East meets West: A comparative tale of two e-commerce giants placing big bets on the cloud

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Alibaba Cloud, AWS focus on build-outs of global footprints via infrastructure investments in 5G and expansion of data center and edge locations

While the growth of the two globally dispersed e-commerce giants Alibaba and Amazon is largely fueled by retail, both businesses have showed marked dedication to the growth of their respective cloud empires, focusing on infrastructure to fuel global expansion and investment in augmenting their respective portfolios. The investment in cloud is evident as the backbone driving each business as they compete on the global stage to become leaders in digital transformation (DT).

Alibaba Group’s aforementioned profit margins, fueled by its B2B operating model, have enabled a hefty investment of $28 billion dedicated to the cloud business. As the world was gripped by the initial effects of the COVID-19 pandemic back in April, the parent company announced the allocation of the sum, which stands as a massive proclamation of the company’s dedication to cloud and related technologies as the core drivers toward the enablement of DT. The sweeping investment, coupled with new leadership and an expanding partnership strategy, solidifies Alibaba’s intent to position its cloud business as a viable contender against AWS, especially in APAC. Alibaba is clearly placing a large majority of its bets on cloud and the future of DT, as the investment equates to 40% of its total 2019 revenue and is 5.7x the revenue of Alibaba Cloud.

The investment will have a profound impact on Alibaba Cloud’s ability to execute on strategies around DT, infrastructure build-out and R&D, and came at a time when the world could not have been in more need of capabilities such as increased bandwidth and enterprise and SME support. The focus in the medium term is a multifaceted push to gain scale globally, attract new customers and expand wallet share with existing customers, and much of this growth will be propelled by the expansion of Alibaba Cloud’s infrastructure backbone with the build-out of data centers and investment in 5G across EMEA and APAC.

Since solidifying its dominance in China and garnering competitive positioning on the global stage, Alibaba has been frequently referred to as the “Amazon of China.” Both companies have anchored their businesses as e-commerce platforms and have demonstrated parallel growth trajectories, becoming mainstays in the lives and businesses of customers globally. The uniqueness of their respective journeys, which have been significantly shaped by their foundations as e-commerce giants, does not overshadow the companies’ similar strategies. Over time, Alibaba and Amazon have evolved rapidly into diversified companies with a distinct focus on technology and digital transformation. While the companies are in different phases of their growth, in terms of size and global footprint, and have different operating models, the investments in and focus on their respective cloud businesses to drive growth are evident when comparing their evolutions and forward-looking growth strategies.  

Unprecedented government support will help CSPs deploy 5G more quickly and broadly than originally anticipated

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CSP spend on 5G infrastructure will scale faster and peak higher than originally anticipated due to the vast amount of support by governments in a range of countries, including but not limited to China, the U.S., the U.K., Japan, South Korea and Singapore. Due to this, typical historical deployment curves for cellular technologies will not apply to the 5G market, which is now expected to be widely deployed globally by the middle of this decade instead of in the later years of the decade. This pull forward and broadening of infrastructure investment are primarily due to attempts by leading countries to support their economies amid the COVID-19 crisis as well as to keep pace with China’s aggressive and broad investment initiative for competitive reasons. Over the past 12 months, 5G has become a highly political issue, and this unprecedented government involvement and funding are being justified on national security, economic competitiveness and public health grounds.

The 5G Telecom Market Forecast details 5G 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 5G market segments and by geographies well as examines growth drivers, top trends and leading market players.

IT services revenue retained its growth trajectory in 1Q20, but the negative effect from the pandemic will intensify in 2Q20

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IT services trailing 12-month (TTM) revenue growth, at 1.5% in U.S. dollars (USD), was down 20 basis points sequentially and 170 basis points year-to-year in 1Q20 as the COVID-19 pandemic began to negatively affect vendors’ revenue growth during March. At every level of every organization, the pandemic forced massive changes in human resources management, pushing vendors to quickly reorganize service delivery to work-from-home models and proactively pursue similar activities with clients as they strive to keep operations running. While vendors are strengthening relationships with existing clients, the pandemic disrupted traditional sales motions, making attracting and landing new logos more difficult in an all-virtual environment, and challenging IT services vendors to develop novel ways to promote new offerings to clients. The pandemic substantially boosted demand for cloud and cybersecurity as all-remote working and delivery necessitated massive changes and brought in new risks.

The IT Services Vendor Benchmark details and compares the initiatives of and track the revenue and performance of the largest global IT services vendors. The report includes information on market leaders, vendor positioning, the IT services market outlook, key deals, acquisitions, alliances, new services and solutions, and personnel developments.

Intelligent supply chain and ports: Atos on the present and future of digital transformation in port operations

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Applying emerging technologies to supply chains  

In a wide-ranging discussion, Atos Technology and Innovation Lead Erwin Dijkstra and his colleague Bas Stroeken, Scrum Master & Pre-sales Consultant – Intelligent Supply Chain, shared a few key insights into their company’s strategy on integrating emerging technologies, such as AI, blockchain and IoT, into maritime port ecosystems, highlighting Atos’ current clients and use cases. Noting that Atos’ client base includes airports as well as traditional supply chain solutions buyers (such as manufacturers), Dijkstra and Stroeken described Atos’ differentiation as its ability to integrate across an entire enterprise and ecosystem, optimize around delivery times, and build a platform for intelligent supply chain management, which Atos then manages as a service to the client. A critical factor for Atos’ clients, according to Dijkstra and Stroeken, has been the company’s in-depth examination of actors and roles within an enterprise and how those actors will engage with the platform. Various roles require different information and options in the event of an out-of-plan event, making the ideal platform more than simply a collection of data points and alerts. As Stroeken explained, real-time insights are meaningless if everything is going according to plan (think Homer Simpson working at the nuclear power plant — all good, until it is not). When something deviates from expectations, multiple actors need to be alerted, informed and given options for remediation. With multiple actors involved, real-time information becomes critical as one person’s decision nearly always impacts options or needed actions for others in the ecosystem.

Bringing the discussion back to the broader enterprise level, Stroeken made two observations that resonated with TBR. First, professionals tasked with managing supply chains within many enterprises are not deeply experienced in AI, which necessitates Atos acting as the bridge between the technology and the humans who need to understand it, deploy it and benefit from it. Second, as Stroeken said, “Collaboration begins with the proper sharing of data,” which may be a perfect mantra for digital transformation and emerging technologies.

Atos provided two additional use cases, both tied to port operations, specifically customs, an area in which Atos has expertise. In the first, natural language processing and AI contribute to understanding the text in customs forms, improving and expediting the classification process. In more colorful terms, Dijkstra explained how a drone could be classified as a toy, a military use item, or a camera, all with different tax implications, creating a need for assistance among customs agents to get the classifications correct. In a second use case, Atos helps cargo screeners operate more efficiently and with fewer random checks by scanning containers with X-ray machines and using AI to match the images to the manifests. In both cases, Atos operates as the integrator, bringing together various emerging technologies and providing the platform for clients’ continued operations.

TBR and Atos also discussed blockchain as a tool across the maritime shipping and supply chain ecosystems. While the well-known benefits of increased transparency and a more level playing field appeal to enterprises across the shipping world, including manufacturers, ports and shipping operators, Atos’ role primarily comes through facilitating adoption and overcoming the human barriers, such as lack of trust in the technology and uncertainty around data-sharing (see the collaboration mantra above). In TBR’s view, blockchain solutions apply more readily to supply chain than nearly any other use case outside of bitcoin. Atos’ approach — which assumes the technology has been proved secure and reliable, but the humans need coaching — reflects what TBR believes will be the long-term reality for blockchain.

We continue to be intrigued by ports as test beds for emerging technologies and as starter kits for large-scale smart cities. Following a presentation on IoT by Dijkstra, TBR analysts discussed intelligent supply chain solutions, ports and emerging technologies with Dijkstra and Stroeken, including details about Atos’ use cases and current offerings. The following reflects that discussion as well as TBR’s analysis of the consulting and IT services opportunities around emerging technologies, including insights from TBR’s Digital Transformation portfolio and Management Consulting Benchmark.

COVID-19 pushes IT architecture further to the edge

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The growing impetus for edge computing in a pandemic-burdened world

It is an understatement that the COVID-19 pandemic and resulting shutdowns have dramatically altered the ways individuals live and businesses function. Reliance on networks, infrastructure, the cloud and associated technologies has never been greater, and the effect of such dependence has laid bare weaknesses in existing architectures. The result has been a proliferation of opportunities and use cases for technology to remediate the pandemic-driven impacts to daily life, namely remote work, increased video streaming and surges in virtual collaboration.

Edge computing is one such supporting technology that was already becoming increasingly relevant in a world where low latency, advanced analytics and intelligent data mining were quickly gaining momentum across a wide range of industries. As devices have become more common and require more processing power, an increasing amount of data was already starting to be generated on what is referred to as the edge of distributed computing networks. By sending only the most important and least time-sensitive information to the cloud, as opposed to raw streams of it, edge computing preserves bandwidth, eases the burden on the cloud and reduces cost. The pandemic then serves as the quintessential blanketed use case for edge computing as the benefits provided by computing data at the edge, such as reduced networking burdens and increased processing speed, address many of the issues caused by the sudden spikes in network traffic and burden on systems.

The COVID-19 pandemic is dramatically accelerating digital transformation timelines for many enterprises while fundamentally changing the ways we interact with and consume data. As remote work and self-isolation measures have resulted in a dramatic uptick in the use of the web, cloud computing has become essential to businesses and people’s personal lives. Edge technology has only recently become recognized as a complementary evolution of cloud computing, and adoption of the technology has been more widespread. Previous use cases centered on leveraging edge computing’s core value proposition of alleviating challenges associated with bandwidth, latency and near real-time analytics. The sudden shift in workloads and network traffic, coupled with bandwidth constraints, has shined a spotlight on how the benefits afforded by edge computing can alleviate the challenges created by the pandemic.

SAP enhances its best-of-suite strategy with core apps running on HANA and improved industry approach

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COVID-19 impacts highlight the value of SAP’s existing portfolio and road map

Before SAP CEO Christian Klein took the virtual stage for SAPPHIRE NOW 2020’s keynote, Chief Marketing Officer Alicia Tillman spoke with the company’s regional leaders for EMEA, APJ and the Americas. Across geographies, there was consistency in customer sentiment, particularly around the benefits of using technology to react quickly to changes in demand and supply chain challenges.

SAP’s president of Asia Pacific and Japan, Scott Russell, summarized many of the regional leaders’ key points by saying, “There’s one thing that I keep on hearing from our customers small, medium and large, whether you’re in the manufacturing sector, which is really strong in this region, or in other industries, is that ability to be flexible, agile and act with speed. And that’s the expectation of SAP: You need a digital platform … to give you the information you want in real time, so I can make better decisions and adapt to a situation, which for all of us is very unpredictable.”

The pandemic-induced, turbulent business environment has created a new lens for customers to look through and appreciate SAP’s portfolio, but at its core, SAP’s strategy has remained consistent in recent years. SAP has been building upon its Intelligent Enterprise vision, in which customers use wall-to-wall SAP products to integrate their IT environments and gain AI-enabled insights from their data. However, the pandemic did enable Klein to double down on SAP’s messaging about the value of IT modernization, stating, “We have all realized companies which use innovative technologies were more competitive before the crisis and are more resilient in the crisis. Those that enabled new digital business models drove automation and adapted their supply chains and were better prepared for the unexpected. This crisis shows us if your business is not resilient, you will be left with nothing.”

SAP (NYSE: SAP) held SAPPHIRE NOW 2020 Reimagined, with the “Reimagined” branding stemming from the event’s virtual delivery method. While this was a new delivery method for SAP’s annual event, the vendor’s messaging stayed largely the same, with a focus on SAP Business Suite 4 HANA (S/4HANA), S/4HANA Cloud, Qualtrics and emerging technologies — all part of SAP’s Intelligent Enterprise vision. In addition, SAP’s recent strategic shift toward industry-specific solutions in the back office added a new flavor to the vendor’s go-to-market strategy.

IT services vendors react as the pandemic persists

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TBR perspective

The first theme to emerge in TBR’s discussions with industry participants — coping with COVID-19 — centered on the maturation of approaches, solutions and ongoing concerns across the IT services space. Vendors continue to prioritize employee safety while increasingly looking to employee productivity measures, and continue to prioritize sales and go-to-market motions around retaining existing clients. Not surprisingly, some vendors have seen the pandemic’s sustained presence as an opportunity to organize offerings and solutions around pandemic-dedicated business units. The second theme, based on extensive discussions with IT services and consulting leaders over the last six weeks, focused on positioning for 2021 and recognizing that this annus horribilis must end before enterprises can truly return to growth. While IT services vendors and consultancies have seen some profit and growth pockets, notably in cloud and security, the overall sentiment can be summed up as, “Survive and operate now; grow next year.” The final theme, emerging from the vendors’ earnings releases last quarter and in-depth discussions with subject matter experts in areas such as supply chains, healthcare IT and outsourcing operations, was scale. Many people TBR spoke with believe scale matters more now than ever, in large part because sustaining operations and retaining talent through what will be a chaotic end to 2020 and a likely rocky start to 2021 require sound financials, the ability to pivot resources to new areas, and the wherewithal to acquire talent and serve new clients when smaller vendors collapse. TBR expects this last theme to carry well into 2021 as federal, state and local budgets begin to feel the pinch of dramatically reduced tax collections caused by the COVID-19 lockdowns. With the overlay of these themes, TBR sees the following six topics as key for 2020.

COVID-19: Coping with employees

Having managed or muddled through the shift to all-remote working and delivery, IT services vendors and consultancies have now begun to face challenges around reopening their offices, including establishing newly defined roles and restructured physical spaces, with variations across every region and country. Companies need to wrestle with setting new work-from-home policies, right-sizing real estate and addressing lingering worries around the virus. In this transitional phase, IT services vendors and consultancies can test their own technology solutions and change management even as they roll out return-to-workplace offerings for clients. For the most aggressive companies, IT services will encompass areas as basic as connectivity and as pandemic-specific as biometrics, telemedicine, enhanced IoT and contact tracing. As vendors do begin allowing employees to return to their offices, some are looking to embrace a hybrid approach with employees working both remotely and on-site, which requires further adapting to remote-working tactics.

Coping with clients

Retaining clients and securing a larger piece of a shrinking budgetary pie continue to be IT services vendors’ and consultancies’ primary concerns with respect to clients as the pandemic continues depressing economic activity, particularly in hard-hit industries, such as transportation and retail. Further disrupting traditional sales motions, attracting and landing new logos has become vastly more difficult in an all-virtual environment, challenging IT services vendors and consultancies to develop novel ways to promote new offerings to existing and potential clients. TBR expects to see changes in marketing spend, particularly as companies begin learning what promotional efforts do and don’t work in an all-virtual reality.

Moving into a third quarter of pandemic-caused disruptions across the entire IT services and consulting space, TBR has spoken with vendors and clients across three broad themes — coping with COVID-19, positioning for 2021 and scaling — leading us to focus our 2H20 intelligence gathering and analysis on six topics.

Atos is pivoting to industry and leading with technology

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Atos emphasizes 7 digital breakthroughs to support its expansion in the mid term  

Atos (Nasdaq: ATOS) is an expert at establishing short- and long-term strategies and not only strictly following and executing its plans but also providing checkpoints and information around milestones and financial achievements related to these strategies. During the Atos 2020 Analyst Day, the company announced seven areas of expansion across its six industry segments in the mid term. The areas are organized around three needs that clients expect to fulfill as they continue with their digitalization:

  • Value — deliver outcome-based services around full-stack cloud, business-critical applications and digital platforms
  • Experience — deliver innovative and flexible services around customer experience (CX) and employee experience
  • Safety — deliver services around security and decarbonization

Atos’ goal is to grow revenue between 5% and 7% year-to-year in constant currency in the mid term and to collectively generate 65% of total revenues from digital, cloud, security and decarbonization solutions, up from 40% in 2019. While digital, cloud and security have been among Atos’ revenue growth levers for the past several years, decarbonization is a new lever that Atos will use to support revenue growth by providing it externally and benefiting from a first-mover approach in the segment, and to improve profitability by expanding its carbon footprint internally. 

Atos 2020 Analyst Day: Atos’ ambition is to be the leader in secure and decarbonized digital. The company will achieve its goal by approaching customers with its technology DNA and a new industry-aligned organization and by targeting seven digital breakthrough segments that address three client needs: value, experience and safety. The global COVID-19 pandemic did not stop Atos from organizing its annual industry analyst day. While the event was held online due to country lockdowns, travel bans and social distancing requirements, the virtual event very much resembled the ones Atos organized in physical locations in past years. Over two days and with a rich agenda of plenary and breakout sessions, a client panel, and virtual one-on-one meetings with Atos’ executives, the company connected with the industry analyst community and shared details on its strategic plans and financial performance expectations in the mid term, or during the next four to five years.

PwC brings data to Return to Workplace decisions

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Understanding the risks of returning to the physical office

As PwC and its clients begin the slow and uncertain return to physical offices, the firm has responded with solutions to help navigate business, health and safety concerns, while keeping a close eye on risks. With clients across the full spectrum of industries and geographies, the firm’s insights into factors challenging a return to workplace, opportunities presented by compelled changes, and risks both obvious and unexpected have become invaluable as the firm assists clients in what Risk leaders described as the mission to “help clients navigate massive disruptions and uncertainty.” Risk leaders shared that clients are reimagining the workplace and the workforce, questioning which roles are best performed in the traditional workplace; what kinds of physical offices meet business, health and safety needs; and how to mitigate the risks around a feared second wave of coronavirus.

While PwC has been active in assisting clients with immediate challenges, such as navigating the coronavirus relief bill, helping them organize for the massive change management related to Libor’s replacement, and addressing essential safety and productivity issues (see TBR’s special report on PwC’s “Check-in” solution), the firm has also accelerated efforts to pull together PwC-wide assets into newly configured platforms that specifically address the risks associated with returning to physical offices. The firm described its Workforce Planning for a Return to Workplace Dashboard as a technology-enabled tool designed to facilitate clients’ data-driven decisions around a wide range of risks. The tool creates a client-specific dashboard with data and analysis around health, safety and operational risks, as well as analysis around business considerations and employee sentiment and preferences.

In TBR’s view, zip code-specific healthcare (COVID-19) data paired with local regulations around return to work provide an immediately relevant operational view for clients evaluating risks around returning to the workplace, essentially providing a curated way to look at the complexities of all the locally specific issues when planning at the national or international level, knowing one size does not fit all in the COVID-19 world. The platform also provides clients with insight into employees’ remote working preferences, historical trends and risks broken down by region and by employee role. In PwC’s efforts to help clients operate with greater agility, gain better visibility into their business and risks, and anticipate what is next, these newly developed products should provide the firm sustained opportunities to engage with the full range of services.

During an hour-long analyst briefing session, PwC Risk leaders, including Tim Ryan, PwC US chairman and senior partner, shared with TBR recent developments around the firm’s response to COVID-19 as well as shifting client sentiments around the macroeconomic picture for 2020 and 2021. While the following special report contains information provided by PwC as well as TBR’s analysis, a more complete assessment of the firm can be found in TBR’s recently published semiannual Management Consulting Benchmark.

Quantum market awareness at the top of the stack spurs business innovation to capitalize on anticipated systems innovations

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Key findings

Customer engagement increases

Services vendors have increasingly shifted their focus and activities from engineering teams to IT shops, deploying workshops for “ideation” sessions designed to outline critical business pain points. IT decision makers can then tie business needs to certain algorithms once quantum performance specifications have been achieved. To date, activity persists primarily in the financial services, healthcare and pharmaceutical sectors.

Infusing legacy applications with quantum insights will not pose a major hurdle

Prioritizing use cases and mapping them against the viability of current and future quantum system performance poses a greater challenge than actual integration. Numerous firms, including startups, are working on the standard building blocks for these integrations. Basic API connections into legacy applications will allow for the quick exploitation of quantum-generated insights once the science and engineering yields system performance capable of executing the algorithm with the appropriate speed and accuracy.

Logical or virtual circuits build on years of lessons learned in the industry

Logical circuits decouple algorithm development from the actual systems. Noisy quantum systems operate similar to a carbureted combustion engine with various tuning deployed to optimize the actual quantum circuits for the specific application. In addition to heavily capitalized vendors such as IBM and Microsoft, numerous startups such as QCWare, 1QBit, Zapata and Cambridge Quantum Computing have materialized, specializing in quantum algorithm development. Some, such as QCWare, provide a brokering platform to distribute the algorithm workload requests to a multitude of different cloud-based quantum systems as they come online.

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.