Service Providers
Service Providers
A quiet French Revolution is brewing in IT services, though it may not last long. Even as most leading companies in the sector are seeing a big decline in growth rate, France’s Capgemini is seeing relatively better growth rate.
According to Peter Bendor-Samuel, CEO of Everest Group, Capgemini’s better performance can be attributed to its concentration in Europe as a geography, which has performed better than the US and also has a better market-leading position in engineering services.
Despite the recession in the UK economy, large cost takeout deals are likely to flow unabated for the next two quarters though discretionary spend by clients will remain under check.
“We believe that there is still some way to go for modernization in the UK and EU and that these markets are also more receptive to cost-takeout mega deals. Hence, we see the current market conditions of more cost takeout and large deals to continue for at least two quarters,” Peter Bendor Samuel, CEO of Everest Group, told Bizz Buzz.
I believe 2024 will be the year of focusing on business value. That applies to gen AI, but it goes further than that. Most companies are now more than ten years into their digital transformation journey. Having already picked the low-hanging fruit, they now want to get more value and return on those investments. However, there are fundamental sentiment shifts in the appetite to invest more to get more value.
The top companies in India’s IT sector have witnessed a decline in their workforce for the fourth consecutive quarter. Yugal Joshi, Partner at Everest Group, states that these companies were highly aggressive in their hiring practices before the slowdown in demand.
Broadcom’s staggering US$61 billion acquisition of VMware in January marked one of the largest technology deals ever. Broadcom’s reputation for radical cost-cutting and focus on short-term shareholder value following acquisitions has raised concerns about VMware’s future direction. Read on for recommendations for enterprises, service providers, and competitors to deal with the aftermath of the acquisition of VMware.
Connect with us to discuss this acquisition further.
Broadcom’s acquisition of VMware has ignited worries that Broadcom’s aggressive cost-slashing and financial optimization measures will harm VMware’s reputation as a trusted partner and hinder its ability to innovate.
Let’s look at Broadcom’s troubling past track record of taking over companies and then selling off non-core assets:
Broadcom might be treading a similar path with VMware. As its acquisition history suggests, Broadcom’s actions will likely be drastic and swift. Within only a month, Broadcom has already created worrying disruptions, posing serious concerns for VMware clients and partners as outlined below:
Founded in 1998, VMware pioneered virtualization technology, allowing multiple virtual machines to run on a single server, eventually creating the multi-billion cloud market. Over the years, VMware grew its product offerings, such as vSphere, ESXi, and Workstation, to become a dominant cloud and infrastructure player. VMware created multiple software solutions for data center management, networking, security, and the digital workplace. The company has maintained a reputation for innovation, working closely with its service partners and creating a positive client experience.
Established in 1991, Broadcom initially specialized in developing semiconductors, focusing on communication and networking chips. The company expanded over the years into many other areas, including security, infrastructure storage and management, and industrial solutions. In recent years, Broadcom consolidated its portfolio and now reports revenue in two areas – semiconductor solutions and infrastructure software. Broadcom is known for its aggressive acquisition strategy and focus on financial returns, often raising concerns about its commitment to product innovation and long-term support.
Since its launch over a decade ago, VMware has held massive dominance in cloud computing, with nearly all enterprises licensing its virtualization technology. Its slowdown started when the giant hyperscalers, such as Amazon Web Services, Microsoft Azure, and Google Cloud Platform, developed public cloud offerings with multiple advantages beyond VMware’s in private cloud settings.
However, most enterprises eventually realized that both public and private clouds had their advantages and drawbacks and settled for a hybrid environment to leverage the strengths of each cloud type.
CIOs who had settled on hybrid cloud strategies have been left with pressing questions by Broadcom’s acquisition of VMware. They must decide whether to stay with VMware, immediately look for alternatives, or wait and watch what peers do. This also allows organizations to reevaluate service providers’ innovative problem-solving abilities or rebalance hybrid cloud portfolios.
While the answers to these critical questions will depend on their specific situations, all enterprises should take the following steps:
Service providers play a critical role as the conduit between technology providers and enterprises in helping provide guidance and the next steps to navigate this uncertainty.
While service provider partners are also grappling with sudden, unexpected terminations of partner agreements with VMware, they must act quickly to determine the best step for their enterprise customers. Delaying and watching is not an option, and we recommend the following actions:
Since VMware has shown its belly to competition, it’s now a mad rush. VMware’s competitors have a rare opportunity to grab its clients, potentially giving them considerable future revenue. Competitors understand this and have launched a scathing attack on VMware through email and social media campaigns, as well as direct outreach. While the desire to capture a larger market share is understandable, competitors should take a more balanced and pointed approach for higher conversion rates. We recommend the following strategies:
We will continue to follow this space and watch how Broadcom’s acquisition of VMware unfolds. If you would like to discuss this further, reach out to [email protected] or [email protected].
Catch our upcoming webinar, Engineering Services in 2024: The Market Outlook and Commercial Trends, for insights into the pricing outlook, commercial dynamics, market attractiveness, and evolving buyer expectations for engineering services.
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