Interoperability, consumerism and patient engagement remain perennial health IT imperatives

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Following a handful of activities that took place during the preceding weekend, including the CIO Forum opening reception, HIMSS 2019 officially kicked off on Feb. 11. Nashville, Tenn.-based Change Healthcare, a 15,000-employee provider of revenue cycle management and clinical data exchange solutions, made headlines immediately with the announcement it will launch a new solution on Amazon Web Services (AWS) to provide “free clinical data interoperability services.” The collaboration with AWS will improve patients’ access to their medical information while enhancing the integration of patient and clinician platforms with EHR systems. There is never a shortage of cutting-edge and innovative health IT technologies showcased at the HIMSS conference, but Change Healthcare’s new offering, and its well-timed introduction, reflects the efforts companies are making amid the persistent challenges of interoperability and consumer-centrism in healthcare IT.

During HIMSS19 TBR spoke with healthcare IT professionals from hardware, software and services vendors; management consultancies; and professional services organizations possessing a bird’s eye view of current market trends and the strategic levers healthcare organizations are pulling to align with market movements and meet evolving demand for value-, data- and patient-centric health IT solutions.

Interoperability is a still a big problem that remains to be solved

Illustrating interoperability as a common and protracted concern among health IT professionals, conference organizers described the HIMSS Interoperability Showcase as “the most trafficked area of the exhibition floor.” There, attendees found demonstration areas where as many as eight health IT vendors could cooperate to showcase use cases for interoperability solutions. Beyond the exhibitions, interoperability-related panel discussions and presentations touched on how the recent Carequality and CommonWell alliances have created a national infrastructure, or informal backbone, of sorts to support and enhance interoperability across disparate health IT systems. The topic of open APIs received significant attention, as did how open source collaborations can help drive the industry toward a more interoperable future.

 

 

HIMSS 2019 hosted over 45,000 attendees and more than 1,300 vendors and featured more than 300 education sessions. Due to the massive scale of this industry conference, TBR elected to focus on seminars, round table discussions and exhibitions that emphasized interoperability, consumerism and patient engagement.

The IoT market has begun sorting itself out in 2019 — a vast improvement from its disorganized past

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It has been a wild and chaotic ride for Internet of Things (IoT) vendors, with many placing big bets on IoT in the past and entering 2018 largely disappointed by the results. While IoT will likely never meet the expectations placed on it in 2015 and 2016 — the peak of hype — IoT’s contribution to IT vendor revenue will increase, with IoT ultimately becoming a core revenue driver. IoT, as a technique to solve business challenges through the assembly of technology to drive results, such as predictive maintenance, resource efficiency, value-added services or generally, increase insight, is not going anywhere.

The good news for vendors is IoT is getting a lot easier as the ecosystem sorts itself out. The increase in portfolio focus and partnering is making the market easier to navigate for vendors and customers. Offerings are becoming easier to implement and integrate as vendors begin to converge on architectures and standards, as well as orient go-to-market strategies toward coopetition rather than “winner takes all.” Customers are coming to market with a greater understanding of what they are looking for thanks to efforts by vendors and early adopters educating the market and cutting through the hype pays off. TBR believes 2019 marks the emergence of “go-to-market 2.0” as an evolved strategy for both IT and OT vendors seeking to better profit from IoT.

 

The 1Q19 Commercial IoT Market Landscape looks at technologies and trends of the commercial IoT market. Additionally, TBR catalogs and analyzes by vertical more than 450 customer deals, uncovering use trends, identifying opportunities, examining maturity, and discussing drivers and inhibitors.

What an energy sector use case teaches us about getting digital transformation right

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TBR has kept a close eye on the energy sector as macroeconomic pressures have forced adoption of digital solutions to problems as old as oil itself. As the business of providing digital transformation services has evolved, TBR has increasingly seen use cases proving substantive, transformative change for companies not in the news or in every emerging technologies presentation. PwC provided TBR a deeper dive on one particular use case, which pulls together those two strands and serves as a useful marker for the present moment in digital transformation.

Show me how I can shrink my inventory using data and analytics

For an oil field services company, PwC deployed elements of its Supply Chain Opportunity and Optimization Platform (SCOOP) offering, including analytics and visualization tools. The company, an existing finance, tax and IT services client, admitted to having “no visibility” into its inventory, making it a perfect case for PwC’s Supply Chain and Data & Analytics practice offerings. By delivering prescriptive analytics across a single product line stored in more than 200 warehouses globally, through a visualization tool that “sold the project,” PwC identified opportunities for the client to reduce inventory by approximately 20% and reduce associated costs by as much as 5%.

Change management determines everything

In debriefing TBR, PwC shared some additional insights into what made the project a success — with success in part defined by the client’s decision to replicate the analytics-based approach across additional product lines. First, PwC baked change management into the engagement, declaring that “managing the change is part of everything we do.” While TBR has heard similar assertions around the criticality of change management in digital transformation engagements, PwC brought forward a few new elements, including a redefinition of the client’s operating model based on the talent the client would need to have on hand to gain the most benefit from PwC’s SCOOP solution. PwC planned upfront for the client’s talent needs and ensured the business model implications would minimize downstream efforts to train client personnel.

In addition, PwC considered the client’s needs to demonstrate success internally — to justify the costs, ensure additional investments, and keep the project funded and viable — and said simply that “change management includes showing that [the PwC solution] is working.” This marks a subtle shift of KPIs from measuring clients’ satisfaction with the consultancy to serving as part of internal change management. Pulling the various strands together, PwC noted that change management can be the most complex element in an engagement: “Training, communications, implementation, coaching, building the metrics, and ensuring changed behavior” all determine whether a project takes four weeks or more than 12 to go from visualization to full-on implementation.

 

Deconsolidating Worldline: Atos gets ready for new age of digital transformation

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At its 2016 Investor Day, Atos publicly set its course for the next three years, identifying digital transformation as the high-growth, high-value segment of the market on which it aimed to capitalize. The company then positioned itself as the digital services and payments leader in Europe and leveraged its Digital Transformation Factory (DTF) and e-payments subsidiary Worldline to shift its revenue mix to higher-value, next-generation solutions. Back in 2016 TBR predicted that Atos was making a smart move that was in line with industry trends. We expected that staying with its digital services and payments strengths as well as diversifying its geographic reach by expanding in North America would enable Atos to sustain revenue growth and improve profitability. Atos met its financial goals for 2018, and the company is now making a shift in its strategic direction. At its 2019 Investor Day, Atos updated its course for the next three years. While Atos will continue to expand in digital services, the payments services component will not be part of the equation as Atos is deconsolidating its e-payments subsidiary Worldline. Deconsolidating Worldline as a stand-alone listed pure play business is a logical move that will have an immediate positive effect and enable Atos to focus on its core digital services activities.

The big break: Separating Atos and Worldline

TBR believes Atos began to prepare Worldline to become a stand-alone business with the initial public offering (IPO) of Worldline in 2014. During the past four years, Worldline has operated as an Atos subsidiary and, as part of financial reporting, was one of Atos’ four divisions along with Infrastructure & Data Management (IDM), Business & Platform Solutions and Big Data & Cybersecurity. Worldline had its own CEO, leadership team, brand identity, strategy and financial goals, and the separation from Atos will not hinder the new company. With annual revenues of €2.2 billion (or $2.5 billion) and 11,500 employees, Worldline will continue to pursue its goal of becoming a leading payment services provider in Europe, especially after the acquisition of SIX Payment Services in May 2018. At its Annual General Meeting on April 30, Atos plans to submit a resolution to distribute to Atos shareholders 23.4% of Worldline’s share capital, out of the 50.8% currently owned by the Atos Group. After the transaction is complete, Atos will retain 27.4% of Worldline’s share capital, 26.9% will be held by SIX Group, and the balance of 45.7% will be free float shares.

As of May, Atos and Worldline will become two listed global pure play services providers specializing in digital services and payment services, respectively. TBR sees this split as inevitable as it enables both companies to individually pursue their goals utilizing their core expertise and gives them a targeted direction for their strategic activities. While the preparations to scale Worldline to a stand-alone company took several years, the Atos board was very quick to organize the separation process by establishing an ad hoc committee in December 2018 and announcing the decision on Jan. 30. As noted during the presentation, Atos and Worldline will maintain all existing partnerships “on an arm’s length basis,” pursuing a joint go-to-market strategy and continuing their industrial and commercial partnership.

 

 

Atos’ 2019 Investor Day was held at the company’s headquarters near Paris. The meeting was hosted by Atos Chairman and CEO Thierry Breton and key members of Atos’ executive leadership team. The company used the event to announce to the financial and industry analyst community its vision, strategy and three-year plan through 2021. The main message was that Atos is positioning as a trusted partner for clients’ digital journeys. Atos focuses on enabling customers’ digital businesses with secure, data-driven ecosystems and end-to-end, industry-specific services and technologies.

AI chips: Explosive growth of deep learning is leading to rapid evolution of diverse, dedicated processors

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Artificial intelligence (AI) utilization has been accelerating rapidly for more than 10 years, as decreases in memory, storage and computation cost have made an increasing number of applications cost-effective. The technique of deep learning has emerged as the most useful. Large public websites such as Facebook (Nasdaq: FB) and Amazon (Nasdaq: AMZN), with enormous stores of data on user behavior and a clear benefit from influencing user behavior, were among the earliest adopters and continue to expand such techniques. Publicly visible applications include speech recognition, natural language processing and image recognition. Other high-value applications include network threat detection, credit fraud detection and pharmaceutical research.

Deep learning techniques are based on neural networks, inspired by animal brain structure. Neural networks perform successive computations on large amounts of data. Each iteration operates on the results of the prior computation, which is why the process is called “deep.” Deep learning relies on large amounts computation. In fact, deep learning techniques are well known; the recent growth is driven by decreasing costs of data acquisition, data transmission, data storage and computation. The new processors all aim to lower the cost of computation.

The new chips are less costly than CPUs for running deep learning workloads

Each computation is limited and tends to require relatively low precision, necessitating fewer bits than found in typical CPU operations. Deep learning computations are mostly tensor operations — predominantly matrix multiplication — and parallel tensor processing is the heart of many specialized AI chips. Traditional CPUs are relatively inefficient in carrying out this kind of processing. They cannot process many operations at the same time, and they deliver precision and capacity for complex computations that are not needed.

Nvidia (Nasdaq: NVDA) GPUs led the wave of new processors. In 2012, Google announced that its Google Brain deep learning project to recognize images of cats was powered by Nvidia GPUs, resulting in a hundredfold improvement in performance over conventional CPUs. With this kind of endorsement and with the widespread acceptance of the importance of deep learning, many companies, large and small, are following the money and investing in new types of processors. It is not certain that the GPU will be a long-term winner; successful applications of FPGAs and TPUs are plentiful.

Intel: Optimizing its scale advantage for Business of One flexibility

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TBR perspective

Usually sound business execution of world-class engineering, coupled with world-class monolithic manufacturing, has made Intel a dominant force around which technology businesses have orbited for decades. Intel’s dominance has been baked in the PC and server form factors, while ever smaller price points and form factors have shifted end-customer purchase criteria from computational performance specifications to business outcomes and user experiences.

Intel’s success has broadly expanded IT to address business problems and reshape our personal lives. Intel’s revenue growth prospects have diminished as its innovation has continued to increase the capacity and shrink the form factors and unit cost of its products. Intel delivers mature components that are embedded in mature products. Nevertheless, Intel thrives. The company has made mistakes, though, such as failing to address the mobile market. Intel’s capital- and engineering-intensive business requires it place large bets on its vision of the future. Now, facing waves of innovation in artificial intelligence (AI), Internet of Things (IoT) and processor design, Intel is, in effect, rearchitecting the company to reduce its dependence on the CPU, and thereby expand its market.

The key to Intel’s new architecture is companywide integration. Intel has always had more products and technologies, including video, networking, storage and memory silicon, than CPUs. As silicon becomes more diversified and is embedded in an increasing number of devices, Intel aims to create, along with customers, a far larger variety of solutions, often at a much smaller scale than the company’s monolithic products. To capitalize on the company’s enormous intellectual property, Intel must break down silos within the company. This will result in products that will often benefit from breaking down silos in silicon by facilitating the integration of computation, storage and communications.

The cultural challenge Intel will face will be in orchestrating and timing the various development teams such that the innovation cycles come together in world-class packages of tightly coupled compute, storage and networking form factors to power the smallest of edge compute instances and the largest of the high-performance computing (HPC) instances. The necessary work of rearchitecting the sales and marketing organizations remains for the next CEO, who has not yet been named, but the task is far less daunting than coordinating development and manufacture.

The thread that will stitch together these instances in the multicloud, always-on world of compute will be software. Software made interoperable through a “pruning,” as Intel Chief Engineering Officer and Technology, Systems Architecture & Client Group President Murthy Renduchintala described it, of the existing assets and frameworks into a cogent set of frameworks and tool sets to power innovation and optimize these scaled designs for specific workloads powered by AI is fed by voice and video as much as they have been fed by human interaction through keyboards in the past.

 

Intel Analyst Summit: Intel (Nasdaq: INTC) hosted an analyst event for the first time in four years to outline its technology road maps through 2021 and to articulate the business and cultural changes it believes are necessary for it to capitalize on the growing business opportunity Moore’s Law economics has unleashed. The senior leadership team gave about 50 analysts very detailed and frank briefings under a nondisclosure agreement (NDA), with ample time for follow-up conversations throughout the event.

CSPs accelerate NFV and SDN investments ahead of the 5G era

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Communication service providers (CSPs) are ramping up NFV- and SDN-related investments to realize greater cost savings and efficiencies, according to Technology Business Research Inc.’s (TBR) 2H18 Telecom Software Mediated Networks (NFV/SDN) Customer Adoption Study. This increase in investment will be driven by two underlying factors: CSPs under pressure to realize cost savings as their connectivity businesses remain under pressure and 5G pushing CSPs to pull forward their NFV and SDN road maps.

5G is greatly enhanced when using virtualization, especially when enabling and maximizing the benefits of network slicing and achieving better RAN economics. Though most CSPs intend to initially deploy the non-standalone (NSA) standard of 5G, which tethers 5G radio with EPC, an eventual upgrade to the standalone (SA) standard, which tethers 5G radio to a 5G core, will become a reality in the early 2020s. 5G core is inherently virtualized, and CSPs will be keen to prepare their networks to fully maximize the benefits of utilizing a virtualized network architecture, including, but not limited to, increasing agility, flexibility, visibility and cost efficiency.

 

 

TBR’s Telecom Software Mediated Networks (NFV/SDN) Customer Adoption Studyprovides an in-depth examination of how operators are planning, preparing and executing to succeed in the NFV and SDN market. TBR surveyed 50 people in operations, procurement and IT roles at 25 of the leading Tier 1 telecom service providers worldwide to gain insight into their NFV and SDN adoption plans. The study includes insight into service provider strategy, as well as service providers’ perceptions of supplier positioning and key benefits and obstacles.

5G-readiness spend and migration to new network architectures spur the TIS market to growth in 3Q18

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According to Technology Business Research, Inc.’s (TBR) 3Q18 Telecom Infrastructure Services (TIS) Benchmark, the TIS market grew as communication service provider (CSP) investment in areas tied to 5G-readiness increased. CSPs are rearchitecting their networks leveraging NFV, SDN and the cloud as well as implementing new business models, which requires growing spend across a broad range of professional services. Deployment services spend grew slightly, but the market will strengthen as the 5G spend cycle ramps up over the next couple of years, although the spend intensity will be lower than during the LTE cycle. RAN suppliers Nokia (NYSE: NOK), Ericsson, Huawei, ZTE and Samsung will capture incremental TIS market share as they drive high volumes of services attached to their 5G RAN. This is already occurring to some extent as CSPs densify networks as part of their 5G-readiness strategies. Though 5G will require significant hardware spend, the aggregate amount will be lower compared to LTE, which will drive vendors to explore new market areas, such as Industry 4.0.

The managed services market was flat year-to-year in 3Q18 as a decline in outsourcing was offset by growth in the out-tasking market. Generally, vendors are exercising pricing discipline when determining which outsourcing contracts to take on in an effort to improve margins. Ericsson is currently leading the way in this regard as it evaluates 42 contracts for exit or rescoping. Huawei, ZTE and CCS have been less concerned with price and are focused on consolidating the outsourcing market. Other vendors, including those that are historically hardware-centric with little to no footprint in the managed services market, are increasingly playing in out-tasking as they will manage applications deployed in CSP networks. Ciena (NYSE: CIEN) is an example of this trend.

 

 

TBR’s Telecom Infrastructure Services Benchmark provides quarterly analysis of the deployment, maintenance, professional services and managed services markets for network and IT suppliers. Suppliers covered include Accenture (NYSE: ACN), Amdocs, Atos, Capgemini, CGI, China Communications Services, Ciena, Cisco (Nasdaq: CSCO), CommScope, CSG International, Ericsson, Fujitsu, Hewlett Packard Enterprise (NYSE: HPE), Huawei, IBM (NYSE: IBM), Infosys (NYSE: INFY), Juniper Networks (NYSE: JNPR), NEC, Nokia (NYSE: NOK), Oracle (NYSE: ORCL), Samsung, SAP (NYSE: SAP), Tata Consultancy Services, Tech Mahindra, Wipro (NYSE: WIT) and ZTE.

U.S. 5G investment supports non-China-based vendors as Huawei and ZTE face increasing headwinds

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Nokia and Huawei are well-positioned to win as operators overhaul architectures in the 5G era, but most of the spend to date is on 5G radios, with Ericsson at an advantage due to market perception of its software-upgradeable Ericsson Radio System RAN. The network must ultimately be overhauled to fully realize 5G’s potential, but it will take CSPs many years to evolve their networks end-to-end, and the current focus — and 5G-related capex spend — will be on 5G radios. In the 5G RAN space, TBR believes Ericsson leads in market share. Nokia and Huawei, however, have broad portfolios that enable them to enter 5G accounts from multiple domains.

 

 

 

The Telecom Vendor Benchmark details and compares the initiatives and tracks the revenue and performance of the largest telecom vendors in segments including infrastructure, services and applications as well as in geographies including the Americas, EMEA and APAC. The report includes information on market leaders, vendor positioning, vendor market share, key deals, acquisitions, alliances, go-to-market strategies and personnel developments.

Ericsson’s turnaround is in process, but sustainability of business is in question

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TBR perspective

Though Ericsson’s focused strategy has proved to be a viable approach to stabilize the company, return it to profitability and provide incremental organic growth, the key concern will be how sustainable that stability and growth will be over the long term.

Ericsson’s focus on the wireless access domain tethers the company to the whims of that market, which is undergoing significant disruption as 5G and virtualization take hold and as operators increasingly shift capex budgets from connectivity infrastructure to building digital businesses, limiting Ericsson’s growth potential. Though there is room for Ericsson to take market share, particularly from Nokia (NYSE: NOK), Huawei and ZTE by leveraging its software-upgradable Ericsson Radio System (ERS) RAN gear, Ericsson is not immune to adverse business trends impacting the broader RAN market, namely legacy decommissioning, virtualization, openness, cloud and white box.

Ericsson is betting its ERS will offset the impact of these adverse trends and hasten its shift to a more software-centric entity with a more recurring, license-based software model that carries relatively high, sustainable margins, but this shift will take years to unfold and there is significant legacy business at risk of disappearing in the interim.

With the architecture of the network fundamentally changing to be virtualized and cloudified and communication service providers (CSPs) focused on relentless cost efficiency and TCO reduction, Ericsson will have to carefully balance its shift from the old world to the new reality, whereby forklift RAN upgrades become lower scale and targeted, and innovation and value migrate to the software layer. This has significant implications for Ericsson’s hardware and close-to-the-box services businesses, both of which are optimized to operate at high scale for efficiency and profitability.

TBR notes Ericsson and its close rival Nokia are pursing different paths during the 5G era. While Ericsson focuses on its core business of selling RAN and mobile core directly to service providers, Nokia is taking an end-to-end infrastructure approach and is building out a dedicated business unit with a full suite of resources to directly sell to enterprises. Though Industry 4.0, 5G and digital transformation are underlying themes that find commonality between the two vendors, their divergent tracks are noteworthy.

 

 

Ericsson (Nasdaq: ERIC) hosted its annual Industry Analyst Forum in Boston, bringing along a range of executives to provide an update on the company’s corporate and business unit strategies, with a focus on Networks, Managed Services and North America. Key topic areas included 5G, Internet of Things (IoT), automation and artificial intelligence (AI). Following the main session, analysts could attend three tracks — Network Evolution to 5G, AI and Automated Operations, or 5G and IoT Industry Innovation — and then participate in one-on-one speed meetings. The tone of Ericsson’s 2018 analyst day was upbeat as the company sees early signs that its turnaround plan is yielding results, evidenced by its 3Q18 earnings results in which organic revenue growth returned and margins improved markedly. Ericsson remains committed to its transformational restructuring and focused strategy, which are key pillars of its turnaround plan.