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.

Cultural readiness and technology savvy: Another view of Egypt’s IT outsourcing ecosystem

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With technology a given, cultural readiness differentiates Egypt IT sector

In a recurring point of discussion, CrossWorkers CEO Hans Henrik Groth described Egyptian technology professionals as creating an atmosphere of high “cultural readiness” for working with Europe-based clients, partly because Egyptians travel frequently to Europe for business and Europeans travel frequently to Egypt for tourism. The cross-cultural experiences have provided many Cairene software developers with a useful level of cultural understanding for European clients and have made working for Europe-based companies attractive, given the likelihood of travel to the continent as part of the job. As an example of cultural readiness, Groth contrasted different ways of handling client concerns regarding the European Union’s General Data Protection Regulation (GDPR). In his experience, IT professionals with little cultural context will see GDPR as an obstacle to be circumvented or a set of checklists to be papered over. More attuned professionals understand the European mindset around GDPR and the (general) willingness to adhere to the standards and demonstrate compliance. Overall, Groth cautioned that the technology requirements of providing managed services from an offshore location could be easily met in most situations. The challenges arose with making a cultural match between the lead software engineers and their European clients.

During our discussion with Groth, TBR asked about three aspects of doing business in Egypt: government, IT and physical infrastructure. On the first, Groth noted the gaps and delays between political decisions and practical impacts, but added that the talent pool in Egypt and the country’s current political and economic climate did not necessitate a heavier role from the government overall. On IT, he lamented the high cost of internet service in Cairo, explaining that CrossWorkers needs two means of connectivity — airborne and traditional cable — to ensure constant communications. Even the best fiberoptic cables, as Groth noted, could be undone by someone with a shovel. For an offshore IT services vendor, high internet costs and unreliability would be constant concerns. Lastly, regarding the physical challenges of working in a city as large and densely populated as Cairo, Groth acknowledged traffic presented a constant source of pain and commented on the three-hour drive — on a good day — from Cairo’s airport to the Information Technology Industry Development Agency (ITIDA), located west of the city. To combat this problem, Groth located CrossWorkers’ offices closer to the airport, allowing clients from Europe to see the facilities and meet the talent without enduring too much of Cairo’s traffic. Groth’s depiction of Cairo’s infrastructure confirmed many of TBR’s previous discussions and assessments and pointed to potential areas for immediate improvements, which could accelerate IT services offshoring growth in the country.

After reading TBR’s assessment of Egypt as an offshore IT services hub, Hans Henrik Groth, CEO of CrossWorkers, contacted TBR to provide additional insights and commentary about Cairo’s IT services environment, highlighting the differences between Cairo and other cities Groth has worked, including Islamabad, Pakistan, and various locations in eastern Europe. This special report reflects the hour-long discussion and TBR’s analysis, including from our Spring 2020 Global Delivery Benchmark.

The Big Nine are trailblazing paths to economic value of the digital era; incumbent players need to determine their roles

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Big Nine aim to own the foundational, intelligent innovation platforms of the digital economy

The Big Nine — Alibaba (NYSE: BABA), Alphabet (Nasdaq: GOOGL), Amazon (Nasdaq: AMZN), Apple (Nasdaq: AAPL), Baidu (Nasdaq: BIDU), Facebook (Nasdaq: FB), Microsoft (Nasdaq: MSFT), Rakuten  and Tencent — view 5G and distributed computing as innovation platforms on top of which value will be created in the digital economy. The Big Nine are building “brains” in their central cloud environments that will autonomously orchestrate and manage the fundamental platforms upon which the digital economy will be built.

A recent example of this trend by the Big Nine to own the intelligence layer and build these platforms is seen in Microsoft’s recent actions, whereby the company acquired Affirmed Networks and Metaswitch (pending) and struck partnerships with ecosystem providers such as Federated Wireless to build out digital marketplaces that enable end users to consume network resources directly from the cloud.

Over time, webscales will become the centerpieces and backbones of the global digital economy and will enable the ecosystem, which includes communication service providers, to innovate and participate in the value creation of the digital economy.

The Webscale ICT Market Landscape includes key findings, market size, customer adoption, operator positioning and strategies, geographic adoption, vendor positioning and strategies, and acquisition and alliance strategies and opportunities.

Business resiliency and people centricity: Fujitsu prepares for post-pandemic world

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Putting people first, so they can put the customer first

In the early weeks of the pandemic, Fujitsu’s global delivery centers quickly shifted to all-remote work environments, transitioning in waves as COVID-19 lockdowns moved from Asia to Europe and the Americas. Fujitsu’s leaders and on-the-ground managers passed along lessons learned in Japan, China, the Philippines and elsewhere in Asia to colleagues facing imminent transitions. Perhaps surprising even Fujitsu’s leadership, some of the later transitions happened in less than 48 hours. In Poland, for example, the entire delivery center adopted all-remote work arrangements over a single weekend as the news coverage of COVID-19 shifted opinions and raised concerns about being in close proximity to coworkers in an office. Fujitsu experienced similarly rapid transitions at other facilities, including global delivery centers in Portugal and India. According to Fujitsu’s global delivery leadership, the transitions had no impact on Fujitsu’s delivery or customer satisfaction: “The SLAs [service-level agreements] hardly twitched.”

In TBR’s view, Fujitsu’s emphasis on its own people — ensuring safety, providing assurances around employment and meeting technology demands — likely had a positive ripple effect on the way employees delivered to Fujitsu’s clients. Fujitsu’s leaders noted the company’s commitment to “focus on people, and enable those people to focus on customers,” underscoring Fujitsu’s overall approach of putting its own people first. One example Fujitsu’s global delivery leaders shared with TBR centered on the company’s travel and visitor policies. Early changes reflected a slowdown in travel, but “not a strangulation.” Fujitsu’s employees believed they were still empowered to deliver to clients, traveling for work as necessary, but cognizant of coming changes and able to include their own feedback on company policies.

As February ended and the virus’s global sweep became apparent, Fujitsu employees were prepared for a shift from limiting travel to limiting visitors to office locations, primarily to provide employees with additional safety and protection from COVID-19 exposure. Another example centered on employee communication and support to ensure well-being. Fujitsu holds ongoing check-ins with employees through coffee sessions and distributed surveys to keep everyone connected and engaged, confirming the employees responded positively to the company’s approach to COVID-19. Fujitsu executives noted to TBR that over 80% of employees felt positive about the approach and execution of its COVID response. The meetings recognized employee needs beyond workload constraints, taking personal COVID-19 challenges in consideration. Overall, TBR believes Fujitsu’s global delivery leadership made a critical decision to focus on employees first, which eased the challenges related to moving to all-remote working through Fujitsu’s additional protection for employees’ well-being as well as protection for their families from COVID-19. Further, by coordinating across countries and regions so that successful strategies could be repeated and mistakes could be avoided, Fujitsu made it possible to sustain customer satisfaction and consistent services delivery.

In a wide-ranging discussion with Fujitsu’s global delivery leaders, including Head of Global Delivery Tim White, Head of Global COVID-19 Response and Chief Information Security Officer Clive Tillotson, and Specialist Marketing Manager Charlie Ayling, TBR analysts heard about the company’s immediate responses to the COVID-19 pandemic, ongoing operations and expectations for the post-pandemic world. This special report includes some highlights from the discussion. Additional information will be included in TBR’s quarterly analysis of Fujitsu Services. 

EY tackles COVID-19 and prepares for Next and Beyond

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Now, Next, Beyond: The perfect framework for our COVID-19 present

In a wide-ranging discussion centered on COVID-19, EY’s global leaders detailed for TBR the firm’s views on the current situation, the immediate needs and opportunities ahead in 2020, and what the post-pandemic reality will be for EY and its clients — Now, Next and Beyond. As an EY framework for a couple of years, Now, Next, Beyond perfectly suits the current moment, when enterprises across the globe need assistance addressing immediate operational challenges, from supply chain to financing to human resource management. At the same time, EY’s clients have already begun planning for or taking the early first steps in implementing changes necessary to survive and grow in the near term, the next few quarters and years. And for EY, the deepest client partnerships are forged through transformations, in which EY serves as trusted partner.

Now: Know your business, know your environment, become resilient

In the Now, EY has brought clients multiple trackers — tools that provide enterprises immediate insights into their operations and expected near-term challenges — while helping to build greater resiliency over time. Even though the pandemic’s impacts vary widely by location and seemingly change daily, assessment and resiliency tools, in EY’s view, remain essential for most enterprises, partly because very few companies came into the pandemic with a data and technology strategy.

As part of the response to COVID-19, the firm rolled out its Enterprise Resilience Assessment Tool and overall COVID-19 Enterprise Resilience Framework to help clients understand the current state, map a route to resiliency and track progress. Extending beyond the enterprise, EY has developed a suite of trackers to help clients follow and understand the constantly changing impacts of the pandemic. EY’s Trade Tracker, for example, provides clients updates on government changes to trade rules, a kind of one-stop trade policy shop. Other tracker focus areas include tax policy, labor and employment law, and immigration. In TBR’s view, these tools — and EY’s emphasis on the big picture, not simply operational needs — underscore the broader value the firm brings to transformational engagements, which should benefit EY as clients move from COVID-19 response to post-pandemic strategy.

Next: Bringing technology to bear in a way EY has not done before

“As one EY professional explained, ‘When we solve a problem through applying tech, and thus creating an asset or tool, we want to productize and commercialize and globalize.’ Like a ship making course corrections while still navigating toward a desired destination, EY has adjusted its business model, folded asset-based consulting and managed services into traditional consulting, and committed to emerging technology.” — TBR special report Now. Next. Beyond.: EY’s road map for moving from current to future, May 2019

Turning to growth, EY’s leaders noted that clients increasingly speak to the firm about the need for technology at speed and innovation at scale, with humans at the center. For a firm with a relatively new foundation in technology at speed, EY provided TBR use cases and details around how the firm meets those clients’ technology demands.

Over three separate hourlong briefings with EY leaders in Europe, Asia and the Americas, TBR analysts heard details on the firm’s initial response to the COVID-19 pandemic as well as its strategies for serving clients in the post-pandemic world. While this special report contains information provided by EY 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.

Vendors pursue tactical run-the-business engagements to help clients react to COVID-19 and relaunch business operations

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Management consulting market summary

Outlook

Regardless of whether the pandemic lingers, re-emerges in the second half of 2020 or significantly subsides, TBR expects consultancies will benefit from opportunities created by the chaos of COVID-19, such as uneven responses from government authorities around economic fallout, pandemic protocols and continued uncertainty throughout 2020. Vendors with greater scale, more established technology-centric brands, and deeper partnerships with cloud and software providers will weather the crisis and alleviate pressures on front-end management consulting by price-conscious clients that demand flexible payment terms. TBR expects management consulting revenue growth for the benchmarked vendors to decelerate to 3.5% year-to-year in 2020 but to continue to outperform revenue growth for the benchmarked IT services vendors.

Disruptors

Every part of the global economy, including the IT services and management consulting markets, are experiencing serious disruptions from the global COVID-19 outbreak. Countrywide lockdowns and changes in travel and personal interaction to limit the spread of the virus, have forced changes in human resource management for vendors and their clients, some short term and some likely permanent. Macroeconomic uncertainty due to the pandemic is pushing clients to re-evaluate their spending and shift their priorities from high-touch, large-scale strategic transformational discussions to tactical run-the-business and price-competitive managed services opportunities.

Overview

Benchmarked vendors in the management consulting segment increased revenue 7% year-to-year in 2019, a growth trend that continued to surpass that of benchmarked IT services vendors in TBR’s IT Services Vendor Benchmark, which expanded 1.9% year-to-year in 2019. The Big Four vendor group remained the largest revenue contributor at 55.8% of benchmarked revenue in 2019; however, strategy-led vendors increased their market share by 10 basis points year-to-year to 28%. Big Four and strategy-led firms are expanding their intellectual property assets and managed services capabilities to position as business advisers with holistic service capabilities.

The Management Consulting Benchmark provides key service line, regional, vertical and operational data and analysis for 13 leading management consulting firms. The research program also includes a deep dive into 11 vendors’ business strategies as well as SWOT analysis.

Atos and COVID-19: Serve now and prepare for the future

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Atos, its clients and its communities will be ‘Future Ready’

In a one-hour virtual session with analysts, Atos’ Pierre Barnabe, head of Public Sector & Defense as well as Big Data & Cybersecurity, and Robert Vassoyan, head of Healthcare & Life Sciences as well as Unified Communications & Collaboration, detailed the company’s response to COVID-19, framing the discussion around communities, clients and technology and explaining what Atos expects as the world emerges into a post-pandemic, “Phase 2 Future Ready” world. In contrast to some peers in the IT services space, Atos’ initial emphasis on “serving our communities” reflected an ecosystem-centric view of the changed environment that brought the company’s responses to the pandemic to a different level. Barnabe and Vassoyan spoke specifically about serving national governments, healthcare providers, schools and public safety officials.

In addition, Atos mentioned helping clients facilitate an increase in remote and contactless payments, adjust their responses to new behaviors and consumption patterns (such as in utilities), broadcast media from remote and global locations, and enhance cybersecurity in work-from-home environments. In all, Barnabe and Vassoyan emphasized that the company’s ethical commitment to being an active and responsible corporate citizen was not challenged in response to COVID-19 but was, instead, core to how the company managed the pandemic and positioned itself and its clients for the next phase. 

Atos uses an industry-led organization to understand clients’ business priorities

Atos leads with technology-enabled solutions and technology expertise to solve clients’ business problems. The new industry-led organization, which has been in the works since early 2019 and was implemented in 1Q20 with six global industries and five regional business units, improves the company’s ability to cater to clients’ industry-specific needs and generate business outcomes. According to TBR’s 1Q20 Atos report, “While Atos’ performance will be negatively affected by the COVID-19 outbreak, the company has a relatively resilient business profile that will enable it to operate in the crisis. Approximately 67% of Atos’ revenue is generated by multiyear contracts that contribute recurring revenue streams; 10% by big data and cybersecurity solutions, which are in demand due to COVID-19; and 23% by projects, which depend on discretionary spending and usually experience slowdowns during economic uncertainty.”

TBR also noted that “a balanced vertical mix with revenue contributions of between 12% and 20% across the six industry groups will allow Atos to use growth opportunities in sectors such as telecommunications, healthcare and public sector to compensate for growth challenges in industries highly impacted by COVID-19” such as automotive, retail, and travel and transportation.

Atos in a post-pandemic world: Atos is utilizing its industry-led approach and technology expertise in areas such as supercomputing and machine learning to address clients’ immediate needs driven by the global COVID-19 outbreak, help clients recover and adapt, and prepare their businesses for the future.

Rooted and stable yet innovative, HCLT relies on core strengths to drive profitable growth

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TBR assessment

HCL Technologies’ (HCLT) Mode 1-2-3 strategy remains a core pillar in the company’s efforts to navigate the dynamics of the ever-evolving IT services market, and positions it to transition its portfolio and address client needs now and post-pandemic. At the 2020 Analyst and Advisor Day, HCLT President and CEO C Vijayakumar noted, “The strategy is applicable to any business or enterprise.” Executing successfully on the strategy requires equal commitment from leadership and employees.

HCLT’s leadership is “strong and stable,” according to C Vijayakumar, with 30 top executives with an average of 26 years of experience with HCLT — a striking contrast to some of the company’s peers that have experienced a slew of executive departures and changes at the helm in recent years, such as Wipro’s (NYSE: WIT) May appointment of former Capgemini executive Thierry Delaporte as CEO. As such, HCLT is able to stay the course of its strategy — to utilize engineering and infrastructure services as a core enabler to drive digital transformation engagements and profitable growth — without deviating too far into unchartered domains. Its leadership also acts as a talent magnet, as a charismatic and consistent vision often trumps micromanagement tactics.

Services remains a people business, and HCLT knows it. While the company continues to embed automation to augment services, it relies heavily on its greatest asset, its employees, to extract the most value from its investments. With engineering services at its core, HCLT can execute on what the client wants — provided the client knows what they want — and the company is not shy about challenging its clients as it seeks to not simply solicit new business but to introduce innovative ideas. All of this would not be possible if HCLT did not stay true to its talent strategy.

Just like with its portfolio offerings, HCLT relies on staff with core capabilities. Consulting engineers, not consultants, are what differentiates HCLT from many of its peers, which often lose sight and aspire to be something for which they are not known. Just as talent carries a significant weight in HCLT’s differentiation, the way the company manages its partner network also has an impact on value proposition. As services and software relationships evolve to account for changing buyer expectations, HCLT must remain vigilant in not just how it partners but also with whom it partners. With COVID-19 shifting buyers’ digital transformation priorities and forcing clients to consolidate budgets, maintaining trusted relationships with business leaders will be key, compelling HCLT to forge exclusive relationships with technology-inclined business consultancies to ensure long-term success.

“A simple strategy and relentless focus on execution” fueled HCLT’s ability to accelerate revenue growth while maintaining margin performance over the past two years. During the HCL Analyst and Advisory Day, company executives, along with regional and segment leaders including the CEO, walked through HCLT’s business performance and growth areas, identifying bright spots within industry and service segments that align with the company’s business investments. While HCLT’s areas of investment, such as security, cloud, IoT and digital, do not vary significantly from those of its peers, the company has differentiated itself with its Mode 3-specific investments and leans on its talent and culture, ongoing innovation, and business outcomes achieved for clients to capture new opportunities around these growth areas.