps accordingly.

Fortunately for the telecom industry, a significant and growing portion of government stimulus is being earmarked to enable the ICT sector to accelerate infrastructure and ecosystem development. CSPs and their suppliers will be key beneficiaries of the trillions of dollars and other support mechanisms (e.g., tax breaks, low or no interest rate financing) governments will directly and indirectly inject into the ICT sector and broader economy for these purposes. This stimulus will help CSPs ease their capex and opex burdens as they migrate to the new network architecture and will ensure they have the capital necessary to keep their businesses going and their debt obligations satisfied.

2021 telecom predictions

  • Government stimulus powers ICT investment
  • Governments will increasingly democratize spectrum to ensure a vibrant 5G ecosystem
  • CSPs accelerate 5G SA road maps

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.

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

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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

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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

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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.