North America incumbents be aware: Atos is ready to fight

The most telling quote during the two days spent with Atos and Syntel executives came from newly arrived Atos North America CEO Simon Walsh, who noted the company’s struggles with cross-selling IT services prior to the acquisition of Syntel: “We have been challenged in cross-selling based on some capability gaps in our regional services portfolio. Now we have them.” Those last four words say it all: Now Atos believes it has end-to-end IT services capabilities, from infrastructure to applications, spanning all clients’ IT services needs.

The name of the game for Atos is scale

With the acquisition of Syntel, Atos gained substantial applications capabilities in the U.S., along with new clients, new talent and new opportunities to expand. TBR has covered the acquisition in our quarterly full report on the company and a recent blog post. The Dallas event increased our understanding of the acquisition’s impact on Atos overall, including how Syntel brought a missing element to Atos’ North America offerings, allowing the company to now credibly claim end-to-end IT services capabilities at scale. This last point — scale — became a repeated theme from Atos and Syntel executives, who acknowledged that previous acquisitions, such as Xerox’s ITO practice, helped the Paris-based company expand in the U.S. but did not adequately expand its range of offerings. Prior to purchasing Syntel, according to Atos leaders, the company could do a “handful of projects in North America,” but infrequently engage in multiple large projects simultaneously. With the Syntel asset, Atos can now tell its customers it can “do small $1 million deals” and tell Syntel customers it can “go to scale” with them. Atos executives repeatedly said a more complete set of end-to-end capabilities would allow them to assist clients in transforming their IT and broader digital environments at scale. Again and again, Atos and Syntel leaders emphasized that the combination of infrastructure and applications allowed the joined companies to finally provide the needed scale that would accelerate revenue growth.

 

Atos hosted a dozen analysts and three clients at its Dallas-based Business Technology & Innovation Center for a wide-ranging discussion of the recently closed Syntel acquisition. Over an informal dinner, formal presentations, extensive Q&A sessions, and well-managed one-on-one sessions with various Atos and Syntel executives, Atos provided TBR multiple opportunities to ask pressing questions on various aspects of the deal, including details on the implications for current clients, expectations for Atos North America, and the Atos-Syntel strategy going into 2019.

2019 Telecom Predictions: 5G will be an evolution, not a revolution

The first few years of the 5G era will be underwhelming, but the future looks brighter for the telecom industry, especially as Industry 4.0 gains steam

The telecom industry entered a brave new world with the inception of 5G in 2018. Stakeholders industrywide are hoping this newest network generation will provide much needed revenue growth after the prior network generation, 4G, fell short of this goal over the past decade. Stakeholders hope 5G enables Industry 4.0, which will spur revenue generation opportunities for service providers that provide the connectivity layer and value-added services to businesses.

Though TBR agrees Industry 4.0 will ultimately take hold, our research suggests the cycle will start later and take longer to play out than many expect. TBR expects 5G to drive a renaissance in new commercially viable use cases for the network between 2022 and 2025, which will be beneficial in the long run but makes the next few years a continuation of the same challenges the industry has been dealing with, namely a lack of growth prospects and additional margin pressure.

In the interim, communication service providers (CSPs) will focus on cost optimization and will allocate their initial 5G investments to enhancing their traditional connectivity businesses to more cost-effectively support the ever-increasing amount of data traffic coming onto their networks. This cost optimization mindset, coupled with digital transformation ambitions, will lead to an acceleration in spend on NFV/SDN-related initiatives as well as 5G access build-outs, particularly in lead countries.

2019 Predictions

  • CSPs justify initial 5G investments for their cost efficiency attributes
  • CSPs accelerate network transformation endeavors
  • Wireless begins to disrupt the traditional fixed access business model

Register for TBR’s webinar 5G will be an evolution, not a revolution, Feb. 13, 2019.

Red Hat can save CSPs from themselves

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.

2019 Devices & Internet of Things Predictions: The mists are clearing as IoT becomes more realistic and better organized

IoT is getting a lot easier

While it is too early to say that the Internet of Things (IoT) market is fully mature, it is maturing. The first three years of the IoT era were filled with extravagant claims, inadequate products and services, and a chaotic partner ecosystem. Starting in 2018 and accelerating throughout 2019 and 2020, more customers will come to the market with an understanding of what they are looking for, offerings will be easier to implement and integrate, and the partnership ecosystem will be more navigable for both vendors and customers.

Increasingly, IoT will be delivered in complete solutions, typically including components from several vendors. As IoT matures, more specific use cases with sufficiently broad applicability will be implemented as solutions, addressing common problems both within and across verticals. Solutions will vary in customizability and integrability.

The economics of data collection, transmission, processing and storage will play an increasing role in the design of IoT solutions. Data-related costs dictate the feasibility of many IoT projects and have driven the adoption of edge solutions.

2019 predictions

  • The IoT ecosystem will sort itself out; vendors will find their niches
  • Packaged and bundled IoT solutions will proliferate
  • Not all data is valuable: Data economics will drive design

 

Register for TBR’s webinar IoT is getting easier, Jan. 23, 2019.

Nokia hedges 5G play with focus on opportunities in the enterprise space

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.

Kurian brings enterprise smarts to Google Cloud

During his tenure at Oracle, Thomas Kurian proved himself as a balance of technical savvy and business strategist at a company that serves the largest enterprises in the world. He reportedly left Oracle because he believed more fully in a strategy to coexist with the cemented leaders in the public cloud IaaS market. Both of these points fit Google Cloud’s aspirations well.

Creating its Google Cloud division and appointing Diane Greene as its CEO in November 2015 was the first step Google, Inc. made to tell a cohesive story around its managed cloud services and more effectively vie for share of the enterprise cloud market in competition with Amazon Web Services and Microsoft Azure, among others. Greene’s enterprise experience from co-founding VMware qualified her to start this transition, but potential Google customers have indicated to TBR that Greene’s empathy had not effectively trickled down the organization to complete the business messaging enterprises are looking for. TBR believes Kurian is a perfect fit to complete what was started by Greene, and he will be able to wrap Google’s technical abilities in a more clear and compelling enterprise story.

Oracle implores enterprises to adopt its uniquely architected cloud stack

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.

Specialized industry expertise and agile service delivery position NIIT Technologies to disrupt incumbents

The rising tide of digital transformation demand continues to lift all boats, particularly small, intensely industry-focused IT services players, such as NIIT Technologies, that aggressively and tactically align their portfolio offerings and go-to-market strategies with the evolving needs of their clients and target markets. Though the long-term sustainability of NIIT Technologies’ rapid revenue growth and margin expansion remains to be seen, its strong performance in a services arena nearing saturation deserves the attention of global technology and IT services peers.

Strong financial performance highlights the success of NIIT Technologies’ pivot toward digital

CEO Sudhir Singh kicked off the event with a summary of NIIT Technologies’ recently reported FY2Q19 earnings results:

  • Revenue for the quarter ending Sept. 30, 2018, grew 23.1% year-to-year and 10% sequentially, in local currency, to Rs. 907.4 crores ($129.5 million U.S. dollars [USD]).
  • Operating margin expanded 186 basis points year-to-year to 18%.
  • Fresh order intake increased for the sixth consecutive quarter to $160 million USD, including 10 new logos.
  • Digital revenue reached 28% of total revenue, expanding 11.6% sequentially in local currency.
  • Headcount crossed the 10,000 mark, with 261 additions during the quarter. During 2018 NIIT Technologies has added 1,000 employees, with 499 in digital areas. Despite double-digit headcount expansion, utilization has also increased (80.4% in FY2Q19) while attrition has stayed well below that of Tier 1 India-centric peers, hovering between 10% and 11%.

Though relatively smaller in scale compared to Tier 1 India-centric peers, NIIT Technologies prided itself on its relatively balanced geographical mix for a company its size (e.g., only about 49% of revenue comes from the U.S., about 34% from Europe and the remainder from Rest of World), on par with Tata Consultancy Services [TCS]). The company also touted its culture, built upon a heritage of learning and research, that empowers employees with both technology skills and design thinking expertise to create business-relevant solutions for clients.

 

 

TBR attended NIIT Technologies’ U.S. Analyst & Advisor Forum in Boston, where the company’s executive leadership team presented on the company’s recent financial performance, strategy and portfolio offerings with an overarching theme of “Engage with the Emerging.” The event’s agenda was organized in line with NIIT Technologies’ recent restructuring around three core verticals ― travel and transportation (T&T), banking and financial services (BFS), and insurance ― and five service lines ― Intelligent Automation, Digital, Data and Analytics, Cloud, and Cybersecurity ― which the company brings together in matrixed offerings. Leaders from each of the three industry verticals and several of the service lines presented individual sessions on their areas, in some cases with clients. TBR also interacted one-on-one with executives throughout the event.

BearingPoint offers collaborative transformation that integrates advisory services and solutions

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.

2018 5G Americas Analyst Forum

5G will provide network efficiencies for telcos as they anticipate next-generation use cases

Given the introduction of Verizon’s (NYSE: VZ) 5G Home fixed wireless service in October, as well as the upcoming launch of AT&T’s and T-Mobile’s mobile 5G networks by the end of 2018, the 5G era is edging closer to reality after years of industry speculation regarding the technology’s capabilities. Similar to prior network eras, such as the transition from 3G to LTE, the 5G era will be a gradual evolution of existing network capabilities and will not immediately yield its full benefits or dramatically alter the global wireless market during its inception.

A resounding theme at the 2018 5G Americas Analyst Forum was that the 5G era will essentially be “more of the same” initially. LTE will remain the predominant source of connectivity for most wireless subscribers in the Americas over the next several years until 5G coverage becomes nationwide and customers transition to 5G-capable devices. The accelerated speeds offered by LTE-Advanced services, as well as the cost savings offered by IoT network technologies such as Narrowband IoT (NB-IoT) and LTE-M, are currently more than sufficient to support the demands of most consumers and enterprises.

The wireless industry is anticipating 5G will foster IoT innovations in areas including connected car, healthcare, smart cities and augmented reality (AR)/virtual reality (VR). Though advanced IoT use cases that require the precision promised by 5G, such as remote surgery, are being explored, many of these services will not become commercially available until the mid-2020s at the earliest. Additionally, solutions like remote surgery and V2X automotive services will be burdened by significant regulatory challenges as ensuring 100% network reliability and ultra-low latency will be essential to prevent hazardous outcomes.

Although the end-user benefits of 5G will initially be limited, investments in 5G will ultimately be viable due to the network efficiencies operators will gain from the technology. 5G, which is expected to provide between four- and 10-times greater efficiency on a cost-per-gigabyte basis compared to LTE, will enable operators to more cost-effectively add network capacity to support the prevalence of unlimited data plans as well as continued connected device additions. Offering 5G services will also be essential for operators to remain competitive against their rivals as the marketing of accelerated 5G speeds will help to attract subscribers. Lastly, the deployment of 5G networks will prepare operators to support 5G-dependent use cases when they do come to fruition and spur customer demand.

 

 

Around 70 representatives from well-known operators and vendors attended the annual 5G Americas event to talk with more than 70 industry analysts about the state of wireless communications in North America and Latin America as well as discuss challenges and opportunities presented by the rapid development of the mobile ecosystem.

The event kicked off with a presentation from T-Mobile (Nasdaq: TMUS) CTO Neville Ray regarding 5G leadership in the Americas. He discussed topics including projected use cases, the importance of 5G to the U.S. economy, the Americas’ position in the global 5G market, and the different initial approaches U.S. operators are taking to 5G. A panel of network and technology executives from operators including AT&T (NYSE: T), Sprint (NYSE: S), T-Mobile, Telefonica (NYSE: TEF), Cable & Wireless and Shaw (NYSE: SJR) provided additional insights into 5G evolution and activity around 5G by each respective operator.

Day 2 began with panel sessions featuring leaders from top telecom vendors, including Ericsson (Nasdaq: ERIC), Cisco (Nasdaq: CSCO), Nokia (NYSE: NOK), Samsung, Intel (Nasdaq: INTC), Qualcomm (Nasdaq: QCOM) and Commscope (Nasdaq: COMM), to discuss areas such as 5G regulatory challenges, 5G network and technology deployments, and potential 5G go-to-market strategies and use cases. Following these panel sessions, the reminder of the event offered analysts the opportunity to participate in a choice of 34 roundtable discussions focused on key 5G topics, including Internet of Things (IoT), edge computing, artificial intelligence (AI), 5G network infrastructure and technologies, regulatory considerations, and 5G in the automotive industry.