Comcast Business targets strategic acquisitions and international expansion to fuel long-term growth

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TBR perspective  

Comcast Business remains in an enviable position and is an outlier in the telecom industry. The cable operator’s business unit continues to post double-digit revenue growth and is taking market share from a range of competitors in the U.S. The company’s core value proposition is its powerful DOCSIS 3.1-based, hybrid-fiber-coax (HFC) fixed access platform, which provides significantly better value in terms of connectivity performance to price paid compared to legacy technologies such as MPLS and DSL. Comcast Business sees at least another $60 billion in market share that is available to take from less competitively positioned incumbent telecom operators in its domestic market. This sizable addressable opportunity will continue to feed the Comcast Business machine for at least the next few years.

TBR believes Comcast Business also has significant opportunity to sustain long-term revenue growth through international expansion and the company’s evolving sales and marketing strategies. The company is pivoting from a focus on selling its products horizontally across verticals to a solution-centric, verticalized approach, evident in the acquisition of Deep Blue Communications, which specializes in the hospitality, retail and entertainment industries, and also evident in the company’s new product offerings and design principles. Comcast Business is also expanding outside the U.S. and is building presence via acquisitions, in Canada via iTel, in the Caribbean and Mexico via Deep Blue Communications, and in Europe via Sky. Over time, TBR believes the shift to build its international footprint will help Comcast Business win more of the Fortune 1000 companies that have sites in multiple countries and that require global services. In addition, Comcast Business’ acquisition of BluVector, an AI-powered cybersecurity technology company, points to another trend at the company, which is to build out robust security capabilities.

The 2019 Comcast Business Analyst Conference highlighted the company’s business progress and financial performance and detailed initiatives that will spur long-term growth including new acquisitions and portfolio developments as well as Comcast Business’ evolving go-to-market strategies. The event included a State of the Business update by Comcast Business President Bill Stemper as well as presentations focused on areas including the company’s recent Deep Blue Communications acquisition, the ActiveCore SDN platform, network security and Comcast Business’ fast-growing enterprise division.

IBM z15 brings enterprise-grade, automated and compliant data management to systems of engagement

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IBM expects prominent mention in Chapter 2 of the cloud

IBM asserts with some legitimacy that incumbents have an advantage when it comes to disrupting markets. They possess the account knowledge, have working capital, and, more importantly, have data in their core systems and databases. To build an ecosystem, these enterprises have to unlock the power of that data and distribute it beyond the core platform and into a hybrid multicloud environment, which IBM envisions as Chapter 2 of the cloud.

IBM asserts Chapter 1 of the cloud consisted of experimentation and then scaling of new systems of engagement applications while mission-critical systems of record and their multiple dependencies within enterprises remained firmly ensconced behind the firewall for increased data protection. Chapter 2, in IBM’s thinking, will enable these existing investments to participate in hybrid cloud to leverage business data in inside-out fashion alongside emerging mission-critical systems of engagement.

In historical context, if Chapter 1 of the cloud correlates to IBM’s ill-fated 9370 hardware launch, then Chapter 2 should be on par with IBM’s successful launch of the AS/400 minicomputer, which lives on today in junior and large enterprises and is ripe for modernization and migration to the cloud.

At the very least, that is the bet IBM hedged with its $34 billion Red Hat acquisition, which is still being thoughtfully rationalized with the venerable Z platform as midsize and large enterprise consumption patterns merge in a hybrid multicloud world enabled by the growing popularity of multi-enterprise business networks underpinned by IoT, blockchain and AI.

Success in the data economy rests on ecosystems with low-risk data velocity

New with the z15 is what IBM calls Data Privacy Passports, which enable policy-based data management. Passports act as a data proxy. Queries go to the Passports controller rather than to the database itself. The permissions stay with any copies that are made, and the permissioned access can be modified or revoked at any time. IBM highlights the success of Passports in complying with General Data Protection Regulation (GDPR) requirements, allowing enterprises to control the data even without physical custody of the data.

The net benefit of adopting z15 flows from future-proofed risk mitigation. Enterprises and policy makers continue to evolve data privacy regulations. A software shell that allows for policy-based data management that can quickly convert domain knowledge into automated procedures can ensure continued compliance in the rapidly changing regulatory environment around data utilization. The lower risk likewise accelerates data velocity beyond the core enterprise platforms in a prudent and trusted manner.

IBM’s (NYSE: IBM) development efforts position the latest refresh of its flagship Z offering, the z15, to become the premier enterprise data controller in what the company considers Chapter 2 of the cloud. Namely, the z15 product launch represents a continuation of the engineering, development and customer engagement that IBM has messaged for 50 years in the rapidly developing hybrid multicloud environment. The product is purpose built for enterprise-grade applications and has evolved in line with demand for new iterations to meet changing needs and use cases. If z14 brought data protection to mission-critical systems of record by delivering pervasive encryption, then z15 delivers enterprise-grade data privacy provisioning via software control planes to protect data when it leaves the Z platform for use among emerging cloud-native, mission-critical systems of engagement.

Voice, business and device design: For business, smart speakers need a button

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The expanding scope of conversational user interfaces

There are many applications for conversational interfaces in business, for both customer and employee users. Input devices include not only smart speakers but also phones, PCs and vehicles. The conversational interface also works without voice; for someone at a keyboard, typing the command is easier, faster and less disruptive than speaking it.

Conversational interfaces offer benefits far beyond hands-free operation. Users need not remember specific applications and commands, but rather the interface can suggest a possible meaning of what the user has asked or can say it does not understand and users can then rephrase and try again. This reduces the burden on the user to learn how to make a command and thereby expands the number of commands available. For some commands, like making an appointment, speaking or typing a command in natural language is far easier to use than any point-and-click or touch-and-swipe interface.

Additionally, when there is a wide range of possibilities from which to select, the conversational interface is supreme. The user need not remember the exact name of the item. Naming the item as the user remembers it, and then correcting as necessary, is far easier than any of the conventional user interface tools for choosing from many possibilities, including hierarchical menus, scrolling lists and incremental search. Items include names of people as well as names of songs, television shows or podcasts for consumer applications along with products, regions, or variables for business users. A well-implemented conversational user interface can make it very easy for businesspeople to query a complex database, and they can do it using a smartphone. Widespread adoption of conversational interfaces in business will drive up the value and utilization of data, leading to more applications that create potentially valuable data.

As conversational user interfaces evolve, they are becoming more powerful. Currently, the popular consumer voice interfaces process user input on servers, so each conversational interchange requires a round trip between the user’s device and the cloud. As devices become more powerful and conversational software improves, there will be a migration of voice processing from the cloud to the edge. Google (Nasdaq: GOOGL) has announced that the next generation of Google Assistant will process requests on the Android smartphone, starting with the company’s Pixel phone. Google claims this change will improve responsiveness by a factor of 10, and will allow a richer vocabulary of commands, more complex back-and-forth dialogues between the user and the device, and greater adaptation of the interface to the needs of each user. TBR believes this local processing will leverage AI capabilities built into the devices and, in the case of the Google Pixel, will use Google’s Edge TPU, the mobile version of the company’s server-oriented Tensor Processing Unit (TPU). With increased power and better security and privacy, this migration of processing to the edge will drive growth of business applications.

Streamline and extend: IBM’s play for what it calls ‘hybrid multicloud’ or ‘Chapter 2 of the Cloud’

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IBM will use OpenShift to bring a consistent cloud value proposition, remaining agnostic toward delivery method, location or cloud provider

In 2015 Red Hat’s CEO made a statement at an analyst day presentation that Red Hat aimed to do to the PaaS layer with OpenShift what it had done to the enterprise operating system layer with RHEL. That strategy was thoroughly validated with IBM’s acquisition of Red Hat. At the core of the IBM Cloud Summit were discussions of how OpenShift was the only platform layer capable of running on multiple clouds, in what IBM describes as hybrid multicloud. In IBM’s definition, hybrid denotes the ability to run applications on premises, in private clouds, in public clouds and at the edge. Multicloud denotes the ability to mix and match different cloud providers across the hybrid continuum. Many vendors can deliver single brand — or monocloud — hybrid that is a new version of vendor lock-in. IBM asserts OpenShift is the only cloud operating system and development layer that can enable customers to code once and deploy on any form factor from any technology vendor.

Stefanie Chiras, VP and general manager of the RHEL Business Unit, articulated the central Red Hat value proposition as being an enterprise software company with an open-source development model. Involved in a variety of different open-source projects, Red Hat monitors these myriad projects, filtering the most powerful innovations from these upstream contributions into the RHEL operating system before hardening these projects into enterprise-grade products and adding the necessary security and DevOps deployment features needed for large enterprises.

This hardened curation of open-source community projects has seen Kubernetes container management rapidly emerge as a de facto deployment standard, which has Linux as the underpinning operating system. OpenShift stitches RHEL and Kubernetes together with additional development services, and IBM will pivot all its software into cloud-native deployment models resting on top of this foundation to enable the software to run anywhere its customers require.

IBM bets on Cloud Paks to simplify application modernization migration to the cloud in what it calls the ‘second chapter’

IBM’s point of view is that the cloud is entering its second chapter. In the first chapter, which has been the last 15 years, enterprises have moved some development and some customer-facing applications to the cloud, but the deep back-office systems of record have remained on premises for a variety of reasons, including the technical debt of the custom applications, as well as concerns around security and compliance.

Cloud Paks are the manifestation of three to five years of ongoing development work to refactor their monolithic middleware applications into containerized, cloud-ready services. From a packaging standpoint, the Paks simplify the sprawling IBM middleware portfolio into pre-integrated solutions that address the most pressing challenges to cloud migration and operations. All Cloud Paks sit atop RHEL and OpenShift, with IBM promising “single button push deployment” when running applications on the IBM Cloud. Being underpinned by RHEL and by OpenShift maintains infrastructure independence and enables enterprise customers the ability to choose any vendor cloud or underlying on-premises infrastructure to run these applications anywhere.

The IBM Cloud Summit 2019 combined several main IBM initiatives into a full day of executive presentations for the analyst community. IBM’s presentations on strategy and innovation centered on the opportunity to migrate 80% of the workloads still run by traditional IT delivery methods to the cloud. IBM’s legacy strengths, combined with more recent investments, make the company well suited to help customers address the remaining 80% of IT workloads, most of which are mission critical. IBM’s recent landmark investment was the purchase of Red Hat, and IBM laid out in even greater detail how that will benefit customers. This was followed by a series of presentations taking aim at the untapped market opportunity as well as the various middleware services and professional services IBM can bring to bear on the application migration and modernization efforts for its customers resting on the foundational elements of Red Hat Enterprise Linux (RHEL), Red Hat OpenShift and Kubernetes container management clusters.

India-centric professional services rivals compete to prove themselves as front-runner in European market

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Vendors look to Europe for new revenue pipelines, but some are falling short

India-centric IT services vendors are looking to do more in Europe, utilizing a few different strategies to get there, including pursuing acquisitions, developing new offerings and building on-the-ground workforces. This allows them to diversify revenue streams geographically. TBR feels this push into Europe is a crucial move for India-centric vendors, to not only remain competitive with each other and advance their bottom lines but also to reap the benefits that the European market has to offer, such as new investment opportunities and a larger talent pool for recruiting.

Vendors look to Europe for new revenue pipelines, but some are falling short

The five leading India-centric professional services vendors — Cognizant (Nasdaq: CTSH), HCL Technologies (HCLT), Infosys (NYSE: INFY), Tata Consultancy Services (TCS) and Wipro (NYSE: WIT) — explored new pipelines for expanding their presence into the mature and growing European market. Infosys worked to close the gap on HCLT in 1Q19, while TCS, Wipro IT Services (Wipro ITS) and Cognizant are feeling the pressure to conform to stay competitive.

Low cost, but little long-term value: Insight Enterprises’ plan to acquire PCM Inc.

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Insight’s acquisition strategy has led to strong services growth and a successful shift from the legacy VAR model

Insight’s last three acquisitions, of Cardinal Solutions, Ignia and BlueMetal, were all services companies that provided significant differentiation and skilled talent that legacy Insight lacked. The acquisitions were part of the firm’s 2015 digital innovation strategy, an attempt to shift its business model from a typical VAR to a true solutions and services provider. That strategy was largely successful, and Insight’s growth in services (greater than 18% year-to-year for the last five quarters) has outstripped nearly all of the firm’s major competitors, including CDW (Nasdaq: CDW), SHI and Connection (Nasdaq: CNXN). In January 2019 Insight announced the formation of a new practice called Insight Digital Innovation, which unites those three acquisitions under one umbrella, allowing Insight to deploy its 850 developers and architects on new IP and services engagements in a streamlined fashion. TBR believes Insight has been executing its digital innovation strategy extremely well, and the decision to invest in services and more highly skilled employees has been a key differentiator for Insight. Though the company’s overall top line has decreased year-to-year in recent quarters, this is due entirely to declines in product sales, which also face particularly difficult compares from a strong 2017-2018. Insight’s extremely robust double-digit growth in services revenue positions the firm to return to growth in 2H19 to deliver midsingle-digit overall growth for the year. TBR believes the firm’s pivot from its legacy business model is an example for other VARs to follow to combat the continual commoditization of hardware and software.

PCM represents a retreat to scale and a regression for Insight

Even considering Insight’s success in shifting away from its legacy model, the company’s plan to acquire PCM does make some immediate sense. Adding scale can be of significant value in a marketplace dependent upon volume selling, and Insight’s leadership touts PCM’s penetration in the small to midmarket segment, where they believe there is opportunity to upsell Insight’s higher-margin services offerings and in which legacy Insight has very little market share. Essentially, Insight is attempting to buy customers in hopes of increasing stickiness with those clients and continuing its services growth in a new market. Beyond its customer base, PCM has largely done nothing to adapt to the changing marketplace that VARs now face and seems to offer little in the way of differentiation. TBR believes purchasing customers is a dubious strategy at best, as PCM has been consistently declining in revenue over the last two years, indicating stickiness is already an issue with its customer base, and being acquired is likely going to send many employees out the door. Undoubtedly, many of PCM’s customers are loyal to the company due to their relationships with current PCM employees — if those employees become redundant or decide to leave PCM as it joins Insight, many of those customers may choose to follow them.

TBR believes the main benefactor of this planned acquisition is likely to be limited to the organization’s supply chain, given the likely increase in scale and efficiency, as well as the addition of about 1,100 highly skilled services and technical employees. Another interesting piece of this planned acquisition is PCM’s cloud hosting business, which seems to be one of the only offerings from PCM that is not matched by most every other VAR. However, in a special conference call regarding this planned purchase, Insight CEO Kenneth T. Lamneck indicated the cloud hosting business is going to get a very close look to determine if it will remain part of Insight once the acquisition is finalized. Though PCM’s cloud hosting business is relatively small, it seems more likely to provide growth than many other parts of PCM’s business and would allow for more opportunity to bundle additional higher-margin services and solutions. Ultimately, fully capitalizing on what PCM has to offer will be a difficult proposition for Insight considering the typical effects of such a large acquisition and Insight’s apparent strategy for growth.

In June Insight Enterprises (Nasdaq: NSIT) announced plans to acquire PCM Inc. (Nasdaq: PCMI) for around $581 million in June, a deal that would add about $2.2 billion to Insight’s revenue, with about $1.6 billion coming from small to midmarket clients and $260 million coming from the public sector. The planned acquisition appears to be aimed at gaining market share with small to midmarket companies, a segment which Insight historically has not had much success growing organically. PCM also has 40 offices and just over 4,000 employees, which would give Insight a significant boon in terms of scale for both product delivery and sales. However, with 2,700 of those 4,000 employees currently in client-facing roles, TBR notes there are a number of redundancies in locations and employees across the two firms.

IoT is trending toward smaller, easy-to-replicate projects that will generate increased data over time

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IoT is not a technology, nor a market, but it certainly drives IT revenue

TBR estimates the contribution of the commercial IoT technique to the overall IT market will increase from $456.1 billion in 2019 to $1.7 trillion in 2025, a CAGR of 24.9%. IoT is not a technology or a market, but a technique for applying IT components, made more relevant by the increased ease of connecting sensors and collecting and processing data. It serves as a tool in the larger toolbox of traditional IT solutioning. As vendors and customers move beyond the stigma that IoT is exotic, untested and expensive and begin to understand that IoT is just an iteration of everyday IT solutioning, IoT is being implemented at an increasing rate, albeit slowly and steadily. While these projects are generally smaller, as customers leverage IoT to solve targeted problems and prove ROI, they are set to grow over time and expand into parallel projects, contributing long-tail revenue to vendors that are amenable to projects that are smaller in scope.

Several drivers will determine whether the growth needle moves toward lower or higher market performance. One is global economic health, including the impact of geopolitical challenges, which is out of the control of the customer and vendor community. If the U.S., Western Europe or China (or all three) faces an economic downturn, IoT projects are less likely to flourish. Increased tension between the U.S. and China could also drive economic challenges, in addition to hurting vendors’ ability to partner, limiting vendors’ market reach and reducing customer choice.

Vendors’ efforts to seek out cooperative and coopetitive opportunities, along with their willingness to tailor their go-to-market strategies around their core competencies, will also be a factor in IoT growth. The better vendors interact and interoperate, the easier it is to piece together solutions. Often those solutions will manifest as packaged solutions — a bundle of vendor components preconstructed to solve a horizontal business problem or vertical challenge.

IoT is a piece of a larger IT strategy and should not be treated as a unicorn

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Let us begin with the bad news: Many IT and operational technology (OT) vendors were disappointed — and some incurred damage or had to scramble to realign — as the IoT opportunity failed to live up to inflated expectations prevalent between 2015 and 2017. Many anticipated far more rapid growth than was reasonable, given that IoT is neither a technology nor a market, but a technique or a class of solutions. Many also thought that version 1.0 of horizontal IoT platforms was a fast and easy sell. An early victim was General Electric (NYSE: GE), but TBR expects other large names to narrow their IoT businesses and investments, if they have not already, and several smaller names to disappear or get eaten by bigger fish as they find themselves spinning their wheels in the mud with nondifferentiated portfolios.

The good news: Starting in late 2018 and continuing into 2019, TBR has observed the IoT opportunity recovering as lessons from the difficult times have led to increased sanity and smarter messaging around IoT. We believe that the pace of IoT project implementation is increasing, but that the mix has shifted to smaller projects. Over time, however, the number of active projects will grow and the amount of data they produce will also grow, leading to an accelerating growth curve.

TBR believes a few significant realizations and realignments are driving acceleration:

  • IoT really is not a market (although that is the easiest way to describe it) nor a technology. It is a technique for applying technology. It is not a very novel technique, but rather an evolution of IT solutioning that includes sensors. More vendors and customers are coming to understand what IoT is and are avoiding the perception of IoT as something that is new, novel and complex, making it easier for vendors to leverage IoT to help customers overcome business challenges. With IoT being treated as one tool in the larger IT solutioning toolbox and the focus turning to solving the end problem, rather than defining the technology needed to get there, vendor-customer relationships are back to business as usual. Vendors do not have to get bogged down in education cycles as much because customers understand IT solutioning, and vendors can focus on delivering solution components instead of getting embroiled in discussions on the perception of IoT as a discrete and transformational technology and the complexity, hesitation and perceived risk that stem from that.
  • IoT is not easy. This is true for two reasons: because customer organizations are complex and have numerous stakeholders with differing priorities, visions and systems, and because IoT is rarely implemented in and of itself. IoT is more often tied with existing or new systems, such as product lifecycle management, supply chain management, enterprise resource planning software, or a multitude of specialized software from ISVs. Adoption is largely from the bottom up in organizations, but customer IoT champions and vendors are realizing that adoption must be supported from the top down to extract maximum value from IoT. Customers are increasingly adding CIO and chief digital officer (CDO) roles to guide holistic, consistent transformation, and vendors are investing in sales strategies targeted at the C-Suite, such as innovation centers and improved messaging. To answer the second challenge, vendors are learning that they cannot address everything alone and must partner to tackle the variety of interconnected systems and build best-in-class solutions.
  • Being the best at a few select components of IoT is better than being OK at everything. Thousands of vendors are attacking the IoT opportunity, culminates in a busy, confusing and hypercompetitive market for customers. Winning vendors are finding their swim lanes and exploiting their niches, such as self-service Amazon Web Services (Nasdaq: AMZN), application-focused Oracle (NYSE: ORCL), embedded-driver Dell Technologies (NYSE: DELL) and things-focused Bosch. These vendors are increasingly known for being the strongest in their chosen niches, and their narrower focuses not only make them prime targets for systems integrators to pull into solutions but also make partnerships easier, with joint go-to-market efforts proving to be a winning strategy for vendors to employ beyond their legacy customer bases. 
  • Packaged solutions are emerging. With customization comes cost and complexity, anathemas to the customer base, especially large customers. As vendors begin packaging components together for shared applications or to address common challenges, costs are beginning to develop boundaries, helping customers understand exactly how IoT can be used and what to expect in terms of ROI. TBR expects packaged solutions to drive steady market growth moving forward. Each solution has its own growth curve, with some being quite rapid—but taken together, these solutions are delivering accelerating but moderate growth.

The 3Q19 Commercial IoT Market Landscape looks at technologies and trends of the commercial IoT market. Additionally, TBR catalogs and analyzes more than 520 customer deals by vertical, uncovering use trends, identifying opportunities, examining maturity, and discussing drivers and inhibitors.

KPMG is on the right path as the firm delivers connected, powered, trusted transformation

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Connected, powered, delivered with trust: KPMG’s ambitions for its clients  

KPMG’s approach to digital transformation revolves around the firm’s concept of the “Connected Enterprise,” an organization fully embracing information technology, networking and data to take every advantage of existing and emerging technologies. In KPMG’s view, fully embracing IT requires an enterprise’s transformation efforts be sustainable and cross-functional; that is, not simply transformation to a new state, but an ongoing, ever-evolving change process, executed across an entire company, not simply within one functional area, geography, or line of business. As a comprehensive vision of digital transformation, KPMG’s Connected Enterprise serves as both an aspiration and a road map, particularly when coupled with the expertise, capabilities and experience KPMG believes it brings to clients. During the event, both formally and in sidebar conversations, KPMG professionals reiterated the firm’s commitment to delivery, from strategy and road mapping through advice on funding transformation, based on KPMG’s core expertise in finance, and through to implementation and managed services. Multiple client examples, some described in this report, brought forward that commitment and reinforced KPMG’s strategy-heavy emphasis.

When the firm shifted to emerging technologies, the Connected Enterprise became empowered: According to KPMG, the firm brings clients functional transformation advice, deep industry knowledge and expertise transitioning to the cloud. And underpinning the firm’s core strengths around strategy consulting and emerging capabilities around technology, KPMG touted the trust clients have developed with the firm and KPMG’s ability to reassure clients their digital transformations will be connected, powered and secure. In TBR’s view, KPMG’s framing around digital transformation does not differ sharply from its Big Four peers, with “connected, powered, and trusted” echoing both the structures and themes used by PwC and EY, in particular. In the near term, minimal differentiation may not matter to clients. As these firms all begin to more aggressively court new logos, KPMG may need to find a unique way of describing its digital transformation vision if it has yet to establish enough differentiation.

KPMG may find differentiation with its Ignition Centers, even as the field is increasingly crowded with these kinds of immersion, innovation and transformation spaces. As described in detail by KPMG’s leaders, the 25 globally dispersed Ignition Centers “make technology real” for clients and allow clients to “see what tech feels like” within a KPMG setting, but attuned to the client’s specific needs. For KPMG, these centers supply the engine for the firm’s innovation agenda, providing the culture and the space for an “ideas to outcomes” framework for clients’ people processes and technology. Further, the firm’s leadership described “sensory advantage capability” — the ability to look at markets and trends, anticipate what will be coming, and then draw conclusions, with specific context, for clients — as critical to both the Ignition Centers and how KPMG views innovation.

In KPMG’s view, the firm has developed expertise around reading “signals of change from an outside perspective” and relating those signals to client-specific content. All of this — the innovation, technology and future sensing — enables KPMG to translate clients’ needs into strategy for a Connected Enterprise, deliver a detailed and tech-supported road map, and then implement the digital transformation.

As with the firm’s overall framing around digital transformation, TBR cannot be certain the Ignition Centers differ substantially from PwC’s Experience Centers, EY’s wavespaces or the 20-plus other centers TBR has visited in the past three years. In discussions with KPMG professionals around client selection and preparation, staffing and talent management, and technology partner inclusion within the Ignition Centers — all concepts researched extensively by TBR — no substantial differences emerged, suggesting KPMG has at least kept pace with the evolutions to date, if not necessarily leading peers in developing new ways of leveraging these centers.

In mid-June, KPMG hosted more than 50 analysts for an extensive series of large sessions and breakouts intended to showcase KPMG’s capabilities, offerings and innovations. With multiple clients on hand for both the opening dinner and presentations across the following daylong session, TBR had the opportunity to hear why clients select KPMG and the different digital transformation challenges KPMG has addressed. TBR also met one-on-one with KPMG leaders and partners, hearing directly from them the firm’s overall strategy, internal metrics, and sense of where KPMG fits within the consulting market.

Key findings from TBR’s Quantum Computing Market Landscape

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While quantum computing continues to make strides, market limitations and technology exploitation are ongoing concerns

Quantum computing vendors continue to make major strides in the technology. Decoherence and qubit quality remain ongoing challenges for which vendors continue to research enterprise-grade workarounds. However, there are challenges facing the quantum computing market landscape that even the smartest physicists and engineers cannot counteract. The first is the looming skills gap that will exist when quantum computing becomes more mainstream. Many customers and vendors alike do not see quantum computing taking off in the near term, despite evidence to the contrary. As such, a majority of organizations are not investing in quantum capabilities, which will lead to a massive influx of demand for quantum-skilled workers once these organizations all begin to rapidly adopt quantum after an adequate number of proofs of concept have convinced the skeptics. Some skills can be retooled from existing capabilities, but others need to be taught through years of schooling. TBR believes this is an opportunity for professional services vendors such as Accenture and Atos, but also for quantum-centric vendors, to invest in the education of future generations. IBM recently announced education-centric investments in Africa, suggesting vendors are recognizing the skills gap that looms and the opportunity that will emerge by investing ahead of the curve.

Determining how to secure both quantum and classical compute instances against bad actors remains a persistent challenge. There are ways to mitigate this persistent threat by adapting cybersecurity capabilities, but the challenge is that, as with other skills shortages, many organizations do not believe this threat is close enough to worry about. Given that TBR research has shown it can take three or more years to adapt current security measures to be quantum safe, organizations, especially those with highly sensitive information in their possession, should begin to monitor this challenge.

The quantum computing market will achieve economic advantage in the next two to five years, one algorithm at a time. Once this is initially achieved, developments will be swift as customers are likely to find ways to repurpose existing algorithms for new uses. While quantum computing brings with it the promise of great, positive change, it also brings the threat of malicious players leveraging this technology for negative purposes, increasing a focus on quantum-safe security developments in line with quantum computing developments. The swift impact of quantum computing will be a key factor in determining who wins and who loses in this technological transformation.