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EY confident supply chain sustainability will change world

In mid-March, TBR met with EY leaders to learn about their latest efforts around supply chain and sustainability, extending our previous discussions with the firm covering these areas separately. TBR heard from Glenn A. Steinberg, EY’s Global Supply Chain and Operations leader; Velislava Ivanova, EY’s chief sustainability officer and Climate Change and Sustainability Services leader for the Americas; Rae-Anne Alves, EY’s ESG (Environmental, Social and Governance) and Sustainability Supply Chain leader for the Americas; Martin Neuhold, EY’s Europe West Supply Chain & Operations leader; Lauren Rogge, EY’s senior manager of Climate Change and Sustainability Services; and Akshay Honnatti, EY’s U.S. Sustainability Tax leader.

Standing out by understanding the problem, defining it and tackling it head-on

During the hourlong discussion, three key observations emerged. First, the EY leaders’ emphasis on the global nature of supply chain and sustainability echoed the firm’s ongoing efforts to operate more seamlessly across international — and member firm — borders. Steinberg acknowledged EY’s Europe-based supply chain practice has been a leader globally, with more depth and experience than the Americas and APAC practices, but reiterated the globally integrated nature of EY’s approach to supply chain sustainability. Second, EY presented client stories centered primarily on traditional consulting engagements and outcomes, including strategies, road maps and change management. EY’s decision to play to its core strengths and avoid promoting technology for technology’s sake reinforces the firm’s overall strategy and its approach to clients’ business problems. And third, EY presented five themes, detailed below, which appeared to TBR to be split between regulator-driven and client-driven approaches. Given the nascency of supply chain sustainability as an EY practice and a priority for EY clients, TBR believes this five-themed framework can serve as a useful guide for clients, investors, regulators and any interested parties across both supply chain and sustainability. In short, expanding globally, playing to core consulting strengths and crafting a framework that resonates should be a solid formula for sustained growth.

To set the stage for the discussion, the EY team said their firm’s Supply Chain & Operations Consulting Practice is set to reach 30% year-to-year growth in 2021, and upward of 40% growth in the Americas. Among the drivers for that growth, EY mentioned ongoing shipping disruptions, excessive supply concentration risks and expiring legacy on-premises IT systems. As enterprises invest in tackling multiple related supply chain and operations challenges and increasingly tie every aspect of their business to sustainability goals, EY has seen new roles emerge, including a chief sustainability officer. In all, EY painted a picture of continued uncertainty around financial and regulatory pressures compounded by macro trends outside of most enterprises’ control. In other words, a perfect environment for consulting.

5 key trends define the supply chain challenges now, next and beyond

To make sense of the chaos, EY explained its framework for chief supply chain officers, including a version of EY’s customary “Now, Next, Beyond” approach, and then five key trends explaining what actions and investments their clients have undertaken (at EY’s recommendation). To set the framework, EY defined resiliency as the combination of visibility and agility, with clients encouraged to fully understand their supply networks, including their operating models and workforces.

Similarly, EY defined sustainability as the commonly used combination of environmental, social and governance, with the emphasis here more on clients taking an outside-in view of themselves. Rounding out the framework, EY described the “Now” as “cost-optimized, manual, rigid and linear,” the ”Next” as “agile networked ecosystems,” and the “Beyond” as “autonomous.” Within that framework, EY then introduced five key objectives:

  1. Ensure sustainable and diverse sourcing
  2. Enable traceability, visibility and disclosure
  3. Decarbonize the value chain
  4. Introduce circularity into your business model
  5. Assess impact of new taxes and incentives for a sustainable supply chain

In TBR’s view, Nos. 2 and 5 reflect the changing regulatory pressures around sustainability and increasing calls for structured, common reporting requirements (see this TBR assessment of an EY webcast on this exact issue). Nos. 1, 3 and 4 focus on enterprises themselves and the changes needed to meet sustainability goals and ensure enduring results.

A coherent and complete sustainable supply chain and operations framework

To illustrate the importance EY places on the framework, the EY team walked TBR through several use cases, all tied explicitly to one or more of the five objectives. Across the use cases, three points stood out to TBR. First, one of EY’s most compelling use cases has been EY itself. The EY team shared an example of a global retailer seeking EY’s advice on diversity, equity and inclusion (DE&I) improvements based on what the client understood about EY’s own internal DE&I success. Second, EY’s technology integrations appeared to be a seamless component of solving a client’s problem, rather than an attempt to shoehorn technology into an engagement to sell a solution. And third, EY’s ability to bring regulatory expertise, particularly around tax issues, consistently elevated the firm’s value with clients.

EY has not been alone in trumpeting its own internal success, layering technology into consulting engagements and bringing governance, risk and compliance expertise to the table. What may separate EY, in TBR’s view, is the coherence and completeness of EY’s sustainable supply chain and operations framework. Repeatedly, the EY team came back to the trends affecting the firm’s clients and recognizing the opportunities to make fundamental changes, not simply short-term operational cost-takeout measures. One example of this long-term thinking came from Steinberg, when he noted that the “circular economy is one of the main levers to decarbonization.”

In EY’s own estimation, clients looking to “introduce circularity” into their business model will need to grapple with, among other challenges, “consumption of resources faster than regeneration cycles with an over-reliance on resources which don’t replenish themselves fast enough to sustain the ever-growing demand” and “regulatory requirements” which may create “extended producer responsibility, waste reduction regulations and the banning of certain products and materials.” Most enterprises have not planned for resources regeneration cycles and waste reduction regulations, but EY appears to understand most enterprises eventually will, so the smarter clients will start now, with EY’s guidance.

Comes down to measurement: Who decides, who measures, who cares

TBR believes sustainability and supply chain challenges require strategy consulting and change management-led approaches, not technology-driven solutions, which plays to EY’s strengths in the near term. As clients’ own sustainability competencies mature, EY should be well positioned to provide technology-enabled solutions to help clients sustain their decarbonization efforts. EY works with its Alliance Partners including Microsoft, SAP, Enablon, and P&G to develop and deploy new ESG solutions in the market focused on ESG reporting, carbon emissions, decarbonization, supply chain and product transparency. They have also formed a partnership with Nottingham Spirk, a product innovation company, around embedding ESG criteria into product design for its clients.

TBR’s favorable assessment of EY’s potential hinges in large part on EY’s track record for layering both trust and data into the firm’s consulting and technology solutions. The most critical element for sustainability will be measurement, starting with how the enterprises, regulators, employees and investors come to agreement on definitions for “sustainable” and “decarbonization.” If EY can lead that discussion and provide its clients with meaningful answers, the firm will stay ahead of the sustainability curve and continue growing its supply chain and operations practice.

 

EY on sustainability reporting: Data, credibility and transformation  

Lessons learned from the EY-hosted webcast “How the Corporate Sustainability Reporting Directive will transform your organization”

KPMG Decarbonization: The change agent helping the firm pivot toward its next chapter

The KPMG Global Decarbonization Hub supports the organization’s ESG agenda by bringing skills, partnerships, tools, and data and analytics solutions that further enhance KPMG’s advisory-led value proposition.

Atos: Digital twin enables decarbonization

At scale, digital twin is a sustainability play

“Digital twin is a decarbonization enabler” and in the next five years “people will generate carbon credits out of digital twin.” Sandeep Bhan, Atos’ global senior expert on digital twin made those assertions at the end of a LinkedIn webinar today in response to TBR’s question about the more-than-marginal business impacts possible through deploying digital twins.

As IT services vendors, consultancies and their clients increasingly talk about sustainability, TBR has kept a skeptical eye on what emerging technologies or consulting trends bring true change to decarbonization and what’s just hype. Bhan and his colleague Murli Mohan Srinivas, Atos’ global leader for Industry 4.0 & digital twin, made a compelling case that digital twin, as part of a greater toolkit, will be part of many companies’ sustainability efforts. Incremental improvements in operational efficiency enabled by digital twin and taken to scale could bring substantial energy and cost savings, potentially converted into tangible decarbonization results. As Srinivas noted, “Every 0.1% increase in asset availability in wind turbine translated to a few hundred thousand units of power generated, which directly translated, in terms of months … into millions of dollars of real energy.”

From TBR’s perspective, digital twin has been an emerging technology more hyped than understood or deployed. The title of the Atos webinar, “Digital Twin Demystified,” reinforces how the intricacies and impacts of digital twin remain largely underappreciated across the broader technology space. This combination of digital twin mystification and increasing hype around sustainability fuels TBR’s uncertainty around the long-term potential of both.

Listening to experts drill down on specific use cases and tie specific technology implementations with real-world business outcomes helps alleviate some of those concerns while uncovering additional questions around applicability beyond asset-heavy industries, demands on change management and talent, and prioritization of digital twin in any sustainability or digital transformation engagement. TBR will continue probing Atos and other IT services vendors and consultancies on their digital twin offerings and capabilities and will consider Bhan’s assertion about digital twin enabling decarbonization in TBR’s inaugural Decarbonization Market Landscape, (scheduled to publish in June).

Atos’ investments in expertise, capabilities and offerings

During the Atos webinar, Bhan and Srinivas made a few other key points about digital twin, including:

  • Digital twin will be increasingly in demand as customers deploy additional automations, look to capture and exploit existing institutional knowledge, and apply the last couple years of supply chain management lessons to their ongoing operations.
  • Customers come to Atos because of the company’s legacy of design engineering across many manufacturing areas, deep understanding of how connected products are more connected, and ability to work across a complex ecosystem. Atos, they noted, has invested for years in not only understanding but also developing expertise, capabilities and offerings around digital twins.
  • Based on those years of investment and development, Atos takes a systematic approach to assessing a customer’s digital twin opportunities and needs: collect structured and unstructured  data coming from the asset in the field; marry that to relevant data coming from the enterprise ecosystem, such as service lifecycle management; and, critically, fold in an understanding of relevant “semantic knowledge … the knowledge of people,” the experience of people. In Atos’s view, digital twin solutions must combine all three to then be able to properly address a business problem.

Over the quick 30-minute primer, the speakers made a compelling case for the company’s expertise, capabilities, and offerings around digital twin. TBR will continue following Atos’ efforts in the digital twin space and include our assessments and analysis in quarterly reports on the vendor, as well as in TBR’s Digital Transformation reports, when applicable.

Top 3 Predictions for Management Consulting in 2022

The who, what and how of management consulting keeps changing and stays the same

Managing talent and restructuring and building decarbonization credentials will drive management consulting in 2022

Management consultancies traditionally stood at the top of the IT services pyramid, delivering advice, road maps and business cases for other vendors to follow, reaping the rewards of high margins and brand prestige. Pre-pandemic, disruption upended every business model across the technology spectrum, while consulting appeared to move along, unchanged since the first corporate board listened to advice from McKinsey & Co. In actuality, management consulting had been shifting from slides to software for years, with the pandemic accelerating those changes. The 2021 drivers and trends pushing change included managing and upskilling talent, restructuring to meet new client demands and bring new capabilities to the market, and jumping on the sustainability bandwagon. 

A note of caution: Even with all the changes in consulting since the spread of digital transformation, TBR believes most management consulting engagements center on traditional deliverables: road maps, business cases and strategic advice. In recent months, TBR has heard from consultancies and their clients about a resurgence in strategy consulting, perhaps stemming from a post-pandemic push to reorient to the future having made the operational and organizational changes necessary to survive 2020 and 2021.

Concurrently, IT services vendors and cloud and software giants have increasingly pushed into the consulting space, sometimes supplanting established management consultancies engaged in implementations and managed services. TBR does not believe this trend will result in significant management consulting market share being earned by the likes of Microsoft or Infosys, but the large-scale implementation and managed services engagements may include a wider mix of ecosystem partners delivering to the end client. In 2022 the management consultancies that navigate the rough and changing partnering landscape will outperform peers.  

2022 management consulting predictions

  • Expanded capabilities require expanded skills, leading consultancies to increasingly invest in education
  • Restructuring throes and woes will continue to constrain some management consultancies abilities to execute consistency
  • Sustainability booms for consultancies poised to measure, benchmark and report client progress

Send me a free copy of TBR’s Top 3 Predictions for Management Consulting in 2022

Telecom Business Research’s 2022 Predictions is a special series examining market trends and business changes in key markets. Covered segments include cloud, telecom, devices, data center, and services & digital.

Top 3 Predictions for IT Services in 2022

Sustainability in talent, decarbonization and emerging tech becomes the watchword for IT services

Services is still people, even as compelling new forces like ESG and emerging technologies challenge IT services vendors

Even with a rush of emerging technologies and responses to the pandemic at the forefront of IT services vendors’ strategies and client success stories, the fundamentals of IT services remain rooted in people — in recruiting, training and deploying the right talent to solve IT-related business problems and staff enterprise IT needs. The changes TBR expects in 2022, including new competitors in the war for talent, new opportunities around decarbonization and accelerated adoption of emerging technologies, will not substantially alter IT services vendors’ business models. Differentiation among the vendors, in offerings, capabilities and financial performances, will come more through execution than strategy, at least in the near term. Vendors more adept at pivoting to new revenue streams and more patient with pressured margins will see greater success beyond 2022, provided they are able to adequately navigate talent challenges in the near term.      ​

The vendors that were ahead of the game in 2019 in portfolio and resource expansion around next-generation technology-enabled solutions are experiencing revenue growth improvement in 2021. New growth initiatives, such as around product engineering, supply chain improvement and sustainability, along with steady investments in areas such as hybrid cloud, AI, security, IoT, blockchain and industry-specialized offerings, will continue to expand vendors’ addressable market opportunities and support revenue growth acceleration into 2022. Virtual delivery enables increased productivity but pushes employee utilization to the limits and supports a surge in attrition. Managing talent to market demand, especially as macroeconomic conditions improve and digital exhaustion continues, will be key as IT services vendors strive to ensure service quality requirements are met.​

While the COVID-19 pandemic remains an external factor that can negatively affect IT services spending, subsiding pressures thanks to global vaccine rollouts indicate a potential for continued revenue growth acceleration from the 6% year-to-year revenue growth during the full year 2021 for the 30 vendors in TBR’s IT Services Vendor Benchmark. Moving into 2022, revenues will be driven by a mix of three activities: short-term projects around operational resilience and running businesses; larger transformational engagements that enable clients to improve their business models; and innovation engagements that allow clients to do something completely different — all supported through technology solutions and services.​

2022 IT services predictions

  • Focus on talent management, refined during the pandemic, will recede in a post-pandemic environment
  • The decarbonization shift from promises to actual results opens a massive opportunity for IT services
  • Blockchain winter ends and 5G & edge bloom in 2022, bringing new enhanced revenue streams to IT services

Send me a free copy of TBR’s Top 3 Predictions for IT Services in 2022

Telecom Business Research’s 2022 Predictions is a special series examining market trends and business changes in key markets. Covered segments include cloud, telecom, devices, data center, and services & digital.