Ending consulting roulette: BXT evolves from grand idea to engaged approach

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Aspirational ideas while executing on BXT

Flight delays and cancellations spark anger in travelers and cost the airlines, in both revenue and brand, making predictive maintenance an easy sell to airlines looking for help. Delivering on the promise of being able to predict when a plane needs to be serviced, the positioning of the necessary technicians and parts, and how to best streamline, analyze, and improve the entire process requires an intricate understanding of an airline and its operating environments, the disparate data sets, and the regulatory complications requiring strict compliance. Most importantly, a consultancy needs to bring trust — deep, proven and sustained levels of trust — something PwC explicitly maintains it delivers, as the firm has stated, “We trade in earned trust.” PwC’s airline-based predictive maintenance case study demonstrates the firm’s ability to attack a client’s business problem, understand the user experience and apply a technology-infused solution, in addition to highlighting three of PwC’s current strengths: 1) earned confidence that the firm understands clients’ industry, regulatory and business intricacies, 2) client expectation that the firm will bring “aspirational ideas,” not simply routine consulting suggestions and solutions, and 3) evidence that the firm’s Business, Experience, Technology (BXT) approach has grown from a well-conceived goal to a functioning, well-engrained way of doing business.

 

Over two days, PwC hosted 50 analysts in its New York City offices, providing opportunities to meet PwC leaders and consultants from nearly every aspect of the firm’s advisory practice. In contrast to recent events, PwC opted to hold its Global Analyst Day sessions in somewhat traditional office spaces, rather than one of its dedicated Experience Centers, subtly reinforcing the message that its BXT approach permeates the entire firm and is not something that is practiced only at special locations. In addition, PwC discarded the traditional analyst day playbook, instead requiring attending analysts act as consultants while PwC professionals acted as clients, giving the analysts a better feel for PwC’s challenges and solutions.

Digital transformation, which encompasses new business models and network architectures, drives demand for TIS

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According to Technology Business Research, Inc.’s (TBR) 2Q18 Telecom Infrastructure Services (TIS) Benchmark, the TIS market grew as digital transformation continued to fuel demand for services that accompany business model evolutions and the implementation of new network technologies, including 5G and NFV/SDN.

The complexity of new network architectures and the interoperability challenges they create have been a boon for professional services revenues, particularly those of IT services firms. A broad range of professional services are required to help operators transform into digital service providers, including consulting, network planning, design, optimization, systems integration, training services, security services and interoperability testing, among other services, all of which are in high demand. TBR estimates the TIS professional services market grew 6% in 2Q18.

TBR’s Telecom Infrastructure Services Benchmark provides quarterly analysis of the deployment, maintenance, professional services and managed services markets for network and IT suppliers. Suppliers covered include Accenture, Amdocs, Atos, Capgemini, CGI, China Communications Services, Ciena, Cisco, CommScope, CSG International, Ericsson, Fujitsu, Hewlett Packard Enterprise, Huawei, IBM, Infosys, Juniper Networks, NEC, Nokia, Oracle, Samsung, SAP, Tata Consultancy Services, Tech Mahindra, Wipro and ZTE.

NFV/SDN prepares operators to support 5G era use cases and helps drive network efficiencies

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According to TBR’s 3Q18 NFV/SDN Telecom Market Landscape, operators will further adoption of virtualized network solutions by capitalizing on 5G use cases and strengthening security capabilities. Integrating NFV and SDN technologies will enable operators to more effectively support network technologies that will become prevalent in the 5G era, including network slicing and edge computing, which will play a pivotal role in supporting 5G use cases such as advanced Internet of Things (IoT).

Operators are under pressure to invest in NFV and SDN to reduce total capex and opex spend as well as introduce new services and stay competitive as they prepare to offer 5G services and search for new network use cases. The shift to software-defined network architectures is extremely disruptive to the vendor community.

Graph showing total NFV/SDN spend by capex and external opex for 2017 through 2022

Incumbent network vendors are under increasing pressure to move up the network value chain, from hardware to software and software-related services. They are increasingly disrupted by the adoption of white-box hardware and the utilization of ODMs as operators search for avenues to reduce network costs. Deploying white boxes provides significant cost savings for operators as well as greater flexibility by allowing carriers to deploy the most appropriate virtual network functions for their environments without being limited by the constraints of propriety hardware. Though the ODM threat has not manifested in the telecom operator customer segment to the extent it has in the webscale segment, incumbent vendors must remain on alert and attempt to mitigate this threat.

The NFV/SDN Telecom Market Landscape includes key findings, market size, customer adoption, operator positioning and strategies, geographic adoption, vendor positioning and strategies, and acquisition and alliance strategies and opportunities.

For additional information about this research or to arrange a one-on-one analyst briefing, please contact Dan Demers at +1 603.929.1166 or [email protected].

 

When the expected cost does not match the actual cost in cloud

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In the relationship between customer and business, expectations are everything

In a lot of ways, the shift to cloud computing has evened the playing field for what is expected in terms of cost, responsibilities, and the services exchanged between IT customers and providers. With cloud services, customers can experience far more of a service before buying it, see a clear unit price from the outset and understand the constraints of the service-level agreements. However, uncertainty still lingers in the exact specifications for many solutions, as the complexity of the design and variability of the actual utilization continue to make accurately predicting real-world cost for cloud solutions difficult for many customers.

While there is still typically a difference in cost between on-premises IT deployments and cloud, the unexpectedly higher cost of cloud projects impacts the market in several ways. Highly efficient and mature IT organizations can often use their own internal resources to compete with the price points delivered through public cloud options. For those customers, cost overruns make cloud deployments more expensive, rather than slightly more cost-effective, when compared with utilizing internal resources. Beyond those marginal customers, however, cost overruns universally wreak havoc on internal budgeting processes, which depend on predictable cost structures. Particularly compared with more stable internal IT funding, variability on a monthly basis puts serious stress on the finance function. Lastly, cost overruns impact other IT project decisions, serving as a deterrent to new and expanded cloud projects. In this respect, this unpredictability is bad for all cloud vendors, providing motivation for these providers collectively to further clarify the customer’s financial expectations.

 

This special report is part of a series driven by TBR’s Cloud Customer Research reports, for which TBR conducted more than 50 interviews and 200 surveys. These special reports will highlight key trends and topics impacting the cloud industry.

Comcast Business fuels digital transformation with its ‘Beyond Fast’ message, strategy and execution

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TBR perspective

The 2018 Comcast (Nasdaq: CMCSA) Business Analyst Conference explored how Comcast Business is helping its customers go “Beyond Fast.” The story arc over the day-and-a-half gathering highlighted Comcast Business’ emphasis on how it not only equips companies with connectivity but also helps them realize the business innovation and customer experience capabilities they truly desire to grow their own businesses.

Offering the best last-mile gigabit broadband coverage in the U.S. is the foundation of Comcast Business’ strategy; however, the unit and its leadership are focused not merely on promoting accelerated data speeds but also on leveraging Comcast Business’ growing network capabilities and business-enabling portfolio to underpin and advance its customers’ digital transformation initiatives. Customer testimonials were a focal point of the event as technology executives within the sporting venue and quick-service restaurant (QSR) industries shared and extolled how Comcast Business’ solutions have helped to enhance customer experiences, improve operational efficiency and reduce costs.

Though Comcast Business’ portfolio is maturing, Comcast Business continues to innovate with significant opportunities ahead, as the unit seeks to gain market share and increase revenue from its existing solutions. Unlike its largest competitors — AT&T (NYSE: T), Verizon (NYSE: VZ) and CenturyLink (NYSE: CTL) — Comcast Business is not encumbered by legacy assets, which has enabled the company to sustain double-digit year-to-year revenue growth over the past 30 consecutive quarters. Comcast Business has the potential to take up to $60 billion in market share from its main rivals as the company targets continued growth through its broadband services and adjacent solutions in areas including managed services, SD-WAN, unified communications, security and video.

Ready when you are: Nokia prepared to migrate customers to 5G

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TBR perspective

At Nokia’s (NYSE: NOK) 2018 Analyst Conference, held in Tokyo in August, the company emphasized that its end-to-end portfolio, supported by a robust R&D program, is ready and able to take its customers into the 5G era. The vendor also stressed that 5G is much more than just a radio upgrade and that realizing the full potential of 5G requires a fundamental change to the architecture of the network.

Given how much disruption is facing the telecom industry, it was refreshing to see that Nokia is being proactive in aligning with where the market is trying to go, even if that means disrupting itself. Though a part of the company will remain focused on servicing the legacy platforms of the past, the other part of the company will focus on realizing the future. Given that most operators are stuck in between both worlds as well, it is fitting that Nokia will be able to support the migrations of its customers toward the network of the future.

Event overview

Nokia hosted a select group of industry analysts in a two-part event. The first part of the event was a two-day workshop about the company’s global Fixed Networks business, and the second part of the event was a two-day Asia Pacific and Japan (APJ) regional update to deep dive on specific trends occurring in those markets.

In addition to the usual market overview, strategy and portfolio updates, Nokia hosted several customers at the event, namely Infracapital, KDDI, NTT DOCOMO, SoftBank and Marubeni, to discuss their own businesses and share how Nokia is helping them achieve their goals. A representative from Japan’s Ministry of Internal Affairs and Communications was also present to provide an overview of Japan’s telecom industry and how policy is shaping that country as it transitions into the 5G era.

Hosting the event in Japan was pertinent and timely given the country’s history as an early technology adopter and its upcoming adoption of 5G. With the 2020 Summer Olympics less than two years away, Japan will showcase for the world cutting-edge use cases of telecom networks leveraging 5G technology. The country also symbolizes the monumental changes occurring in the telecom industry, namely that domestic operators are challenged to evolve into digital service providers to better compete against digital-native competitors in their home market, such as Rakuten, as well as realize new business models from the 5G era to grow.

Legacy’s last gasp: SAIC, Engility and the importance of skills over scale

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SAIC’s planned purchase of Engility combines federal contractors with business models similarly disrupted by the march of technology

Themes of consolidation continued to pervade the U.S. federal government IT and professional services market on Monday, Sept. 10, with SAIC (NYSE: SAIC) announcing it will acquire peer Engility (NYSE: EGL). The proposed deal would combine two legacy providers of systems engineering and technical assistance (SETA) and ITO services to U.S. defense, intelligence, civilian and space agencies. The combination makes strategic sense for both parties as the commoditization of labor-based services compresses margins, compelling companies to look for scale advantages to optimize cost structures and maintain competitiveness to capitalize on the federal market’s current upswing.

The proposed deal would add to the lengthy list of market-shaping acquisitions and divestitures over the past five years. SAIC can be viewed as an instigator of the trend, as the company split from its former parent company, now Leidos (NYSE: LDOS), in 2013. Engility has also played a role in the industry’s consolidation through its acquisition of TASC in 2015. In the few years since, Leidos purchased Lockheed Martin’s (NYSE: LMT) IT services business, CSRA briefly gained independence before combining with General Dynamics IT (GDIT) earlier this year, and another new company, Perspecta (NYSE: PRSP), emerged from the combination of DXC Technology (NYSE: DXC) U.S. Public Sector assets with Vencore and KeyPoint Government Solutions.

While scale motivated all of these moves to varying degrees, SAIC’s planned purchase of Engility may represent the beginning of the end of this trend. As rapid technological change disrupts legacy business models, TBR believes the importance of scale will diminish. The deal will help SAIC in the near term, but what the company does next will determine its long-term survivability in the Business of One era.

Agile-ready everything: An India-centric special scenario

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In Technology Business Research’s (TBR) April 2018 Global Delivery Benchmark, we noted that reskilling existing resources is taking precedence over aggressive hiring, resulting in decelerating headcount growth for the 14 benchmarked vendors in 4Q17. While vendors claim that digital-related revenues contribute from 25% to over 55% of their total services sales, existing engagements continue to require nondigital skills as well. Recruitment initiatives help vendors fill skills gaps in areas such as artificial intelligence (AI), Internet of Things (IoT) and analytics. At the same time, vendors continue to build local presence by opening innovation hubs to support agile-based service delivery. The return on these investments has yet to be quantified, but TBR will continue to monitor this trend as these facilities become ubiquitous to how vendors conduct business.

Workforce, workplace, offerings, partnerships

Based on previous forays by India-centric vendors into consulting-intensive offerings, TBR remains skeptical that a trend toward agile will radically change these vendors, but the exception could be TCS. As the largest, TCS will be the biggest battleship to turn around, but the public, deliberate, and staged approach may create the kind of permanence necessary for significant organizational change. TBR has witnessed an emphasis in recent years by consultancies prioritizing recruiting, retaining and reskilling of their talent, especially in emerging tech areas and the consulting offerings tied to those technologies. By leading with two people-centric initiatives, TCS may have charted the proper course. Now, will the company follow it? And will its peers chase its wake?

Creating innovation; creating clients

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A New Thing: BearingPoint ‘At the Heart of Innovation’

“I came in with absolute clarity about what my challenge was, and now I don’t know.” After two days of large-group discussions on the fundamentals of innovation and small-group challenges putting those fundamentals to the test, one participant at a recent BearingPoint innovation event seemingly lamented having gone backward and away from solutions. However, the participant quickly followed up that “I don’t know” comment by explaining how examining her company’s and her own individual challenges revealed an incredible complexity — but the presence and guidance of an established consultancy provided reassurance that complexity could be managed and innovation started, if not guaranteed to bring success. Every consulting client should be so thoroughly uncertain about their problems while comforted knowing they’ve got help at the ready.

TBR perspective: Diversity, subtlety and the art of consulting

The entire event accentuated uncertainty, but with a sense that innovation challenges can be solved, creating an ideal hunting ground for consulting opportunities. BearingPoint strengthened advocates for innovation while consistently and subtly reminding those advocates that they would need help. By building toward a workable solution to a real-world innovation challenge, BearingPoint used a velvet hammer to reinforce that “you can change, you must change, and change requires consulting.”

TBR includes coverage of BearingPoint in our Management Consulting Benchmark, and the most recent profile, published in April, noted that “as a business and technology consulting firm [positioned] for predominantly EMEA clients, BearingPoint will continue to attract clients with holistic consult-build-run solutions across its three business pillars — Consulting, Solutions and Ventures — to enable clients’ business transformations through advanced technologies. BearingPoint’s agile offerings in its three primary business units and local market expertise will resonate well in the EMEA market and support the company’s growth over the next two years.” This innovation event reinforced TBR’s assessment of BearingPoint’s ability to see its approach and offerings resonate well with existing clients and very likely continue to lure new clients away from traditional European and global consulting competitors. BearingPoint has not built its own innovation/collaboration/experience center and the firm’s overall approach at the innovation event remained subtle throughout the two and a half days — but BearingPoint’s effort was effective and highly replicable, and the lasting impact will likely be measurable by the firm’s 2019 growth.

BFSI: An India-centric special scenario

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Two up, two down

Four of the India-centric vendors share similar assessments of IT investments, predicting they will improve behind spend from larger-enterprise banking clients, with growth in digital implementations, mobility, and modernization of legacy IT infrastructures and applications portfolios. The divergence in performance in 2Q18 likely reflects one-time or short-term changes at large clients and not a strategic shift for any single vendor. From TBR’s quarterly analysis:

  • Infosys’ (NYSE: INFY) revenue expanded 6.8% in USD year-to-year to $2.83 billion during the quarter but was flat sequentially due to softness in its largest vertical, Financial Services. With 40% of large-scale deals in 2Q18 stemming from Financial Services clients, we expect vertical performance to rebound and bolster Infosys’ overall performance. While Infosys experienced softness among a few key accounts within Financial Services, the vertical continued to generate the largest percentage of sales, at 31.8% in 2Q18, as the company benefits from its platform-centric portfolio and “as a Service” solutions portfolio. In addition to Finacle-related deals, an uptick in demand among insurance clients, similar to the deal win with John Hancock, is driving McCamish platform adoption.
  • In recent quarters, Cognizant (Nasdaq: CTSH) has noted some acceleration in initial projects to map out blockchain implementations for banking and financial services clients. In fact, Cognizant has described the banking industry as the most mature sector regarding blockchain implementation, while insurers and retail companies are somewhat behind their banking counterparts and other industries are still in trial phases. Financial Services sales rose 4.5% year-to-year in 2Q18 as Cognizant’s slowly expanding pipeline of new business with banks and financial services clients began to translate into new revenue streams.
  • Banking, Financial Services and Insurance growth slowed for Tata Consultancy Services (TCS) to 5.3% year-to-year in 2Q18, from 6.9% in 1Q18, though TCS executives noted improving IT investment trends among U.S.-based financial institutions, saying they believe the recent slowdown in IT spend has “bottomed out.” TBR believes TCS’ open-based banking API framework enabling banking, financial services and insurance (BFSI) clients to expedite digital transformations is resonating increasingly well. TCS’ massive, $2 billion digital transformation award with Transamerica (won in January) continues to spool up while growth among banking institutions in Europe and APAC remains strong.