Strong Services Execution, Enabled Through Infosys Cobalt and Focused on Outcomes, Provides Foundation Upon Which Infosys Can Build AI Strategy

The steady performance of Infosys’ cloud business highlights the company’s pragmatic approach to its portfolio and go-to-market efforts, largely enabled by Infosys Cobalt.

Building on Infosys Cobalt’s success, the company now has an opportunity to steer client conversations toward AI and is positioning Infosys Topaz as the suite of services and solutions that can bring it all together. Agentic AI (i.e., autonomous AI) is the newest set of capabilities dominating client and partner conversations. Scaling AI adoption comes with implications and responsibilities, which Infosys is trying to address one use case at a time. For example, earlier in 2024, Infosys launched the Responsible AI Suite, which includes accelerators across three main areas: Scan (identifying AI risk), Shield (building technical guardrails) and Steer (providing AI governance consulting). These capabilities will help Infosys strengthen ecosystem trust via the Responsible AI Coalition. Infosys also claimed it was the first IT services company globally to achieve the ISO 42001:2023 certification for ethical and responsible use of AI.
 
Regardless of the client’s cloud and AI adoption maturity, everyone TBR spoke with and those who presented at 2024 Infosys Americas Confluence agreed that the need for data strategy and architecture comes first. Two separate customers perfectly summarized the state of AI adoption: “You can’t get to AI without reliable data across the supply chain,” and “GenAI is not a magical talisman. Companies need to build true AI policy and handle GenAI primitives before scaling adoption, with the shift in mindset among developers and users a key component.”

Infosys recognizes that AI adoption will come in waves. The first wave, which started in November 2022 and continued over the last 18 to 24 months, was dominated by pilot projects focused on productivity and software development. In the current second wave, clients are starting to pivot conversations toward improving IT operations, business processes, marketing and sales. The real business value will come from the third wave, which will focus on improving processes and experiences and capitalizing on opportunities around design and implementation. Infosys believes the third wave will start in the next six to 12 months. While this might work for cloud- and data-mature clients, only a small percentage of the enterprise is AI ready across all components including data, governance, strategy, technology and talent. Thus, it might take a bit longer scale for AI adoption to scale.

But as Infosys continues to execute its pragmatic strategy, the company relies on customer success stories that will help it build momentum. As another customer positioned it, “Infosys knows the data and processes. They know what they are talking about. In [the] 11 years since we have worked with them, they have not missed a single release with their … team delivering the outcomes.”

We believe Infosys’ position within the ecosystem will also play a role in how fast and successful the company is when it comes to scaling AI with clients. Infosys’ AI-related messaging includes 23 AI playbooks, which focus on value realization spanning technical and business components, such as Foundry and Factory models, as well as change management.

Of course, AI and GenAI will also disrupt Infosys’ business model and service delivery. And while many of its peers are still debating internally how to best position themselves with clients and pitch the value of GenAI without exposing their business to too much risk in the long run, Infosys’ thoughtful, analytics-enabled approach to commercial and pricing model management has positioned the company favorably with price-conscious clients that have predominantly been focused on digital stack optimization over the past 18 months.
 
Infosys’ success with large deals is a testament to the effectiveness of the company’s strategy. In FY4Q24 Infosys had $4.5 billion in large deals, which is the highest quarterly large deal value for the company. In addition, investing in and transforming right-skilled talent who can support this model are critical components to the company’s success. While Infosys has trained 270,000 of its employees on AI, we believe it is the composition and depth of these skills that vary across service lines and clients, especially as outcome-based pricing models now represent half of the contracts in some service lines.

Infosys’ Investments in Engineering and Marketing Strengthen Company’s Position as a Solutions Broker

Navigating the hype of GenAI requires Infosys to also recognize and place bets on other areas that are tangential and have a more immediate impact on its value proposition and overall financial performance.

Infosys Tries to Bring CIOs and CMOs Together Through Infosys Aster

Building off the success of Infosys Cobalt and Infosys Topaz, the company launched Infosys Aster, a set of AI-amplified marketing services, solutions and platforms. While Infosys Cobalt and Infosys Topaz have horizontal applications, the domain-specific nature of Infosys Aster provides a glimpse into what we might expect to see from Infosys in the near future, given the permeation of GenAI across organizational processes. Additionally, the marketing orientation of Infosys Aster is not surprising since most GenAI use cases are geared toward improving customer experience.

Built around three pillars — experience, efficiency and effectiveness — Infosys Aster will test Infosys’ ability to capitalize on a new wave of application services opportunities and create first-party data-unique solutions rather than providing off-the-shelf solutions just to ramp up implementation sales.
 
With DMS continuing to act as a conduit for broader digital transformation opportunities for Infosys, we expect the company to use Infosys Aster to position its marketing services portfolio in a more holistic manner, creating a bridge between CMOs and CIOs and also bringing parts of Infosys’ Business Process Management subsidiary into the mix to position the company to capture marketing operations opportunities. Infosys Aster provides a comprehensive set of marketing across the value chain of strategy, brand and creative services, digital experience, digital commerce, marketing technology (martech), performance marketing and marketing operations.
 
Although this is an area of opportunity for Infosys, rivals such as Accenture have an advantage in the marketing operations domain. We do believe the greater opening for Infosys comes from focusing more on driving conversations around the custom application layer and steering client discussions toward achieving profitable growth through the use of Infosys Aster. Client wins such as with Formula E and ongoing work with the Grand Slam tennis tournaments also allow Infosys to demonstrate its innovation capabilities beyond traditional IT services. Part marketing and part branding, wins such as these elevate Infosys’ capabilities. Executing against its messaging is key for Infosys.

Infosys Engineering Services Will Close Portfolio and Skills Gaps Between IT and OT Departments

Infosys Engineering Services remains among the fastest-growing units within the company as Infosys strives to get closer to product development and minimize GenAI disruption on its content distribution and support position. Since the 2020 purchase of Kaleidoscope, which provided a much-needed boost for the company to infuse new skills and the IP needed to appeal to the OT buyer, Infosys has further enhanced its value proposition to also meet GenAI-infused demand.

Infosys recently announced the acquisition of the India-based, 900-person semiconductor design services vendor InSemi, which presents a use case where the company applied a measured risk approach to enhance its chip-to-cloud strategy as it tries to balance its portfolio of partner-ready solutions, such as through NVIDIA, with a sound GenAI-first cloud-supported story. Shortly after, Infosys also acquired Germany-headquartered engineering R&D services firm in-tech. The purchase will bolster Infosys’ Engineering Services R&D capabilities and add over 2,200 trained resources to regional operations across Germany, Austria, China, the U.K., and nearshore locations in the Czech Republic, Romania, Spain and India, supporting Infosys’ opportunities within the automotive industry. The purchase of in-tech certainly accelerates these opportunities, bringing in strong relationships with OEM providers, which is a necessary steppingstone as Infosys tries to bridge IT and OT relationships.

We do not expect Infosys’ cloud business Infosys Cobalt to slow down anytime soon given the company’s market position for infrastructure migration and managed services as well as its well-run partner strategy with hyperscalers. Adding semiconductor design services bolsters that value proposition as buyers consider whether to use price-attractive CPUs or premium-priced GPU data centers. The latter currently dominates the marketplace, and we expect that trend will not change for at least the next 18 to 24 months. But having semiconductor engineers on its bench can help Infosys start supporting CPU-run models, further appealing to more price-sensitive clients. Meanwhile, Infosys is planning to train 50,000 of its employees on NVIDIA technologies. Lastly, the close collaboration between Infosys Engineering Services and Infosys Living Labs further extends the company’s opportunities to drive conversations with new buyers and demonstrates its ability to build, integrate and manage tangible products.

Infosys’ Reliance on Partners Provides a Strong Use Case of Trust and the Future of Ecosystems

The mutual appreciation between Infosys and partners was amplified throughout 2024 Infosys Americas Confluence. From a dedicated Partner Day to partner-run demos and various sponsorship levels to main-stage presentations, the experience reminded TBR of an event that a technology vendor would typically set up (think: Adobe Summit, AWS re:Invent, Dreamforce, Oracle OpenWorld, to name a few).
 
Infosys’ decision to feature some of its key alliance partners in a similar way that the tech companies do suggests a strong alignment between parties starting with the top-down executive support, through mutual investments in both portfolio and training resources, and most importantly, knowledge management between the parties. In conversations throughout the event with partners, it was evident that Infosys’ strategy is consistent regardless of the length of relationship, from decades-long relationships such as with SAP or an emerging but fast-growing alliance such as with Snowflake. All partners agreed Infosys’ humble approach to managing relationships has put them at ease in working with Infosys and delivering value to joint clients.

After attending Infosys’ U.S. Analyst and Advisor Meeting in Texas in March, TBR wrote about Infosys’ relationship with Oracle, highlighting the level of trust and transparency Infosys typically deploys with partners. In TBR’s Summer 2024 Voice of the Partner Ecosystem Report we wrote: “Services vendors most frequently rely on their direct sales efforts and permission to demonstrate value with customers to drive revenue. Using demos and proof-of-concept discussions as a frequent tactic to engage with clients also highlights many of the profiled vendors’ consulting heritage.

The technical expertise came through very vividly and aligned with Infosys’ strengths in playing within its own swim lane. In a main-stage discussion, Infosys and Hewlett Packard Enterprise (HPE) discussed at length the role each plays in pursuing opportunities in areas such as GenAI and the need for greater interactions through multiparty model including the value NVIDIA brings to the table, for example. While one could argue that Infosys’ alliance partner strategy mirrors that of many of its competitors as it seeks to secure foundational revenue opportunities while pursuing innovation through a measured risk approach, the company strives to differentiate by acknowledging its strengths and sticking to them rather than branching too far into partners’ territory, which enterprise buyers strongly appreciate.

Land-and-execute Approach and Expansion Will Follow Naturally

Close to a decade ago, TBR analyzed what Infosys’ five-year strategy should look like. While the company went through leadership and strategy changes during this period to such an extent that one could cite concerns about consistency, those days are over. Infosys now has a well-grounded strategy with executives executing on a clear vision rooted in a land-and-execute approach rather than the typical land-and-expand framework many of its peers aspire to. This puts greater pressure on the company’s quality and talent-retention strategies. While no one is immune to macroeconomic headwinds, the internal growth and training opportunities the company provides for its employees across all levels provides a strong backbone to a culture of learning and trust.

TBR will continue to cover Infosys within the IT services, ecosystems, cloud and digital transformation spaces, including publishing quarterly reports with assessments of Infosys’ financial model, go-to-market, and alliances and acquisitions strategies. Access reports as soon as they’re available with TBR Insight Center™ access.

Oracle Is Charting a Path for Unprecedented Growth with Its ‘Infrastructure Anywhere’ Vision

Oracle has among the most complete, full-stack cloud portfolios, from infrastructure to database to applications. While Oracle Cloud World 2024 covered a sizable landscape, one theme stuck out during the four-day event: deployment flexibility. This theme reflects how much Oracle has changed compared to 2016, when Gen2 OCI (Oracle Cloud Infrastructure) launched.

With multitenant OCI, Dedicated Regions, Cloud@Customer and Oracle Alloy, a specialized service where customers white label OCI services inside their own data centers, Oracle has quickly emerged as one of the most flexible, delivery-agnostic IaaS vendors on the market. Of course, the other big component of Oracle’s “infrastructure anywhere” vision is multicloud, in which customers can run Oracle databases as native services hosted in the data centers of Oracle’s biggest hyperscaler competitors.

Not only does this move reflect a major maturity leap for Oracle, in which Oracle cozies up to its rivals to better address the needs of the customer, but it is also critical to the company’s financial strategy. In addition to giving Oracle the flexibility to allocate more capex dollars toward strategic compute and storage resources as opposed to land and buildings, this strategy will help Oracle get its on-premises database support base to the cloud faster. In doing so, Oracle may forfeit lucrative support and license contracts, but the company reports that for every $1 in lost license and support gross profit it could realize as much as $5 in gross profit in the cloud, which is a testament to how quickly the cloud business is growing.

The multicloud strategy is also one of the reasons Oracle awed financial analysts not only by raising its FY26 revenue targets by $1 billion, to $66 billion, but also by setting a FY29 goal of $104 billion. This target, backed by Oracle’s $99 billion RPO (remaining performance obligation) balance, implies an average corporate revenue growth rate of roughly 16% over the next five years. This kind of growth was once unheard of for Oracle, but with cloud now overtaking support as the biggest business, Oracle is a different company, and the OCI growth trajectory instills a degree of optimism in Oracle’s ability to disrupt a highly saturated market in the years to come.

Announcing Oracle Database@AWS

Based on interactions at Cloud World, it is clear the Oracle Database@AWS announcement was the most noteworthy. In our view, given Oracle already launched Oracle Database@Azure, and more recently Oracle Database@Google Cloud, which is now live in four regions, it was only a question of when, not if, Amazon Web Services (AWS) would partner with Oracle.

With this announcement, Oracle officially saved the biggest hyperscaler for last, onboarding all the critical partners it needs to migrate legacy database customers and accelerate cloud revenue growth. In terms of how this alliance will work, it is no different than the approach Oracle takes with Microsoft Azure and Google Cloud; Oracle will deliver the hardware and networking inside AWS data centers so customers can provision Oracle database services natively from the AWS console and have the system run in AWS, just as it would if it was hosted in OCI.

The approach of physically embedding OCI within other clouds as opposed to just bolting Oracle Database on to other infrastructure through a standard interconnection is important as it will not only give customers the native AWS, Azure and Google Cloud Platform (GCP) experiences they are used to, but also limit latency as the Oracle Exadata hardware is physically located with the appropriate hyperscaler.

One could argue Oracle is taking a lot of risk with this strategy, as it is essentially bringing customers and their data closer to AWS, Azure and GCP. But in the age of mounting competition, not to mention generative AI (GenAI), it is a risk worth taking. As one customer at a major financial services firm recently told us, “The GenAI decision makers will not be the old world relational database experts,” and these alliances could help ensure Oracle stays relevant in cloud GenAI discussions by making it easier for customers to use the data within Oracle Database for RAG (retrieval augmented generation), to fine-tune foundation models and build new applications using tools many customers are likely already using, like Amazon SageMaker.

We should also point out the concept of data gravity. Customers leveraging these multicloud services will still be established Oracle Database customers with some Oracle SaaS presence, and therefore the bulk of their business data gravity will naturally reside within OCI. Those customers may still be inclined to keep their databases within OCI and not extend to other clouds, but with this strategy, Oracle is at least giving them the option to do so. We expect that these multicloud offerings will gain a lot of traction among Oracle Database customers that have big application footprints on other clouds.

Oracle Analytics Is the Glue Between IaaS and SaaS

Analytics, and the ability to turn data into business insight, is the ultimate objective for nearly every organization. With popular tools like Power BI and Tableau as well as neutral data platforms like Snowflake on the market, customers have a lot of choices when crafting the analytics stack.

But customers have also made it clear they want to limit the integration burden, and one of the compelling things about Oracle’s approach to analytics is how it can store customers’ operational data from Fusion applications in the Autonomous Data Warehouse (ADW) for analytics as part of a single SKU. This approach, productized as Fusion Data Intelligence (FDI), reinforces the value of Oracle playing in both the SaaS and IaaS markets and its ability to deliver a unified solution.

Evolving the Data Lake Strategy and Competing as a Unified Solution

Access to operational data in the Fusion suite will remain the hallmark differentiator for FDI, but it is on the infrastructure side where Oracle took a big leap forward with the launch of Intelligent Data Lake. Oracle has been elevating its data lake strategy and positioning for some time, but this announcement puts Oracle more squarely into the space.

At its core, Intelligent Data Lake is a reworking of existing OCI capabilities, such as cataloging and integration, to create a single abstraction layer that in true data lake fashion, allows customers to query data on object storage, such as Amazon S3 or Microsoft OneLake, with support for the popular Apache Iceberg and Delta Lake frameworks.

To be fair, with Fabric and BigLake, Microsoft and Google Cloud, respectively, have been similarly making advancements with the data lake architecture to better address analytics workloads. However, Oracle is not only adding the simplicity and performance benefits of the data lake but also delivering the architecture in a way in which customers can run the entire data pipeline and still have all the analytics components in a single SKU.

With Oracle’s launch of a native Salesforce integration with FDI, which allows customers to combine their CRM and Fusion data within the lakehouse architecture, Oracle’s vision of embedded clouds at the database layer is extending to analytics.

Though FDI’s draw will still be primarily with existing Oracle customers, the company is clearly taking steps to help combine Fusion with non-Fusion data and make its platform more relevant within the cloud ecosystem. While FDI may not rip and replace the analytics footprint within any particular account, we could see scenarios where FDI displaces some components of the stack, such as Snowflake at the infrastructure layer, or on the analytics side, PowerBI in Microsoft Fabric.

New Applications Are Being Built on the Analytics Stack

In general, scaling the existing platform components of Oracle Analytics is a top priority for the company, but there is another emerging piece of the analytics vision: Intelligent Applications. Coming soon, Oracle will offer applications — People Leader Workbench for HCM and Supply Chain Command Center for SCM — that sit on top of the Fusion system of record, within the FDI platform.

This approach should allow Oracle to target a broader set of personas. For example, in People Leader Workbench, it is not necessarily about reaching only the C-Suite but rather anyone who manages people and can benefit from data-driven insights on their people, and most notably, take action on that insight by connecting back to the Fusion HCM system of record.

What About GenAI?

GenAI has officially exited the hype cycle and is being widely deployed within the enterprise, but when it comes to analytics, capabilities like dashboarding, semantic models and visualization are still taking precedence It is still early, but customer feedback suggests that if data is properly configured and there are guardrails in place, GenAI in analytics has a lot of potential.
 

Dive into the complexities of vendor partnerships in this recent TBR Insights Live session — Click the image below to watch on demand today!

One of the key announcements at the event was the general availability of Analytics Cloud AI Assistant in Oracle Analytics Cloud (OAC), which is based on a large language model (LLM) so customers can ask questions about their data. Staying in line with the rest of the Oracle strategy, where GenAI is fully embedded into the portfolio and available to customers at no added cost, the analytics assistant will be available to OAC customers for free as part of their existing instances.

Speaking of SaaS and IaaS

From database alliances to the data lake architecture, Oracle has made many calculated moves at the PaaS layer to better compete for strategic workloads. But there are other innovations and key developments in the upper and lower rungs of Oracle’s cloud portfolio.

Oracle Targets Complete End-to-end Process Automation with AI Agents in Fusion Suite

Since it first entered the GenAI game in late 2023, Oracle stood out in the SaaS market for not upcharging customers for GenAI in their SaaS applications. This speaks to Oracle’s play at the IaaS layer with the OCI GenAI Service, which is native to the same infrastructure where all Oracle’s SaaS applications live.

Logically, this approach means that as Oracle’s LLM partners, which host in OCI, push the boundaries of their models, Fusion customers stand to benefit in not just using GenAI for basic assisted authoring and summarization use cases (e.g., writing a job description in Fusion HCM or summarizing customer calls in CX), but actually contextualizing data. In the long term, this could mean providing reasoning on that data to manage more complex workflows and deliver business recommendations.

At this time last year, Oracle announced 50 GenAI use cases in the SaaS suite. This year, the applications team announced the number of use cases has grown to over 100, while there are now more than 50 AI agents within the Fusion suite. This announcement marks a progression in how Oracle is moving from more generic prompt-and-response use cases in Fusion to actual contextualization use cases, by applying LLM-based RAG agents to address specific goals and roles within a particular business function. In Fusion HCM, this could include a benefits analyst agent, offering users the ability to ask questions, such as which health plan features are available, based on the enrollment data contained in Fusion HCM and the health plan document specific to the company.

But the most commonly cited example throughout the event was the Document IO agent in Fusion ERP, which can convert a picture of a quote in a particular currency into U.S. dollars and automatically create and load a purchase order (PO) within the system. With these AI agents, we see Oracle taking the next big step in addressing more complete process automation and productivity enhancements within its SaaS portfolio, and ultimately a shift in mindset where it is less about delivering an ERP system or an HCM system but more about completing end-to-end business process and experience.

OCI Strategy Centers on Growing Within the Large Enterprise and Attracting Cloud-natives

Oracle’s ability to offer among the most flexible cloud delivery methods is the focus of the OCI strategy and strategic road map, led by high-profile partnerships with AWS and others. But Oracle’s strategy is about being agnostic to not only where customers run OCI but also how they run OCI.

For example, at Cloud World Oracle announced Dedicated Region 25, a longtime investment and feat of engineering that essentially consolidates a standard Oracle Cloud region into just three racks, which we physically saw on the keynote stage. This configuration extends the value proposition of Dedicated Region, where customers can get the scale and economics of the public cloud inside their own data centers.

Dedicated Region 25 could also play a big role in helping Oracle reach new customers. Oracle’s multicloud alliances will undoubtedly be appealing to the large enterprise customer base, but offerings like Dedicated Region 25 could help Oracle attract cloud-native and AI companies looking for a more compact footprint that can still scale to support critical workloads.

Conclusion

Led by its partnership with AWS, Oracle Cloud World 2024 told a story of a maturing business that is turning competitors into partners to better address the needs of the customer. By keeping the lifeblood of the cloud stack, the database, relevant in customers’ cloud transformations, Oracle also ensures it remains competitive in GenAI scenarios, which aligns with the GenAI investments the company is making in other areas of the stack, from analytics to Fusion applications.

As the company continues to navigate as a full-stack vendor catering to the existing Oracle base, while simultaneously gaining relevance in the broader cloud ecosystem, there is a lot of potential ahead, and Oracle is well on its way to becoming a $100-plus billion company.

TBR Perspective

Ericsson’s Enterprise Wireless Solutions unit is exhibiting strong revenue growth and serves as a bright spot amid the company’s broader challenges. Ericsson has a compelling 5G-related portfolio that addresses the unique needs of enterprises ranging from SMBs to large industrial entities. Ericsson’s focus on enhancing its enterprise portfolio in areas including private cellular networks (PCNs), neutral host networks, fixed wireless access (FWA) and IoT will generate new revenue that will help to partially offset declining consolidated revenue, which is being negatively impacted by most Tier 1 operators decreasing network capex as they enter the later stages of 5G deployments.

Ericsson’s Enterprise segment has experienced challenges, however, namely declining revenue within its Global Communications Platform division, which includes Vonage. Ericsson appeared to overpay ($6.2 billion) for its acquisition of Vonage, which fits awkwardly within Ericsson’s historical core business and was primarily considered a down payment on developing a network API business with an unproven business model when it closed in 2022, and Ericsson has essentially confirmed that notion.

In October 2023 the company booked an SEK 32 billion ($3 billion) impairment charge on Vonage’s goodwill, writing off half of the acquisition price. The company took a further SEK 11.2 billion ($1.1 billion) noncash charge on the Vonage acquisition in July 2024. TBR believes Ericsson is correcting course, however, by more deeply collaborating with industry partners through its new network API joint venture, which will reduce fragmentation in the market and make it easier for developers to innovate and create new apps and use cases.

The joint venture will also provide Ericsson with a more risk-averse approach to tackling the network API opportunity by pooling funding and resources from the partners as the long-term market size for network APIs is uncertain. Ericsson will need to split proceeds from the joint venture with its partners, however, which will limit long-term revenue potential.

Ericsson Realizes the Need to Collaborate with Industry Partners to Accelerate Network API Development

The composition of Ericsson’s new network API joint venture, which currently does not have a formal name and is expected to close in early 2025 pending regulatory approval, entails Ericsson holding 50% equity in the venture, with the following telecom operators holding the remaining 50% of equity: America Móvil, AT&T, Bharti Airtel, Deutsche Telekom, Orange, Reliance Jio, Singtel, Telefonica, Telstra, T-Mobile, Verizon and Vodafone.

Vonage and Google Cloud will serve as channel partners for the joint venture, providing access to their ecosystems of millions of developers as well as their partners, and additional communication service providers (CSPs) and channel partners will be invited to join the entity in the future (Ericsson would maintain its 50% share in the venture if additional CSPs join). The goal of the joint venture is to create a platform that will provide network APIs to an ecosystem of developers, including hyperscalers, Communications Platform as a Service (CPaaS) providers, systems integrators and independent software vendors. The joint venture will be in alignment with existing industry network API initiatives, including the GSMA’s Open Gateway and the Linux Foundation’s CAMARA Project.

TBR believes the main benefit of the joint venture will be incentivizing developers to focus on the network API market by providing them with a simpler way to create apps at scale. For instance, developers currently need to engage with CSPs on a one-on-one basis to procure network APIs, which can be a slow and complex process. The joint venture aims to accelerate market development by providing combined common APIs that can work from any location or network. Reduced fragmentation will also speed market development as developers will be able to more fully concentrate on new use cases and applications rather than spending time modifying existing applications to make them compatible with networks on an operator-by-operator basis.

Industry projections for the network API market are wide ranging, with Ericsson citing McKinsey & Co.’s projections that the market will generate around $100 billion to $300 billion in incremental connectivity and edge computing-related revenue for operators by 2030 and that an additional $10 billion to $30 billion in revenue will be generated from the APIs themselves.

TBR believes the market size of the segment will mainly hinge on network APIs being able to provide developers with differentiated and compelling capabilities that are distinct from existing 5G capabilities that are available independent of network API access. Enhanced capabilities enabled by network APIs include differentiated connectivity, device-based location, security (e.g., authentication) and network insights.

Current primary use cases for network APIs include simplified secure login for devices and advanced network authentication to strengthen fraud prevention. Other main use cases include enabling enhanced location verification and more reliable connectivity to support point-of-sale platforms, as well as optimizing the user experience for entertainment services such as video streaming and gaming applications.

Ericsson’s joint venture will create competitive pressures for Nokia, which is providing network API solutions via its Network as Code platform. Nokia has at least 14 Network as Code CSP partners as of June and aims to have more than 30 partners by the end of 2024. Nokia may be challenged in meeting this goal, however, due to potential CSP partners possibly being swayed by the ecosystem and benefits provided by Ericsson’s joint venture. Ericsson’s CSP partners are not tied exclusively to the joint venture, however, and have the option to join Nokia’s ecosystem as well.

For IT Services Companies and Consultancies, the New Joint Venture Could be a Promising Change Agent in the Broader Ecosystem

From the perspective of global IT services companies and consultancies, such as Accenture, Infosys and Deloitte, Ericsson’s event theme, “Capture the value of enterprise 5G,” remained focused on Ericsson’s opportunities with and through telco operators while providing a modest opening for increased go-to-market and alliance activity.

Based on the event presentations, sidebar discussions with Ericsson leaders, and TBR’s analysis of Ericsson over the last two decades, we see two opportunities for Ericsson to enhance its ecosystem plays with IT services companies and consultancies that align well with Ericsson’s overall strategy.

First, TBR’s recent Voice of the Partner research shows that cloud and software vendors, OEMs, and IT services companies see 5G as a promising source of near-term growth, nearly on par with generative AI. To address their enterprise clients’ growing 5G needs, IT services companies and consultancies will need closer alliances with incumbent telcos and OEMs, including Ericsson. IT services companies and consultancies will not try to sell their own connectivity solutions but will readily partner to bring those solutions to their enterprise clients if informed, aligned and incented, particularly if the five-to-eight-times revenue multiplier applies to services attached to Ericsson’s hardware.

Second, TBR’s ecosystem reports, which cover a dozen leading global IT services companies’ relationships with Amazon Web Services (AWS), Google Cloud, Microsoft Azure, Adobe and Salesforce, confirm that scale remains a key differentiating characteristic, both for alliances managers across the ecosystem and enterprise clients looking for multiparty, well-orchestrated technology solutions. Ericsson’s joint venture with Google and the 12 operators could be highly appealing as an alliance partner, bringing IT services companies and consultancies into contact with new personas within their enterprise clients, which will create an expanded playing field for professional and managed services companies. In short, Ericsson’s new joint venture could be an ecosystem catalyst, provided the joint venture finds a go-to-market focus and well-led partnerships with the right IT services companies and consultancies.

Ericsson Launches Private 5G and Neutral Host Network Solutions Under its Ericsson Enterprise 5G Segment

At Ericsson Enterprise Industry Analyst Day in September, Ericsson reintroduced its Ericsson Enterprise 5G portfolio, which includes three solutions:

• Ericsson Private 5G: A converged LTE/5G PCN solution with industry and licensed spectrum support
• Ericsson Private 5G Compact: A U.S. CBRS-based solution designed for enterprises requiring connectivity that is more reliable than Wi-Fi. The solution was previously branded as Cradlepoint NetCloud Private Networks.
• Ericsson Enterprise 5G Coverage: A turnkey neutral host solution that features certification from all Tier 1 U.S. operators. The solution can support up to three carriers per radio.

The relaunch of the Ericsson Enterprise 5G portfolio, in addition to the legacy Cradlepoint business now branded under this segment, will help Ericsson strengthen its messaging within the PCN market and better compete against Nokia, which TBR estimates is the second-largest PCN vendor by revenue globally (behind Huawei) and the largest when excluding China.

Ericsson Enterprise 5G Coverage is certified by AT&T, T-Mobile and Verizon, which will be a significant benefit as Ericsson aims to gain headway within the neutral host networks market. Neutral host networks are gradually gaining traction as they are easier to deploy compared to legacy distributed antenna systems (DAS) and can provide significant cost savings as they enable a single neutral host network to support customers from multiple operators without requiring each operator to deploy its own separate infrastructure.

Industrial sites, schools and hospitals are the primary locations where neutral host networks are initially being deployed, and Ericsson’s early customers for the solution include Toyota Forklifts in Indiana and engine manufacturer Cummins in New York.

Conclusion

TBR believes Ericsson is effectively positioning to capitalize on 5G-based solutions within the telecom enterprise space, including network APIs, PCNs and neutral host networks. Ericsson is aware that industry collaboration is essential for these segments to reach their peak potential, evidenced by the vendor’s initiatives including the formation of the network API joint venture and gaining certification from AT&T, T-Mobile and Verizon for its neutral host network solution.

Ericsson’s success in areas including network APIs, PCN and multi-access edge computing will be impacted by coopetition from hyperscalers within these segments. Though Ericsson has established partnerships with AWS, Google Cloud and Microsoft Azure within multiple portfolio segments, the company’s revenue opportunities will be limited as hyperscalers take a portion of revenue from enterprise deployments.

Atos, the worldwide IT partner for the Summer and Winter Olympic and Paralympic Games, invited a group of industry analysts to the 2024 Paris Olympics. The goal of the event was to show Atos in action during the Games with a tour of the Technology Operations Center in Paris, which is one of the three locations responsible for delivering IT services and keeping the Games running. The analysts also attended a swimming competition event at Paris La Defense Arena, to experience the secure and digital experience provided by Atos and its partners in running the IT systems behind the Games.

The Olympics Must Run Flawlessly; There Are No Second Chances

Atos utilized its well-established expertise in the sports and entertainment industry to provide IT services for the 2024 Paris Olympics and Paralympics and enable a secure and digital experience for end users, which typically amounts to a total of approximately 4 billion viewers globally. Atos has been providing services for the Olympic Movement since 1989. Atos established its relationship with the International Olympic Committee (IOC) as a Worldwide IT Partner in 2001 and provided IT services for the first Winter Olympics in 2002 in Salt Lake City. Providing uninterrupted running of the IT systems behind the Olympics every two years requires dedication and strict execution of processes and timelines.

According to Angels Martin, general manager Olympics at Atos, “Olympics challenges are similar to other projects; the difference is visibility [of the Games]. No one will postpone the opening ceremony because Atos is not ready.” Martin also explained that cybersecurity management is a vital activity that Atos provides as the Games are one of the most targeted events in terms of cyberattacks, which could threaten the smooth functioning of the Olympics. She also stated that the Games are complex to manage with multiple parties, such as the IOC, sports federations, broadcasters and journalists, requiring services and access to information 24/7 from anywhere on any device. Martin also noted that demand for information has changed significantly since the first engagement 30 years ago, and today Atos is applying AI-driven solutions to enable processes for the Games. For example, Atos used AI solutions for the 2024 Paris Olympics to support the Organising Committees for the Olympic Games in providing scenarios for matching volunteers with job positions based on skills and abilities. In the 2020 Tokyo Olympics Atos provided an AI solution for facial recognition for venue access using accreditation.

Atos Integrates Critical IT Systems and Manages Partners to Run the Games

Atos is responsible for integrating critical IT systems, managing programs with IT vendors that deliver services for the Organising Committees for the Olympic Games, supporting critical applications for the Games and providing security services to enable smooth and uninterrupted running of the Games. For example, for the 2024 Paris Olympics and Paralympics Atos operated the Olympic Management System, which included a volunteer portal, a workforce management system, athlete voting applications, sport entries and qualifications, competition schedule and accreditation. Atos was responsible for the Olympic Diffusion System, which contained Olympic data feed, web results, mobile apps for results, a Commentator Information System, an information system for journalists called MyInfo, and a print distribution system. Atos was also responsible for cloud orchestration between private cloud, public cloud services and data centers at venues.

Additionally, Atos applied its expertise around working with a diverse group of technology partners to help run the Games and provided systems integration of applications with other IT providers and partners. Atos integrated partners, such as technology providers, media, the IOC, Organising Committees for the Olympic Games, and security providers, to ensure efficient delivery, operations, timelines and venue management activities. Atos also helped coordinate responses on daily activities and addressed critical events when they occurred. For example, Atos worked with Omega, the timing and scoring sponsor of the 2024 Paris Olympics, to relay results and data to spectators globally in real time. Omega captured raw data around timing and scoring, fed the results into scoreboards and videoboards at venues jointly with Panasonic, and provided data to Atos to feed into the Commentator Information System.

Atos’ Olympics and Paralympics Achievements

Achievements from the 2020 Tokyo Olympics and the 2024 Paris Olympics show the magnitude of work Atos provides. There are approximately 900 events that Atos has to manage to be able to transmit results instantly from competition and noncompetition venues. The company utilized the volunteer portal to process 200,000 volunteer applications prior to the 2020 Tokyo Olympics, and the number of volunteer applications swelled to 300,000 for the 2024 Paris Olympics. According to Atos, one of the most complex activities around managing people for the Olympic and Paralympic Games is assigning volunteers to the large number of necessary positions. For the 2024 Paris Olympics and Paralympics, Atos innovated the volunteers’ assignment process by implementing an optimized pre-assignment scenario model and an AI-based solution that utilized constraint logic programming to improve position matchups. At the 2020 Tokyo Olympics Atos issued 535,000 accreditations through the system and established 350 accreditation checkpoints with facial recognition in all competition and noncompetition venues. Additionally, cloud usage at the 2020 Tokyo Olympics enabled Atos to reduce by 50% the number of physical servers at the 2020 Tokyo Olympics and improve sustainability.

Every Two Years Atos Organizes Upcoming Games

Typically, pre-project activities for each Olympic Games begin six years prior to the event. For example, pre-project activities for the 2024 Paris Olympics and Paralympics began in 2018, and planning began in 2020 with the development of a master plan and strategy and related responsibilities matrix. In November 2020 Atos appointed the first core team for the 2024 Paris Olympics and Paralympics. In 2021 Atos began designing business requirements and systems infrastructure and established a test lab, and in 2022 the company initiated the building of systems and expanded the testing facility. In June 2023 Atos launched testing activities such as integration tests, acceptance tests, systems tests, events tests and multisport tests to prepare for operating the Games in 2024. During the first several months of 2024, Atos worked on venue deployment, disaster recovery and technical rehearsals.

For example, between May 13 and May 17 Atos completed the final technology rehearsal for the 2024 Paris Olympics and Paralympics. The rehearsals, which took place across different locations in Paris and other sites of the Olympic and Paralympic Games, were designed to test IT policies and procedures and how well IT teams can collaborate and handle real-time situations that may impact the Games. Atos is the IT integration leader and coordinates with the Organising Committee for the Olympic Games and with experts and technology partners. The technology rehearsals were conducted in 39 venues, including Atos’ Central Technology Operations Center in Barcelona, Spain, and venues specific to the Games, such as Atos’ Technology Operations Center in Paris, the Main Press Center, The Stade de France and competition venues.

The Olympic Games resemble a large-scale international corporation mobilizing approximately 300,000 people for the duration of the Games. Atos provides IT services with teams located in the host city and in Atos’ facilities in Poland, Morocco and Spain, and serves more than 4 billion customers globally competition results. While every two years Atos must set up a new organization for each Summer and Winter Games, the company has a well-established process and experience with starting over again. Every two years Atos establishes a Technology Operations Center (TOC) in the host city of the Summer and Winter Games. The TOC is the technology command and control center that houses teams from Atos, the IOC, the Organising Committees for the Olympic Games and other technology partners. The TOC consists of approximately 300 people who are coordinated by Atos and available 24/7 while the Olympics and Paralympics are running. Atos also has a Central Technology Operations Center (CTOC) in Barcelona, which is organized in a similar manner as the TOC in the host city. The CTOC delivers remote support during competitions and critical events, such as the volunteer campaigns, and orchestrates applications for the Games, and consists of approximately 80 people who provide services around operations, architecture, security, infrastructure and data management. Atos also has an Integration Testing Lab in Madrid that manages system testing for the Games.

Atos Adds New clients in the Sports and Entertainment Industry

Atos’ engagement with the IOC ends with the 2024 Paris Olympics and Paralympics. However, Atos has been expanding its client roster in the sports and entertainment industry, applying its vast experience gained from the Olympics. In December 2022 Atos signed an eight-year deal with the Union of European Football Associations (UEFA) to be the official technology partner for men’s national team competitions. Atos is assisting UEFA in managing, improving and optimizing its technology landscape and operations. Atos is also managing and securing the hybrid cloud environment and infrastructure that hosts UEFA’s services, applications and data. In July Atos announced that it had successfully delivered key IT services and applications supporting the UEFA EURO 2024 from June 14 to July 14. Atos supported UEFA systems such as accreditation, access control solutions and competition solutions. Atos managed core IT systems through its football service platform and stored and distributed UEFA football data to stakeholders. Atos is the official IT partner of UEFA National Team Football until 2030.

Conclusion

Atos has a well-established position and history of operating in the sports and entertainment industry. Expanding its client roster with organizations such as UEFA will help the company maintain its reputation as a reliable IT services provider and innovation partner for major events. Enabling the running of complex events such as the Summer and Winter Olympic Games and the UEFA EURO 2024 championship provides global visibility of Atos’ capabilities and brand and enables the company to augment its client base in the industry.

A Multitude of Secular Trends Are Reinforcing Colocation’s Value Proposition

Market trends over the past few years have made several things clear about the IT strategy of most enterprise customers, all of which reinforce the value proposition offered by colocation providers:

• Hybrid environments will persist — Whether due to existing legacy investments, divisional or regional nuances, or acquisition and divestiture activity, heterogeneity will remain in most IT environments. At one point, the benefits of public cloud made organizations consider a homogeneous, fully cloud-based IT delivery strategy, but those visions have faded for most. The challenge — and goal — is to embrace the hybrid heterogeneous approach and find the best way to integrate, manage and optimize services across these diverse sets of delivery methods and assets. Colocation data centers play a critical role for customers, offering a hybrid approach to facilities and in the interconnection of cloud and on-premises services.
• Location and proximity matter — The importance of delivery locations is driven by not only the hybrid nature of the environment but also the latency requirements of many workloads. Edge workloads are the clearest example, but there are other cases where latency is critical or where regulations determine the location of data.
• Investment costs and opportunity costs are important — While organizations are still looking to control and minimize IT costs where possible, there has been a shift toward selective investment. This started when IT became one of the few levers companies could control as they shifted their business models to adapt to changes wrought by the COVID-19 pandemic. Most recently, the onset of generative AI (GenAI) convinced organizations that IT could be a competitive advantage as well, prompting investment in new solutions and technologies to keep pace with the market and key competitors. In this way, organizations are still closely controlling investment costs in new solutions but also can be swayed to spend due to the fear of lost opportunities. Colocation provides an emerging value proposition with GenAI and AI workloads, offering prebuilt facilities and interconnection services without requiring large retrofits or new capital expenditures.
• Ecosystems equal innovation — Though hyperscalers have become the center of the IT ecosystem over the past decade, the network of infrastructure providers, ISVs, systems integrators (SIs), colocation providers, consultancies and managed services providers remains intact. With the hybrid approach that most customers are embracing, combined with the digital transformations being deployed and then amplified by the onset of new AI and GenAI technology, numerous vendors are part of most enterprise IT solutions. The orchestration of those multiple vendors is critical and most often handled by a trusted SI partner.

Colocation Is a Relied-upon Option for the Vast Majority of Enterprises

According to TBR’s 2Q24 Infrastructure Strategy Customer Research, a significant portion of enterprises report colocation as some part of their overall IT delivery strategy. Most have less than 25% of their workloads deployed in colocation facilities, which is a reflection of the two predominant delivery strategies: their own centralized data centers and cloud-based environments. Colocation is even more of a consideration for new workloads, however, as 72% of surveyed respondents expect to deploy between 25% and 50% of net-new workloads using colocation providers.
 
We believe this trend is due to two factors. First, enterprises are reluctant to build their own data center facilities for workloads that perform best outside the cloud or that have location and latency requirements. Most organizations want to reduce their data center capacity at this point, not add to it at. Second, for many new workloads, data center requirements are more challenging to provide. With the need for increased density, more power requirements and unique GPU-based AI services, a modern data center is required. The challenges of technology, facilities and staffing highlight the value of a ready-to-use colocation facility.

Digital Realty and Equinix Stand Out in a Tightly Packed Colocation Market

Recent trends around hybrid deployment models, latency-sensitive workloads, data residency and AI-reliant solutions have highlighted the sometimes-overlooked benefits of colocation providers. Especially for large enterprise customers, the scale of colocation facilities, strength of alliances and ability to invest in supporting new technologies make a difference in the value of their services. TBR research shows Digital Realty and Equinix are head and shoulders above the rest of their peers in terms of the ability to meet enterprise requirements. From a purely data center location perspective, Digital Realty is the market leader worldwide, with 309 data centers, including those from unconsolidated joint ventures, effective 1Q24.

The current revenue perspective is one component when it comes to colocation spending, but enterprises also want to know their solution providers will be able to scale as demands grow. Especially after the supply constraints over the last couple of years and the ongoing shortage of key components for next-gen workloads like GenAI, customers are not always secure in their ability to access resources on a timely basis. While the supply of colocation capacity remains tight, investing now to guarantee expanded capacity is another differentiator. Here again there are advantages to scale, as Digital Realty actually outpaced all covered vendors in level of capital expenditures in 2023. This commitment to current investment is a signal to customers that they can continue to grow with Digital Realty moving forward.

Digital Realty Is Well Positioned to Address Hyperscaler Demand, Both Financially and in its Go-to-market Approach

Though adamant about vying for mindshare among both enterprises and hyperscalers, Digital Realty has always been better known for its play in wholesale colocation. Over the past several quarters, Digital Realty has employed an aggressive joint venture strategy, allying with private equity firms to build multibillion-dollar hyperscale data centers in both Tier 1 and Tier 2 markets. As such, much of Digital Realty’s financial makeup and recent performance have stemmed from this customer base, with over 80% of annualized base rent from new leases in the >1MW category (effective 1Q24). The retail colocation market will undoubtedly continue to grow, led by robust demand for hybrid deployments and cloud adjacency for reasons highlighted earlier in this piece.
 
But many sources continue to suggest a rampant demand surge in the wholesale market as hyperscalers rush to satisfy their own customers’ AI and GenAI deployments. There are several ways Digital Realty is addressing this demand. Some are financial, including the ability to recycle capital by selling off nonscalable, single-tenant facilities to reinvest in strategic markets and maintaining a conservative capital structure; for context, Digital Realty owns nearly all of its facilities, in stark contrast to competitor Equinix, which is still leasing roughly 40% of its data centers. But the other aspect is Digital Realty’s go-to-market approach and how the vendor is nurturing relationships with the hyperscalers and their own partner ecosystems.

Digital Realty and Oracle Have a Strong Customer-partner Relationship: Other Hyperscalers Should Take Note

Digital Realty has always had a strong relationship with Oracle, which is now Digital Realty’s third-largest customer, deploying in 38 locations and spending $170 million in annualized recurring revenue (ARR). It is hard to dispute Oracle’s success pivoting from a traditional software incumbent and SaaS provider to an IaaS challenger with OCI (Oracle Cloud Infrastructure), which is on track to become Oracle’s largest cloud business in the coming years. Digital Realty astutely took notice of OCI’s role in the market, not to mention Oracle’s tight relationship with NVIDIA, which supplied Oracle with GPUs early in the AI wave.
 
Recent developments like connecting to Oracle’s EU Sovereign Cloud and offering NVIDIA-based OCI instances in its high-traffic Northern Virginia data center only reinforce Digital Realty’s role in powering OCI’s expansion. It is one of the reasons Oracle can not only boast more rapid footprint expansion over peers but also deliver on the “distributed cloud” message that nearly all hyperscalers are eager to convey. For perspective, Oracle holds only a single-digit share percentage in the IaaS market, but Oracle’s ability to leverage Digital Realty to expand ahead of peers is notable and something that other hyperscalers that are adamant about building their own data centers should recognize as they fight to capture net-new AI workloads.

SIs and Consultancies Pull It All Together at Scale for Enterprises

For IT services companies and consultancies, two needs mentioned above — orchestration and scale — illustrate how the colocation piece of the enterprise IT ecosystem can provide competitive opportunities.

Orchestration Is Critical and Most Often Handled by a Trusted SI Partner

Companies like Deloitte, Accenture and Infosys have the most complete view of an enterprise’s IT environment, positioning them best to coordinate vendors that provide disparate technologies. Most consultancies and SIs stay in well-defined swim lanes, delivering their added value while facilitating cloud, software and even hardware solutions from an enterprise’s suppliers. In TBR’s research, the market-leading consultancies and SIs use their industry knowledge, influence and reach within a client as the basis for orchestrating a full spectrum of technology providers, calibrated specifically to an enterprise’s IT needs.
 
As described above, colocation continues to be a pressing need, creating an opening for IT services companies and consultancies that have traditionally shied away from alliances that are too far removed from their core competencies. Just as alliances have formed around cloud computing and enterprise software, with IT services companies and consultancies delivering value through innovation, cost containment and managed services, partnerships with colocation specialists could add a compelling component to an IT services company’s orchestration value proposition. Consultancies’ and SIs’ business models depend on retaining clients and expanding footprint within clients. If colocation can become another differentiating factor and improve enterprise clients’ overall IT environments, SIs and consultancies will willingly seek partnerships.

Enterprises Want to Know That Their Solution Providers Can Scale as Demands Grow

If client retention remains critical to SIs’ and consultancies’ business models, scale increasingly marks the difference between average performance and market-leading results. No SI or consultancy can out-scale the largest players, but TBR’s research shows that companies that manage their alliances well can leverage their ecosystem for scale unattainable on their own. In short, no other company can be Accenture, but an SI or consultancy can replicate Accenture’s reach with the combined forces of a well-oiled tech and services ecosystem.
 
Colocation providers already play within the technology ecosystem but have not traditionally been considered a means for consultancies and SIs to increase scale. As AI and GenAI increase compute power demands and enterprises turn to their consultancies and ask, “How can I take advantage of all this new technology without exploding my IT budget?” and “How can I take this GenAI-enabled solution from pilot to my entire enterprise,” colocation can become a critical component.

The SI and Consulting Tech Evolution: From ERP to Cloud to GenAI to Colocation

In TBR’s view, SIs and consultancies will never become adept at selling those components of the technology ecosystem that are the furthest from their core competencies, but the market leaders have become exceptional at managing and expanding their ecosystems. TBR’s research around the relationships between the largest cloud providers and the largest SIs demonstrates how much revenue can be driven through alliances. As SIs and consultancies mature their partnering practices, colocation will become another element orchestrated by the likes of Deloitte, Accenture and Infosys. Quite possibly some smaller SIs and consultancies will use colocation as a critical component to scaling themselves into competitive positions against those larger players. As GenAI drives new demands — on compute power, budgets and expertise — TBR will closely watch these relationships between SIs and colocation providers.