In early March, TBR met with CGI’s Diane Gutiw and Frederic Miskawi, both VPs of Global AI Enablement, for a discussion about CGI’s evolving generative AI (GenAI) capabilities and offerings, as well as the executives’ views of the changing market around digital transformation, IT services and consulting, and AI overall. The following reflects both that discussion and TBR’s ongoing research into CGI and peers across the IT services and broader technology ecosystem.

CGI’s Approach to Generative AI and Innovation

Leveraging AI Expertise for Business Transformation

In describing the current market for IT services and technology-enabled solutions, Gutiw and Miskawi noted that clients emerged from 2023’s GenAI hype cycle feeling overwhelmed by proofs of concept (PoCs). Many emerging technology-centric engagements stalled at the PoC and pilot stages, stymied by challenges around data, change management and uncertain (or slow) ROI.

 

As a result, enterprise IT leadership, already saddled with a vested interest in maintaining relationships with current vendors (think: Amazon Web Services [Nasdaq: AMZN], Microsoft [Nasdaq: MSFT] and others), relies on current vendors and partners for guidance, even in an emerging area like GenAI. This echoes TBR’s findings in our December 2023 AI & GenAI Market Landscape.

 

Gutiw and Miskawi pointed out that in the current market, CGI (NYSE: GIB) can lean on two long-standing strengths: its culture of innovation rooted in governance and methodology, and its expertise and experience with AI, which predates the emergence of GenAI and the subsequent hype cycle. Bringing specificity to assertions about innovation, Gutiw and Miskawi described CGI’s thinking around “digital triplets.”

 

As Gutiw explained, CGI is “taking our digital twins that already exist and extending it by adding the generative AI and explainable AI as the third sibling.” In TBR’s view, this approach to harnessing technology in which clients have already invested — and in which CGI has proven expertise — and multiplying the benefits by leveraging GenAI and explainable AI should be a successful strategy for CGI to expand its footprint at existing clients and solidify its reputation as an innovative leader in the AI market.

 

Reinforcing CGI’s strength around established AI capabilities and scale, Miskawi added that CGI is seeing a “multi-model ecosystem where, depending on the nature of the industry that you’re in, the nature of even the group within the enterprise that you’re working with, you have different types of needs, different types of fine-tuning that CGI is doing, mixing specialized AI models, which are more the legacy AI models, with the generative AI models where we’re seeing LLMs [large language models] interacting with the data inside categorization models … that ecosystem is evolving in front of our eyes and accelerating.”

 

Gutiw and Miskawi explained that while CGI’s GenAI practice resides within the company’s Data practice, CGI is undertaking GenAI efforts globally. This is in contrast to the proximity model that differentiates CGI from other IT services vendors. Gutiw said CGI understood that GenAI could not be stuck in one silo or isolated by client and that the technology would bring the most value internally and to clients only through a global approach to accelerating processes and disseminating knowledge around AI.

 

Bolstering this approach, CGI is focused on more than simply GenAI and is innovating on and delivering Frontier AI, according to Gutiw and Miskawi. In TBR’s view, 2023’s relentless hype around GenAI probably makes IT services and technology buyers more likely to look beyond the exciting new trends and instead find credibility in an approach that leverages established AI expertise.
 

TBR principal analysts discuss how the GenAI disruption is similar to prior disruptions, as well as how it is different, and which technology vendors are best positioned to win and why. Watch now by clicking the image below.

CGI’s Strategic AI Investments and Global Success

The CGI GenAI leaders also touched on two aspects of the current IT services and technology ecosystem that TBR believes are critical to vendors’ success: customer zero and technology agnosticism. TBR’s research has shown that the most resonant GenAI use cases start with the vendor testing the solution itself, serving as customer zero for the services or products before bringing them to clients.

 

Gutiw described CGI’s take on this idea, noting that the company innovates, develops and tests GenAI-enabled solutions internally, like other vendors, but ensures clients understand that CGI views this investment as a way to save clients’ money: “We always talk about fail fast. We’re doing that on our dime because we would not fail fast on your dime.” Gutiw described a solution CGI developed for responding to RFPs, called BidGenAI, which pulls from the company’s own database of wins and losses, shortening the time needed to pull together a (hopefully winning) response.

 

While requiring customizations to fit a client’s specific data environment, industry needs and compliance requirements, the BidGenAI tool undoubtedly can be applied across a wide range of enterprises. While not the first or only IT services vendor using the customer-zero approach (think: Accenture [NYSE: ACN] and IBM [NYSE: IBM]), CGI was explicit about the financial benefits clients will realize when CGI foots the innovation — the fail fast — bill.

 

The second aspect, technology agnosticism, has long been a feature of the consulting and IT services market, in which vendors shy away from aligning too closely with any one technology supplier for fear of alienating clients looking for the best-fit solution, not just the tech solution that most benefits the IT services vendor’s or consultancy’s bottom line.

 

Post-pandemic, TBR has seen a pronounced shift among some leading IT services vendors and consultancies toward much closer and more publicly embraced partnerships. Exclusivity remains rare, but something akin to most favored nation status or first among equals has permeated the IT services ecosystem. In this evolving landscape, CGI’s AI leaders described the company’s approach as “technology flexible” and noted strategic partners in the AI space include IBM, Microsoft, Google (Nasdaq: GOOG), SAP (NYSE: SAP), Oracle (NYSE: ORCL) and Amazon Web Services, as well as a slew of smaller technology players.

 

In TBR’s view, CGI’s emphasis on flexibility addresses the need to work with a range of technology partners to meet clients where they are while assuring clients CGI has invested fully in the training and capacity-building necessary for a robust AI practice.

Embracing Transformation While Rooted in Solving Business Problems

Two aspects of CGI’s approach to GenAI struck TBR as significant in understanding the company’s likely path forward and potentially its position within the IT services and GenAI market.

 

First, Miskawi, speaking about GenAI as understood and deployed within CGI itself, said simply, “It is transformative.” One could understand that to be obvious after more than a year of relentless hype. Or one could hear echoes of the famous “Mad Men” line, “It is toasted,” and consider CGI is embracing how much change will be necessitated by adopting GenAI across its own enterprise. Every other IT services vendor could do the same, but it remains to be seen if they can do it with the same welcoming embrace as CGI.

 

Second, TBR noted that during the entire discussion, Gutiw and Miskawi remained focused on business outcomes — for CGI and for its clients — a mindset and approach frequently ascribed to but rarely done. At one point, Gutiw noted that “it’s really understanding how we can use [CGI’s own capabilities and partner technologies] safely and how we can help solve business problems leveraging the technology.”

 

CGI’s challenge, of course, is ensuring that leaders across the company understand how to stay focused on clients’ business problems and how to recognize when a business challenge could be addressed through a GenAI-enabled solution.

CGI and GenAI: Investments, Approaches and Designs

In addition to the wide-ranging discussion, CGI’s GenAI leaders shared specifics about the company’s GenAI practice, including:

 

• Over 10,000 professionals globally engaged on Data Analytics and Data Engineering projects with clients
• CGI’s AI Advisory Services include AI Enterprise Governance OCM, Data and AI journey design and implementation, AI Business Consulting services with AI strategy road maps, and Responsible Use of AI frameworks.
• CGI’s enterprise AI investments have focused on operational excellence; training and teaming; foundational capabilities around data, platforms and processes; and solution/use-case development.
• CGI has invested in a Responsible AI Framework and an AI Strategy Framework to guide itself and its clients through the complexities of AI governance and risk.

 

In TBR’s 1H24 CGI Federal Vendor Profile, we noted that “CGI Federal’s parent company announced in July 2023 it would invest $1 billion over the next three years to fuel AI-based growth. CGI’s forthcoming outlays will fund the expansion of its AI-based advisory capabilities — particularly around the company’s Responsible Use of AI framework, which would resonate well with federal agencies. CGI Federal is facing a shifting competitive landscape in federal digital consulting, as General Dynamics Information Technology (GDIT) (NYSE: GD) is standing up a new advisory practice that will push adoption of its AI-related digital accelerators and ManTech is leveraging its 3Q23 acquisition of Definitive Logic Corp. to launch an AI-focused Data Analytics and Artificial Intelligence Solutions Practice.”

 

In addition, TBR notes that CGI Federal won a deal with the U.S. Department of State in October 2023 to provide on-site processing functions for consular services in Australia, Fiji, Japan, New Zealand and South Korea, leveraging the CGI Atlas360 solution’s AI capabilities to help enhance the visa application process.

 

Ready, Steady, Scale

As part of the Big Four, KPMG has brand permission and a breadth of services relevant to nearly every role in any enterprise. TBR believes KPMG will accelerate the scale and completeness of its offerings in the coming year, building on a solid foundation and furthering the gaps between KPMG and other consulting-led, technology-enabled professional services providers.

 

KPMG’s four-part framework — Connected, Powered, Trusted and Elevated — resonates with clients and technology partners, provides KPMG’s professionals with clear insight into the firm’s strengths and strategy, and underpins a transformation already well underway. The coming year will challenge KPMG’s leaders to execute on the promise of that transformation during the next wave of macroeconomic pressures, talent management battles and technology revolutions.

 

KPMG’s leaders described their priorities as transforming the firm’s go-to-market approach, unlocking the power of the firm’s people, reimagining ways of working, and innovating capabilities and service enhancements. Success against these priorities, in TBR’s view, will come as KPMG shifts from building a foundation to scaling alongside the growing needs of its clients.

Welcome (or Welcome Back) to Lakehouse

Breaking from the traditional form for analyst events — presentations followed by special sessions and one-on-one meetings — KPMG divided the attending analysts into three groups, rotating each group through Ignition, KPMG’s immersive innovation lab experience; presentations and demos in an Innovation Showcase; and a tour of Lakehouse. A few highlights:

 

• In addition to walking the analysts through the typical 10-minute start of an Ignition session, recreating what KPMG’s clients experience, the firm gave the stage to a client, who shared their experiences working with KPMG. The consulting and technology solutions provided by KPMG served as useful context for the breadth of KPMG’s capabilities and the importance of using an innovation center. Most notably, the client described how their own brand depended on being a trusted partner in the communities they served and how their relationship with KPMG reinforced that trust across the full spectrum of the consultancy, the client and the client’s clients. TBR came away with a better appreciation for KPMG’s ability to extend trust and partner across its offerings and engagements.
• KPMG’s technology presentations included a wide range of solutions leveraging an array of emerging technologies such as quantum and generative AI (GenAI). Taking more than the allotted hour with TBR, the KPMG team walked through a surprising number of offerings, repeatedly coming back to two critical points: These are currently active solutions, deployed with clients and moving toward scale (i.e., not ideas undergoing testing or in beta), and KPMG boasts a breadth of technology capabilities that TBR realized was far greater than our expectations prior to the event.
• KPMG has continued to apply lessons around training and talent management to maximize the firm’s culture effects delivered by Lakehouse. As shared by KPMG’s leaders, small changes since Lakehouse opened have kept the employee experience fresh and the overall satisfaction with attending training or other kinds of sessions at Lakehouse exceptionally high. For example, KPMG learned that two and a half days of in-person sessions reduced the stress of being away from clients or engagements for a full week. By layering Monday to Wednesday and Wednesday to Friday training schedules, KPMG can bring more employees through Lakehouse without inducing training burnout or challenging employees to balance client demands with professional development time. In an informal discussion, an event guest (neither an analyst nor a KPMG employee) commented to TBR that she was amazed to see a facility that was designed for and dedicated to training.

 

KPMG’s decision to ease into an analyst event with small groups wandering around Lakehouse played to the firm’s strengths as approachable and multifaceted, with each of the three sessions quietly reinforcing the firm’s commitments to maintaining trust with clients, advancing technology-enabled solutions to business problems, and supporting the firm’s own people through professional development and firm culture.

 

While the firm is already leveraging the facility globally, one challenge for KPMG next year and beyond will be replicating Lakehouse globally. During a coffee chat shortly after the analyst event in Orlando, TBR and a senior KPMG consulting partner discussed how, whether and when the firm could open similar best-in-class training facilities in key geographies, such as Europe, the Middle East and Asia Pacific.

 

While Lakehouse requires a significant investment from KPMG’s legally separate member firms, TBR — and KPMG leaders who discussed the possibilities — has already seen Lakehouse expand from a training-only facility to a showcase for clients, reinforcing KPMG’s culture and the firm’s place in the professional services market.

Stick to the Mission and Tackle the Biggest Problems

Across the full day of presentations, KPMG repeatedly came back to highlighting its efforts to bring together the entire firm to deliver value to clients through a four-part framework: Connected, Powered, Trusted and Elevate. That value, according to KPMG’s leadership, began with trusted relationships with its clients, built when clients developed their business strategies and turned to KPMG for advice and validation.

 

Notably, according to KPMG’s leadership, pure technology companies often lack the strategy consulting permission (or people) as an enterprise begins a transformation, even if implementing new or modernizing existing technology will play a leading role. And when the technology is delivering business results, KPMG has the trusted advisor role and the skills to refresh an enterprise’s strategy.

 

Bringing this high-level view — which is not that different from what the other Big Four firms offer — to a more concrete understanding of KPMG’s value to its clients, TBR repeatedly heard two phrases during the Lakehouse event: “Let’s go after the core of the biggest problems you have” and “Stick to our mission.”

 

The first phrase demonstrates a willingness to take risks and tackle hard issues, not simply assist with marginal, if necessary, changes. In contrast, many of KPMG’s IT services competitors that are equally willing to help clients move from technology transformation pilots to enterprise-scale deployments still prioritize transactional engagements with a reduced risk mindset. (Note: TBR believes GenAI will strip 15% of the cost from current large-scale managed services contracts, a potentially existential threat to a few global systems integrators [SIs].)

 

The second phrase signals to TBR that KPMG’s leadership fully embraces the firm’s role within the larger services and technology ecosystem, to include where and when the firm needs to partner with technology vendors and even larger SIs. In a market flush with technology hype — GenAI today, metaverse in 2021, blockchain in 2019 — KPMG has resisted the temptation to chase technology discussions with technologists for technology’s sake and instead has focused on business decision makers looking for advice, a strategy and an execution plan. Stick to the mission. Go after the biggest problems.

Who Has the Money and Time to Build Their Own Bridge?

In a wide-ranging presentation and discussion around data, KPMG leaders acknowledged that every professional services firm emphasizes rigorous, standardized and methodical analysis of its clients’ data (when they can get it and its useful; see TBR’s Voice of the Customer research for how often that is the case).

 

To separate itself, KPMG leaders said the firm leans into experience, applicable industry knowledge, a dedication to methodology, and extracting value from existing assets. In TBR’s view, this last point illustrates a critical shift in enterprise buyers’ priorities that KPMG has picked up on and has begun to leverage.

 

In TBR’s view — and apparently KPMG’s as well — consulting and digital transformation clients want to move beyond the endless rounds of buying new technology solutions and reorient to extracting value from existing assets. To span that gap from existing data to modernized technology and transformed business, enterprises still need a bridge. KPMG has the blueprints and the experience in building those bridges, helping clients elevate and transform.

Solidifying Alliances Through Trust, Culture and Shared Values

Pivoting to alliances with technology partners, KPMG’s leaders spent a significant portion of the analyst event describing how the firm works with Google Cloud (Nasdaq: GOOG), IBM (NYSE: IBM), Oracle (NYSE: ORCL), Microsoft (Nasdaq: MSFT), ServiceNow (NYSE: NOW), Salesforce (NYSE: CRM), SAP (NYSE: SAP), Workday (Nasdaq: WDAY), and Verizon (NYSE: VZ). We cover SAP and Verizon in detail below, but a few elements came across as essential to how KPMG sees its role in the larger technology ecosystem:

 

• Technology partners look to KPMG for industry experience and access to buying personas at clients that technology partners simply do not have (think: CFO).
• Technology partners expect KPMG to share values, align culturally and invest in sustained relationships at multiple levels within each partner.

 

The first set of expectations technology partners have for KPMG do not significantly differ, if at all, from similar expectations of the other Big Four firms. The second set, in TBR’s view, demonstrates KPMG’s more focused and selective approach to alliances. Technology partners only expect cultural alignment and shared values if both parties make that a core element of the alliance.

 

Given the nature of other technology-plus-consultancy alliances TBR has analyzed in detail, KPMG is likely driving the emphasis around cultural fit and shared values, an effort that cannot be replicated across tens or even hundreds of alliance relationships. As will be reinforced by the following sections on SAP and Verizon, TBR sees KPMG’s alliance strategy as well suited to how the firm has built its brand around trust. As the firm continues to scale to meet clients’ needs, maintaining that emphasis on trust, culture and shared values will challenge KPMG and require careful management across the global member firms.

 

One final comment: One of the leaders from one of KPMG’s technology partners began their discussion by stating, “The candor and brutal honesty that they brought to the assessment reinforced KPMG’s reputation.” It is hard to imagine an endorsement more rooted in trust and shared values.

KPMG and SAP: Growing Exceptionally Fast, with Plenty of White Space Ahead

For more than a decade, KPMG’s audit relationship with SAP precluded the firm from going to market jointly with SAP and constricted KPMG’s potential relationship with the ERP giant. Unrestrained now, KPMG has the opportunity to step smartly into a competitive field currently overcrowded with services vendors looking to ride the wave of enterprises migrating to SAP S/4HANA. Separating KPMG from this pack, which includes its Big Four peers and global SI (GSI) giants like Accenture (NYSE: ACN) and Capgemini, requires executing on three key elements, in TBR’s view.

 

First, KPMG needs to ensure SAP’s leadership, sales teams and especially SAP S/4HANA subject matter experts understand the scale and capabilities KPMG already has and where the firm is investing — in SAP — in the near term. Convincing SAP that KPMG will bring value beyond just another consultancy or SI to SAP’s clients will help KPMG expand its small SAP footprint within existing clients.

 

Second, KPMG will need to continue investing in its SAP practice to ensure credible scale in a crowded marketplace in the long term. KPMG is not starting from zero, and with success in the SAP marketplace requiring integrated cloud, security and business capabilities, KPMG will have to ensure continued tight collaboration among all of these adjacent areas and the 5,000 SAP consultants it already has on its books.

 

Finally, with industry and domain expertise critical to successful SAP-led business transformation KPMG’s Powered Enterprise approach will be key to customer success. Aligning functional and domain expertise across SAP’s Business Technology Platform (BTP) with industry understanding will be critical to driving client value in areas like environmental, social and governance (ESG) and AI. Clients are increasingly seeking outcomes through technology investment, and the KPMG Powered approach aligns the KPMG Target Operating Model, Powered Technology and Powered Industry excellence as well as its suite of deployable assets to drive outcomes with business value.

KPMG and Verizon: Vendor Agnostic No More

If SAP is KPMG’s up-and-coming alliance, what KPMG has developed with Verizon truly distinguishes the firm from the rest of the market. In essence, KPMG and the networking giant evolved their relationship from a history of transformational engagements into what KPMG leaders describe as a collaborative “360-degree relationship” based on a foundation of trust. KPMG brings deep business intelligence and systems integration capabilities, combined with strong industry experience, going to market with Verizon and their disruptive 5G/Mobile Edge Computing technology. In addition, KPMG continues to deliver transformative work, often leveraging other key alliance partners such as ServiceNow.

 

Focusing initial joint go-to-market efforts around opportunities in healthcare, KPMG and Verizon have staked out complementary offerings and responsibilities. For example, as KPMG highlighted during the event, the firm “brings advanced data science and analytics capabilities through KPMG Lighthouse,” while Verizon provides “advanced multi-access edge computing and API management capabilities.” KPMG also emphasized that, specific to healthcare, the firm has launched an Innovation Lab supported by Verizon’s “private 5G infrastructure as backbone.”

 

Describing the array of KPMG and Verizon services, KPMG leaders noted the many offerings, such as Cloud Engineering, Platform Design & Engineering and Digital Twin, Device Simulation & Certification, that KPMG and Verizon will deliver through a joint approach, combining KPMG and Verizon professionals. In TBR’s view, this alliance stands apart from other consultancy technology alliances because of the innovation, development, go-to-market and commercialization commitments.

 

This is not a vendor-agnostic approach. This is picking a 5G, networking and edge provider and going all-in. Based on the presentations onstage and sidebar discussions, this all-in commitment goes both ways, with Verizon clearly seeing the value of partnering as closely as possible with KPMG.

Bringing the Right People Together and Always Making a Difference

During the afternoon sessions, TBR heard multiple client use cases, each one reinforcing KPMG’s core messages around trust, transformation, innovation and value. Three moments stood out as exemplifying precisely what makes KPMG the market-leading firm it is today:

 

• During a discussion on cybersecurity, KPMG’s leaders noted that the firm brings security experts, industry subject matter experts and even tax professionals to Ignition Center engagements, stressing that this approach — which includes the whole KPMG team — serves multiple purposes. First, the client can appreciate the full range of KPMG’s capabilities and offerings. Second, this approach allows the client (in this case, the chief information security officer [CISO]) to see the business from others’ perspectives. Third, KPMG creates a collective, trusted, collaborative environment, focused on both innovation and core business problems.
• In a presentation by KPMG, one of its clients and one of its technology partners (Oracle), the client said one key criterion in selecting KPMG was the firm’s credibility in always being able to deliver the right people at the right time who understand the right technology. Trusted relationships depend on dependability and consistent delivery. This client case proved KPMG’s commitment and reinforced that KPMG has been building needed scale.
• Lastly, dinner at Lakehouse included a panel discussion featuring LPGA’s Commissioner Mollie Marcoux Samaan, and the assistant U.S. team captain, golf pro Angela Stanford, both arriving directly from the 2023 Solheim Cup in Spain, where the U.S. had its best ever score on European soil. According to the LPGA guests, KPMG provided analytics-enabled insights and on-site support to help the U.S. team pick the right pairings over the course of the tournament, bringing data and additional rigor to intensely personal and often challenging decisions. As a use case, few of KPMG’s enterprise clients will need the firm’s help pairing golfers to win a tournament, but every client will likely lean on KPMG for assistance with data-driven decisions.

 

At the start of 2024, KPMG has positioned itself well to sustain its core values, bring transformation to clients and continue to scale. Now comes the execution of that strategy.

 

Note: KPMG also shared specific details about its alliances with ServiceNow, Salesforce, Workday, Microsoft and Oracle. These details will be included in TBR’s ongoing coverage of KPMG and in upcoming ecosystem reports.

 

On Jan. 9, 2024, HPE and Juniper announced they had entered a definitive agreement through which HPE intends to acquire Juniper Networks for approximately $14 billion in cash. The planned acquisition is expected to close in late 2024 or early 2025 should the agreement receive regulatory and Juniper shareholder approval. By acquiring Juniper, HPE’s networking capabilities, especially around AI-enabled networking, will be immediately bolstered. Naturally, the acquisition would also support HPE’s edge-to-cloud vision. Additionally, TBR predicts Juniper’s SaaS assets will be integrated into HPE’s GreenLake platform, which would strengthen GreenLake’s value proposition and expand the audience of enterprise customers.  

Acquiring Juniper Networks Will Bolster HPE’s Edge-to-cloud Networking Capabilities

Demand for networking solutions that securely connect, protect and analyze companies’ data will continue to rise as AI workloads proliferate across a variety of industries and organizations increasingly leverage hybrid cloud architecture. Recognizing these trends, Hewlett Packard Enterprise (HPE) has been increasing its focus on networking to meet the demands of existing infrastructure customers and further differentiate from its main infrastructure OEM competitors.  

 

Meanwhile, Juniper Networks also identified opportunities presented by trends in AI and hybrid cloud, understanding that customers were seeking simplified networking solutions with an emphasis on flexibility in consumption and deployment. As such, the company prioritized the expansion of capabilities associated with empowering cloud-managed, AI-enabled networking operations. 

HPE’s Road to Enterprise Networking Prominence Began with Aruba

With the development of mobile technologies enabling internet-based data transmission, enterprises began to realize the need for network modernization, supporting the ramping of cloud-driven digital transformation initiatives in the early 2010s. This gave rise to the wireless or mobile enterprise model, which is a near requirement in today’s business landscape.  

 

However, at this time, HPE’s networking expertise was somewhat limited to wired switching. The company knew it would have to expand its portfolio of wireless mobility solutions to remain competitive, and in March 2015, HPE announced plans to acquire Aruba Networks, a leading provider of network access solutions for the mobile enterprise.  

 

After closing the acquisition in May 2015, HPE immediately began to see a return on its investment, with the company’s networking segment revenue growing approximately 8% year-to-year in 2015, driven primarily by Aruba’s inorganic revenue contribution to the business, which centered on wireless local area network (WLAN) products.  

 

In addition to accreditive top-line impacts, the Aruba acquisition drove increasing gross profitability at the corporate level. Over the next few years, HPE leaned further into the WLAN space, leveraging its acquired Aruba assets. In 2018 HPE reorganized its reporting structure, forming its Intelligent Edge segment, which consists of two subsegments, HPE Aruba Products and HPE Aruba Services, and unified the company’s WLAN, campus and branch switching, and edge compute networking solutions. 

 

The formation of HPE’s Intelligent Edge segment promoted deeper portfolio synergies, supporting the development of new Aruba software and services offerings, including “as a Service” and consumption models for the Intelligent Edge portfolio of products, which benefited the company’s GreenLake “as a Service” business, boosting HPE’s annual recurring revenue (ARR) and the strength of the company’s Network as a Service (NaaS) capabilities. 

 

The importance of HPE’s Intelligent Edge segment as it relates to the company’s corporate performance was further underscored in recent years as demand for traditional servers and storage stagnated and began to decline due largely to market cyclicality. In the trailing 12-month (TTM) period ending 3Q22, HPE’s compute and storage revenues fell 10.2% and 6.3% year-to-year, respectively, while Intelligent Edge segment revenue soared, growing 41.6% year-to-year.  

 

To further contextualize the segment’s growth, what started out as 9.9% of HPE’s total revenues in 2018 quickly grew to represent 13.3% of the company’s revenue in 2022, and in the nine months ended 3Q22, Intelligent Edge contributed over 19% of the company’s corporate top line. On top of this, since 2020 Intelligent Edge has contributed a disproportionately high amount to total segment operating income relative to the segment’s revenue contribution. In 2020, 2021 and 2022, Intelligent Edge accounted for 13.4%, 15.9% and 18.1% of HPE’s total segment operating income, respectively, highlighting the opportunity to provide high-value products and services to customers.  

Juniper’s Cloud-managed, AI-enabled Networking Solutions and Expertise Add Another Dimension to HPE’s Intelligent Edge Portfolio

As more and more organizations embarked on cloud-driven digital transformation journeys, it became clear that consumption and deployment flexibility were key priorities among most organizations. Recognizing this, Juniper acquired Mist Systems, a leader in AI-powered, cloud-managed wireless networks, in 2019. Mist’s AI-driven WLAN platform was a strong complement to Juniper’s wired LAN, SD-WAN and security solutions, laying the groundwork for Juniper’s Mist AI platform, which has been key to the company’s growth since the closing of the acquisition. 

 

In 2020 Juniper continued its acquisition spree with the purchase of 128 Technology, a networking company known for its session-smart networking technology that enables customers to create user-experience-centric fabric for WAN connectivity that is not only simplified and secured but also efficient and agile, basing networking decisions on real-time user sessions as opposed to static network policies. By incorporating 128 Technology’s session-smart technology into Juniper’s AI-driven enterprise network portfolio, Juniper sought to accelerate the adoption and development of modern AI-driven networks aimed at optimizing the user experience from edge to cloud. 

 

Through these acquisitions, Juniper became a leader in AI-driven enterprise networking, which supported the company’s expanding top line. In the TTM periods ending 3Q20, 3Q21 and 3Q22, Juniper’s AI-Driven Enterprise operating segment revenue, which includes Mist and Technology 128 offerings, has grown 20.4%, 22.7% and 45.9%, respectively, year-to-year. For context, Juniper’s corporate revenue expanded just 5.1%, 10.6% and 9.6%, respectively, year-to-year over the same TTM periods, highlighting Juniper’s focus on AI-Driven Enterprise as well as the market’s strong appetite for these offerings. 

HPE to Solidify Its Presence as an Industry Leader in the Networking Space by Integrating Juniper’s Mist AI Platform into its Existing Portfolio

Juniper’s portfolio of solutions somewhat overlaps that of HPE; however, much of this overlap is complementary. For example, both companies have competency in WLAN, SD-WAN, and enterprise and campus switching, but Juniper’s AI-native networking technology and expertise will bolster the capabilities of HPE’s existing offerings.  

 

Uniquely, Juniper’s Mist AI platform leverages AI, machine learning and other data science techniques to simplify operations across wireless access, wired access and SD-WAN domains in a way that optimizes the user experience from the edge to the cloud. Essentially, Mist AI brings greater insight and automation to network operators, which improves the end-user experience and is a compelling reason why HPE is moving to acquire the company. Additionally, Juniper’s portfolio lends HPE net-new competencies around WAN routing as well as network firewalls. 

 

HPE has been vocal in expressing its commitment to grow its highly profitable Intelligent Edge segment revenue stream as the company recognizes the massive opportunity presented by the onset of the generative AI (GenAI) revolution. Should the acquisition close, HPE is expecting to double its networking business, integrating Juniper’s solutions and expertise, especially as it relates to the Mist AI platform, with its own rapidly expanding Intelligent Edge segment.  

 

By integrating Juniper’s Mist AI platform with its existing technologies and offerings, HPE will further differentiate from its infrastructure OEM peers as an AI-driven networking provider, building a networking portfolio rivaling that of Cisco (Nasdaq: CSCO). However, HPE’s acquisition of Juniper would arguably propel HPE’s portfolio past that of Cisco and other major networking players in terms of technological advancement specifically through an AI-driven networking lens. Juniper’s deep relationships with telcos and service providers and the company’s large router install base will also expand HPE’s addressable market.  

 

Similar to how HPE integrated Aruba’s management platform into GreenLake, should the Juniper acquisition close, TBR expects HPE will fold Juniper software and services into GreenLake, bolstering HPE’s GreenLake for Networking solution, formerly GreenLake for Aruba. This anticipated move would enhance HPE’s GreenLake value proposition compared to Dell APEX and Lenovo TruScale while fueling continued GreenLake ARR growth, supporting the company’s edge-to-cloud strategy and improving its profitability.  

 

Additionally, TBR believes that if the acquisition closes, HPE will integrate Juniper’s product offerings into HPE’s “as a Service” portfolio, further augmenting the company’s NaaS offerings. 

In late November 2023, TBR and PwC Transformation Consulting Solutions Leader Tom Puthiyamadam continued a decadelong discussion about the consulting business model, reflecting on changes wrought by the pandemic, technology ecosystem partnerships and generative AI (GenAI).  According to PwC’s assessment, technology investments have not delivered the business value or transformative effects enterprises have expected over the last decade. Implementing the latest ERP does not, in itself, deliver growth, and moving workloads to the cloud does not, unrelentingly, reduce costs. Just as commuters have not taken off in the flying cars that “The Jetsons” promised, business leaders have not seen technology provide transformational results.

Technology Is Easier to Use but Harder to Make Useful — and Still No Flying Cars

For PwC, a new year and a hot new technology, GenAI, provide an opportunity to reassess how consultancies and IT services vendors bring value to their clients, first by defining credible, meaningful business outcomes and then creating a value chain back into the technology, process and operations stacks. What does that actually mean? According to Puthiyamadam and other PwC leaders involved in the discussions with TBR, the starting point is defining business value transformation — a desired end state — and then delivering on trust, transparency and speed.

 

Taking the 10,000-foot view, PwC leaders noted that technology as a whole has been getting easier, perhaps even more so now in the GenAI age. No-code and low-code platforms, visualizations, and GenAI-enabled programs like Microsoft’s Copilot all support a trend toward making technology easier to understand and deploy.

 

Notably, in Puthiyamadam’s words, “The old hard part is still the hard part. Can you stitch it all together? Can you get people to work differently? Can you drive behavioral changes in an enterprise?” And most critically, can a consultancy “deliver on CFO-level outcomes in 12 weeks, not 12 months?”

 

Repeatedly, PwC Consulting leaders came back to a fundamental point around how clients view consultancies: How fast can they deliver measurable, meaningful outcomes? Experience, expertise, technology skills and even scale are table stakes. Speed, combined with quality and at a fair price, matters most.
 

  

NASCAR and the Factory Approach: What PwC Can Do Differently

Embracing what PwC leaders have called a “factory approach” to technology-infused professional services engagements allows PwC to reassure clients that the firm is purpose-built when it comes to people, scale, expertise and price.

 

Critically, PwC reassures clients’ IT professionals that the firm provides advisory and support services, availability, and integrated technologies but does not wholly replace those IT professionals’ roles within their organization.

 

In TBR’s view, PwC’s recognition that a standardized, scaled business model — the factory approach — combined with high-touch consulting could actually assuage fears around job disruption may prove critical in coming years as GenAI permeates IT services, generating more uncertainty and fear. Paired with the focus on measurable business outcomes, PwC’s factory approach could help separate the firm from peers.

 

During the discussions with TBR, PwC leaders acknowledged that many enterprise clients struggle with technical debt but challenged the idea that this debt constitutes the biggest obstacle to realizing digital transformation value. Instead, PwC suggested process debt — the ingrained operational tasks, flows and interdependencies — has also accumulated at enterprises, slowing efforts to gain value from the technology (digital) or the business (transformation) investments in digital transformation.

 

PwC leaders further suggested process debt at many enterprises had reached levels that demand attention, even at the cost of additional technical debt. Here, according to PwC, the firm helps clients gain maximum use from current technology investments, finding additional value while accelerating transformation to new (and better) processes with, as needed, new technologies.

 

In TBR’s view, a NASCAR pit crew analogy Puthiyamadam invoked multiple times seemed most appropriate in discussing how PwC could help clients with both their processes and technology. Changing tires fast requires not just better tools but also practice, teamwork and performing under pressure. In an increasingly competitive and budget-constrained IT services and consulting market, bringing NASCAR-like precision and speed to digital transformations will be expected of leading vendors.

Business Value Realization and the Art of Keeping Everyone Honest

Speeding and crashing provides no value on the track or to a business, bringing into play the other two elements PwC sees as critical to a new way of framing consulting: trust and transparency. PwC leaders told TBR that the firm has increasingly been bringing a private equity mindset to its clients’ value realization.

 

Rather than taking three years to fully understand the value of a technology-enabled change, PwC and its clients have been constantly examining ongoing work, determining on a monthly basis whether the expected value continues to be reflected in current progress. The transparency around business value realization — critically here actual measurable business value, not just technology milestones — builds trust and enables speed. PwC has had to reorient its ways of working, reinvigorate its technology training, and build the business model agility to take on financial risks as a way of “keeping everyone honest,” in Puthiyamadam’s assessment.

 

As he pointed out, PwC can help with “modernizing the core while improving the business, realizing value from existing technology. … The client can hit ‘pause’ if they’re not believing [PwC is] going to hit value.”

 

Further on PwC itself, PwC leaders reiterated to TBR that the firm has been training strategists on emerging technologies, an effort that began globally years ago with the Digital Fitness app and has continued to be a learning and development priority. Assessing management consulting overall, Puthiyamadam stated that consultants who are not “trilingual will be irrelevant really soon, if not already. Design, business value, and technology. Must speak all three.”

 

Critically, PwC leaders in the discussion added that the firm’s consultants focused on working within the existing technology stack at their clients, accepting the technology environment that they are in and recognizing that perfect is the enemy of progress. Combining what PwC does for itself and what it brings clients, PwC leaders further elaborated that as clients bring new technologies into their IT stack those clients need the full suite of change management, learning and professional development, and product management critical to successful technology deployments.

 

In TBR’s view, the near-term disruptions in the management consulting and IT services space will require many traditional services — ones that PwC has experience with and credibility around, in part by applying those services directly to the firm.

Does PwC Have the New Consulting Business Model? If So, TBR Is Here for It

TBR might not be quite as gloomy as some of PwC’s consulting leaders on the failures of technology to date — we may yet see flying taxis in Paris next summer — but we agree fully that most enterprise information technology has been oversold and has under-delivered in terms of overall business value. PwC’s focus on getting the most from technology that clients have already acquired and addressing process debt, those sticky business problems that prevent the full value of technology or digital transformation from taking hold, all while delivering value quickly and transparently strikes TBR as a smart strategy to address an ecosystemwide problem.

 

There is an old saying, “You can have it fast or good or cheap, but not all three.” PwC is challenging that formulation by saying you can have fast and good, and you will always know what you are paying for and what you are getting, even in a previously nebulously defined area like management consulting. And to back it up, PwC will put its own fees at risk, knowing that value will be evaluated every three months, at least, if not more frequently.

 

To TBR, this approach echoes the recent attention around financial operations, in which enterprise IT buyers ask how much value they are getting from software, platforms and cloud. At frequent intervals, PwC assesses the value it is bringing to clients with no further steps and no further action until the expected value is understood and credibly on track. Is PwC disrupting the consulting business model? In TBR’s view, there is no better time for it.

Approximately 250 attendees representing entities including telecom network vendors, communication service providers (CSPs), technology companies, regulators, academia, and experts from multiple nontelecom industries converged on the 2023 Brooklyn 6G Summit in late October. The event was hosted by Nokia and NYU Wireless and covered a wide range of topics relevant to 6G, including ICT industry trends, regulatory impacts, the metaverse, AI, vertical use cases, and cloud-native network infrastructure.

TBR Perspective on Telecom Industry Progression to 6G

The 2023 Brooklyn 6G Summit highlighted both the optimism and uncertainty the telecom industry is experiencing as it progresses from the 5G era, which is about halfway through its developmental cycle, to the 6G era, which is expected to commence in 2028, when the first 6G specification in 3rd Generation Partnership Project (3GPP) Release 21 is finalized.
 
Initial commercial 6G network deployments are expected by 2030. The sentiments of optimism and uncertainty around 6G were discussed throughout the event, including in a keynote from AT&T’s EVP of Technology Chris Sambar in which he expressed concerns regarding the ROI of 6G.
 
Sambar stated, “We’re getting a little bit worn out with the economics of the industry” to summarize the challenges AT&T and other operators are currently experiencing in light of high investment costs and limited monetization opportunities in the 5G era. Sambar also remarked, “To be completely honest and transparent, the industry has questions on what is 6G going to bring us, what are the use cases that customers want from 6G and frankly, what is it going to cost us.”
 
Sambar’s keynote, which was one of the initial sessions at the 6G Summit, set the tone for the rest of the event as speakers candidly assessed the current state of the 5G market while discussing the benefits and use cases that are expected to materialize during the 6G era. Though 6G technical specifications and expected use cases are still in the developmental stages, TBR believes operators will be more calculated and tactical in investing in 6G compared to 5G, with a deeper emphasis on ensuring a clear line of sight to ROI before significant spending occurs.
 

 

Impact and Opportunities

Lessons Learned From 5G Era Provide Blueprint to Optimize 6G Deployments

Speakers discussed missteps during the 5G era and the importance of not repeating those mistakes in deploying 6G. A key theme was that the launch of multiple variants of 5G in the U.S. — described as “50 shades of 5G” by an event participant — was ultimately a misstep that was impacted by premature marketing. This trend was exemplified by the initial launch of 5G services in the U.S. over low-band spectrum providing only marginal performance benefits compared to LTE, which in turn created a generally tepid initial impression of 5G from consumers.
 
Another notable example was the launch of 5G non-standalone (5G NSA) prior to the deployment of 5G standalone (5G SA). Though 5G NSA enabled operators to launch commercial 5G services faster, 5G NSA lacks key benefits enabled by 5G SA, including faster data speeds, enhanced security, and the ability to support network slicing and lower latency use cases. The separate launches of 5G NSA and 5G SA in turn created complexities and misunderstandings for consumers and enterprises.
 
Event participants noted these challenges experienced within the 5G era will help guide the industry as it creates more cohesive 6G strategies that will enable operators to optimize network spending, provide more tangible initial benefits to customers, and minimize premature marketing of services. Key focus areas for the industry in 6G development include optimizing spectrum allocations for 6G as well as establishing unified global technology standards for 6G to minimize fragmentation in the market. For instance, participants at the event noted it would be beneficial for the industry to determine during the earlier stages of standards development if 6G will be deployed on its own separate network core or existing 5G cores and for operators to adhere to one deployment model to avoid the complexities created by 5G NSA and 5G SA.

The Clearance of 6G Spectrum Will be Vital in Supporting Continued Growth in Data Traffic

Despite the early stages of 6G use cases and the uncertainties around monetization opportunities, operators will need to invest in 6G to remain competitive with each other and support escalating data traffic long-term as 6G is projected to support a 10x increase in usage on networks. The clearance of additional spectrum in the U.S. will be essential to support 6G and for the country to remain at the forefront of the global wireless market, as Sambar cited that the U.S. currently ranks No. 10 worldwide in licensed midband spectrum allocation. Key spectrum ranges Nokia expects 6G to be deployed on include the 7GHz-20GHz frequencies to support outdoor cell sites in urban markets, low-band spectrum in the 470MHz-694MHz range to maximize coverage, and sub-terahertz spectrum to provide peak data speeds in localized areas.
 
The National Spectrum Strategy, which was released by the Biden administration in November 2023, will help in advancing spectrum development in the U.S. The strategy identifies 2,786MHz of airwaves to study in the near term for new uses, including 5G and 6G. The strategy identifies five spectrum bands for study: 3.1GHz-3.45GHz, 5,030MHz-5,091MHz, 7,125MHz-8,400MHz, 18.1GHz-18.6GHz, and 37GHz-37.6GHz.

More Efficient Network Technologies Will be a Primary Use Case for 6G

Various potential 6G use cases were discussed at the summit, though the time frame for commercial readiness and the willingness of customers to pay for these solutions remain unknown. Many of the use cases discussed involved extended reality (XR) technologies such as AR and VR and included the metaverse and real-world simulations to provide training for users including military personnel and first responders. Use cases around autonomous vehicles, advanced robotics, drones and 8K video were also discussed.
 
TBR expects the most beneficial use cases for 6G will involve the provisioning of advanced technologies that will enable operators to more cost-efficiently support rising traffic on their networks. For instance, deeper implementation of artificial intelligence and machine learning technologies will enable operators to enhance self-optimizing network (SON) capabilities to realize cost efficiencies. 6G is also expected to result in deeper implementation of digital twins, which will help operators better anticipate potential outcomes to their networks and optimize their operations in areas including site management and field operations. Additionally, 6G is expected to be significantly more energy efficient compared to 5G, which will enable operators to improve cost efficiencies while helping to support corporate sustainability goals.
 

Conclusion

The 2023 Brooklyn 6G Summit provided an optimistic yet realistic outlook on the potential of 6G. The telecom industry is particularly concerned regarding the revenue opportunity provided by 6G given the current state of the 5G market. Despite the uncertainty of revenue-generating 6G customer use cases, investments in 6G will likely benefit operators in the long term due to the technology’s ability to support escalating traffic more cost-efficiently on their networks.