Most CSPs in developed countries will widely deploy 5G networks by mid-2020s

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According to Technology Business Research, Inc.’s (TBR) 5G Telecom Market Forecast 2018-2023, an increasing number of CSPs globally, predominantly in developed countries, are accelerating and broadening the scope of their 5G build-outs, which prompted TBR to increase its 5G infrastructure market size forecast compared to 5G Telecom Market Forecast 2017-2022. There are a few reasons for this pull forward, including the need for CSPs to stay competitive for customers of traditional mobile broadband and high-speed internet services, reduce the cost-per-gigabyte of carrying traffic (network opex efficiencies), and build a foundation in preparation for new use cases of the network. The availability of 5G devices, including a variety of smartphones, in 2019 is another key driver prompting earlier infrastructure investment.

The software upgradeability of some newer LTE base stations will enable some CSPs to more quickly and seamlessly migrate to 5G. However, nearly all CSPs will need to deploy net-new 5G base stations and 5G mobile core over time as CSPs transition from a Non-Standalone (NSA) to Standalone 5G architecture. This seamless software upgradability of new RAN platforms to 5G will facilitate deployment at incremental cost, keeping overall 5G capex spend scaling quickly but at a relatively lower level compared to prior RAN generation upgrades.

Mobile broadband (MBB) and fixed wireless access (FWA) will be the two predominant use cases for 5G technology by CSPs through the forecast period, with other use cases materializing in the middle to later years of the forecast period, mostly as it pertains to machine-type communications such as massive IoT or mission-critical IoT.

Now. Next. Beyond.: EY’s road map for moving from current to future

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TBR perspective

Norman Lonergan, EY global vice chair, Advisory, opened the EY 2019 Global Analyst Summit with an outline for a new strategy called Now. Next. Beyond. Having executed extremely well against its earlier strategy, EY needed to raise its own bar. In a way, it is adhering to a strategy that it likewise seeks to use to assist its key clients in adopting and leveraging technology to enter the digital economy as a stronger and more vibrant operating business.

Achieving these objectives does not happen overnight, nor will it occur without false starts and shelved proof of concept trials. From TBR’s perspective, Now. Next. Beyond. broadly translates into the following:

  • Now: The point in time where the heavy advisory lifting takes place to establish the foundational business rules required for further automation on the way to becoming a truly digital business.
  • Next: Obtainment of the low-hanging fruit in quick operational enhancements to cut costs (and prove value) and to enhance the overall customer experience. This phase likewise lays the foundation with anchor ecosystem participants to harden the automated or smart contract pieces necessary for the network effect at scale.
  • Beyond: The aspirational objective that in some ways could be entirely different business models made possible through atypical partnerships with business entrants from radically different business domains.

The EY construct is not necessarily groundbreaking or unique, but it is the strategic framework and corporate language the firm intends to deploy as it moves forward in the industry evangelizing its best practices and promoting the tight working relationships it has built over the past decade with enterprise technology stalwarts such as Microsoft and SAP.

Appropriately, EY hosted its annual Global Analyst Summit at a working cruise terminal at the water’s edge of Boston’s Seaport District, in a facility that served as an EY innovation hub before turning back into the assembly area for an oceangoing cruise ship. The venture-forth vibe in the physical facility amplified the sentiments expressed by EY’s leaders, particularly around making the firm more global, including global engineering across service lines and developing IP in a more industrialized way. 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.

Cyber liability insurance: Modern security apparatus for modern security threats

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Cyber liability insurance: Leveraging an old concept for modern challenges

Despite modern security challenges, there are modern solutions emerging to help customers navigate security risks, reduce risk for enterprises, generate better security hygiene, and perhaps even foster stronger standard bodies. One solution is taking an old concept, insurance, and modifying it for the data age.

Insurance is a concept that has existed since the Babylonians built the hanging gardens, and likely in some form before that. Insurance generally exists in a love-hate relationship with those that are covered. However, it is often deemed essential (or made essential through law) to cover the many what-ifs of life.

We discussed in the prior section several ongoing security challenges related to liability and business risks that are causing customers to reconsider pursuing digital transformation. However, what if customers’ digital footprints were insured? What if damages from a breach were paid through an insurance company, or if an expert recovery team was funded through a policy that would be dispatched as soon as there was an incident? And what if such a policy included damage control and positive marketing services following a breach? This would make customers much more comfortable by mitigating part of the risk associated with taking the technological leap toward digital transformation.

This is not an “aha” moment. Cyber liability insurance already exists on the market. It is defined by the International Risk Management Institute Inc. as:

 A type of insurance designed to cover consumers of technology services or products. More specifically, the policies are intended to cover a variety of both liability and property losses that may result when a business engages in various electronic activities, such as selling on the Internet or collecting data within its internal electronic network.

Most notably, but not exclusively, cyber and privacy policies cover a business’ liability for a data breach in which the firm’s customers’ personal information, such as Social Security or credit card numbers, is exposed or stolen by a hacker or other criminal who has gained access to the firm’s electronic network. The policies cover a variety of expenses associated with data breaches, including: notification costs, credit monitoring, costs to defend claims by state regulators, fines and penalties, and loss resulting from identity theft.

Companies such as Nationwide and Hiscox, among a long list of others, provide it. However, it is hardly brought up in the digital transformation discussion, and TBR believes it has important market impacts as well as drives opportunities for current security vendors. In terms of the market, TBR believes the more mature cyber liability insurance becomes, the faster organizations will adopt digital transformation. It would be beneficial if cyber liability insurance were part of the conversation when a vendor leads a digital transformation implementation, just as car insurance must be a consideration when buying a new car.

Do not concern yourself with quantum supremacy; the opportunity is in ‘economic advantage’

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Economic advantage is a key, repeatable milestone for quantum computing

TBR defines “economic advantage” as the point at which there is a significant benefit, either in time to insight or the ability to obtain an insight, that makes it cost-effective to pursue a given problem with the help of quantum computing. This does not mean that the benefit needs to be achieved exclusively with a quantum computer. In fact, TBR believes that initial economic advantage will be achieved by disaggregating a complex problem from classical computing to quantum computing and then back to a classical computer to maximize the cost efficiencies of gaining a given insight. Just as quantum computing will hit the market algorithm by algorithm, so will economic advantage.

It is not necessary for quantum computing to reign supreme across the IT space in order for value to be abstracted from the technology. It is also not necessary for quantum computing to take the place of a classical computer in order to provide value. This is a key factor that many vendors in the market are overlooking. Just as cloud is not all or nothing, neither is quantum computing. Cloud, as it currently exists, works in partnership with on-premises environments. In fact, customers prefer the consumption of cloud in this hybrid manner. This is a similar consumption-type model we foresee quantum computing taking, in which classical computing and quantum computing work together to fully harness the power of quantum computing.

As the prevalence of quantum computing continues to increase in the IT realm, there are many different views on the technology. Some believe the technology is so far from being relevant that it is not worth worrying about. Others believe the technology is already here, while still others believe the technology is on our doorstep and the wealth of knowledge it will release for society is almost upon us. Here is one thing we all can agree on: Quantum computing has not achieved quantum supremacy. However, TBR believes there is a far more important metric to concern ourselves with as a society that is much closer than we think: economic advantage.

Technological complexity could become a major impediment to realizing the promise and potential of 5G

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TBR perspective

The 5G ecosystem remains in a pressure cooker. There is pressure on standards bodies and their constituencies, including vendors, operators, enterprises and governments, to rush forward with technology development and hurry infrastructure into the field. There is also pressure on these same stakeholders to figure out how to not only get that gear into the field at scale but how to monetize this new infrastructure.

Though the 5G bandwagon has remained cohesive thus far, increasing technological complexity could become a major impediment to realizing the promise and potential of 5G. Additionally, increased influence by enterprises and governments is adding more complexity to the fold.

It will likely take another year for the dust to settle on the specifications for 5G NR and the 5G core, two foundational technologies for 5G networks. A key takeaway from the 5G Summit is that, despite complexity challenges, incremental progress continues to be made in the development of 5G, and the 3GPP’s Release 16 remains on track to be completed by the end of this year, fulfilling the initial promise of 5G by providing a fully stand-alone system. Release 16 will also address some of the feature limitations in the Release 15 specifications.

The sixth annual 5G Summit, which was hosted by Nokia and New York University Tandon School of Engineering in Brooklyn, provided an overview of what happened in the 5G ecosystem over the past 12 months and delivered a forward-looking view into where companies and academia think the ecosystem is headed, even out to 6G.

Be bold and get moving: PwC on risk, digital transformation and embracing data

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TBR perspective

With risk permeating every business conversation and PwC accelerating investments in digital-related offerings, including PwC Connected Solutions, which sits within its Risk and Regulatory Platform business, the firm has prepared for the next wave of opportunities. Trading on trust remains at the core, especially as the politics of data continue to disrupt PwC and its clients. Becoming customer zero keeps PwC consistent with peers, while pulling in risk differentiates, particularly against non-Big Four competitors. But the firm creates a good use case for embracing digital when it comes to managing risk. PwC’s broad spectrum of capabilities, including digital risk solutions, internal audit support, cyber and privacy advisory, due diligence, and third-party certification, add necessary dimension to its risk practice. They also help PwC protect its spot in the market as the shift to digital operations elevates the strategic importance of risk and compliance functions.

“By rethinking risk, you create confidence at scale”

Across client panels, which featured risk and IT professionals from various industries and countries, similar themes emerged, including the evolution of understanding the value of smart risk-taking (Being a smarter risk taker through digital transformation, a recent PwC paper). Additionally, panelists, attendees, and PwC risk and consulting specialists spoke of the profound shift from managing and containing risk to leveraging risk processes and profiles to build transparency and confidence in an organization and enhancing trust with customers and partners. The similarities among the professionals’ comments created layers of emphasis, particularly around trust and scale.

One client noted, “Companies that know and manage risk smartly, build trust with their customers [and] move faster themselves.” The client explained that risk management enables his company to build trust with customers faster and react to security issues more quickly than competitors. When a futurist spoke about emerging technologies and their impact on future organizations, he peppered his remarks with comments around the ethics of powerful technologies. The underlying questions: “Is the system trustworthy?” and “Can we trust the people [working those systems?]”

Scale risk management across an organization through developing talent

The PwC client who reintroduced PwC’s tagline, “by rethinking risk, you create confidence at scale” succinctly pulled together two recurring thoughts across this year’s Risk Summit: talent and digital transformation. Multiple clients and PwC professionals spoke of the importance of talent. One client stated, “The first priority is to develop talent,” even as they recognized that decreasing budgets for risk management and increasing competition for skilled IT talent resulted in pressure to expand an appreciation for risk more widely across an organization — or essentially to scale risk management practices through education and analytics-based decision making. Not surprisingly, all of these issues and opportunities fall well within the scope of PwC’s expertise.

For the second year in a row, TBR attended PwC’s annual Risk Summit, a client-centric event geared toward sharing lessons learned among client risk professionals and presenting PwC’s thinking on risk and successes to date to the analyst community. This year the summit featured multiple client panels and created a clear picture of issues most prominent in the Risk space.

Not your father’s partner programs: How vendors and partners are evolving cloud ecosystems

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Chicken or egg first? For partner programs, that makes a big difference

As Intel (Nasdaq: INTC), Microsoft (Nasdaq: MSFT) and Cisco (Nasdaq: CSCO) created the modern computing era in the 1990s, partner programs were at the forefront. The success of these companies and the distributed computing era in general was largely built on the backs of technology and distribution partners. In fact, these companies still rely on partners to drive a majority of their revenue today. The same cannot be said for the cloud era of IT, which was led by the direct sales strategies of top vendors such as Salesforce (NYSE: CRM) and Amazon Web Services (AWS; Nasdaq: AMZN). These two vendors became leaders in their respective cloud markets by selling directly to customers, bypassing distribution partners altogether. Partners are certainly playing a larger role now, but the timing does impact their position in the value chain for cloud. Without a well-defined value-add in the self-service, transactional and passive sales strategies for cloud, partners are forced to create or carve out activities that are both unaddressed by the cloud provider and hold value for the end customer. Rather than traditional IT vendors relying on partners to drive their business, in cloud those partners are on their own in many respects to identify and develop their own value-add. Being creative, developing intellectual property and focusing on the gaps between multivendor solutions are much more important activities for partners in cloud programs compared with traditional ones.

Partners may look the same, but are in fact quite different

“What does a cloud partner look like?” was a common question as these new cloud-centric programs came to be. It was unclear if a new startup class of born-on-the-cloud partners would come into existence, or if the existing stock of VAR, distributor, MSP, systems integration (SI) and hosting partners would eventually transform their businesses to align with the new cloud business opportunities. As shown in Figure 1, the types of partners participating in new cloud programs is just the first category of changes programs are undergoing. As the answer to what type of partners are needed for these programs comes into view, it is looking like a little bit of the former and a lot of the latter. Cloud-native partners that are focused on consulting, managed services, intellectual property development and cloud solution integration hold a small but important space in the market. The difficult thing for vendors is that there are not very many of these newly formed partners, and to make matters worse, many are being acquired. It is also difficult to spur their creation or fit them into a traditional partner program. While traditional partners are cattle that can be controlled and herded in a consistent direction, cloud-native partners are wilder animals that create, forge and follow their own path. In terms of existing partners changing to focus on cloud solutions, that, too, is a difficult task. The truth is that many traditional VAR-type partners, focused on reselling and implementation activities, may not survive the transition to cloud solutions. Part of this is generationally driven, as many of the baby boomer-owned partner businesses lack the incentive to adapt their business model with retirement looming. Many of these partners will ride the slow decline of traditional IT opportunity until eventually closing their doors. Those traditional partners that do make the transition to a more cloud-focused business model will compose the largest segment of cloud partners. While they may keep the same name, these partners will be operating in a fundamentally different manner compared with traditional partner models.

Informatica adds intelligence to data management but faces unusual competition as traditional roles blur

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The Customer Data Management landscape

Informatica continues to thrive in its position as an agnostic third-party data management vendor that supports enterprises’ applications and data initiative. This approach has served Informatica well, as tailored solutions such as Customer 360 have complemented and supported leading front-office applications like Salesforce with customer data management. As front-office application vendors innovate to challenge Salesforce for market share, many are building customer data platforms that enhance the information feeding these applications and build a case for full-suite sales across front-office touch points. Among this competition, there is also a driving need to build greater insight and intelligence into customer data. Informatica’s acquisition of AllSight greatly strengthens the intelligence it can deliver around its clients’ customer data, but applications-led vendors will increasingly challenge Informatica in the customer data management space as they look to build out their value propositions.

Unifying and adding intelligence around customer data is a ubiquitous priority

Vendors across the cloud-based and traditional software landscapes want to elevate the value they provide customers and increase their addressable market by prioritizing unified and intelligent data to power enterprises. Data efforts are following the same workloads trends as cloud applications, focusing on CRM first before HCM and ERP to build traction in the market.

Applications-led vendors such as Salesforce, Oracle, SAP and Adobe are leveraging the data their individual sales, marketing, customer support and commerce applications generate and consume. This allows vendors to craft partnerships, new solutions and data model transformations to unify and enrich the data across all discrete application areas. The message shapes up to enable an enterprise to equip all front-office functions with a single and complete depiction of each customer or prospect that tracks and contextualizes actions at every point of the customer life cycle. In the last nine months we’ve seen numerous developments along these lines, including:

  • SAP announced the unification of its customer experience applications into a single suite, C/4HANA, with plans for deep integrations and layers of intelligence.
  • Adobe, Microsoft and SAP announced their alliance under the Open Data Initiative to give joint clients a more comprehensive view of their customers by enriching data across each vendor’s front-office applications.
  • Salesforce announced Customer 360 to update records across its systems with new information via a unique customer identifier.
  • Oracle announced CX Unity as a data platform that unifies data across Oracle and partner front-office applications to provide a comprehensive view of engagement points and additional data intelligence.
  • Salesforce announced intentions to offer a customer data platform to store a unified profile of customers.
  • Adobe announced a customer data platform.
  • Adobe and Microsoft expanded their relationship, launching new tools and leveraging data from LinkedIn to provide purchasing insights for B2B sales and marketing.

TIS market returns to positive growth as key operators accelerate and broaden 5G build-out plans

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TIS market returns to growth …

According to Technology Business Research, Inc.’s (TBR) Telecom Infrastructure Services Global Market Forecast 2018-2023, the telecom infrastructure services (TIS) market has returned to a positive growth trajectory through the forecast period after several years of declines, now that the 5G cycle is underway and webscales continue to increase their spend on network technologies to drive their strategic initiatives. Leading operators globally have accelerated their 5G timelines by up to two years, and this has correspondingly pulled forward the TIS market growth curve by two years. 2018 was a key year where leading operators invested to prepare their networks for 5G and, in some cases, began deploying 5G technology. This trend will play out over at least the next five years as operators build out their 5G networks and continue their transformational journeys toward becoming digital service providers.

… but growth rate suppressed by offsetting factors

Offsetting factors that will constrain the rate of TIS market growth include the shift to more efficient network architectures (NFV/SDN and cloud); the decommissioning of legacy infrastructure; the increasing use of network resource pooling, such as network sharing; and operator consolidation.

Professional services will be the fastest-growing services segment through the forecast period

Increasing technology and business model complexity will drive demand for a broad range of professional services through the forecast period. Leading operators will continue their journeys toward evolving into digital service providers, and this will require the full spectrum of professional services, from consulting to systems integration. Operators will increasingly rely on the vendor community for assistance, requiring expertise, staff augmentation and access to intellectual property, or a combination off all three, as they pursue digital transformation.

TBR’s Telecom Infrastructure Services Global Market Forecast provides annual analysis and forecasting of the deployment, maintenance, professional services and managed services markets for network and IT suppliers.

Operators are partnering more deeply with webscales to support multicloud and hybrid environments

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Combined Cloud as a Service revenue for telecom operators in Technology Business Research, Inc.’s (TBR) 4Q18 Carrier Cloud Benchmark rose 13.2% year-to-year in 4Q18, primarily due to investments in new data centers and portfolio expansion in growth segments such as SaaS and hybrid cloud. All benchmarked companies sustained year-to-year Cloud as a Service revenue growth as significant opportunity remains for carriers to target businesses seeking greater cost savings, scalability and efficiency by migrating traditional infrastructure and applications to the cloud.

Combined IaaS revenue among benchmarked companies rose 11.2% year-to-year, driven by portfolio expansion and data center investments to reach customers in new markets. IaaS revenue growth will decelerate over the next several years, however, as operators increasingly emphasize supporting in-demand IaaS solutions from third-party providers such as Amazon Web Services (AWS) (Nasdaq: AMZN) and IBM (NYSE: IBM) over first-party IaaS platforms.

Other Cloud (which includes SaaS, PaaS and BPaaS) revenue rose 16.8% year-to-year, driven by the adoption of services including unified communications, CRM and office productivity solutions. Operators are capitalizing on the demand for SaaS and PaaS applications by cross-selling the solutions with IaaS platforms and other network services.

The bulk of revenue is being generated in APAC and EMEA as local operators benefit from data sovereignty laws that require cloud data be stored in local data centers, which is slowing the momentum of U.S.-based webscale providers. The Americas accounted for only 15% of Cloud as a Service revenue in 4Q18, as AT&T and Verizon are no longer competing in the IaaS market and Asia- and Europe-based operators are primarily targeting foreign-based multinational customers with operations in the Americas.

TBR’s Telecom Practice provides semiannual analysis of Cloud as a Service revenue in key segment splits and regions for the top global carrier cloud operators in its Carrier Cloud Benchmark. Operators covered include Bharti Airtel, British Telecom, CenturyLink (NYSE: CTL), China Telecom, Deutsche Telekom, Korea Telecom, NTT, Orange, Singtel, Telefonica (NYSE: TEF) and Vodafone (Nasdaq: VOD).