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AI, Accenture and Amazon: HITS acquisitions update 2020

Accenture’s steady appetite, Amazon’s potential new offering and Google’s uncertain moves

Accenture’s acquisition of Clarity Insights follows the company’s INTIENT purchase and rounds out a typically active acquisition year for one of the leaders in TBR’s HITS benchmark. Clarity Insights brings Accenture AI and machine learning capabilities, 350 healthcare data scientists, and healthcare industry clients. As noted in our most recent full report on Accenture’s HITS business, “Accenture targeted the AI opportunity in life sciences in mid-2019, launching its INTIENT platform for collecting, storing, monitoring and analyzing data from life sciences clients’ business environments. The platform leverages Accenture Applied Intelligence to provide AI and analytics services, improving efficiency and data management.” Beyond extending Accenture’s capabilities, the Clarity Insights acquisition reinforces Accenture’s strategy around AI and life sciences that the INTIENT purchase supported. The report adds, “TBR believes Accenture must foster industry-specific partnerships to extend the capabilities of INTIENT and drive traction for the platform in the industry.” TBR will closely track how Accenture’s partnerships evolve and how the company drives new revenue based on these acquisitions.

Echoing Accenture’s focus on AI, Amazon acquired Health Navigator, a platform designed to foster more expeditious collaboration between healthcare providers and patients, in part through natural language processing and enhanced analytics. Amazon reportedly purchased the company amid efforts to build out Amazon Care, its in-house healthcare services, which it launched in September 2019. On the surface, Amazon’s healthcare-related acquisitions and moves denote neither an immediate threat to traditional HITS vendors nor a clear signal Amazon intends to become a different kind of player in the HITS space. Analyzing Amazon only on the surface would be foolishly shortsighted. Once the company irons out the challenges within Amazon Care, including fully integrating Health Navigator, TBR expects the company will craft a new offering for Amazon clients, potentially starting first with healthcare joint venture partners JPMorgan (NYSE: JPM) and Berkshire Hathaway (NYSE: BRK.A; NYSE: BRK.B). At 1.2 million employees for those three companies combined, Amazon would have a sizable test bed for enhancing current capabilities and developing new offerings. If Amazon can demonstrate an ability to provide top-notch healthcare services for its own employees and a few select partners, every household will wonder if the first step in getting healthcare should start with, “Alexa …”     

In acquiring Fitbit, Alphabet (Google) alarmed some data privacy and industry analysts concerned that the search engine and advertising giant bought the wearables company to gain access to massive amounts of personal, and specifically healthcare-related, data. Both companies’ executives declared data protections would be unchanged and the underlying reasons for the acquisition centered on Fitbit’s expertise and intellectual property around wearable devices and health-tracking applications, platforms and user experience. In TBR’s view, acquiring Fitbit conforms with Google’s overall expansion strategy and specifically boosts the company’s potential role in the overall HITS space. Enhancing Fitbit’s platform with Google’s AI capabilities could further minimize perennial HITS challenges, such as around data privacy and population health, but only if Google can manage the delicate tasks of leveraging user data without violating privacy, crafting and enhancing algorithms that improve the user experience, and maintaining the streamlined seamless flexibility of Fitbit even as the data flows into the highly regulated healthcare ecosystem.  

Microsoft beats out Amazon after contentious competition for DOD’s JEDI award

Last Friday’s announcement of the massive U.S. federal government cloud contract led Senior Analyst John Caucis to publish a special report explaining how Microsoft won, why Amazon lost, and what it all means for the IT services vendors in the U.S. public sector space. “Regardless of why the DOD [Department of Defense] chose to announce the winner of the biggest single cloud contract to date in federal IT (and one of the biggest IT contracts in federal IT history) when it did, Microsoft is now poised to capture potentially billions in revenue as the DOD’s leading cloud vendor on JEDI [Joint Enterprise Defense Infrastructure], an award with a $10 billion ceiling and a potential 10-year life span if all options are exercised. Vendor selection for JEDI has been ongoing for over a year, plagued by multiple protests, internal investigations, and conflict-of-interest allegations by and between the initial four contestants, Amazon, IBM, Microsoft and Oracle. The acrimony kept the DOD from awarding JEDI by its original target date of April 2019, though the agency eliminated IBM and Oracle in April in the first ‘down-select’ of the vendor review process.”

Additional assessments publishing this week from our analyst teams

“Restructuring and automation efforts help Fujitsu reposition for profitable growth in its services business. However, the company may need to look outside its traditional client base to see tangible results throughout 2020.” — Kelly Lesiczka, Analyst

“From a cloud perspective, Fujitsu will align its strategy to its competitors’ strategies, which consist of encouraging customer migrations to hybrid and multicloud environments. However, TBR believes Fujitsu’s expertise in IT outsourcing will serve as a differentiator as Fujitsu looks to explore operational services within multicloud environments more heavily compared to industry peers. Fujitsu announced plans to invest ¥500 billion in its DX business over the next five years and to launch an independently operated consulting business, expected in January 2020, to meet its technology goals.” — Nicki Catchpole, Senior Analyst

“While Cognizant faced challenges within its mature industry segments in 2Q19, we expect the company improved its ability to scale digital solutions through additional acquisitions, such as Zenith Technologies, to offset pressure in 3Q19.” — Lesiczka

Tata Consultancy Services’ (TCS) Business 4.0 strategy focuses on expanding the company’s solution suite around next-generation offerings such as AI, analytics, big data, blockchain, cloud, IoT and security. Integrating this strategy across service delivery and got-to-market teams enables TCS to sustain its global brand awareness and creates opportunities to upsell existing clients and attract new logos seeking increasingly comprehensive digital transformations, which generates opportunities for longer-term and often larger-dollar outsourcing engagements.” — Kevin Collupy, Analyst

“TBR’s Global Delivery Benchmark shows that agile-based service delivery is speeding up vendors’ ability to deliver at scale, which is forcing vendors to hire more talent with specific skills to keep pace in this delivery model. As vendors continue to adjust business models to operate in an automation-enabled services environment, their inability to systematically and consistently monetize IP will further pressure profits.” — Boz Hristov, Senior Analyst

“In the latest Digital Transformation Insights report on Digital Marketing Services, TBR notes that as the most mature digital transformation process, customer experience process has compelled buyers to embark on omnichannel projects to unify insights and processes across the customer life cycle and deliver more personalized experiences to end consumers. While macroeconomic headwinds will taper revenue growth, AI-enabled user experience solutions will continue to create entry points for customer acquisitions compelling vendors to recalibrate investment strategies.” — Hristov

Leidos’ 3Q19 revenue is expected to rise between 4% and 6% year-to-year to between $2.68 billion and $2.73 billion as the company’s backlog continues to reach new highs, owing to a strong, sustained pace of net-new contract bookings across defense, civilian and particularly, healthcare areas. Leidos also successfully defended its position on a handful of large projects during 3Q19, including the $2.9 billion, 10-year NASA End-User Services & Technologies (NEST) program and the $927 million IT and logistics support contract with the Transportation Security Agency (TSA).” — Caucis

CACI’s revenue is projected to increase between 15% and 20% year-to-year to between $1.34 billion and $1.4 billion in 3Q19. A revenue result for CACI anywhere in the projected range would represent another record level for the company, reflecting the tight alignment of its differentiated solutions with high-priority spending areas in the defense and intelligence markets. CACI is beating out incumbents on large-scale program recompetes and effectively defending its incumbency on its own legacy engagements, while the strength of its fiscal performance points to a high-value solutions mix highly relevant to its core customer set. $1 billion in acquisitions made in 1Q19 are also bolstering CACI’s top-line, though concurrently generating margin pressures.” — Caucis

Booz Allen Hamilton’s (BAH) revenue is expected to increase between 9% and 11% year-to-year to between $1.76 billion and $1.79 billion in 3Q19, consistent with the company’s plan to aggressively execute on its FY2020 growth objectives during the first half of the fiscal year (calendar 2Q19 and 3Q19).  BAH is realizing balanced growth across its government-focused business lines, while growth in its Global Commercial business has been more variable. Irrespective, BAH continues to book a strong volume of IT modernization, advisory and security-focused engagements.” — Caucis

“To further reduce churn and increase revenue, T-Mobile is building a more robust customer ecosystem by launching new value-added services, expanding its IoT portfolio, and entering new markets such as video and residential broadband.” — Steve Vachon, Analyst

AT&T’s network investments in areas including 5G, NFV, SDN and IoT are providing the foundation for businesses to support digital transformation initiatives to enhance efficiency and customer experience. AT&T is preparing to support next-generation digital solutions by fostering network innovations at its six global AT&T Foundry centers as well as working with multiple leading technology providers including Dell Technologies, IBM, Microsoft, Samsung and Hewlett Packard Enterprise.” — Vachon

Microsoft outduels Amazon for JEDI

Microsoft beats out Amazon after contentious competition for DOD’s JEDI award

Late on the afternoon of Friday, Oct. 25, the Department of Defense (DOD) announced it had selected Microsoft (Nasdaq: MSFT) for its lucrative Joint Enterprise Defense Infrastructure (JEDI) cloud contract, the Pentagon’s plan to adopt a general-purpose cloud infrastructure first announced in November 2017. The notification of JEDI’s winner came at an odd time — we saw the first notification of Microsoft’s win at 6:30 p.m. EDT. Releasing news or documents late on a Friday afternoon is sometimes referred to as a “Friday news dump” by members of the media, a technique that can thwart in-depth media analysis of bad news or unfavorable developments affecting the story’s source.

Regardless of why the DOD chose to announce the winner of the biggest single cloud contract to date in federal IT (and one of the biggest IT contracts in federal IT history) when it did, Microsoft is now poised to capture potentially billions in revenue as the DOD’s leading cloud vendor on JEDI, an award with a $10 billion ceiling and a potential 10-year life span if all options are exercised. Vendor selection for JEDI has been ongoing for over a year, plagued by multiple protests, internal investigations, and conflict-of-interest allegations by and between the initial four contestants, Amazon (Nasdaq: AMZN), IBM (NYSE: IBM), Microsoft and Oracle (NYSE: ORCL). The acrimony kept the DOD from awarding JEDI by its original target date of April 2019, though the agency eliminated IBM and Oracle in April in the first “down-select” of the vendor review process.

Amazon was once the ostensible front-runner, but Microsoft’s approach to hybrid cloud may have won out in the end

Amazon won the $600 million cloud award with the CIA in 2013, beating out AT&T (NYSE: T), IBM and Microsoft, an engagement many industry observers expected would act as a springboard for Amazon to future cloud work in the federal IT sector. After JEDI was announced in late 2017, industry analysts believed Amazon, the market share leader in the cloud space, and its ongoing cloud work in the U.S. Intelligence Community (IC) would help clear the way to victory on JEDI. Amazon’s alliance with VMware (NYSE: VMW) was key to winning the CIA cloud work, as VMware was estimated to be hosting between two-thirds and three-quarters of government workloads running on the cloud at the time. Amazon had also enhanced the security of its cloud offerings to accommodate defense- and intelligence-grade data assurance needs by steadily obtaining new authorizations to host government data at increasingly higher security levels. As the vendor selection process for JEDI moved along, however, concerns arose that JEDI’s single-source structure would diminish the DOD’s flexibility in choosing cloud vendors and technologies. There were also indications during 2019 that the DOD’s cloud migration strategy was increasingly favoring a more piecemeal and unhurried transition to the cloud. The DOD’s evolving cloud preferences seemed to shift the JEDI competition in favor of Microsoft’s hybrid cloud approach that blends exiting IT infrastructures with new cloud systems while leveraging partners to a greater degree in the migration process. 

Webscale capex growth will decelerate, though dollar volume will continue to climb, as data center builds slow

According to Technology Business Research, Inc.’s (TBR) 1Q19 Webscale ICT Market Landscape, webscale ICT capex for the Super 7 will grow at an 8.1% CAGR to nearly $58 billion in 2023. Most U.S.- and China-based webscales began pulling forward significant investment in data center and network capacity in 2018, which will lead to moderating — or even declining — capex levels for some U.S.-based players beginning in 2020. China-based webscales will continue to ramp ICT capex through the forecast period, however, to catch up to Western rivals in key areas, particularly public cloud.

Webscale "Super 7" capex forecast

The entrance of Rakuten, a Japan-based e-commerce company, to the mobile industry could be a game changer and provides a glimpse into what a digital service provider will look like. Rakuten’s mobile network will blanket Japan with LTE coverage by year-end. Not only will Rakuten’s network be agile, flexible and dynamic to provide digital services, it will also enable a dramatic reduction in the cost of connectivity. Rakuten’s ultimate intention is to be more than just another mobile network operator in the highly competitive Japan market; it aims to provide a foundational connectivity platform from which to sell a host of digital services. Rakuten’s acknowledgment that it needs its own network could lead to other webscales trying to take a more active ownership and control stance toward having a connectivity platform from which they can leverage their digital businesses. Alphabet, Facebook and Amazon, among other webscales, have all experimented with how to address last-mile connectivity, not only to bridge the digital divide but also to serve as a conduit to give them more control over their destinies without relying on communication service providers (CSPs) to provide the connectivity layer.

The OEM landscape continues to see disruption due in part to the power webscales hold over their suppliers. The vast number of suppliers taking part in Rakuten’s network build demonstrates that webscales hold the power when soliciting vendors for connectivity initiatives. When engaging with webscales, which have few legacy encumbrances, incumbent OEMs are being relegated to commoditized hardware and services. Should the 5G era bring about this trend in the CSP customer segment, incumbents will see more widespread disruption. Vendors must be wary of the webscale procurement model taking hold with their traditional customers.

Cost of ‘intelligent connectivity’ must decline significantly for intelligent world to unfold

TBR perspective

Realizing the intelligent world presented by the mobile industry at Mobile World Congress Barcelona 2019 (MWC19) will require a fundamental change in how networks are architected, including a radical reduction in the cost of providing connectivity. It will also require business transformation for companies tied to the old world, namely communications service providers (CSPs) and their incumbent vendors.

It was readily apparent at the event that technology is advancing at a much faster pace than the establishment of business cases that economically justify deployment of the technology. The reality for the mobile industry is that the cost of building, owning and operating networks is too high and networks are too inflexible to support the business realities of the digital era, whereby connectivity is relegated to a commodity service and the value lies in the platforms and applications that run over the network. The industry has known this for years, but changes have been minimal, until maybe now.

The entrance of Rakuten to the mobile industry could be a game changer and provides a glimpse into what a digital service provider will look like. In what could arguably be the most important takeaway from the entire event, Rakuten’s approach to building and operating a network could signify a paradigm shift in the industry. Not only will Rakuten’s network be agile, flexible and dynamic to provide digital services, it will also enable a dramatic reduction in the cost of connectivity.

The theme of MWC19 was “intelligent connectivity” and centered on how 5G, IoT, AI and big data are coming together to enable the intelligent world. Against this backdrop, Rakuten stole the show with the evangelization of its end-to-end virtualized and cloud-native network, which is being deployed across Japan this year. Rakuten’s network provides a glimpse into what the intelligent network of the future will look like.

Don’t stop thinking about tomorrow: Amazon, RPA, AI and ethical IT in the federal sector

Notwithstanding the increased integration of artificial intelligence (AI) and process bots into government operations, the U.S. federal services sector decidedly remains a people business. At a recent Washington Technology Power Breakfast forum, industry leaders talked talent strategies and how they hope to succeed as digital transformation fundamentally changes the types of people sought for government work. A few key themes emerged as near-universal top-of-mind concerns for forum participants and audience members, such as the importance of developing a brand and messaging values that resonate with the emerging workforce; the criticality of public-private partnerships to develop talent in the greater Washington, D.C., area and beyond; and the concern and uncertainty about the human capital impact of Amazon’s (Nasdaq: AMZN) recent decision to become a much closer neighbor of Uncle Sam.

The trends and issues discussed often repeated themes TBR touches on regularly in its analysis of the IT industry, both within the federal market and across public and private sectors globally. While the perspectives shared were both validating and enlightening, there was just as much value in paying attention to what the panelists did not talk about at length. Today’s pressing HR demands leave little time for talent strategists to worry about the looming disruptive impacts of AI and robotic process automation (RPA), the fundamental changes in labor amid the rise of asset-based services, forward-thinking venture-capital-like approaches to partnerships, or the uncomfortable and growing issue of ethics conflicting with the eagerness to apply innovative IT to government missions. HR leaders and strategic decision makers at the leading services firms will need to grapple with these difficult topics today if they want to stay ahead of disruption that is just around the corner in the dynamic and rapidly changing IT industry.

 

 

Washington Technology Power Breakfast: TBR Public Sector Analyst Joey Cresta was recently invited to participate in a panel discussion on talent strategies of government contractors at a breakfast forum hosted by Washington Technology. The event provided an outlet for executives, HR experts and industry thought leaders to share how they intend to win talent in a competitive labor market while maintaining profitability and bracing for the impact of Amazon’s impending move into Crystal City.

Voice assistant volume is increasing

A survey conducted by Adobe Analytics found that 32% of U.S. consumers owned a smart speaker in September 2018, compared to 28% in December 2017. The report also projected that near half of the U.S. consumer base could own one by the end of December 2018, supported by Adobe Analytics’ finding that nearly 80% of smart speaker sales occur during the holiday season. It is just one study, and there are more conservative studies out there ― but even if the data isn’t completely on the mark, it does uncover the trend of voice-controlled devices gaining ground inside consumers’ households despite use cases and monetization still being blurry.

I own four Amazon Alexa-enabled devices myself: two Echo Dot smart speakers and two Fire TVs. Of the Echo Dots, one was given to me by a colleague to play around with, and another I bought for about one-third the list price from acquaintances who had received it as a gift from their extended family and left it unopened because they felt it was “too creepy.” In our household, the Echo Dots have been used as glorified hands-free music players in our kitchen and one of our bathrooms. The Fire TVs are used as media players first and foremost. Sometimes, we try some of the new skills Amazon sends along in update emails as a fun diversion, but usually that is a one-off activity. I am deeply invested in the Amazon ecosystem, having been a Prime member since its debut and a fan of Prime Video, but it is still challenging to find ways to use Alexa smart-home devices to enhance my other Prime benefits or drive me to Amazon’s e-commerce business.

Adobe’s research seems to align with my anecdotal experience, noting that among the most common voice activities* are asking for music (70% of respondents) and asking fun questions (53% of respondents). The only other activity above 50% is asking about the weather (64% of respondents). So yes, people are using them, but these are not skills that require much depth or complexity or that drive additional revenue for Amazon.

Therein lies the problem for voice-platform providers such as Amazon and Google (Microsoft and Apple are also players, but I don’t believe they are as developed as Amazon and Google are in the smart speaker and voice assistant space). In an ideal world, voice assistants would provide platform companies with a wealth of consumer data as users query the devices about their everyday needs. Also, voice assistants can be a new conduit to monetization through new applications or — especially in Amazon’s case — to lowering barriers to the purchase of goods. However, most complex tasks, such as ordering a ticket for the movie you’d like to see tonight, finding out when the beach is open, or buying an outfit for an upcoming wedding, are still much easier via a smartphone or laptop interface. The Adobe study found that of the 32% of respondents with a smart speaker, only 35% and 30% used voice interfaces for basic research or shopping, respectively.

Improving the use cases, or “skills,” of voice assistants will be critical for platform vendors to increase the use of these devices for complex tasks and to elevate smart speakers from smart radios and novelties to gleaming data gems. TBR expects this to be the major battleground between voice assistant and smart speaker providers moving forward as the form factor has been relatively proved. TBR believes Google has a slight advantage due to its heritage in data mining behind the façade of services as well as its Android and Chrome cross-platform tie-ins (a lot of relevant user data is already in Google, such as contacts, schedules, and often email). Amazon is no slouch either due to its investment spend, growing media empire and robust e-commerce platform, which Google lacks. Apple could be a dark horse; however, its Siri is still weaker on an artificial intelligence (AI) basis and the HomePod’s pricing makes it an unlikely easy gift.

The next frontier for all of these platform providers is in the commercial space, an area we may see Microsoft put much of its effort into while leaving the consumer space for better-suited peers. In fact, collaboration between Microsoft and Amazon on voice and smart speakers may confirm this. Using voice assistants and smart speakers to query analytics or gain business insights or employing them as a “smart secretary” in conference rooms are areas TBR sees as avenues for commercial expansion. TBR has seen slightly different approaches from Amazon and Google in the commercial space. Amazon, likely with Microsoft support, focuses on the office with Alexa for Business, while Google seems to be positioning its voice AI and smart speaker technology to serve as an interface for a business’s customers.

However, as with the consumer space, the use case must be proved, the skills must be ironed out, and existing commercial infrastructure must be modified to support voice assistants and smart speakers. And despite furious investment in these possibilities by the major platform players, TBR doesn’t expect to see Alexa widely adopted in the boardroom for at least another two to three years. For now, I believe smart speakers will continue to find their way into homes as a novelty or curiosity for tech-excited people and early adopters, contributing to slow but steady growth, or as an easy, cost-effective tech-based gift, driving additional bursts of increased unit sales during the holidays.

*Voice activity data includes devices that are not smart speakers, such as smartphones.

Increased market clarity drives 16.1% year-to-year growth in commercial IoT revenue

Technology Business Research, Inc.’s (TBR) 2Q18 Commercial IoT Benchmark recorded revenue growth of 16.1% year-to-year, to $10.3 billion, in 2Q18, among the 28 IT and operational technology (OT) vendors we benchmark. The revenue growth is largely a result of continued implementation of Internet of Thing (IoT) and growth of installed IoT solutions.

The dousing of rampant IoT hype, which only served to confuse and overwhelm customers and vendors, is helping drive the growth of installed IoT solutions. As the hype dies out, a wave of increased clarity and maturation is forming with vendors rationalizing their go-to-market strategies and messaging, leading to customers better understanding how to apply IoT and vendors learning how to assemble solutions. Packaged solutions are emerging as vendors cooperate, focusing on their strengths, and assemble components sets that solve verticalwide challenges. TBR believes these factors are driving tactical business-focused IoT projects to supersede overambitious projects stuck in proof-of-concept limbo.

However, while easier than in the past, IoT design and implementation are still a challenge. TBR does not expect a huge explosion of revenue beyond midteen growth going forward.

Total 2Q18 commercial IoT benchmarked gross profit increased 16.6% year-to-year to $5.1 billion. Reduced complexity in IoT due to increased knowledge around building and applying IoT as well as the streamlining of portfolios as a result of increased partnering is improving vendor profitability. Also, vendors are leveraging specialized tools, such as artificial intelligence (AI), to justify higher pricing.

 

TBR’s Commercial IoT Benchmark highlights current commercial IoT revenue and gross profit for vendors. TBR leverages financial models and projections across a diverse set of IT and OT components. Additionally, the benchmark outlines the major vendor drivers and trends shaping the market.

Super 7 webscale total capex spend will reach $123B in 2022

Infographic showing webscale "Super 7" capex forecast for 2017 through 2022

 

Data center builds and expansions as well as AI investment drive growth

According to Technology Business Research, Inc.’s (TBR) 3Q18 Webscale ICT Market Landscape, webscale ICT capex for the “Super 7” will grow at a 26.2% CAGR from 2017 to 2022 to more than $69 billion as these top webscales aim to future-proof business-critical infrastructure and map network capacity to data traffic growth, which is expected to increase exponentially through the forecast period.

Webscales are investing tens of billions of dollars in new data centers, either to support their core businesses or to increase the scale of their cloud services businesses. Capex spend is spiking in 2018 as many of the Super 7 build new facilities on land they acquired in 2017. Amazon’s 30.4% year-to-year ICT capex growth rate in 2018 is noticeably lower than that of its peers, which is largely due to its leading presence in the cloud services market. Challengers Microsoft, Alphabet and Alibaba will grow 2018 ICT capex 73.6%, 100.3%, and 101.6%, respectively, year-to-year in a bid to catch up to market leader Amazon Web Services.

The OEM landscape is being upended as webscales embrace ODMs and open-source technology. A growing number of ODMs aim to take share from incumbent hardware vendors such as Cisco and Dell EMC. Webscales often possess the talent necessary to design their own equipment, then outsource production to an ODM. In these instances, the software is disaggregated from the hardware and the code is written by webscale software engineers. This threat gives webscales negotiating power over incumbents. Some vendors, such as Cisco, mitigating the threat from ODMs with acquisitions, strong customer relationships and litigation.

For more information, contact Senior Analyst Michael Soper at [email protected].

VMware leans on partners IBM and AWS to go increasingly all-in on cloud

What’s new from VMworld on the cloud front?

VMworld 2018 in Las Vegas came to a close just a few short weeks ago, but the impact from the slew of cloud-related announcements from VMware and its partners continues to reverberate. After multiple changes in course over the past 10 years as VMware reacted to the shift toward cloud computing, the company has found a strategy that works. VMworld 2018 showed the company doubling down on its partnerships with leading cloud providers and addressing customers’ cloud management pain points.

To extend VMware’s relevance in the cloud management space, the company announced both an acquisition and a host of organic portfolio updates during the conference. Notably, the company announced its intent to acquire CloudHealth Technologies to further its multicloud management and operations capabilities with CloudHealth’s platform and expertise in Microsoft, Google and Amazon Web Services (AWS) clouds.

Portfolio updates were announced across the vendor’s Workspace ONE, VMware Edge, vRealize, vSAN, vSphere, VMware Cloud Foundation and vCloud Director portfolios. Additionally, partner program enhancements through the VMware Cloud Provider Program and announcements with key partners AWS and IBM in regard to partner-based cloud solutions were made as well. While the portfolio updates are notable, much of VMware’s relevance in the cloud space as of late is coming from its alliances and partnerships. It took the shutdown of VMware’s own vCloud Air service, but the vendor’s partner-led cloud strategy reinforces the value of VMware in cloud and hybrid environments.

VMware’s alliance with IBM is a decades-long, increasingly strategic partnership that now spans customers’ and cloud data centers as the two companies work together to help enterprises modernize their traditional and virtual environments into truly hybrid environments. VMware and IBM look to optimize customers’ existing IT assets with strategic cloud workloads and functions as well as the help of thousands of VMware specialists within IBM Services. Additionally, their tenured relationship turned even more strategic in 2016 as IBM helped VMware re-enter the public cloud market with IBM Cloud for VMware Solutions. At the conference, the two announced vCloud Availability for vCloud Director on IBM Cloud, a disaster recovery solution for multitenant environments that enables IBM Cloud to serve as a failover for workloads on VMware environments. After the successful migration of a few key legacy applications to VMware HCX on IBM Cloud for American Airlines in recent months, IBM and VMware also unveiled JumpStart enhancements, announced at VMworld, to help customers migrate their existing on-premises VMware workloads to IBM Cloud.

VMware’s partnership with AWS is very well known, in large part due to the number of customers using technologies from each of the two vendors and because of both companies’ former reluctance to address new delivery methods. VMware was very much on-premises focused while AWS was solely public-cloud focused, making the partnership and VMware Cloud on AWS a notable shift for both vendors. At VMworld 2018, the two companies announced the expansion of their relationship, including the global extension of VMware Cloud on AWS into Australia, a Cloud Provider Hub that allows partners to offer VMware Cloud on AWS as a managed service, AWS Relational Database Service on VMware, NSX integrations, price reductions, Log Intelligence for VMware Cloud on AWS, Instant Data Center Evacuation and more.

Let’s dig a little deeper into these two partnerships and solution sets

While much of the focus as of late in terms of VMware Cloud partner developments has been on AWS, VMware’s partnership with IBM has existed for a longer period of time and encompasses more than IBM Cloud for VMware Solutions, thus the bulk of the integrations are well established and the two announce new features, integrations and functionality as their portfolios evolve. To note, back in August 2016, VMware announced that IBM would provide the first service offering for VMware Cloud Foundation and also train more than 4,000 services professionals with expertise around VMware solutions.

In line with market trends, VMware is partnering with as many leading vendors in their respective technology markets as possible, ultimately to meet and exceed the demands from its customers for multivendor environments, integrations and interoperability across environments. Each of the aforementioned partnerships fits its own customer set, albeit with slight overlap, and addresses specific customer pain points. VMware and AWS are poised to capitalize on midmarket and small enterprise opportunities, with an emphasis on cloud specifically, while VMware and IBM are poised to capitalize on opportunities in the midsize and large enterprise sectors, with a hybrid IT emphasis, optimizing customers’ blends of cloud and legacy IT assets.

While VMware’s partnerships with IBM and AWS may seem like six of one and half a dozen of the other, the differences themselves when looking at hybrid IT as a whole rather than cloud only, where IBM and VMware naturally have a longer, more strategic relationship that encompasses virtual and cloud environments spanning customer and vendor data centers.

To make this a little easier to digest, we’ve developed a table that includes some key solutions recently announced by VMware and AWS and compares them to existing and new IBM and VMware solutions in regard to how customer pain points can be addressed. While the technical functions available from both VMware partners are aligned, many of the target customers will be different.

Information on IBM Cloud for VMware solutions and VMware Cloud on AWS for several customer pain points

It is our perception that the VMware and AWS partnership better suits organizations that embrace public cloud, whether for budgetary reasons, risk sharing or lack of IT staff. Alternatively, IBM is the partner of choice for IBM and VMware large enterprise customers. Joint IBM and VMware solutions are tailor-made for organizations with large on-premises data centers that remain fully functional and thus are not yet ready to be shut down in favor of public cloud only, serving instead as a blend between the old and new.

Sponsored by IBM