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HPE continues to evolve technical solutions for a dispersed workforce

HPE’s VDI portfolio is not new but is increasingly valuable to its customers as remote work looks like a more permanent situation than initially anticipated

As of April HPE had rolled out a series of VDI solutions that enable customers to adapt to the growing workforce and garnered a significant number of new customers. This week’s announcement at Workplace Next rides the momentum that highlighted use case-specific VDI offerings, allowing customers to customize their experience based on the type of worker and the size of the remote workforce. With these inputs, HPE can optimize newly designed VDI configurations that are dependent on each type of worker and customize pricing, billing and delivery.

Kaddoura explained that customers “need access to their data centers in a very secure way, and in a highly cost-optimized way as well,” and highlighted GreenLake as the cloud that can be implemented in a customer’s data center, colocation facility or edge. Additionally, she noted that what HPE has done is “brought together the best of our Pointnext Services, our software management layer, as well as HPE’s rich portfolio of hardware to create that cloud experience.”

While the announcement of HPE’s GreenLake virtual desktop cloud services was the banner topic woven throughout the event’s discussions, HPE’s rich ecosystem of partners was highlighted as key to optimizing the rollout of these latest features. For example, in addition to offering VDI from Citrix (Nasdaq: CTXS), HPE can now include VMware (NYSE: VMW) Horizon as well as NVIDIA (Nasdaq: NVDA) virtual GPU (vGPU) technology for more cumbersome workloads. The extension of HPE’s partnership with Wipro was also announced, enabling delivery of hybrid cloud and VDI solutions “as a Service” through HPE GreenLake.

Yadavalli expanded on the partnership between Wipro and HPE explaining how the relationship will allow Wipro to leverage HPE GreenLake across its managed services portfolio, offering a pay-per-use model that is subscription based and easily consumable. The aim, said Yadavalli, is to “bring hyperscaler capabilities to customers on-premises or on hosted infrastructure,” which will enable customers to “fast track their workplace transformation efforts by eliminating the need for upfront capital investments and provisioning costs while enjoying the benefits of on-premises control, security and compliance.”

On Nov. 10 HPE sponsored Workplace Next, a series of discussions on the trends and impacts of the reimagined workforce as a result of the COVID-19 pandemic, featuring a cross-industry panel of experts and executives. During the virtual broadcast, business leaders from various industry roles, including human resources, real estate, healthcare and manufacturing, discussed not only the workplace challenges and trends resulting from the pandemic but also highlighted the opportunities a remote work mandate have unveiled. HPE is a prime example of an enterprise that has addressed the challenges of remote work internally while reorienting its portfolio of solutions to enable as seamless a shift as possible for customers. Additionally, with the discussion of the reimagined workplace as the backdrop, HPE notably leveraged the event to announce expansion of HPE GreenLake VDI cloud services, which included several updates to its workforce strategy for the digital economy.

India-centric IT services vendors focused on protecting margins to survive rough market conditions

Select vendors pursue alliances and deals in the growing cloud market to offset choppy financial performance

During the first couple quarters of the pandemic, Cognizant (Nasdaq: CTSH), HCL Technologies (HCLT), Infosys (NYSE: INFY), Tata Consultancy Services (TCS) and Wipro (NYSE: WIT), the India-centric vendors covered in TBR’s IT Services Vendor Benchmark, looked to form partnerships and sign new deals, especially those around cloud capabilities, with strong patterns of continued growth in cloud implementation, migration and advisory to offset deteriorating areas in traditional outsourcing engagements. For example, Wipro’s partnerships with cloud infrastructure experts, such as Google (Nasdaq: GOOG) and Microsoft (Nasdaq: MSFT), will allow Wipro to build solutions off these technologies and pair them with its advanced AI and automation capabilities to strengthen its position in the market.

To mitigate the damage caused by COVID-19, the India-centric vendors will also make resource management improvements, such as enhancing their training and hiring efforts, and solidify existing client relationships by supporting clients through optimization and digital transformation offerings as they transition to digital business practices. Cognizant must secure alliances to bolster the company’s cloud and analytics capabilities while focusing on internal stability.

HCLT performed rather well financially, all things considered, and should utilize its cloud and software power to further develop its portfolio mix, leading to improved client satisfaction. TCS, on the other hand, should capitalize on its global presence as well as its diverse portfolio to gain traction and improve its financial performance. Wipro also struggled during 1H20, but its financial performance is expected to improve if the vendor focuses on acquisitions, similar to its recent purchase of Europe-based 4C, to add new sources of cloud services revenue in the region while driving portfolio investments around cybersecurity. Similar to HCLT, Infosys came through 1H20 mostly unscathed, due to its healthy pipeline and a strong first quarter. The company should continue to tap into new areas of opportunity, such as digital transformation and blockchain, using its recent partnerships with Essential Utilities and the National Bank of Bahrain.

True to their business models even in a pandemic, India-centric IT services vendors prioritized margin protection as a primary damage control strategy during COVID-19. To adjust management operations and combat growing company expenses, IT service vendors will likely increase employee training and look to hire internally to fill positions. Additionally, TBR believes it is imperative for vendors to continue their focus on upselling to existing clients and leaning on strategic partnerships to offset revenue losses due to geographic macroeconomic disruptions.

Big changes for Big Blue

Lots of news coming from IBM these past few weeks, and we have plenty of analysis on it from Geoff Woollacott, Stephanie Long, Elitsa Bakalova, Catie Merrill and Nicole Catchpole. IBM unveiled a new Power System and announced Ginni Rometty will be stepping down, making way for cloud champion Arvind Krishna to emerge as the new CEO, effective April 6. TBR’s 4Q19 IBM report will comment on these changes as well as touch on the overall health and performance of IBM corporate and its Systems Hardware business.

Additional assessments publishing this week from our analyst teams

“TBR estimates Wipro IT Services’ (ITS) revenue growth will accelerate in 2020, as the company leverages a broad network of centers opened throughout 2019, including centers dedicated to industry solutions and emerging technologies as well as centers that enhance core capabilities. An emphasis on centers will lead to cross-selling and upselling opportunities and improved client retention within Wipro’s addressable market. Additionally, increasing training and reskilling efforts will allow Wipro ITS to more effectively communicate its portfolio and manage client relationships to drive opportunities around its digital offerings. Wipro ITS’ ability to accelerate revenue growth will be contingent on securing deals around emerging digital assets — particularly through its now-robust cloud platform partner ecosystem — to expand its wallet share and mitigate its lack of digital scale compared to peers.” — Kelly Lesiczka, Analyst

“Recent acquisitions, such as that of Luxoft and Syscom, reinforce DXC’s focus on integrating acquired industry expertise into its distinct industry segments to create higher-value engagements and build longer-term relationships with clients. DXC will aim to capture technology demand in industries such as automotive, which aligns with industry strengths gained through strategic acquisitions such as Luxoft.” — Kevin Collupy, Analyst 

“Moving through 2020, Cognizant’s ability to create scale for its newly acquired digital solutions and services will be critical to driving growth, though its emphasis on digital will have an adverse impact on its traditional outsourcing business. We expect Cognizant will operate within its revenue guidance in 4Q19 as it emphasizes its digital portfolio to drive adoption of emerging technologies as well as looks to key verticals to generate use cases and drive growth opportunities.” — Kelly Lesiczka

“T-Mobile will end 2019 on a high note as the company’s annual postpaid net additions and adjusted EBITDA will surpass initial guidance expectations. T-Mobile’s momentum will continue in 2020 regardless of the outcome of the proposed Sprint merger, as the company’s widespread 5G coverage and expanding portfolio and service options will attract new customers.” — Steve Vachon, Analyst

In 4Q19 Google Cloud saw rapid revenue growth that paralleled and validated its continued and planned investments in infrastructure, R&D, talent, partnerships and expansion of its global footprint. TBR predicts this accelerated pace of growth, fueled by Google Cloud Platform and Anthos, will help the company close the gap with market share leaders Amazon Web Services and Microsoft. In addition, 4Q19 marks the first time that Alphabet disclosed Google Cloud revenue, a move that isolates and highlights the significant growth rate of this sector of the overall business. — Nicole Catchpole, Senior Analyst

On Wednesday Principal Analyst Ezra Gottheil and Analyst Eric Costa will host a live webinar and Q&A on TBR’s predictions for IoT in 2020 and beyond, including the more purposeful role of AI in IoT and how the conversational interface will demonstrate its relevance. Register today for “IoT settles in for the long haul,” and check out our Webinar Portal to view all of TBR’s previously aired webinars.

Sustained growth provides Accenture with the flexibility to enact internal and operational changes

In this week’s Accenture report, Senior Analyst Boz Hristov notes, “Accenture’s robust account management capabilities and diversified footprint supported continued profitable growth in FY1Q20 (CY4Q19), leading to increased market share. TBR does not expect major changes to the course of the company’s go-to-market strategy following the announced changes on Jan. 13 to its growth model, as client demand for globally supported, locally sourced services align well with Accenture’s integrated scale. TBR will provide further analysis of these changes during 1Q20.”

Additional assessments from our analyst teams

“As reported in the IT Services Vendor Benchmark, trailing 12-month IT services revenue growth decelerated year-to-year in 3Q19 as competitive pressures in traditional and emerging IT service areas, such as digital, cloud and cybersecurity, combined with unfavorable market dynamics tied to rising macroeconomic uncertainties and pockets of tight spending, slowed vendors’ revenue performance during the quarter. Average profitability for benchmarked vendors contracted year-to-year in 3Q19, and five of the top 10 operating margin leaders experienced the negative trend. Some of the vendors are finding it hard to balance addressing revenue pressures with investing in portfolio expansion, talent development and service delivery improvement such as through automation.” — Elitsa Bakalova, Senior Analyst

“In 4Q19 Wipro announced the opening of multiple centers globally. Specifically, Wipro opened a next-generation engineering and innovation center in Virginia that will focus on domain-centric use cases and add 200 jobs to its workforce of 500 in the area. Further, Wipro launched a NextGen Cyber Defense Center in Australia with plans to hire 100 cybersecurity personnel. TBR believes the new centers are aimed at diversifying Wipro’s APAC revenue base by driving traction with Australian government agencies for services like cyber resiliency and digital protection, supported by Wipro’s plans to open additional centers in Australia.” — Patrick M. Heffernan, Principal Analyst

On Wednesday Analyst Stephanie Long and Principal Analyst Geoff Woollacott will host a live webinar on the 2020 outlook of the data center market, including how data center vendors are investing in various emerging technologies to augment their portfolios and maintain relevance as legacy portfolios become commoditized. Register today for an opportunity to participate in this exclusive Q&A!

India-centric vendors defy gravity and all sensible expectations

An exclusive review of TBR’s IT Services Vendor Benchmark

Every quarter the large India-centric IT services vendors — Infosys, Tata Consultancy Services (TCS), Wipro, Cognizant and HCL Technologies (HCLT) — produce revenue growth and profitability that keep them in the top half, and sometimes in the top five, vendors TBR tracks, despite market trends that seem to run counter to their core strengths. As consulting-led digital transformations using emerging technologies and delivered on-site (not from offshore) drive investments and acquisitions, these five vendors manage to expand into new areas just enough, hire the right onshore talent, and manage costs to sustain their growth. But for how much longer?  

Join Kelly Lesiczka, Kevin Collupy, Boz Hristov, Elitsa Bakalova and Patrick Heffernan as they dig into key findings from TBR’s latest IT Services Vendor Benchmark.

Don’t miss:

  • How India-centric vendors compare to other leading IT services vendors
  • Which vendors are transforming faster and with better results
  • TBR’s predictions on where the IT services market is heading
  • Which vendors have the most to lose from sustained success among India-centric vendors

TBR webinars are held typically on Wednesdays at 1 p.m. ET and include a 15-minute Q&A session following the main presentation. Previous webinars can be viewed anytime on TBR’s Webinar Portal.

For additional information or to arrange a briefing with our analysts, please contact TBR at [email protected].

India-centric professional services rivals compete to prove themselves as front-runner in European market

Vendors look to Europe for new revenue pipelines, but some are falling short

India-centric IT services vendors are looking to do more in Europe, utilizing a few different strategies to get there, including pursuing acquisitions, developing new offerings and building on-the-ground workforces. This allows them to diversify revenue streams geographically. TBR feels this push into Europe is a crucial move for India-centric vendors, to not only remain competitive with each other and advance their bottom lines but also to reap the benefits that the European market has to offer, such as new investment opportunities and a larger talent pool for recruiting.

Vendors look to Europe for new revenue pipelines, but some are falling short

The five leading India-centric professional services vendors — Cognizant (Nasdaq: CTSH), HCL Technologies (HCLT), Infosys (NYSE: INFY), Tata Consultancy Services (TCS) and Wipro (NYSE: WIT) — explored new pipelines for expanding their presence into the mature and growing European market. Infosys worked to close the gap on HCLT in 1Q19, while TCS, Wipro IT Services (Wipro ITS) and Cognizant are feeling the pressure to conform to stay competitive.

5G-readiness spend and migration to new network architectures spur the TIS market to growth in 3Q18

According to Technology Business Research, Inc.’s (TBR) 3Q18 Telecom Infrastructure Services (TIS) Benchmark, the TIS market grew as communication service provider (CSP) investment in areas tied to 5G-readiness increased. CSPs are rearchitecting their networks leveraging NFV, SDN and the cloud as well as implementing new business models, which requires growing spend across a broad range of professional services. Deployment services spend grew slightly, but the market will strengthen as the 5G spend cycle ramps up over the next couple of years, although the spend intensity will be lower than during the LTE cycle. RAN suppliers Nokia (NYSE: NOK), Ericsson, Huawei, ZTE and Samsung will capture incremental TIS market share as they drive high volumes of services attached to their 5G RAN. This is already occurring to some extent as CSPs densify networks as part of their 5G-readiness strategies. Though 5G will require significant hardware spend, the aggregate amount will be lower compared to LTE, which will drive vendors to explore new market areas, such as Industry 4.0.

The managed services market was flat year-to-year in 3Q18 as a decline in outsourcing was offset by growth in the out-tasking market. Generally, vendors are exercising pricing discipline when determining which outsourcing contracts to take on in an effort to improve margins. Ericsson is currently leading the way in this regard as it evaluates 42 contracts for exit or rescoping. Huawei, ZTE and CCS have been less concerned with price and are focused on consolidating the outsourcing market. Other vendors, including those that are historically hardware-centric with little to no footprint in the managed services market, are increasingly playing in out-tasking as they will manage applications deployed in CSP networks. Ciena (NYSE: CIEN) is an example of this trend.

 

 

TBR’s Telecom Infrastructure Services Benchmark provides quarterly analysis of the deployment, maintenance, professional services and managed services markets for network and IT suppliers. Suppliers covered include Accenture (NYSE: ACN), Amdocs, Atos, Capgemini, CGI, China Communications Services, Ciena, Cisco (Nasdaq: CSCO), CommScope, CSG International, Ericsson, Fujitsu, Hewlett Packard Enterprise (NYSE: HPE), Huawei, IBM (NYSE: IBM), Infosys (NYSE: INFY), Juniper Networks (NYSE: JNPR), NEC, Nokia (NYSE: NOK), Oracle (NYSE: ORCL), Samsung, SAP (NYSE: SAP), Tata Consultancy Services, Tech Mahindra, Wipro (NYSE: WIT) and ZTE.

Top 5 IT firms hired over 37,000 people in Q2, the highest since Sept 2015

“Bozhidar Hristov, senior analyst at Technology Business Research, US, told the daily that cyclical changes – driven by rising attrition, demand for professionals with skills in new technologies that can not only execute on traditional outsourcing projects but can also drive design-led opportunities – are compelling Indian vendors to hire again.”

Services Weekly Preview: Nov. 11-16, 2018

As we build toward the middle of the quarter, we’re wrapping up our periodic assessments of IT services vendors. Like last week, we also have some semiannual analysis on vendors in the management consulting space.

Monday: 

  • KPMG’s risk-averse culture pressured its performance, causing the firm to drop a spot in terms of revenue size among peers in the latest assessment of the management consulting practice. A potential KPMG and Bain marriage, however, could be a way for the firm to catch up with rivals and disrupt the management consulting space.
  • Continued expansion of its onshore presence, including the recent build-out of its co-innovation center in London, improves HCLT’s value proposition by enabling it to work alongside its clients to create larger-scale transformation engagements. However, HCLT faces some challenges in recruiting talent to support new centers, spurring the implementation of employee development programs.

Tuesday: Although Atos will grow revenues at a slower rate in 2018, the expansion of the company’s Digital Transformation Factory portfolio and recently announced acquisition of SIX Payment Services, which is expected to close in 4Q18, will enable the company to accelerate revenue growth in 2019. TBR’s 3Q18 Atos report analyzes the implications from Atos’ ongoing activities, such as the Syntel acquisition and investments artificial intelligence (AI) and security solutions and capabilities.

Wednesday:

  • Senior Analyst Jen Hamel examines EY’s strategy to provide clients with technological enablement of business transformation in her profile on the firm for our Fall 2018 Management Consulting Benchmark. One key takeaway: Increasing its investment in technology-enabled services, including those involving blockchain and AI, by $1 billion over the next two years will improve EY’s competitiveness with solutions-led peers IBM and Accenture.
  • We continue looking for signs Wipro will see improved performance, as its India-centric peers have, to align with its digital transformation strategy and expanded portfolio and capabilities. In this latest assessment, we’re still searching.
  • Capgemini has made changes to its portfolio, organizational structure and sales model to address rising demand from clients’ business side, rather than their technology side. In TBR’s 3Q18 Capgemini report, we will dive deeper into topics such as AI, digital marketing, and Capgemini Invent, the new global business line Capgemini launched in September.
  • In TBR’s 3Q18 Perspecta Initial Response, we will provide an overview of Perspecta’s second quarter as an independent company. Made up of Hewlett Packard Enterprise’s former U.S. Public Sector business, Vencore and KeyPoint Government Solutions, Perspecta faces some challenging financial and resource-related issues as it works to find its footing as a stand-alone company.  

Thursday:

  • TBR’s 3Q18 Raytheon Intelligence, Information & Services (IIS) full report explores how the emerging geopolitical power struggle in space and cyberspace plays to Raytheon’s strengths in cyber hardening, computer network operations, advanced analytics and AI. The report examines how IIS was able to outgrow federal IT services competitors in 3Q18 and how its deep mission knowledge in the U.S. provides a strong foundation as it pursues riskier adjacent market opportunities in volatile markets such as the Middle East.
  • TBR’s 3Q18 Leidos full report examines the company’s first quarter of year-to-year organic revenue growth since it acquired Lockheed Martin’s IT services business in 2016. The report explains Leidos’ positioning across defense, health and civilian markets and how the company is adjusting to disruption amid the federal market’s shift from bespoke proprietary technology development to configurable commercial-off-the-shelf IT solutions.
  • In our 3Q18 results on Wednesday, TBR expects Cisco Services to continue to accelerate revenue growth during the rest of 2018 and in 2019, positively affected by Cisco’s ongoing portfolio investments in and acquisitions around next-generation and software-driven solutions that generate professional services opportunities. TBR expects Cisco’s recent acquisitions and partnerships in cloud, security and networking to generate increased professional and technical support services for Cisco Services during the coming quarters.

Friday:

  • The previous edition of TBR’s Management Consulting Benchmark Profile: PwC described the firm’s efforts to make its Business, Experience, Technology (BXT) framework a companywide endeavor. Six months later, we’ve seen signs the firm’s ambitions around BXT have evolved from aspirational to operational, with global examples of the framework becoming an on-the-ground reality in working with clients.
  • Partners enable Fujitsu to enhance its core services with cloud, software and digital capabilities, helping to ease clients’ transition into emerging areas while offsetting declines from traditional services. However, without expanding its client base outside of Japan, Fujitsu could face challenges in maintaining revenue growth.

IT vendors ‘patently’ sharpening focus on developing newer technologies

IBM has a unique position as a software, hardware and services vendor. — Bozhidar Hristov, Senior Analyst