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

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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

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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

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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. 

People, methodology and trust: PwC’s Tokyo Experience Center

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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.

Webscale competition increases among carrier cloud providers

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Combined Cloud as a Service revenue for telecom operators in Technology Business Research Inc.’s (TBR) 2Q18 Carrier Cloud Benchmark rose 26.3% year-to-year in 2Q18 due to strategic acquisitions and alliances, 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 in 2Q18 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.

Certain Asia- and Europe-based operators including China Telecom, Telefonica and Orange accelerated Cloud as a Service revenue growth in 2Q18 as the companies benefit from data sovereignty laws, such as General Data Protection Regulation (GDPR), requiring cloud data to be stored in local data centers, which is slowing the growth momentum of U.S.-based webscale providers in these regions. Pressure from U.S.-based webscale providers will continue to increase over the next five years in Asia and Europe, however, as they ramp up data center investments and partner with local data center providers to gain traction in these regions.

 

 

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, China Telecom, Deutsche Telekom, Korea Telecom, NTT, Orange, Singtel, Telefonica and Vodafone.

UiPath Forward Americas

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UiPath brings robots ‘to life’ through business-first approach

Under the slogan “a robot for every person” UiPath’s CEO and Co-founder Daniel Dines’ vision for automation takes a pragmatic approach and furthers Bill Gates’ 1980 Microsoft mission of “A computer on every desk and in every home.” While UiPath and/or any of its competitors are far from making this vision a reality, it certainly summarizes the company’s total addressable market. As UiPath executes on its vision, the company’s comprehensive portfolio of attended and unattended robots as well as a SaaS orchestrator solution meet current market needs for solutions addressing brokerage and management of structured and unstructured data across the front, middle and back office. Additionally, UiPath’s approach to automation through a business lens makes it an appealing vendor that can help consultancies and other alliance partners better target line-of-business leads, especially clients with backgrounds in Six Sigma and Lean methodology training.

While UiPath will continue to have the tough task of overcoming skepticism around the public perception that automation will eliminate jobs, educating the market on the broader ROI from the use of RPA, including increased productivity, improved accuracy and compliance, can help it counteract initial resistance and accelerate adoption. Use cases, such the one with a Japan-based bank that deployed 1,000 UiPath robots to optimize the work of 700 FTEs with the long-term goal of creating capacity for 4,000 employees and saving $500 million over three years, make for a tangible impact on operations and the bottom line.

As the pendulum continues to swing between hope for and fear of automation, accelerated by hype, UiPath’s value proposition and go-to-market strategy enables it to illustrate that automation is not a jobs killer but rather a jobs creator.

 

 

TBR attended the second annual UiPath Forward Americas conference in Miami. TBR interacted with executives from across UiPath and its partners and clients. With over 1,500 attendees, including 500 partners and client executives, the conference was three times larger than the first UiPath Forward Americas event a year ago. During the sessions, UiPath highlighted its exponential success over the past three years, with a fair dose of energy but balanced with humility. UiPath provided an update on its financial performance and portfolio road map and laid out new initiatives including the launches of UiPath Go, the Academic Alliance, the UiPath Venture Innovation Fund and the UiPath Partner Acceleration Fund. These new initiatives connected well with the discussions about the need for democratization of automation and collaboration among business leaders, IT and the partner ecosystem.

Engaging with clients’ business side to address mission-critical challenges

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TBR perspective

“Capgemini is overall in a good shape relative to the market,” said Capgemini CEO Paul Hermelin during the opening keynote session at the company’s Global Analyst and Advisor Day 2018. Over the past six quarters, Capgemini has accelerated its revenue growth, reaching 8% year-to-year in constant currency in 1H18, and improved its profitability, aiming for an operating margin before other expenses of between 12% and 12.2% in 2018, owing to growth in scale of digital projects, automation, low-cost leverage and cost management. However, there is always room for improvement, and Hermelin pushes Capgemini’s management team to do more. Over the past several quarters, Capgemini has made changes to its portfolio, organizational structure and sales model to address rising demand coming from clients’ business side instead of their technology side. TBR believes Capgemini has a competitive portfolio and global services capabilities that will continue to move the company in the right direction. Capgemini is notably well established in India, not only for outsourcing but also for digital and cloud, and is able to provide fast-growing and emerging solutions at scale while continuing to address clients’ outsourcing needs with revitalized core offerings.

Transforming portfolio, organization and sales will drive revenue growth in the coming quarters

Following a disciplined portfolio management approach, Capgemini is reshaping its offerings to provide solutions, such as digital, cloud and cybersecurity, that enable clients to build their digital models. The company revitalized its core infrastructure, application and business services offerings, such as through launching next-generation ERP solutions to reimagine enterprise core systems to fit in the digital world, and infusing automation and AI across the portfolio to increase value for the client. Partnerships with technology vendors, startups and academic institutions are a key lever for expanding Capgemini’s portfolio and filling in capability gaps instead of always developing its own intellectual property, which can lead to increased costs and slow down the company’s digital and cloud portfolio expansion. From an organizational standpoint, Capgemini has shifted to a unified go-to-market approach that presents one face to the client and sells the entire Capgemini portfolio. From a sales perspective, the company has been pushing initiatives to foster strategic client relationships by deepening the engagement and offering all dimensions of Capgemini’s portfolio. The objective is to have an established group of strategic relationships in which Capgemini ranks among the leading IT services vendors for those clients to address their mission-critical challenges. This relationship approach in which Capgemini is the strategic supplier somewhat resembles Accenture’s (NYSE: ACN) Diamond Client structure.

TBR attended Capgemini’s annual Global Analyst and Advisor Day, held at the company’s combined Applied Innovation Exchange (AIE) and Accelerated Solutions Environment facility in New York City. The facility opened in October 2017 and is part of a global network of 16 locations that enables clients to explore, discover and test new solutions in collaboration with Capgemini and an ecosystem of technology partners, startups, academic institutions and venture capitalists. The event featured plenary and breakout sessions on topics such as portfolio strategy and management; Capgemini’s artificial intelligence (AI) ambition and portfolio; Capgemini Invent, the company’s newest global business line; digital; cloud; and North America. Client cases and demos on AI Insurance, AI Digital Ops, AI Manufacturing and economic Application Portfolio Management (eAPM) exemplified Capgemini’s activities with clients and provided insights into delivered results.

Maturing offerings, vendors and customers prompt long-term IoT vendor growth

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The continued interweaving of the technology component market with Internet of Things (IoT) techniques delivers a well-defined path to long-term sustained growth for many IT and operational technology (OT) vendors, especially those vendors that are best able to differentiate their portfolio and position themselves as critical partners for a wide set of IoT solutions.

The hype surrounding IoT has only served to confuse and overwhelm customers and vendors, but efforts by both parties to cut through the hype is driving the growth of installed IoT solutions. As the hype fades, vendors are better able to rationalize their go-to-market strategies and messaging, particularly around how to assemble IoT solutions, leading customers to better understand how to apply IoT.

However, while it is becoming easier to assemble an IoT solution, it is still challenging to design and implement the IoT technique. We don’t expect a huge explosion of revenue; IoT itself isn’t a “killer app,” but it will enable moderate and slowly accelerating revenue growth for the various components involved in an IoT solution.

In our 3Q18 reports and thought leadership, TBR will focus on three topics that we believe are currently the most impactful on the wider IoT ecosystem: the increasing maturity of the IoT technique, the growing consolidation of generic platforms, and how increasing commoditization around IoT is working in favor of economies of scale and enabling the growth of installed solutions.

IoT is growing up: Increased ecosystem maturity will lead to increased customer adoption

TBR, through discussions with vendors and customers as well as our use case databasing, is noticing growth in installed IoT solutions, whether from net-new deployments or expansions of existing IoT deployments, signaling improved maturity. IoT maturation is not so much about the components of IoT as it is about businesses developing their ability to leverage technologies and techniques that are increasingly applicable to a growing number of business problems.

A major driver of this maturity is greater clarity around IoT techniques, led largely by go-to-market realignment and improved messaging by vendors, organization around IoT by customers, shifts from competition to coopetition by vendors, and general improvements in the construction of the technology that facilitate advanced usage of the IoT technique.

HCL Technologies (HCLT): IoT NXT Summit

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Working with leading technology vendors to develop emerging technology offerings in areas such as Internet of Things (IoT) challenges HCL Technologies (HCLT) to differentiate from peers. However, leveraging its deep engineering expertise integrated with vertical capabilities enables HCLT to be more competitive, driving business transformation for new and existing clients with IoT-based services solutions.

TBR perspective

HCLT’s IoT WoRKS business unit benefits from demand for IoT, primarily among existing customers. The company has some advantages in the IoT business and will continue to expand its IoT practice as it generates IP that will prove useful as IoT becomes an increasingly important part of both build and run services.

HCLT has a long history in electronics and mechanical engineering and continues to provide engineering and R&D services beyond the usual scope of IT-oriented companies. TBR has written extensively about HCLT’s engineering heritage and offerings, noting the company’s engineering and R&D expertise serves as a key differentiator within the broader IT services space. Our white paper HCLT’s Intelligent Sustenance Engineering Service Line Unit delivers data insights to extend the product life cycle discusses the impact of engineering and R&D expertise on the value of HCLT’s data analytics services through differentiation. HCLT’s history and continued use of engineering and R&D help the company navigate customers’ operations technology (OT) areas in both technical and cultural engagements, a necessity in IoT. Nevertheless, in IoT, the company engages primarily with customers’ IT organizations, and HCLT’s advantage in the IoT space enables it to efficiently implement IoT-driven solutions using more complex OT factors. However, as OT is far more diverse than IT, one type of OT expertise does not imply knowledge of another. Although HCLT’s established engineering experiences, combined with its IT services for IoT environments, provide an advantage for the company, adding OT skills would bridge any gaps within OT areas and create a simple but strong advantage. TBR believes that OT organizations will continue to initiate IoT solutions, but will evolve to integrate IT-based practices focused on security, scalability and manageability.

 

On Aug. 22, 2018, TBR attended HCLT’s IoT NXT Summit at the company’s recently opened IoT COLLAB innovation center in Redmond, Wash. The center is located on the same property as HCLT’s Lab 21, which was opened in collaboration with Microsoft (Nasdaq: MSFT) around artificial intelligence (AI) and Cortana Analytics in the Azure Cloud. The analyst event centered on HCLT’s 3-year-old IoT WoRKS business unit and featured demonstrations of HCLT’s IoT solutions and how the company works with its partners to develop IoT portfolio offerings as well as extensive discussions with HCLT’s IoT WoRKS industry leads. During the event, HCLT emphasized its focus on existing assets, enhanced by partners and vertical expertise, which, combined with growing demand for cloud-based infrastructure services, enables HCLT to transform clients’ business operations with IoT solutions, providing scale and speed at the edge.

Consultancies and IT services vendors face uncertainty in a shift to data and automation for 2019

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As we start the final three months of 2018, TBR’s Professional Services Practice (PSP) has begun wrapping up analysis on the year as a whole and thinking more about what 2019 will bring, specifically in the areas of healthcare IT services, data management and consulting. Top-of-mind issues for TBR’s clients and the PSP analysts reflect today’s driving trends and set the stage for the next few years.

Now: Cloud, competition and emerging tech uncertainty unsettle HITS vendors

TBR’s healthcare IT services (HITS) practice has noted rising interest in electronic health record (EHR) systems and other health IT solutions, for example, patient data storage and application hosting in the cloud, tempered only by ingrained concerns about data privacy and security. EHR-centric companies aggressively cross-selling emerging solutions to their existing installed base of EHR clients have simultaneously captured new EHR work in the vast white space of latent demand for EHR systems outside the U.S. Complementing those efforts, increased cloud adoption generates opportunities for systems integrators to digitally transform payer, provider and life sciences organizations alike. For example, community hospitals eager to digitize and better connect with other providers in the healthcare ecosystem have become a growth engine for many HITS vendors, a trend that favors small-scale EHR providers, especially those that have pivoted to cloud, compelling leading vendors to scale down flagship EHR platforms and adopt small- to mid-market deployment models.

TBR closely monitors and analyzes the impacts to the business models for key HITS vendors as new pressures compel a shift toward different clients and markets, including the following development:

  • Will cloud-based EHRs, infused with automation analytics for care and administrative processes, artificial intelligence (AI) for genomics-informed medicine, machine learning and telemedicine become more commonplace?
  • How will executives at HITS vendors approach retrofitting existing EHR systems with these emerging solutions, in addition to integrating human-centered design into new EHR platforms?