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Deep dive: Management consulting and analytics services leading trends in 2021

Join Practice Manager and Principal Analyst Patrick Heffernan, Principal Analyst Boz Hristov, Senior Analyst Elitsa Bakalova and Senior Analyst Kelly Lesiczka Thursday, Feb. 24, 2022, at 1 p.m. EST/10 a.m. PST for an in-depth analysis of leading trends in the IT services industry, such as vendor performance across regions, service lines and select verticals and the evolving value proposition as pent-up demand for run-the-business awards continues. The team will also do a deep dive into management consulting and analytics services segments.

Mark your calendars for Thursday, Feb. 24, at 1 p.m. EST,
and REGISTER to reserve your space.

Related content:

  1. Top 3 Predictions for IT Services
  2. Top 3 Predictions for Management Consulting

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PwC’s Saratoga, diversity and inclusion challenges amid the shifting landscape of HR management

Beer carts do not lead to promotions  

Prior to the pandemic, companies across all industries marketed their diversity and inclusion scores, rankings and awards, demonstrating to clients, investors and potential recruits their efforts in this area and good corporate citizenship. Combine fewer marketing opportunities with increased scrutiny of what exactly well-run diversity and inclusion programs look like, and the human resources space has become ripe for the same kinds of disruption and digital transformation running through every aspect of large enterprises. In this environment, PwC noted three critical aspects of the current HR landscape.

First, data-focused companies adopt enterprise-changing diversity and inclusion initiatives more rapidly and successfully than companies that continue to focus on softer, less quantifiable actions, such as Friday afternoon beer carts and magazine awards for diversity.

Second, the challenges, risks and opportunities around diversity and inclusion have now reached the senior-most levels at most companies, with issues elevated even beyond the chief human resources officer (as noted in this story, which aired Aug. 17, 2020, on the WBUR radio station in Boston), in addition to being passed to line-of-business leaders and finance and risk officers, all of whom recognize that diversity and inclusion impacts all aspects of the enterprise, including the bottom line.

Third, promotion rates, turnover, performance and hiring remain the biggest and most significant gap for enterprises attempting to assess their performance around diversity and inclusion. Jeffords spoke at length on the challenges of moving minds to accept that awards and external recognition meaningfully address challenges uncovered by examining promotion rates. Most leaders, according to PwC, do not know the data on their own promotion rates nor the benchmarks for top-performing peers. For PwC, the time is ripe for tackling all three of these critical aspects.   

An established tool, Saratoga complements HR consulting

As a well-established product, the Saratoga performs a foundational, yet essential, service for PwC’s clients. Starting with data ingestion and leading to industry comparisons and trends, PwC helps clients understand which internal human resource management levers they can pull to make changes across their organizations. PwC provides fundamental consulting work, with benchmarks and recommendations, backed by massive amounts of client data as well as data PwC has collected from peers over many years.

Following up on our assessment of the newly launched PwC Products, TBR met virtually with two PwC partners to discuss the firm’s Saratoga offering, a long-held human resources management tool that has found renewed importance for enhancing diversity and inclusion efforts within PwC’s clients. Two partners from PwC’s Organization and Workforce Transformation practice — Pam Jeffords, Diversity and Inclusion, and Scott Pollak, People Analytics — along with Michelle Gorman, a marketing director, briefed TBR on trends within HR, especially around diversity and inclusion, and the specifics of the Saratoga product before pivoting to a discussion on the future of diversity efforts across PwC and its clients. This special report reflects the discussion, as well as previous TBR analysis of PwC and the management consulting space.   

Atos gains AI consulting expertise through the Miner & Kasch acquisition to enable digital transformations

Miner & Kasch’s deep AI expertise in North America helps Atos extend global reach and scale

According to Atos SVP of Big Data & Security Jerome Sandrini, Miner & Kasch’s appeal included raw talent — “pure data scientists, real PhDs, not citizen data scientists” — and reusable components, particularly assets that will work with Atos’ Edge servers. Listening to Miner & Kasch co-founder Niels Kasch walk through several use cases, TBR understood both of Sandrini’s points, as the technical expertise was matched with examples of applying distinct approaches and solutions across multiple industries. Sandrini also noted Atos’ commitment to ensuring Miner & Kasch is integrated fully into the larger Atos but not diluted, retaining its agility and culture. Miner & Kasch resources were merged with resources gained from the zData acquisition in 2017. The Miner & Kasch acquisition accelerates Atos’ Data Science as a Service offering and improves the company’s ability to deploy edge and next-generation data science platforms for industry solutions.

Since the beginning of 2019, Atos has been following a bolt-on acquisitions approach to gain capabilities and intellectual property and support its expansion in areas with growth potential. In 2019 Atos made two purchases with 100 employees each, IDnomic in identity and access management and X-perion Consulting in energy and utilities consulting. In 2020 Atos announced six acquisitions, three in the U.S. and three in France, ranging from 50 to 800 employees, targeting new areas of expansion for Atos and offering small-scale capabilities with IP: Maven Wave (U.S.) in Google Cloud; Miner & Kasch (U.S.) in AI and data science; Paladion (U.S.) in AI-driven cybersecurity and risk analytics; AliA Consulting (France) for SAP S/4 HANA; EcoAct (France) in decarbonization; and digital.security (France) in cybersecurity services.

In April Atos announced the acquisition of Maryland-based data analytics consulting boutique Miner & Kasch, folding it into Atos’ zData business group to create a team of more than 100 AI consultants. TBR spoke with Miner & Kasch co-founders Donald Miner and Niels Kasch, zData CEO Dan Feldhusen, and Atos SVP of Big Data & Security Jerome Sandrini about Atos’ strategy behind the acquisition and expectations for the zData business group heading into 2021.

Vendors enhance core competencies with strategic purchases and AI investment to address IT challenges in the analytics services market

All vendors tracked in TBR’s Digital Transformation: Analytics Professional Services Benchmark except Oracle expanded their analytics services revenue in 1Q20, albeit at a slower pace from the previous year, highlighting that optimizing IT operations — through the use of analytics — is becoming table stakes for buyers.

Accenture took over the No. 1 spot from IBM Services in revenue size in 1Q20, something TBR saw coming a couple of years ago. In TBR’s 1Q18 A&I Professional Services Benchmark, we wrote, “In 1Q14, when TBR launched the inaugural edition of this benchmark, Accenture’s quarterly A&I services revenue was just over half the volume of IBM’s. In 1Q18 Accenture was nearly 85% of IBM’s size in overall A&I services revenue, surpassing Big Blue in three service lines and one region. Though IBM made significant strides to reshape its services organization over the last four years, those efforts came too late to protect its market share.”

1Q20 Estimated Analytics Professional Services Revenue, Profitability and Year-to-year Revenue Growth

TBR’s Digital Transformation: Analytics Professional Services Benchmark addresses changes in leading digital transformation vendors’ strategies and performances as well as their investments and go-to-market positions as it relates to the ever-evolving analytics services market. The report includes use cases and analysis of IT services’ and consultancies’ management of technology partnerships as well as highlights region-specific market trends to benchmark key service line, regional and operational data across 20 leading analytics services vendors.

COVID-19 causes analytics services market to pause, allowing vendors to prove the true value of analytics and better train their AI models

COVID-19 causes analytics services market to pause, allowing vendors to prove the true value of analytics and better train their AI models

All vendors tracked in TBR’s Digital Transformation: Analytics Professional Services Benchmark except Oracle expanded their analytics services revenue in 1Q20, albeit at a slower pace from the previous year, highlighting that optimizing IT operations — through the use of analytics — is becoming table stakes for buyers.

Accenture took over the No. 1 spot from IBM Services in revenue size in 1Q20, something TBR saw coming a couple of years ago. In TBR’s 1Q18 A&I Professional Services Benchmark, we wrote, “In 1Q14, when TBR launched the inaugural edition of this benchmark, Accenture’s quarterly A&I services revenue was just over half the volume of IBM’s. In 1Q18 Accenture was nearly 85% of IBM’s size in overall A&I services revenue, surpassing Big Blue in three service lines and one region. Though IBM made significant strides to reshape its services organization over the last four years, those efforts came too late to protect its market share.”

TBR’s Digital Transformation: Analytics Professional Services Benchmark addresses changes in leading digital transformation vendors’ strategies and performances as well as their investments and go-to-market positions as it relates to the ever-evolving analytics services market. The report includes use cases and analysis of IT services’ and consultancies’ management of technology partnerships as well as highlights region-specific market trends to benchmark key service line, regional and operational data across 20 leading analytics services vendors.

‘Every company is a technology company’ is new mantra for post-digital world

TBR perspective

“Every company is a technology company.” That combined description and imperative from Accenture Group Chief Executive—Technology and CTO Paul Daugherty made clear how the company sees its clients now and entering the post-digital future. All companies will need the technological savvy and innovative culture of digital natives while pivoting from pilots to execution. In simple terms, digital is everywhere, so every company must be able to execute digitally, including developing a digital core, optimizing operations and investing in new technology-driven offerings. For Accenture, maturation as a technology company has resulted in an increase in technology-centric headcount, paired with an emphasis on platforms and tools (see below analysis on myNav, myWizard and myConcerto). A new recently announced growth model has shifted former Accenture Technology leader for North America, Annette Rippert, to be the new Group Chief Executive leading the combined Strategy and Consulting services, further cementing Accenture’s role in moving its clients toward a future where “every company is a technology company.” Building on the technology mantra, Accenture can now bring leadership deeply rooted in emerging technologies applied at scale to its strategy, supply chain & operations and talent & organization consulting clients. Based on Rippert’s long-standing emphasis on Accenture’s relationships with technology partners, clients can expect ecosystems and alliances will factor substantially into the company’s strategic advice as the post-digital future nears. 

Following Daugherty’s presentation, Accenture CIO Penelope Prett emphasized the role cloud continues to play in Accenture’s own digital journey, even describing cloud as “mandatory to capitalize on innovation.” Prett noted that roughly 95% of Accenture’s applications reside in the cloud, with adoption of some legacy architectures still a challenge. Among the lessons Accenture has drawn from its own experience are the need to consider the pace of business change and the need to account and plan for interoperability and long-term simplifications. Echoing Daugherty, this imperative to move to cloud at scale and to innovate plays well into Accenture’s overall go-to-market strategy around technology enablement.

Overall, Accenture’s belief that “Every company is a technology company” raises questions about how the company will engage with its clients going forward. Accenture has excelled at developing talent with specializations and exceptional, often industry-specific skills. As the company shifts toward assembling teams with diverse talents and skills and takes those teams to scale, how prepared is Accenture’s middle management leadership? What resources have they dedicated to training the military equivalent of majors and lieutenant colonels? Prett spoke of teams assembling within hours, rather than weeks, which provides a tremendous boost to productivity, provided leadership can keep up.  

In addition, Accenture’s evolving approach to industries will come under pressure from two forces. Clients, according to Accenture and its peers, increasingly look beyond their own industries for best practices, recognizing that emerging technology solutions typically start with horizontal capabilities applied within an industry and business context. Internally, Accenture must continue to share broad, industry-agnostic best practices across the entire company, even as it develops a common language, separate from industry. Secondly, ecosystem partners such as Google (Nasdaq: GOOGL) and Amazon Web Services (Nasdaq: AMZN) are not organized by industry, which may make it easier for Accenture to align with those hyperscalers. Though more traditional partners, such as SAP (NYSE: SAP), pushing an industry-led approach, through initiatives such as Model Company, may challenge Accenture’s ability to manage competing ecosystem pressures.

The Accenture Technology Symposium brought together over 200 Accenture (NYSE: ACN) clients, along with industry leaders and practitioners. Similar to last year’s event, Accenture discussed and showcased disrupting technologies in areas including cloud, blockchain, AI, automation and security while using client case studies and testimonials to highlight Accenture’s innovation-led approach to solving business problems.  

Analytics within digital transformation engagements depend on high-quality people and data

This week, TBR publishes the first Digital Transformation Insights report for 2020, building on the 2019 series, which included analysis around blockchain, digital marketing, IoT and quantum. The first report centers on IT services vendors’ strategies and performances within their analytics practices. Senior Analyst Boz Hristov notes that, “The maturing A&I services market continues to hold strong digital transformation opportunities for vendors, as long as they can address buyers’ business model complexities through collaborative and coopetitive delivery frameworks. Additionally, vendors that can address skills gaps and ensure data quality and security standards are met are positioned to win.” Next month’s DTI report will look at edge computing within digital transformation. In March TBR will examine the SAP practices of a few leading services vendors.

Additional assessments publishing this week from our analyst teams

Sprint’s rising churn rates, weakening financial performance and high debt load highlight the necessity of the proposed T-Mobile merger. Subpar network quality remains at the root of Sprint’s issues as postpaid phone subscriber losses continue to escalate, despite the operator’s aggressive pricing and elevated network capex spending since 2018. A more significant capex budget is required for Sprint to successfully compete long-term in the U.S. market; however, Sprint’s inability to generate significant free cash flow hinders the company from doing so.” — Steve Vachon, Analyst

“As Infosys ramps up cyber offerings to better address the complexities associated with the next wave of emerging technologies, an aggressive pricing strategy paired with revamped account management enables the company to expand its client roster as it turns into a solutions broker.” — Hristov

Verizon remains able to capitalize on its reputation as a premium wireless service provider to attract customers willing to pay a higher price for the operator’s network coverage and premium unlimited data plans. However, Verizon’s wireless network is becoming a less significant differentiator as AT&T and T-Mobile are now on par with Verizon in LTE coverage and as the rival companies are improving signal quality and data speeds by deploying services on additional spectrum.” — Vachon

“Though AT&T is facing short-term challenges, the company’s ambition to transition from a traditional telco to a global digital service provider is a long-term endeavor requiring a broad array of assets that may not all pay dividends in the short term. AT&T also has abundant opportunity to reduce expenses without divesting core business units via initiatives such as WarnerMedia synergies, nonvital headcount and real estate reduction, and deeper integration of network virtualization.” — Vachon

“TBR anticipates Fujitsu Services will report revenue growth acceleration in 4Q19, as Fujitsu enhances its software, digital, hybrid IT and cloud offerings, which help offset declines in traditional areas. Reorganization and investments within its sales organization, such as the consolidation of its European sales force and the implementation of Account Planning and Opportunity Planning software to improve management in North America, will also contribute to revenue expansion in 2019. The business model adjustments allow the company to better execute and deliver on initiatives to drive adoption of hybrid IT and software offerings, providing recurring revenue opportunities.” — Kelly Lesiczka, Analyst

Senior Analyst John Caucis notes that the U.S. federal earnings season kicks off this week with three defense majors and one services-led defense contractor releasing the results from the final calendar quarter of 2019. First up is General Dynamics Information Technology (GDIT), releasing earnings on Jan. 29. Sales are expected to continue sliding for GDIT, owing to recent asset disposals, portfolio reshaping and operations realignment. TBR projects GDIT’s top-line revenue will decline between 11% and 12% year-to-year to roughly $2.1 billion. A strong rebound for GDIT will hinge on the full leverage of CSRA’s capabilities to win big-ticket, next-generation federal IT engagements in 2020. 

Two additional defense majors, Northrop Grumman and Raytheon, will release their earnings on Jan. 30. Northrop Grumman’s Technology Services (TS) unit completed what was likely its final quarter and last fiscal year as a dedicated, stand-alone business line offering technology, sustainment and modernization solutions in 4Q19. TS, which includes the bulk of Northrop’s technology-related services, was integrated into Northrop’s emerging Defense Systems (DS) business group, effective Jan. 1, 2020. TBR projects TS’ 4Q19 sales will continue the rebound begun in 3Q19, with year-to-year growth between 2% and 3%, bringing TS’ 4Q19 revenue to roughly $1.1 billion. Raytheon Intelligence, Information and Services (IIS), the services division of Raytheon Technologies, is expected to continue expanding its sales at a robust pace, putting the wraps on a red-letter year accentuated by consistent revenue and bookings growth, record backlog levels, improved margin performance, and of course, the pending merger with United Technologies (UT). TBR projects IIS will post revenue of about $1.9 billion in 4Q19, up between 10% and 11% year-to-year.

Finally, Booz Allen Hamilton (BAH) will release earnings on Jan. 31. We project BAH will expand its top line between 8% and 9% in 4Q19 to over $1.8 billion, building on the momentum established during the first half of its FY2020. BAH’s strong performance stems from traction with its technically focused solutions, increasingly infused with advanced technologies that enable the mission aims of its federal agency clientele. Operationalizing AI has clearly become a strategic growth platform for BAH; AI featured prominently in the company’s alliance activity, new contract awards and introduction of new offerings in 4Q19.

UiPath’s enhanced and expanded technology stack provides a solid foundation to reach scale

In mid-October Senior Analyst Boz Hristov attended the annual UiPath Forward conference in Las Vegas, and recently, he published his thoughts on the event and UiPath’s role in the robotic process automation market.

He wrote, “UiPath’s position as one of the leading vendors defining the robotic process automation (RPA) market comes with responsibilities for managing expectations across stakeholders, and the company knows it. Enhancing its value proposition by adding the necessary layers of technologies and deploying business-led frameworks internally and with alliance partners helps it build use cases of scale, a necessary attribute to maintain growth momentum, as RPA is no longer a siloed, line-of-business-led initiative, but rather a node in an enterprisewide automation initiative.”

Additional assessments publishing this week from our analyst teams

“TBR’s quarterly full report on IBM highlights the strategic development in the hardware portion of IBM’s larger portfolio. In 3Q19 we discuss IBM’s quantum computing business as well as the positive implications of the September launch of the z15. Additionally, highlights of IBM’s more emerging capabilities such as around blockchain are also expanded on. IBM’s July finalization of its Red Hat buy has sent a wave of open source through the business, impacting Power Systems this quarter.” Stephanie Long, Analyst

IBM Services will continue to experience growth in business and technology transformation areas, such as advisory activities around cognitive technology, cloud application modernization and next-generation enterprise applications such as SAP Business Suite 4 HANA (S/4 HANA) and Salesforce. The growth will be driven by IBM Services’ portfolio realignment initiatives to deliver higher-value and higher-margin services that integrate technology and industry expertise and enable clients’ digital reinventions. Synergies with the Red Hat acquisition, which closed on July 9, will continue to generate application modernization deals for IBM Services involving the OpenShift hybrid cloud platform. However, lingering growth challenges in traditional IT service areas and ongoing transformation of the Global Technology Services business will stall IBM Services’ revenue growth and profitability improvement in 2019.” Elitsa Bakalova, Senior Analyst

“While TBR expects T-Systems’ revenue growth to decelerate slightly in 3Q19, reorganization efforts combined with the company’s investments in cloud, IoT and security capabilities to align its portfolio with client demand will prepare the company to stabilize revenue in 2020.” Kelly Lesiczka, Analyst

Sprint’s 3Q19 performance highlights the necessity of the T-Mobile merger and the challenge of Sprint remaining a stand-alone company. Sprint continues to struggle to gain customers without aggressive pricing, while its elevated capex budget is limiting free cash flow and has yet to produce a significant improvement in network quality to lower churn rates.” Steve Vachon, Analyst

IBM and the Raptors: Building an NBA champion and looking for a repeat

While watching the NBA’s defending champion Toronto Raptors begin their season, I thought back to a trip to IBM’s Toronto office in late summer 2018, where we got to play with the technology IBM built for the Raptors’ draft and trade war room. We created teams, selecting college players, current NBA players and even European league all-stars based on stats and contracts, influenced a bit by our own biases (toward the Celtics). And when we visited IBM Toronto again in 2019, when the Raptors were on the march to the playoffs and a championship, we understood that IBM’s technology had made a huge difference in pulling together an underappreciated, under-the-radar team. IBM’s combination of massive amounts of data, AI and a near-flawless user interface allowed the Raptors’ management team to put the right pieces in place to unseat the Warriors. Will the Raptors repeat? Unlikely, but they’re still partnering with IBM.

Later this month, we’re going to publish a special report on IBM’s role with the Raptors in the context of other consultancies and IT services vendors that have invested in analytics and sports, building on the following assessment from our Digital Transformation Insights Report: Cross Vendor, published in March.

“In 2016 IBM partnered with the NBA’s Toronto Raptors to create a ‘war room’ for the NBA draft, pulling together an exhaustive and diverse set of performance, personality and biological data on basketball players in the league, in college, and around the world.

Leveraging a user-centric design approach, IBM worked with the Raptors’ front office to develop an end-to-end platform that revolutionizes the operations experience and provides them with comprehensive and actionable data about players to support front-office decision-making processes.

IBM worked with the Raptors to gather player performance statistics and contract details, allowing the Raptors to get an instant view of all aspects of player performance and the ability to search and filter players, compare players, simulate trade scenarios, and collaborate with decision makers throughout the player recruitment and acquisition processes — how did a player do and what would it cost to have him play in Toronto.

The IBM Sports Insights Central solution was built over six months using a collaborative and agile model. The platform includes a state-of-the-art digital war room located at the Raptors’ facility as well as a mobile application and a web-based service to enable remote collaboration.

The IBM team synthesized and visualized all aspects of player data through an intuitive and highly functional user experience to make this a transformative engagement for IBM and the Raptors. Since the solution deployed, IBM has assisted the Raptors by further enhancing the functionality of the platform with scouting management, players’ social media profiles, and analytics provided by the IBM Watson AI engine via a native mobile app.”

(The Raptors started their title defense with a 130-122 win over the Pelicans.)