COVID-19’s societal pressures kick up a Digital Dust Bowl

Evolving business activity and social interaction have been on a collision course with dated public policy best practices for decades

Three years ago, TBR put out a report called The impending Digital Dust Bowl: Mitigation, survival and interdependence, in which we evaluated the social, economic and political arenas and examined how the pivot to digital business and social interactions was disrupting society. In the interim, we have discussed what seems to be transpiring as a societal rebirth, arguing that while there would be pain involved as a normal component of bringing about new life, the end result would be a better world because of what the technology industry can enable the world to do. Big changes are on the cusp of commercialization as blockchain ensures data accuracy, machine learning addresses new queries, and quantum provides the compute horsepower needed to tackle the world’s most intractable problems.

Three years ago, in discussing AI’s impact, the historical comparison we settled on was the Great Depression, fueled by manufacturing automation, which appeared to be a reasonable analogy. Henry Ford launched his first assembly line in 1913; Watson beat a human on “Jeopardy!” in 2011. These were the comparative touchstones.

At this juncture, we may view that historical comparison as a best-case example and may find mechanization in the early to mid-1800s as a more appropriate parallel. The mid-1800s radically transformed agrarian economies, and that disruptive impact spurred the revolutions of 1848 in Europe and was a contributing economic factor to the U.S. Civil War.

Few conversations today are held without discussing the implications of COVID-19 on our daily lives. Technologists and other pundits talk of the accelerating trends the pandemic triggers. Whether social, business or political trends as we know them, COVID-19 has certainly quickened the rate at which those trends are being felt by virtually everyone around the globe. It is a unique time and highlights the need for career technologists to step forward and participate heavily in the dialogues occurring throughout society on how to remediate the dysfunctional aspects of modern life on which COVID-19 has shined a very bright light.

Mipsology’s Zebra looks like a winner

Mipsology is a 5-year-old company, based in France and California, with a differentiated product that solves a real problem for some customers. The company’s product, Zebra, is a deep learning compute engine for neural network inference. While these engines are not uncommon, Zebra unlocks a potentially important platform for inference using the field programmable gate array (FPGA). There are two parts to this story, which is one of the challenges Mipsology faces.

Inference — the phase where deep learning goes to work

Deep learning has two phases: training and inference. In training, the engine learns to do the task for which it is designed. In inference, the operational half of deep learning, the engine performs the task, such as identifying a picture or detecting a computer threat or fraudulent transaction. The training phase can be expensive, but once the engine is trained it performs the inference operation many times, so optimizing inference is critical for containing costs in using deep learning. Inference can be performed in the cloud, in data centers or at the edge. The edge, however, is where there is the greatest growth because the edge is where data is gathered, and the sooner that data can be analyzed and acted upon, the lower the cost in data transmission and storage.

Specialized AI chips are hot, but the mature FPGA is a player too

For both training and inference, specialized processors are emerging that reduce the cost of using deep learning. The most popular deep learning processor is the graphics processing unit (GPU), principally Nvidia’s GPUs. GPUs rose to prominence because Nvidia, seeing the computational potential of its video cards, created a software platform, CUDA, that made it easy for developers and data scientists to use the company’s GPUs in deep learning applications. The GPU is better suited to training than inference, but Nvidia has been enhancing its GPUs’ inference capabilities. Other specialized processors for deep learning inference include Google’s Tensor Processing Unit (TPU) and FPGAs.

FPGAs have been around since the 1980s. They are chips that can be programmed so the desired tasks are implemented in electronic logic, allowing very efficient repetitive execution, which is ideal for some deep learning inference tasks. Mipsology lists several advantages of FPGAs over GPUs for inference, including a lower cost of implementation, a lower cost of ownership and greater durability. While FPGAs have been used in some implementations, including on Microsoft’s Azure platform, these chips have not received the attention that GPUs have.    

Zebra is where inference meets FPGAs

Mipsology’s Zebra compute engine makes it easy for deep learning developers to use FPGAs for inference. Zebra is a software package that provides the interface between the deep learning application and the FPGA, so that specialized FPGA developers do not to have to be brought in to exploit the benefits of the processors. Zebra is analogous to nVidia’s CUDA software; it removes a barrier to implementation.

Bringing together the puzzle pieces

FPGAs are mature and powerful potential solutions that lower the cost of inference, a key to expanding the role of deep learning. However, the programming of FPGAs is often a barrier to their adoption. Zebra is an enabling technology that lowers that barrier. In the world of specialized solutions based on broadly applicable technologies such as deep learning, there are opportunities for products and services to make it easier to assemble the pieces and lower the cost of development. Zebra is exploiting one of these opportunities.

Buoyed by Red Hat profits, IBM’s CEO sees ‘progress’ in shift to cloud and AI

“‘A year into becoming part of IBM, Red Hat has not disappointed and is a major component of the new and diversified life that has been breathed into the IBM portfolio,’ said  said Nicki Catchpole, senior analyst at TBR Cloud and Software.” — WRAL TechWire

Logicalis’ local scale and investments in services transformation offerings position it well to withstand the COVID-19 headwinds in LATAM

Following one of the last in-person analyst events held in in Sao Paolo, Brazil, just before COVID-19 took over our personal and business lives, TBR had a chance to reconnect virtually with Logicalis LATAM CEO Rodrigo Parreira and Logicalis LATAM Director of Strategy Eduardo Harada. Expanding on our discussion at the analyst event in February, Parreira confirmed many of the regional market trends are still in place, although some initiatives have been paused, with COVID-19 forcing buyers to reorient their budget priorities toward run-the-business awards.

A spike in demand around supporting remote work, implementation and management of collaboration tools, and security plays to the strengths of Logicalis’ value proposition, particularly within the infrastructure services domain. Parreira is even more optimistic about a resurgence of opportunities in 2021 as regional buyers begin to solicit services in areas such as automation and AI, creating increased opportunities around IoT and connected devices. As Parreira positioned it, “The crisis accelerated automation.” He also highlighted that more than 50% of Logicalis new bookings have been geared toward services, accelerating the company’s efforts to become an IT services leader.

TBR is not surprised to hear there is an uptick in demand for automation considering the technology’s potential to lower the total cost of ownership, which is of particular importance to highly price-sensitive buyers in the LATAM market. We believe vendors that have experience adopting and scaling automation tools to drive down their own costs, improve remote delivery and retain savings will see immediate rewards. However, Logicalis may face an uphill battle educating regional customers on the value of AI beyond cost optimization, as many continue to see AI as a threat to their jobs. The company, however, is well positioned to capitalize on the trust it has built over the past six decades of operating in the region.

TBR previously wrote, “While the company’s business consulting unit spearheads outcome-based pricing initiatives, we believe Logicalis could further accelerate its value proposition transformation if it approaches every opportunity with scale in mind from the beginning. To execute on such a strategy, the company would need to further build out its consulting and application services capabilities, with acquisitions in these domains highly likely.” COVID-19 will likely fuel market consolidation, including in the LATAM market. Both Parreira and Harada believe consolidation in the LATAM market will be even greater as the challenging macroeconomic conditions will drive many smaller vendors out of business. Acquiring for capabilities, not for scale, would deepen Logicalis’ value proposition in both existing and emerging domains, including AI and SaaS. Larger global peers, though, including the Big Four and multinational corporations, are also scouting for price-competitive targets, possibly pushing Logicalis to take more aggressive action sooner.

Egypt and IT and the center of the world

What makes Egypt attractive

Egypt’s growing IT services and technology sector has been built on important natural advantages and few forward-looking investments in recent years. The country’s proximity to Europe, considerably large and educated talent pool, and relatively low costs compared to nearshore locations such as Poland, Romania and Bulgaria make Egypt a natural hub for IT services, just as it has been a hub for commerce for millenniums. In addition, multinational companies have long-established histories of doing business in Egypt, building up the trust and goodwill needed for large investments and sustained operations. IBM has had a presence in the country for 66 years, and in addition to its six regional delivery centers in Cairo, in 2019 it opened two new centers — an Innovation and Industry Client Center and a Marketing Services Center — to accelerate digital transformation for public and private sector clients through next-generation solutions such as AI, cybersecurity, digital technology, blockchain and hybrid cloud. Sharing a time zone with much of Europe provides Egypt with a natural advantage, particularly relative to India and the Philippines, two outsourcing megacenters. 

Atop these advantages and potentially separating Egypt from other growing outsourcing locations has been active investment by the Egyptian government in developing a business ecosystem, creating jobs and exports, fostering entrepreneurship, encouraging foreign direct investment, and assisting Egyptians in innovation efforts. While this mandate may sound ambitious, Egypt, a country known for large projects, has kept a tight focus on successful development of IT services and technology exports.

Sustained investment in talent

Egypt’s critical advantage could be its talent base, particularly due to the group’s size, technology skills and fluency in multiple languages. According to the Central Agency for Public Mobilization and Statistics in Egypt, approximately 500,000 students graduate from universities in Egypt every year, of which around 90,000 speak English. To assist graduates in finding employment with multinational companies — and to help those companies develop their employees’ skills — the Egyptian government, through ITIDA, partners with companies to provide mentoring, tools and competitions for startups as well as sponsor various hackathons and other initiatives.

The Egyptian IT sector exported around $4.2 billion in services in 2019, according to the Egyptian Information Technology Industry Development Agency (ITIDA). The country’s IT sector has become a substantial part of the overall economy growth, contributing both jobs and export revenues, primarily from BPO, software, application development and maintenance, and technical support services. TBR sees advantages for Egypt in the post-coronavirus world.

IBM Think Digital 2020: Making the case for better together

IBM places hybrid cloud at the center of its digital transformation strategy from both a product and a services perspective

At both the IBM and Red Hat sessions, there was no shortage of content that placed hybrid cloud at the center of digital transformation. Through various keynotes and sessions, IBM’s architectural approach, which places Red Hat as the foundational layer for future innovations, came to the forefront. A key example is the IBM Cloud Paks, which are to IBM Services what Red Hat products are to open-source projects. Cloud Paks provide functionality as a service, making it easy for customers to deploy the middleware functionalities that support solutions and applications. The combination of the advantages of cloud computing with IBM’s trusted ability to manage, update and certify solutions for regulatory compliance enable significant improvements in ability and flexibility. It is an emulation of the Red Hat playbook, albeit with far-reaching implications to the Global Technology Services business.

At the event IBM unveiled the IBM Cloud Pak for Data 3.0, which leverages OpenShift 4.3 to deliver new analytics and data management services. Further, IBM’s Partner Packages is a new incentive program for partners that successfully sell the solutions, underscoring IBM’s desire to facilitate customers’ cloud migrations by combining the expertise of services partners with the flexibility of the Cloud Paks.

However, the hybrid cloud model is anything but confined, and Whitehurst noted that edge devices must essentially operate as little clouds and require the same orchestration and interoperability standards. Edge implications address both the telco and enterprise spaces. Network virtualizations seemingly merge IT and cellular technology (CT) through virtualizing those functions to run on the same common platforms supported by OpenShift. Vodafone Business made the case that it leap-frogged competition in India by building a modern architecture that enabled the company to run IT and CT from the same cloud, delivering better consumer service for voice and extending IBM into the adjacent market of hosting enterprise workloads from the same instance.

IBM Think Digital 2020 made the case that IBM and Red Hat are better together — better together in mixed infrastructure, better together in cloud and AI, and better together in IBM’s and Red Hat’s ways of working. Lastly, IBM and Red Hat are better together with Arvind Krishna as IBM’s CEO and Jim Whitehurst as IBM’s president, as the former can assure customers of the IBM offering road map built on Red Hat’s engine while the latter can instill the operational best practices for managing people, processes and financial metrics for a technology world built increasingly on open platforms and recurring revenue subscription models.

BearingPoint’s bold triple bet on cars

Can the Europe-centric consultancy lead the race to remake the automotive industry?

In recent years, as nearly every IT services vendor and consultancy has attached itself to an automotive sector client and touted their industry expertise, TBR has followed the routes those vendors have taken and which aspects of the car industry they have focused on. In broad strokes, consultancies and IT services vendors help their automotive clients in one or more of three areas: 1) AI and autonomous vehicles; 2) customization, customer mobility and brand; and/or 3) Manufacturing 4.0. For example, last fall, TBR spoke at length with Accenture about the company’s new efforts in Stuttgart, Germany, which mostly fell into the second category. Cutting across all three areas, trends in car ownership, transportation, ride sharing, car sharing, and privacy and data sharing have sustained opportunities for consulting, with anticipated large-scale implementations and managed services to follow.

In a recent discussion with BearingPoint, TBR learned the automotive sector would be a priority over the next few years, as the firm has recognized changes that affect the industry, such as climate change, air pollution, buyer needs and behaviors, mobility services, parking “as a Service,” and car rental “as a Service,” to name a few, were forcing changes in the business models for every supplier, maker, advertiser and buyer involved. With established relationships with all the major car manufacturers in Europe, as well as a legacy working with manufacturers across the continent, BearingPoint will do what almost no other consultancy or IT services vendor has done: organically build an automotive practice that tackles all three areas — AI and autonomous vehicles, customer experience and brand, and Manufacturing 4.0 — and place that business group among the firm’s highest priorities.

TBR will watch BearingPoint’s progress closely, in part as a component of our ongoing management consulting research, which includes a detailed profile on BearingPoint. Secondly, we want to see if a consultancy or IT services firm can balance serving the three elements of the automotive sector we have outlined. Many vendors have developed strengths in one or two areas, but no one vendor has applied consistent, sustained and leadership-supported investments in all three. It is a tough road. Let’s see if BearingPoint can navigate it.  

Quick Quantum Quips: Economic advantage nears as software development advances

Welcome to TBR’s monthly newsletter on the quantum computing market: Quick Quantum Quips (Q3). Market activity remains strong despite the impact of COVID-19 on daily lives, as researchers spider out through many different elements of the quantum ecosystem in pursuit of scientific discoveries that will bring the quantum era into clearer view and closer proximity.

For more details, reach out to Stephanie Long or Geoff Woollacott to set up a time to chat.

April 2020 developments

Announcements continue in different scientific discoveries to enhance quantum systems and bring them closer to economic advantage. More interesting are the flurry of announcements aimed at developing software for live applications, especially for financial services use cases.  

  1. Singapore Management University (SMU) and Tradeteq announced they are working on a project to develop a quantum-based credit scoring method for companies. The work will be underpinned by a grant from the Monetary Authority of Singapore’s Financial Sector Technology & Innovation (FSTI) – Artificial Intelligence and Data Analytics (AIDA) Grant Scheme. To TBR, this is a clear example of the kind of application that will become a proof point of quantum’s economic advantage. The goal of the application will be quicker credit assessments based on greater volumes and varieties of data. This speed to insight can underpin fintech instruments based on AI credit checks.
  2. QC Ware’s France subsidiary announced it had been selected as one of 32 BPIFrance Concours d’Innovation i-Nov award winners. QC Ware’s award was in the deep tech category for its work on quantum machine learning. Like SMU and Tradeteq, QC Ware’s initial focus has been computational finance applications in concert with Goldman Sachs. Like many early quantum leaders, the efforts have been to create software tools for classical data scientists as the initial “bridge” between the classical and quantum computing worlds. 
  3. The IBM Quantum Challenge, timed to coincide with IBM (Virtual) Think in May, serves multiple purposes. First, it provides a reference point to how far IBM efforts have grown since quantum systems were made available in the cloud — now at 16 systems accessed by 225,000 registered users performing 500 million circuit calculations daily. Second, it seeks to foster broader market education on the technology as well as on the tool sets IBM has available for those seeking to familiarize themselves with the technology and its potential commercial use cases.  
  4. Terra Quantum, based in Switzerland, announced it has raised €10 million to advance the European quantum tech ecosystem. This announcement has geopolitical implications as different regions see the strategic implications of quantum technology and seek to establish their in-region competencies. The startup intends to use its funding to build infrastructure and software solutions leveraging quantum technologies. Initially, the efforts will revolve around developing hybrid quantum algorithms ahead of the development of commercial-grade quantum computing systems.
  5. University of New South Wales and Delft University of Technology announced independent efforts using silicon spin, or “hot,” qubit devices. These devices operate at 1 kelvin, which is 15 times hotter than current technologies can tolerate. Reduced cooling costs and the ability to locate traditional computing instances near the quantum systems are two of the proposed benefits of this new technological approach.

If you would like more detailed information around the quantum computing market, please inquire about TBR’s Quantum Computing Market Landscape, a semiannual deep dive into the quantum computing market. Our latest version published in December. The next iteration will be placing attention on the Quantum-related professional services being deployed to increase business awareness and technical skills that will be in short supply once quantum’s economic advantage becomes reality. Vendors interested in being considered for inclusion in the report should reach out to Geoff or Stephanie directly to arrange a briefing.

And, lastly, on behalf of the entire TBR team, we hope you stay healthy and safe in these unique times.

Fujitsu continues on path of transformation despite macroeconomic challenges

2020 will be a critical year for Fujitsu as the firm executes on its plan to become a digital transformation (DT) company, emphasizing key areas of emerging technologies and superior client experience. The company’s pace of portfolio investments and expansion outside Japan will support Fujitsu’s goal of driving top-line revenue growth and transitioning to a DT provider. Additionally, Fujitsu’s ability to retain its client base despite COVID-19 challenges will showcase whether the company can quickly adapt to dynamic economic conditions and address client needs; if the firm is unable to evolve its portfolio in a timely manner while protecting its existing market, Fujitsu could face greater challenges in creating new avenues of growth around emerging areas.

Fujitsu focuses on growth areas to drive its top-line revenue

AI is a top-of-mind concern for clients when considering digital transformation (DT) strategies as they look to automate certain processes as well as adopt other emerging technology solutions such as analytics, which enhance and increase efficiencies of human tasks. IT services vendors develop their portfolios around AI to help maintain client engagement as well as to capture demand around AI and analytics. Cloud is also an area vendors have sought to build services around to support migration, integration and management services as clients seek to leverage more responsive and insightful operations.

The cloud market has been growing more rapidly than the IT services space — the cloud professional services market grew 16.3% year-to-year, according to TBR’s 4Q19 Cloud Professional Services Benchmark, versus IT services growth of 2.2% year-to-year, according to TBR’s 4Q19 IT Services Vendor Benchmark — as clients shift to remote work environments that require greater capacity and workload support to ensure stable operations and client delivery and prepare for the post-pandemic era.

Changing client initiatives coupled with increased demand for AI guided Fujitsu’s September decision to transition from a traditional IT vendor to a DT company that will infuse digital throughout operations and engagements as well as work more closely with partners and clients using its network of transformation centers to improve delivery and execution. Fujitsu identified AI, IoT and data utilization as key areas that will enhance and uphold its transformation engagements and has invested in filling gaps around AI and data tools in 2020 to deliver on its clients’ DT initiatives. For example, in collaboration with Inria, a France-based research institute that focuses on emerging technologies, Fujitsu developed a technology that identifies patterns and outliers within IoT environments through devices and sensors that use AI. Capabilities of the technology include sorting methods and AI deployment models that guide business decisions and drive operational efficiencies, improving clients’ data analytics.

EY and technology: Embedding AI and moving beyond trust

Taking AI further

EY’s “six habits” study provides detailed information and assessments of digital transformation leaders’ best practices as well as “actions for the boardroom,” such as “create a culture of continuous learning” and “embed innovation with corporate governance.” In previewing the study, TBR noted that the recommendations for boards to consider when accelerating AI — “assess the current state,” “integrate AI into core” and “measure AI benefits” — perfectly mirror EY’s own consulting offerings around AI. In discussing AI further, Higgins and Little explained that the firm has been applying AI when making its own financial forecasting and HR management decisions, providing additional insights into how different solutions could be rolled out to clients. Little made explicit that the firm would “build AI into every solution we have,” laying down a clear marker of the firm’s bet on emerging technologies. The firm has been trying to move away from the historical consulting and systems integration approach of putting many people on projects and would instead be adopting more agile sprint methodologies, automation and AI. A concerted effort to embed AI both internally and in every solution built for clients echoes TBR’s November 2019 Digital Transformation Insights Report: Emerging Technology, which noted that, “to capitalize on the cost savings generated by AI, vendors must shift their value proposition toward navigating clients’ technical and business change management obstacles to implement solutions, a strategy requiring continued investment in consulting expertise.”

Building better ecosystems

In discussing changes to the partnering ecosystem for all consultancies and IT services vendors, TBR has emphasized the need for re-evaluation and constant management of alliances, particularly as the technology vendors themselves change their own partnering models and go-to-market approaches. EY has stepped ahead of this change, recognizing the firm needed to evolve its traditional partner program into strategic ecosystem management.

In February EY released a new study on the “six habits of digital transformation leaders,” based on a survey of global CEOs and board members. TBR spoke with Jim Little, EY’s global Microsoft Alliance lead and EY Americas Technology Strategy lead, and Dan Higgins, EY’s global Technology Consulting leader, to gain additional insights and comments on the study, as well as to understand how the firm has shifted its internal operations and strategy around technology. TBR has attended multiple EY events in the last few years, including those geared specifically toward highlighting the firm’s technology practice. Based on those events and the March 2020 discussions with Little and Higgins, TBR believes EY has substantially changed its approach to technology consulting, from enabled to embedded and scalable, which will increasingly expand the firm’s opportunities with global clients, potentially at the expense of traditionally more technology-centric competitors, such as Accenture (NYSE: ACN) and Deloitte. Little and Higgins explained that EY fully intended to embrace a new strategy around technology, with solutions designed for reach and scale, a brand seeking to move beyond trust, and an ecosystem managed to “create real outcomes” for clients.