TBR perspective

Red Hat (NYSE: RHT) is inarguably the leading open source company, with revenues far outpacing those of open source-centric competitors, such as Canonical, which only recently began taking monetization seriously. Red Hat’s solutions are pervasive in the market, with the company counting over 90% of the Fortune 500 as customers. Red Hat executives have been assured the pending acquisition by IBM (NYSE: IBM), if approved, would not disrupt Red Hat’s ways of working and stressed to the analysts gathered that the additional large enterprise relationships IBM would bring to the table would expand Red Hat’s addressable market. Maintaining Red Hat’s open, innovative culture would be imperative for IBM, as a passive imposition of IBM’s culture on Red Hat would severely diminish the value of the acquisition.

While Red Hat Analyst Day focused on the company’s total addressable market, communication service providers (CSPs) is a key customer segment for Red Hat, particularly with respect to virtualization via the Red Hat OpenStack Platform. Red Hat can capture greater wallet share from CSP customers with its open source-centric business model and highly capable, expanding Red Hat Global Services organization as these customers embark on their digital transformation journeys.

Red Hat hosted a few dozen industry analysts at its facility in Boston, which opened in June 2017. The space houses an Open Innovation Lab and Executive Briefing Center equipped with interactive touch-screen walls, providing the company an ideal area to bring prospects to demonstrate how Red Hat harnesses the power of open source. A slate of Red Hat executives expounded on Red Hat’s position as the leading open source company globally, divulging customer wins, new products and product road maps, and growth strategies. Little new information was given on Red Hat’s looming acquisition by IBM, though that was expected. Several customer presentations rounded out the day, with each articulating how Red Hat was the ideal partner to shepherd an open source, cloud-first future.

TBR perspective

The next few years will be challenging for Nokia (NYSE: NOK), and execution will be critical to ensure the company is optimized to drive profitable revenue growth when its addressable market ultimately returns to sustained growth. With its core communication service provider (CSP) customer segment, which composes 95% of Networks’ revenue, expected to remain in a cost-optimization cycle pending new, proven revenue growth opportunities enabled by 5G (which TBR’s research suggests remains several years away), Nokia’s strategic focus on opportunities in the enterprise space and its internal digital transformation are prudent and timely and will take center stage in determining how financially successful the company will be as it transitions into the next decade.

Though more CSPs are committing to deploy 5G and other advanced network innovations such as virtualization over the next few years, the reality is that these infrastructure investments are being justified because they provide significant cost efficiencies to CSPs, enabling them to build, operate and support networks in a much more efficient and cost-effective manner compared to prior generations of network technology. This reality not only increases pressure on Nokia to boost its enterprise exposure to grow revenue, but also pushes management to accelerate digital transformation to protect margins.

Though TBR generally agrees with Nokia’s stance that the world is at the cusp of Industry 4.0, the divergence in thought comes down to timing and whether this cycle will be a short-duration revolution or a long-term evolution. TBR’s research suggests the latter and that Industry 4.0, which includes mass 5G adoption globally, will not ramp up until the 2022-2025 timeframe, at which point business cases will be proved, justifying an increase in market spend on ICT infrastructure. Until that time, Nokia needs to rightsize its shorter-term expectations and focus on building a solid foundation for its fledgling enterprise business while digitally transforming its internal operations to stay competitive.

Enterprises, 5G and Industry 4.0 dominated most of the mindshare at Nokia’s 2018 Global Analyst Forum. Nokia spent much less time discussing its individual product innovations and more time discussing how technology, people and processes are coming together to enable digital transformation, not only for CSPs but also for enterprises.

Oracle reinforces its cloud stack to accelerate enterprise cloud adoption

Oracle has a strong portfolio of cloud applications that are proving competitive in the market against more narrowly focused or less integrated SaaS competition. Oracle’s core platform and infrastructure businesses, however, are proving a harder sell, implied by financial results and qualitative context, despite significant innovations over recent years. The tone of Oracle OpenWorld 2018 mirrored its overall performance: The company is well positioned and executing in cloud application adoption initiatives, and is well positioned but facing stalling sales in the infrastructure business.

Applications updates were minimal but valuable

As Oracle executives pointed out, Oracle has been able to position itself well in the SaaS market by buying and building applications across both front- and back-office functional areas, leaving few holes in its horizontal applications portfolio. This relatively comprehensive portfolio, particularly across the back office with integrated ERP and Human Capital Management (HCM) suites, positions the company well as more customers look to adopt cloud applications — both voluntarily to achieve efficiencies, and under duress to plan migrations as other vendors’ on-premises products are given end-of-support deadlines. Strengthening the value of its applications at the annual event, Oracle announced artificial intelligence (AI)-based capability additions to its ERP and HCM portfolios, including chatbots, recommendation engines and process automation. Oracle also enhanced select supply chain management applications with blockchain-enabled tracking and controls to increase value for customers. These advancements add value for customers but do not significantly alter Oracle’s back-office portfolio.

Oracle’s (NYSE: ORCL) annual conference, Oracle OpenWorld 2018, took a different tone than in recent years. With corporate focus narrowed around the cloud portfolio, and key product foundations already in place, keynotes and announcements were more focused on improvements to existing applications and the database and infrastructure architecture underpinning all cloud services. This year’s event doubled down on themes of past years, including Oracle CEO Mark Hurd’s previous keynotes concerning macroeconomic trends and predictions for the cloud market, and introduced a panel of distinguished U.S. and U.K. security personnel that painted a bleak cybersecurity picture, subtextually in support of a secure, single-vendor cloud stack that Oracle is positioning itself to best address.

BearingPoint is transforming from a consulting company that delivers services in a traditional way into a company that is flexible in the way it works with clients and values innovation, collaboration and entrepreneurship. In a discussion, BearingPoint’s new Managing Partner Kiumars Hamidian stated, “We try to reduce the use of PowerPoint with clients,” which essentially leads to increased interactions during the proposal and solution development phases. On the other hand, BearingPoint is increasing its use of collaborative activities with clients and encouraging people to bring their best ideas, often using design thinking and agile-based methodologies. BearingPoint places innovation at the center of its activities across its three business pillars — Consulting, Solutions and Ventures — utilizing its “Be an Innovator” process to generate ideas for new services. The company uses IP assets such as accelerators, as well as incubators and ventures, to drive innovation.

BearingPoint is a European consulting company with global market reach

Executing on its three priorities — markets, portfolio and people — and utilizing its three business pillars will enable BearingPoint to continue to grow revenues and reach its 2020 overall revenue goal of €1 billion (or $1.2 billion). On the markets side, BearingPoint positions as an independent and partner-owned management and technology consulting company that has European roots and global reach and enables clients predominantly in its core European territory to become global leaders. Utilizing its European market reach and a new design and brand profile that emphasizes creativity, innovation, and a collaborative, agency-like approach, BearingPoint is set to attract such clients. As BearingPoint updates its brand profile to represent the company’s diversity, its bold, fresh and modern character will likely lead to growth opportunities, especially in new digital segments. To serve clients outside its core territory, BearingPoint utilizes its Global Reach Offices in Dallas and Shanghai and expands its global market reach through consulting and technology partnerships, such as with West Monroe Partners in North America, ABeam Consulting in APAC and Grupo ASSA in LATAM.

BearingPoint selected Lisbon, Portugal, as the host city for its Analyst Summit 2018. The event, which was held on Oct. 11, was not a traditional analyst day, as it was held at a former needle manufacturing facility, rather than in a conference room, and the vendor refrained from using PowerPoints to display its capabilities. Instead, the vendor transformed the facility to use personalized setups and spark attendees’ imaginations, and it relied on engaging conversations to gain the attention of the audience. The agenda was rich in topics, ranging from strategic and business overviews to five client case representatives talking onstage about their work with BearingPoint. The company also used a mobile app that was specifically developed for the event to provide personalized information about the event, share files and take live polls of the audience, which further enhanced engagement with the audience.

Uncertainty, globalization and trust: How PwC suits the Japanese market

In describing PwC’s presence in Japan, firm leaders said professionals in the consulting practice make up 2,500 of 7,300 total at the PwC Japan firm, with the practice’s revenues growing more than 20% year-to-year.

Echoing sentiments expressed by PwC consulting leaders last month in New York City, the Japan-based team said systems integration (SI) work, currently earning approximately 20% of consulting revenues, would expand in coming years as the BXT model pulls through long-tail SI opportunities. Speaking more broadly about the Japanese market, PwC’s leaders noted that their own research revealed that Japanese companies believe the U.S. and China matter most with respect to overall growth, with the U.S. economy increasingly more important to Japanese companies than China’s economy. In addition, while global executives have cited overregulation, terrorism and geopolitical uncertainty as the top three threats to growth, Japanese executives are worried most about the availability of key skills, especially in digital and emerging technologies. Further rounding out the landscape, PwC’s Japan-based leaders said local companies have expressed a renewed interest in overseas M&A opportunities, in part due to saturation of the Japanese market. PwC leaders added that previous “misconduct” by acquired companies and overseas subsidiaries makes some Japanese companies nervous, causing them to exercise caution and restraint when considering potential acquisitions. Even after folding in cybersecurity issues and overall political and economic risk, plus the costs associated with post-merger integration, the M&A picture appears positive, but quietly so. Within this complete market environment, PwC’s local leaders, including Susumu Adachi, Consulting CEO (Japan); Yukinori Morishita, Group Markets leader; and Nobuaki Otake, Business Transformation lead partner, repeated the message that PwC’s expanding role in Japan revolved around trust—a familiar refrain from previous PwC Experience Center visits and analyst events in Miami, New York, Shanghai, Toronto, and Frankfurt, Germany.

On Oct. 3, PwC’s Tokyo Experience Center hosted its first-ever Analyst Day in Japan, marking a significant expansion of the firm’s BXT approach across the globe. Leading the event, Koichiro Kimura, PwC’s Japan group chairman and territory senior partner, outlined the firm’s growth and strategy in Japan as well as initiatives launched by both the Experience Center and the firm’s Data & Analytics (D&A) practice. PwC leaders and Japan-based clients rounded out the event with detailed examples of the firm’s relationships and work across multiple offerings, including cybersecurity, business process reengineering, artificial intelligence and change management.