2019 Cloud & Software Predictions: More purchasing will be driven by intelligence rather than deployment

In 2019 customers will care less about deployment, vendors will buy more, and both sides will become more intelligent

As 2018 comes to a close, it is good to look back at some of the long-standing questions that have been settled during the year:

  • Not all workloads will move to cloud; in fact, some will move back to on-premises delivery methods.
  • There will be no single cloud that rules all others, even if Amazon Web Services (AWS) remains the IaaS front-runner.
  • Wholesale migrations of legacy workloads will not occur quickly or easily.
  • The IT department will play an important role in cloud adoption moving forward.
  • Cloud needs to deliver short-term, immediate value for customers to consider adoption. The days of yearslong implementations are over.

The market is far from mature, however, as 2019 promises even more changes. Cloud remains a generic term for many customers, but they know just how many options are now available. A growing choice of delivery methods, combined with a much-improved management tool set, will drive pervasive hybrid adoption. These options allow customers to focus more on the solution, regardless of the specific cloud delivery method, that best fits their use case. Greater customer adoption is also creating more urgency among cloud providers, which will force more acquisition investments and riskier purchases as leaders scramble to best position themselves to claim share of the growing market. Lastly, the overarching trends around analytics, artificial intelligence (AI) and machine learning will become increasingly pervasive. Combined, these developments should redefine the cloud market yet again during 2019.

Opportunities for wireless subscriber growth remain plentiful for U.S. operators

Cable providers are disrupting the U.S. wireless market

Subscriber growth for U.S. Tier 1 operators is being limited by the growing momentum of Comcast’s Xfinity Mobile brand, which outperformed AT&T and Sprint in postpaid phone net additions in 3Q18 and now has a base of over 1 million subscribers. Xfinity Mobile will become a stronger competitor in the U.S. market over the next several years as it expands its retail footprint and Comcast gains additional broadband customers to which it can cross-sell wireless service. Spectrum Mobile, which became available across Charter’s footprint in September, will also disrupt the U.S. wireless market by offering similar pricing incentives as Xfinity Mobile.

 

TBR’s U.S. & Canada Mobile Operator Benchmark details and compares the activities of the largest U.S. and Canadian operators, including financial performance, go-to-market initiatives and resource management strategies. Covered companies include AT&T (NYSE: T), Verizon (NYSE: VZ), Sprint (NYSE: S), T-Mobile (Nasdaq: TMUS), U.S. Cellular (NYSE: USM), Rogers, Telus and Bell Mobility.

2019 Services Predictions: Fix my business problem with a solution, not a slide — IT services and consulting for human-centric digital transformation

Trust in turbulent times: data access and management as the key to IT services and consulting success in an uncertain 2019

From London to San Francisco, macroeconomic shifts and unsettled political environments in both the U.K. and the U.S. will make the start of 2019 turbulent and likely troubled for many companies, including the IT services vendors and consultancies we cover within TBR’s Professional Services practice. These companies will face harder decisions around repositioning their investments to other geographies or finding more cost-conscious investments in new areas. We are expecting a slowdown in both countries — not necessarily in revenues, but in fresh ideas and creativity, service launches, and expansion in additional markets within both economies — driven by new uncertainty and well-founded caution. The U.S. has traditionally been the largest market for IT services vendors, and no single year will change that hard, economic fact. But where we have seen IT services vendors experiment with new consulting business models that blend emerging technologies into strategy consulting and embed codeveloped IP into outcomes-based IT services engagements, we expect a retrenchment as 2019 opens, with uncertainty lingering at least through the summer. By this time next year, we expect to see more initiatives in APAC leveraging that region’s faster adoption of 5G (and all that means for digital transformation at speed and scale). And we expect the three trends described below will be demonstrably evident in the strategies and performances of the leading IT services vendors and consultancies we cover.

Underlying all of our assessments, we are developing a new appreciation for the criticality of data. Beyond the cliché that every company is a data company or that data is the new oil, we have been seeing throughout 2018 the way IT services vendors and consultancies have begun investing increasingly in data management, cleansing and protection, all with the assumption that analytics, automation, artificial intelligence and every other emerging technology starts with and relies on clean and useful data. Smarter business decisions do not come from bad data, no matter how good the algorithm or analytics package. For 2019, this means data access becomes an opportunity to extend to all IT services, up to and including digital transformation, the same trust that comes with an audit or a multiyear outsourcing engagement. Imagine a consultancy working with unfettered access to every data element across a client’s enterprise. Getting there may take a changed regulatory environment and will definitely require that boards be willing to extend trust in new ways, a human limitation that may slow this new data access. But we see it coming. If politics and economics could cause stormy weather in the U.S. and U.K., the acceleration of digital transformation through data access may be the longer-term trend, the global warming lifting all boats on rising sea levels.

Don’t stop thinking about tomorrow: Amazon, RPA, AI and ethical IT in the federal sector

Notwithstanding the increased integration of artificial intelligence (AI) and process bots into government operations, the U.S. federal services sector decidedly remains a people business. At a recent Washington Technology Power Breakfast forum, industry leaders talked talent strategies and how they hope to succeed as digital transformation fundamentally changes the types of people sought for government work. A few key themes emerged as near-universal top-of-mind concerns for forum participants and audience members, such as the importance of developing a brand and messaging values that resonate with the emerging workforce; the criticality of public-private partnerships to develop talent in the greater Washington, D.C., area and beyond; and the concern and uncertainty about the human capital impact of Amazon’s (Nasdaq: AMZN) recent decision to become a much closer neighbor of Uncle Sam.

The trends and issues discussed often repeated themes TBR touches on regularly in its analysis of the IT industry, both within the federal market and across public and private sectors globally. While the perspectives shared were both validating and enlightening, there was just as much value in paying attention to what the panelists did not talk about at length. Today’s pressing HR demands leave little time for talent strategists to worry about the looming disruptive impacts of AI and robotic process automation (RPA), the fundamental changes in labor amid the rise of asset-based services, forward-thinking venture-capital-like approaches to partnerships, or the uncomfortable and growing issue of ethics conflicting with the eagerness to apply innovative IT to government missions. HR leaders and strategic decision makers at the leading services firms will need to grapple with these difficult topics today if they want to stay ahead of disruption that is just around the corner in the dynamic and rapidly changing IT industry.

 

 

Washington Technology Power Breakfast: TBR Public Sector Analyst Joey Cresta was recently invited to participate in a panel discussion on talent strategies of government contractors at a breakfast forum hosted by Washington Technology. The event provided an outlet for executives, HR experts and industry thought leaders to share how they intend to win talent in a competitive labor market while maintaining profitability and bracing for the impact of Amazon’s impending move into Crystal City.

Dell Technologies’ IoT strategy evolves

IoT is strategic

Internet of Things (IoT) is important to Dell Technologies because it generates data at the edge of the network. CEO Michael Dell reiterated that, “AI [artificial intelligence] is your rocket ship and data is the fuel,” but one might just as well say that data is Dell Technologies’ fuel. Dell Technologies’ business is built on customers’ need to obtain and extract value from data. The fact that IoT is edge-based helps with Dell Technologies’ need to maintain and grow its on-premises infrastructure business. While Dell Technologies is a vendor to public cloud providers, its on-premises business is more profitable. Data generated at the edge increases the need for edge storage and processing and makes other on-premises storage and processing more attractive.

Dell Technologies is starting with partners, bundles, and appliances

While other digital transformation technologies such as machine learning and blockchain are not as edge-centric as IoT, they are often used in IoT solutions and they present Dell Technologies with the same problem: Their applications are so diverse and specific to businesses and business processes that Dell Technologies cannot acquire or develop the domain knowledge necessary to create and sell enough specific solutions to address the breadth of the market or the majority of the revenue. For this reason, Dell Technologies prioritized the development of a strong partner ecosystem. Different ecosystem partners bring to the table domain expertise, other desirable technology, or the services necessary to integrate, deploy, and run specific solutions.

 

Dell Technologies Analyst Summit 2018: Dell Technologies’ (NYSE: DVMT) Internet of Things (IoT) strategy has emerged over the last year, addressing the challenges faced by horizontally focused companies when approaching a fragmented market. The company shared its approach with analysts in half-day interactive session, revealing a multifaceted strategy that TBR believes is thoughtful, sophisticated and likely to help the company grow. The strategy includes a strong partnership network, specific IoT solutions and a growing set of relevant infrastructure components.

 

2019 Public Sector Predictions: Ethics compound complexity as federal agencies rush to embrace commercial IT innovations

The march of technology challenges humans to keep up, leading to difficult conversations for the many technology firms clamoring for a slice of federal IT modernization spend

In 2018 U.S. federal government policy and budget aligned to amplify excitement around the long-promised application of private sector IT innovations to public sector missions. We began to see action as government policies such as the President’s Management Agenda and National Defense Strategy combined with a bipartisan budget agreement to send a clear message that government agencies need to embrace cloud operating models and explore new technologies to reduce costs, move faster and serve constituents more effectively.

In a prevailing movement TBR calls Wallet vs. Will, the federal market’s pursuit of commercial IT represents a fundamental shift from traditional procurement models predicated on bespoke, costly and difficult-to-replace proprietary technology to a more agile model leveraging configurable off-the-shelf solutions enabled by open standards. In the old model, prohibitive cost was the primary impediment to moving technology forward, driving top-down commercialization models out from the Pentagon, or the wallet holder. In the emerging model, the axis has flipped as technology is no longer the problem but rather the will of the humans interacting with technology has become the main obstacle to keeping up with technological advancement.

As technology moves forward at breakneck pace, government policy and regulations will struggle to keep up. Law as the codification of an agreed-to set of ethical standards remains woefully behind as society struggles with the implications of technology development on myriad issues, from a citizen’s right to privacy to warfighting. In 2019 familiar market trends such as transformative M&A in the IT industry broadly and in the federal services market specifically will continue to reshape the market and create new disruptions. However, we believe that the continued ethical debate around emerging technologies, as much as who holds the innovative IP around those technologies, will help shape the competitive landscape in the years ahead.

IBM builds out concierge services so internal IT departments can satisfy the business

TBR perspective

The recent IBM Cloud Analyst Day continued a theme introduced at IBM Think 2018, with numerous IBM executives reiterating “the axis has flipped” in the market for IT solutions. Nowhere has the axis flipped more than in the relationship between IT and lines of business (LOBs). Where IT hardware and software were once costly components, the IT department served more as a security guard meant to ration the business use of IT. Today, with virtualizing compute and storage turning computing ubiquitous and 5G set to disrupt network virtualization, IT must shift to the role of concierge — listening to LOB demands and then stitching together the requisite IT assets to enable successful execution.

At IBM Cloud Analyst Day, IBM Analytics General Manager Rob Thomas discussed the concept of data virtualization, made possible by adhering to specific run times that allow for abstracting the requisite data from where it resides and transporting it to where it is needed with pervasive encryption, to deliver the business insights required for the LOBs. That vision is what IBM described as the “ladder to AI,” or the climb the business must make to infuse its operations and integrated IT stack with artificial intelligence (AI) insights, deploying all IBM AI assets from SPSS to Watson.

 

At IBM Cloud Analyst Day, IBM Analytics General Manager Rob Thomas discussed the concept of data virtualization, made possible by adhering to specific run times that allow for abstracting the requisite data from where it resides and transporting it to where it is needed with pervasive encryption, to deliver the business insights required for the LOBs. That vision is what IBM described as the “ladder to AI,” or the climb the business must make to infuse its operations and integrated IT stack with artificial intelligence (AI) insights, deploying all IBM AI assets from SPSS to Watson.

 

 

IBM-Red Hat economic implications: Is disruptive state the new steady state?

IBM’s assets combined with Red Hat’s business monetization models are a good bet to provide a scaled, secure and trusted platform, if IBM can adjust internally and convince its clients to do the same.

The market splash

When a blue-chip bellwether company buys a firm that broke the lock on proprietary operating system dominance something big is afoot. IBM’s market luster has faded somewhat, and the financial sharks are circling with calls for CEO Virginia Rometty’s head and for IBM to be broken up and sold off to warm the cockles of institutional investors’ hearts, who cannot see the market implications beyond 90 days. IBM has been here before, in the late 1980s when Digital Equipment Corporation had a higher market valuation than IBM based on a single architecture and operating system as opposed to IBM’s six or so disparate computing architectures and operating systems. IBM’s first effort to course correct with the 9370 minicomputer was essentially dead on arrival, but its second shot, the AS/400, lives on in server closets to this day as the iSeries.

But this new challenge is different, and IBM knows it. Its executives talk about how “the axis has flipped.” At TBR, we talk of the Business of One as others label this moment as Industrial 4.0. The core revolves around cheap compute. Moore’s law has been the fundamental economic axiom driving the rapid rise and fall of technology vendors for at least 60 years, though some say its effects are waning. Despite the undeniable shift, innovations around cheaper and cheaper compute, storage and networking sources will continue in ways fascinating to fathom, especially as quantum computing nears commercial viability. At once scale means nothing and everything in this Business of One era.

Scale: Vital and trivial at the same time

Scale means nothing amid the development of new ideas.

Scale means everything when it comes time to ensure business commerce can leverage the new ideas in ways that protect brand, customer privacy and regulatory compliance.

IBM understands this as well as, if not better than, any of its competitors. The challenge for IBM is the same one faced by Satya Nadella when he took over Microsoft: how to change a deeply ingrained and highly successful corporate culture to align to these new, seemingly contradictory market realities. A lot of economists get lost in the buzz of hypergrowth for scaled public cloud revenue. Public cloud, at its core, is nothing but a commodity utility offering. It has never been the IBM play, and it ought not to become its play now. The company’s domain is enterprise IT, not easy storage of family photos or digital music. Amazon, Azure and Google (“Amazurgle”), and emerging regional rivals, can meet these demands, especially when such companies derive the bulk of their revenue elsewhere through advertising or e-commerce.

What IBM has to learn is how to compensate the management layers on companywide execution rather than on siloed execution. You cannot hold firm on razor sales when to lose that sale means risking a lifetime of highly profitable razor blade sales.

The technology assets IBM stands to gain in the acquisition are well documented, particularly in a recent commentary by TBR Senior Analyst Cassandra Mooshian. But TBR has covered IBM and Red Hat for years, and after one particular Red Hat analyst day, TBR summed up Red Hat CEO Jim Whitehurst’s business strategy as “deja vu all over again.” Essentially Red Hat aimed, and is still aiming, to do in the PaaS layer what it did in the enterprise operating system layer. Red Hat’s success with this strategy would prove a boon to IBM, and IBM’s long working history with open-source communities should allay many (but obviously not all) of the concerns within those communities around the business following the proposed acquisition.

Dell EMC Services enables clients’ transformation to modern IT infrastructure environments

Dell Technologies’ core competencies remain rooted in products and infrastructure

The keynote sessions began with a Dell Technologies Capital update by Scott Darling, president of the venture arm. This group manages investments for all of Dell Technologies’ strategic business units, including Boomi, VMware, RSA, Secureworks, Virtustream, Dell EMC and Dell. Dell Technologies Capital has spent over $100 million in investments to broaden the company’s innovation ecosystem, taking various levels of financial positions in over 90 companies over the past six years. We believe Dell Technologies’ strategy of using this venture capital structure to spur innovation and gain access to creative new technologies across the startup community will play a critical role in the expansion of its strong market position as a key infrastructure provider enabling IT modernization.

Chairman and CEO Michael Dell also spoke at the event, discussing the topic of unlocking the power of data. He talked about how the company stores and protects more data than any competitor, and has the market opportunities to enable clients to extract value from data, from the edge to the core to the cloud. The presentation transitioned into a keynote by CTO John Roese that outlined six key areas of innovation that Dell Technologies will focus on to capture market share: powerful accelerated compute, high-performance data storage and protection, software-defined infrastructure, multicloud operating models, compute and analytics at the edge, and data mobility. The company will continue to invest in these six areas to make data and applications agile and adaptable to the large advances made in data generation through modern technology, and we believe this aligns nicely with the company’s overall goal of being the supplier of essential infrastructure across the globe.

 

The two-day summit began with a full day of keynotes spanning Dell Technologies’ (NYSE: DVMT) various lines of businesses and capabilities. The second day consisted of track sessions on infrastructure, client solutions, Internet of Things (IoT) and business innovations, including one-on-one discussions and small group meetings.

2019 Data Center Predictions: The pendulum swings as customer demands reshape how infrastructure vendors do business

The cycle of complexity is back as infrastructure vendor portfolio transformations make digitization achievable

Moore’s law economics has reached a point where compute no longer constrains IT automation. Due to the miniaturization of electronics, distributed computing is taking place at the microprocessor board level, as evidenced by the rise of graphics processing units (GPUs) and the resulting hyperconverged infrastructures. As such, refresh cycles no longer consist of replacing old, standardized Intel servers with new variants. Now IT departments look at the cost economics of the traditional standardized servers against the increasing number of compute form factor variants coming to market as purpose-built edge compute instances.

As compute form factors proliferate, there has been a shift in the type of skills IT departments require. Manual taskwork becomes automated. Technical skills have to incorporate more software functionality to operate the various management control planes that can monitor, manage and dynamically provision an enterprise IT instance. Physical IT becomes less relevant based on abstraction, which allows for enterprise IT to reduce the number of primary suppliers. The margin protection for infrastructure vendors will come from the power and simplicity of the abstraction layer, be it PaaS or management, orchestration and provisioning.

The plot thickens when emerging technologies are placed on top of this evolving landscape. Cutting-edge capabilities and the growing need to secure environments are further adding to the complexity of IT infrastructure, as is necessary to achieve desired outcomes. Meanwhile, consumers want to reap the benefits of these emerging capabilities without dabbling in the complexities. Infrastructure vendors will undergo many transformations — in how they partner, in how they go to market, and in how they innovate — to maintain relevance in a rapidly evolving 2019.

2019 Predictions

  • In an increasingly open-source world, the power of partnerships grows stronger within hardware-centric vendor strategies
  • Innovation will be reimagined by infrastructure vendors, as R&D is shifted to address the overarching demand by customers to leverage their key IT vendor as a one-stop shop
  • Emerging infrastructure technologies reshape customer demands, placing increasing emphasis on new ways of computing and managing data

Register for TBR’s webinar The pendulum swings: Customer demands reshape how infrastructure vendors do business, Feb. 6, 2019.