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Drawing on its partner network and Red Hat’s open posture, IBM enables full-stack transformation

TBR attended IBM Think in a virtual format for the third consecutive year, and this time around we sensed a new IBM. No longer beholden to its low-margin managed infrastructure services business, IBM is emerging a more agile, streamlined and focused organization, especially as it looks to lead the digital revolution through two overarching areas: getting customers to embrace a hybrid architecture and helping them unlock data-driven insights through AI.

This strategic pivot was driven home not only by high-level executives, including CEO Arvind Krishna himself in an exclusive Q&A session with the analyst community, but also through the various partnership announcements, service launches and upskilling programs unveiled over the course of the interactive, two-day event.

Through Red Hat, Software and Consulting, IBM has created an end-to-end approach to unlocking hybrid cloud’s value

Closing in on the three-year anniversary of its acquisition of Red Hat, IBM (NYSE: IBM) continues to execute on its hybrid cloud vision, offering the services and software needed to integrate and orchestrate enterprise workloads across multiple environments. With the exception of some mono cloud and data center-only customers, enterprises are largely heterogenous in how they consume IT, drawing on multiple architectures, vendors and environments.

Considering IBM’s large legacy software install base and ties to the mainframe, this trend bodes well for the company as it can leverage Red Hat OpenShift — which now has roughly four times the number of customers it had prior to the acquisition — to unlock siloed data and extend it to any public cloud. The challenge, however, as articulated by Roger Premo, general manager, corporate development and strategy, is that getting greenfield applications to the cloud is only Step 1 in achieving a scalable hybrid cloud framework, yet the amount of time, level of skills needed and executive-level pushback are some of the factors that keep enterprises from expanding on their lift-and-shift investments.

 

Hoping to advance customers through the containerization, operational change and replatforming phases of hybrid cloud adoption, IBM is revamping its go-to-market model, closely aligning the Software and Consulting business units to address customer needs end to end. For instance, IBM Consulting is invested in the technology behind IBM’s hybrid cloud and AI vision, providing clients the tools needed to provision their own hybrid environments, which, as phases of adoption become more complicated, will naturally pull in more automation, observability and AI assets, as well as additional advisory assistance to help determine which clouds are best suited to which workloads.

Specifically, Premo highlighted the data fabric, which has grown synonymous with IBM Cloud Pak for Data, as one of the technology pieces underpinning IBM Consulting’s value proposition for building and modernizing applications in a hybrid cloud environment. While IBM is still committed to supporting legacy data warehouses and on-premises databases, the company is likely encouraging customers to adopt the data fabric for integrated capabilities that help simplify data management, such as cataloging and automated governance. Essentially an ecosystem of data powered by active metadata, IBM’s data fabric allows various AI offerings, from decision intelligence to machine learning, to run in any environment, while maintaining a common, governed framework.

IBM’s partner strategy continues to evolve post-Red Hat

IBM has always prided itself on having a broad partner ecosystem but appears to be taking a page out of Red Hat’s playbook by creating a more open position in how it goes to market. For instance, as a full-stack vendor specializing in infrastructure, platform software and professional services, IBM naturally runs up against competition in many areas but appears more willing to risk coopetition to do what is in the best interests of the customer.

TBR notes this is a stark contrast from the SoftLayer days, when IBM seemed more concerned with protecting its direct business interests. Today, Big Blue is absorbing more of Red Hat’s operational best practices and is investing in dedicated teams across the ecosystem, including niche ISVs, hyperscalers, global systems integrators (GSIs), advisory firms and monolithic SaaS companies. At the same time, preserving Red Hat’s independence remains equally important, and as Premo indicates, the relationship between IBM and Red Hat is asymmetrical in that IBM is biased toward Red Hat but Red Hat is not biased toward IBM.

 

IBM inks strategic partner agreement with AWS to scale ‘as a Service’ software

In one of the more newsworthy announcements at IBM Think Digital 2022, IBM unveiled it is working with Amazon Web Services (AWS) (Nasdaq: AMZN) as part of a multiyear agreement that brings the IBM Software portfolio, delivered “as a Service,” to AWS’ cloud infrastructure. Customers can now take advantage of the popular click-to-buy experience on the AWS Marketplace to run IBM data and automation assets, including Db2, API Connect and Watson Orchestrate, among others, in an AWS environment. This partnership announcement is a testament to the major strategy shift IBM made three years ago when it acquired Red Hat and standardized on the OpenShift platform, which, being based on Linux and containers, makes the platform and subsequent IBM software applicable on any infrastructure, including AWS.

This platform approach is also providing IBM the flexibility to adapt alongside changing customer buying habits, including a shift toward cloud managed services, which is the fastest-growing usage of OpenShift and prompted the launch of Red Hat OpenShift on AWS (ROSA) at last year’s Red Hat Summit. Customers looking to offload operations to site reliability engineers (SREs) will be able to deploy IBM SaaS offerings integrated with ROSA as a managed service, although IBM is continuing to support customers looking to protect their capex investments as there are over 30 IBM licensed software offerings available on the AWS Marketplace. Expanding service availability is only one part of the partner agreement as IBM indicates it will work with AWS in other areas, including co-selling and co-marketing initiatives that could engage AWS sales teams and help IBM further tap into AWS’ expansive customer base.

 

Strategically, IBM is staying the course with its strategy, leveraging Red Hat’s neutral status and integrations with hyperscalers to sell more software and attached services. Offering IBM SaaS on AWS is a strategic move as it will allow IBM to address customers that have years of experience running IBM software but want the scale of AWS’ cloud infrastructure, which TBR interprets as IBM prioritizing partner clouds at the expense of its own so it can focus solely on OpenShift and Software. Further, as IBM looks to grow its software business, particularly through the monetization of “as a Service” models built on OpenShift, leveraging partner marketplaces will be key, especially considering IBM lacks marketplace capabilities at scale and IT procurement continues to rally around the digital catalogs of AWS, Microsoft (Nasdaq: MSFT) and Google Cloud (Nasdaq: GOOGL).

 

Use of RISE with SAP internally aligns with IBM’s vision to bring legacy ERP to the hybrid cloud

IBM joined the roster of 1,000-plus RISE with SAP customers, announcing it is migrating to SAP Business Suite 4 HANA (S/4HANA) to streamline business operations across its Software, Infrastructure and Consulting units. This announcement comes just months after IBM unveiled a new supplier option via the BREAKTHROUGH with IBM for RISE with SAP program, which enables customers to bundle professional services with IBM IaaS offerings as part of a unified contract and set of service-level agreements (SLAs).

IBM’s new migration project will leverage the premium supplier option and bring over 375 terabytes of on-premises data to IBM Power on Red Hat Enterprise Linux (RHEL) on IBM Cloud. While IBM is partnering with GSIs in many areas, SAP (NYSE: SAP) implementations is likely one of the areas where competition is fiercer between IBM and its peers, especially as the end-of-life deadline for legacy SAP R3 approaches. However, the premium supplier option paired with IBM’s over 38,000 trained SAP consultants could help the company better tap into SAP’s base of over 30,000 on-premises ERP customers and challenge the likes of Accenture (NYSE: ACN) and Deloitte.



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The pandemic’s lasting impact on IT services: Who’s leading through 2022 and beyond

Join Practice Manager Patrick Heffernan, Principal Analyst Boz Hristov, Senior Analyst Elitsa Bakalova, Senior Analyst Kelly Lesiczka and Analyst John Croll for a discussion on which vendors have fared best in IT services, consulting and digital transformation amid the global pandemic. The team will evaluate the strategies and investments made by different vendors, including in alliances, M&A, talent and portfolio transformations, that improved or hindered their position in the market.

 

In this FREE webinar you’ll learn:

  • Key investments driving revenue growth acceleration for some benchmarked vendors
  • Automation as the clear, successful path forward as vendors’ HR strategies have reached an inflection point
  • How consultancies are enabling hybrid cloud while bolstering on-premises enhancements to flourish

 

Mark your calendars for Thursday, June 9, 2022, at 1 p.m. EDT,
and REGISTER to reserve your space.

 

 

Related content:

  1. Digital transformation, cybersecurity and cryptocurrency: How the war in Ukraine will change technology forever

 

Click here to register for more TBR Webinars

WEBINAR FAQs

 

 

 

Blockchain, sustainability and IT services

Join Practice Manager Patrick Heffernan and TBR’s Professional Services team as they connect evolutions in blockchain-enabled digital transformations and acceleration in adoption of sustainability actions and commitments, all in the context of the fast-changing market for IT services. TBR’s analysts will discuss which vendors will most likely benefit from increased demand around decarbonization and managed services and which vendors are best leveraging their alliances within the wider technology ecosystem..

 

Mark your calendars for Thursday, May 5, 2022, at 1 p.m. EDT,
and REGISTER to reserve your space.

Related content:

  1. Ukraine and the future of digital transformation
  2. KPMG decarbonization: The change agent helping the firm pivot toward its next chapter
  3. Atos: Digital twin enables decarbonization

 

Click here to register for more TBR Webinars

WEBINAR FAQs

 

 

 

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”

Ukraine and the future of digital transformation

Join Patrick M. Heffernan and members of multiple TBR teams Thursday, April 14, 2022,  for a discussion on the repercussions of Russia’s invasion of Ukraine across consulting, IT services, cloud and digital transformation landscapes. TBR analysts will debate which vendors will most likely see a surge in business and opportunities and detail which vendors have been most exposed to negative fallout from sanctions, talent disruptions or overexposure to Russian markets. They will also look at whether a sustained conflict in Eastern Europe will stall, slow or accelerate digital transformation initiatives across the globe.

Don’t miss:

  • From localization to globalization and robotization to hybridization, vendors’ delivery models continue to evolve with the war in Ukraine, forcing many vendors to reconsider their next move
  • Cloud vendors will likely see minimal direct disruption as a result of the invasion, and overall, economic uncertainty bodes well for cloud continued accelerated adoption
  • Vendors best positioned to advise on and deliver solutions as real-time data processing globally complicates data privacy issues when collecting information in and around a war zone

Mark your calendars for Thursday, April 14, 2022, at 1 p.m. EDT,
and REGISTER to reserve your space.

Related content:

  1. 2022 Predictions: Digital Transformation
  2. Russia-Ukraine war: 3 factors critical to IT services vendors and consultancies
  3. Russian aggression will not dampen pandemic-driven cloud demand

Click here to register for more TBR Webinars

WEBINAR FAQs

 

 

 

Taking innovation to 4 dimensions: EY, Nottingham Spirk and the metaverse

In mid-February, TBR met with EY-Nottingham Spirk Innovation Hub leaders and learned further details about the goals and operations of the relatively new center. The EY team included Greg Sarafin, EY’s Global Alliance and Ecosystem leader; Jerry Gootee, EY’s Global Advanced Manufacturing Sector leader; and John Nottingham, cofounder and copresident of Nottingham Spirk. Three weeks later, Gil Forer, EY’s Digital and Business Disruption leader; Woody Driggs, EY’s Americas Consulting Digital Transformation wavespace leader; and Shubhra Kathuria, Metaverse, NFT and Foundry Leader at EY wavespace, walked TBR through how EY has been delivering wavespace sessions in the metaverse. On the surface, EY presented approaches with stark contrasts between “not much that can’t be made here” and “mapping a client’s journey to the metaverse.”

EY-Nottingham Spirk: Commercialization at speed and innovation with partners

Since TBR’s visit to the grand opening of the EY-Nottingham Spirk Innovation Hub in October 2021, the pace of engagements has stayed consistent with EY’s expectations, steadily increasing as the firm’s leadership, technology partners and clients appreciate the potential for taking innovation straight through to commercialization at scale. According to Gootee and Nottingham, many industrial clients have come to the Innovation Hub looking for both a strategy reset and guidance on how to innovate differently. Nottingham said manufacturing clients, in particular, have been “firefighting” through the current market due to supply and demand imbalances and a generally turbulent environment. Even while focused on operational challenges, these clients continue to be interested in looking to the future and understanding emerging opportunities. Gootee reinforced that EY’s role remains convening a value chain that can drive innovation for clients.

Both the EY and Nottingham Spirk professionals remain committed to commercialization at speed and scale, as well as strategies and business model transformations, product innovation and immersion, and the future of technologies and markets. Gootee, in particular, re-emphasized many of the priorities and characteristics described in detail in October. TBR asked specifically about the role of EY-Nottingham Spirk’s technology partners, such as Microsoft (Nasdaq: MSFT) and SAP (NYSE: SAP), which led Gootee to note that ideally three-quarters of the clients coming to the Innovation Hub will be led through by EY, while the remaining quarter will be shepherded by technology partners. In TBR’s analysis, no other IT services vendor or consultancy has a similarly tightly intertwined engagement structure, which allows and even encourages technology vendors to lead clients through this kind of digital transformation and innovation space.

Wavespace metaverse: Building trust through familiarity and faces

Over the last seven or eight years, TBR has visited more than 30 innovation and transformation centers, soaking in the immersive experiences and trying out the funky chairs. The COVID-19 pandemic forced IT services vendors and consultancies to shift to entirely virtual engagements, and TBR has been predicting an evolution toward hybrid sessions since the start of 2021. Over the last year, TBR has attended some virtual analyst sessions, which included avatars and kind-of-still-beta versions of the metaverse. Just as the EY-Nottingham Spirk Innovation Hub broke new ground in innovation and transformation centers, EY’s wavespace metaverse is breaking new ground in an entirely new space.

Digital transformation, cybersecurity and cryptocurrency: How the war in Ukraine will change technology forever

The war in Ukraine and ICT vendors: 3 coming challenges in a changed world

Less than two weeks into Russia’s invasion of Ukraine, TBR’s assessment of the effects on the ICT market remains necessarily constrained. The majority of the largest ICT vendors TBR covers do not have tremendous local market and/or client exposure to Russia or Ukraine, so the impact of the war on ICT companies, if the conflict remains limited to those two countries, will be marginal — not insignificant, but marginal — with some exceptions, such as Ericsson (Nasdaq: ERIC), Nokia (NYSE: NOK) and SAP (NYSE: SAP). Longer term, absent either a miraculously positive or an existentially negative development (peace blooms or mushroom clouds), TBR expects the pressures detailed below will force IT services, cloud and software, data center and infrastructure, and telecom vendors to adjust their strategies and their business models.

 

Digital transformations slow, opening new opportunities

Already stressed supply chains will experience additional sand in the gears, slowing down deliveries of essential hardware and delaying build-outs of data centers, enterprises’ IT infrastructures, and even the physical towers needed for telecommunications. While IT services vendors and consultancies have sold digital transformation (DT) as a method of addressing business problems through agile application of emerging technologies, enterprises and their technology suppliers need the actual physical components to make the “digital” part of digital transformation work. A slowdown in hardware availability will convert into a slowdown in enabled applications and soon everything around DT will become slower and more expensive.

 

In this DT winter, consultancies advising on supply chain issues and global systems integrators (GSIs) and their technology partners enabling hybrid cloud while bolstering on-premises enhancements will flourish. Chip manufacturing investors will receive government backing and may find technology vendors across the entire ecosystem willing to make long-term commitments to mitigate the risks they are facing now. In a reversal of fortune from the last few years in IT, third-party maintenance specialists — the very boring techies who are keeping the old systems running while the young geeks play with AI and the metaverse — may see a boom as a constrained chip supply and slowed digital transformations make keeping the current technology operational increasingly important.

 

Cybersecurity commands center stage (hopefully, for real this time)

In every survey TBR has conducted around IT services and digital transformation, buyers have prioritized cybersecurity as a top three — and frequently No. 1 — concern. And yet, enterprises underinvest and remain vulnerable, humans fail to take precautions and fall prey to ransomware attacks and worse, and cybersecurity remains more talked about than acted upon. Russia’s invasion of Ukraine will change that. While pre-invasion predictions anticipated an aggressive Russian cyber campaign, the first week of fighting featured exclusively kinetic military action, with limited, negligible cyber strikes. Analysis conducted in the middle of combat rarely survives intact once the smoke clears, but TBR believes a couple of scenarios could account for Russia’s relative cyber silence. The most encouraging one is that Ukraine’s defenses worked. While NATO, particularly the U.S., shared near-real-time intelligence in the lead-up to the invasion as a means of applying diplomatic pressure and denying Putin a war narrative suited to Russia’s needs, the West and Ukraine would be less likely to share cybersecurity victories in the same way military successes have been touted and with the same divulgence of critical intelligence. A less-encouraging scenario would be that Russia is saving its cyber strikes for an anticipated second stage of the war, when the shooting slows and economic and political wills are tested. Cyberattacks that take critical energy infrastructure offline in Western Europe would be damaging now but would have a greater effect on NATO countries’ populations during a prolonged economic slowdown tied to a standoff in Ukraine. In either scenario, consultancies, GSIs and technology vendors providing cybersecurity services and infrastructure will benefit from renewed concentration in the C-suite on cyber risks, provided those vendors have invested in country-specific, locally sourced, certified talent.

 

 

TBR releases exclusive webinar content from 2022 Prediction series

Technology Business Research, Inc. (TBR) announces on-demand availability of all of our 2022 Predictions webinars. Predictions is an annual special series examining market trends and business changes in key markets, such as cloud, IT services, digital transformation and telecom.

Logicalis: The partner for helping with today’s problems and providing solutions for the future  

In February 2022 TBR spoke with Logicalis Group Chief Operating Officer Michael Chanter and Chief Technology Officer Toby Alock for an update on the company’s strategy as well as an overview of the company’s new Global Services Organization (GSO), including its solutions portfolio and road map. The conversation, which contained specific details on strategy, was a continuation of the journey Logicalis embarked on nearly two years ago when it appointed Bob Bailkoski as CEO.  

In TBR’s special report Know-your-tech strategy could be invaluable as Logicalis aims to disrupt peers in cloud managed services, we wrote, “Logicalis’ efforts to optimize its legacy operations while doubling down on key growth areas such as cloud will largely depend on the company’s ability to develop integrated scale to ensure standardized service delivery.” The launch of Logicalis’ GSO highlighted these efforts and marked a new stage in the company’s ability to deploy practical solutions that build a foundation of trust with partners, employees and clients.  

Transforming into a modern managed services provider  

Logicalis Group’s executives understand the need to develop an ever-evolving strategy that allows the company to stay abreast of market trends. Pivoting from historically employing a regional focus to now building outcome-based solutions that are global in nature paves the way for Logicalis to build scale. Ensuring internal organizational silos are removed will be key, as clients expect vendors to deliver services locally through globally integrated operations.  

At the same time, Logicalis realizes the importance of nurturing local relationships, ensuring its consultants and professional services organization continue to operate as close to the customer as possible. Developing a “modern managed services organization,” as Chanter describes the company’s transformation, is not an easy task, especially when executed at scale.  

Accounting for the permeation of automation to drive efficiency and fine-tuning operations and business models to facilitate cloud-enabled sales, service delivery and support are among the key pillars of GSO. Continuing to provide existing clients with support also enables GSO to secure foundational revenues and maintain relevance, as often clients take time to move to the next phase of their digital transformation (DT) programs.  

When TBR asked about the change management that typically comes with such evolution, especially due to the increased use of automation in service delivery, Chanter provided a strong use case for how the company is handling it. Starting with the appointment of an executive dedicated to overseeing transformation, the main focus then has been teaching staff how to be agile while also considering new compensation models in connection with cloud-enabled service delivery.  

Providing support to external clients has been enabled by a three-part framework: Align, Transform, Scale. Logicalis first assesses where clients are in their DT journey compared to their desired outcome. The company then maps out the kind of support it can provide at different points in the journey, relying on its professional services organization to feed regional market nuances. With sales teams trained and certified before going to market, Logicalis also tries to align and close the feedback loop with staff at the Centers of Excellence (CoEs), which are typically responsible for the development and management of global solutions.  

As Logicalis Group aims to increase its share of the managed services market, we believe the company will continue to work toward striking the right balance between developing automation-enabled services P&L and achieving integrated scale. Previously, TBR wrote, “Logicalis has begun to identify areas across geos, industry verticals and horizontal areas that can support its goal of expanding share of highly profitable ‘as a Service’ managed service sales, which currently garner about 25% of its global revenues. … As Logicalis works out the details around managing its partner ecosystem, Bailkoski and [Chief Customer Experience and Service Transformation Officer Vincent] DeLuca are also increasing the company’s investments in internal portfolio offerings that will not simply standardize global service delivery but also pave the way for an innovative approach to engaging with clients. Launched in June, we believe Logicalis’ AI-enabled Digital Service Platform (DSP) will be the center node of Logicalis’ solutions and services ecosystem, similar to how iTunes has helped Apple (Nasdaq: AAPL) build a community of die-hard brand followers.”  

Logicalis is on the right path to achieving its managed services goals, but like many of its peers, it needs to partner better and differently than it has in the past, especially as buyer expectations around managing partner ecosystems also evolve. Meanwhile, expanding its global footprint, similar to opening an engineering center in Portugal to house about 200 employees in support of the Agile, Transform, Scale framework, will continue to bolster Logicalis’ resource bench for building and delivering solutions at scale as clients seek support around migrating and transforming operations. Chanter noted that the new Portugal facility will “help transform clients quickly and help Logicalis transform.” TBR notes this dual-track approach has proved successful for other IT services vendors undergoing their own digital transformations.