Author: Nitish M

Advocating for IT Innovation in an Evolving Market | Blog

The biggest advocates for information technology transformation can come from inside your organization. Internal IT innovators can spark business growth and evolution. Learn how having employees as innovation champions can benefit your company in this blog. 

With companies increasingly relying on IT post-pandemic and through the current macroeconomic headwinds, innovation is vital to continue pushing the business world forward. Having employees as IT innovation advocates can help your company attract talent and optimize efficiency. While it may seem like a big undertaking to tackle, let’s explore how employees can play this important role in organizations.

How can IT organizations become more innovative?

Leadership alignment and buy-in can inspire innovation and make IT organizations more effective. Technology should enable and act as the catalyst for business objectives – not the end state. Organizational leadership should align on objectives. Executives responsible for IT and digitalization who report to the board and executive committees, such as CIOs and CTOs, should sponsor innovation initiatives.

Implementing contextual metrics for progress is another focus of innovation. Because IT organizations often are viewed as cost centers, they are typically measured on efficiency and policy only. As technology fundamentally enables new business models, organizations need to ensure they are using purpose-led metrics. Everest Group recommends using different metrics based on the objective, such as time to implement systems, improvement in customer onboarding scopes, and automating back-office processes that measure efficiency, and customer experience and new business model innovation that track growth. We believe IT is becoming an enabler for growth, through Systems of Growth thinking, Agile governance also drives innovation in IT organizations. Given the rapid technological change and disruption, IT organizations cannot be static. A cross-functional leadership team should re-examine IT organizations frequently to ensure they remain aligned to their “North Star” and quickly learn from mistakes and course correct.

What benefits come from being an IT innovator?

Innovative-driven IT organizations benefit in three main ways. First, organizations can respond to customer needs faster. More and more, an organization’s ability to use technology determines its success in a fast-changing environment as customer preferences and consumption patterns evolve.

Second, IT innovation improves the ability to attract the right talent. As Gen-Z (and beyond) become the primary workforce that organizations try to attract, they must provide the right tools and infrastructure to make the employee experience a key part of their value proposition. This is also the key to managing attrition and creating belonging in the workplace.

Lastly, IT innovation allows organizations to stay ahead of compliance and security needs. With the ever-evolving regulatory environment, using purpose-built technology can help organizations become resilient and secure. As a result, organizations can avoid brand, reputation, and financial loss.

How can IT leaders convince their business counterparts that it’s important to fund innovation?

Creating internal advocates and champions is vital to IT innovation. IT should seek greater feedback from internal and end users to create a distinctive business case. Beyond that, individuals can start promoting IT innovation.

The first way is to speak the language of business. IT enables business growth and innovation — thus, it needs to be referenced in the same context. Framing technology investments as anchored to growth, efficiency, and resilience will enable a wider cross-section of organizational counterparts to understand its impact.

Another avenue to garner support for IT innovation is to regularly report results. IT leaders shouldn’t wait for end-of-year results or budgeting cycles to showcase progress. They should do this quarterly or more frequently, so leaders see the impact and value.

The IT department shouldn’t be an isolated team but instead, plug into a company’s DNA and morph as the company changes. By collaborating with multiple sectors of the company, IT innovation can be built into the organizational framework. This will ensure the IT team is not at odds and can more easily assist their company by continuously adapting to changing markets.

For more information or to discuss how to implement innovation into your IT team, reach out to Nitish Mittal at [email protected].

You can also discover how technology, processes, and business networks will evolve in our webinar, What’s Ahead After a Decade of Digital Transformation?

The Ukraine-Russia War is Impacting Global Sustainability Initiatives and Derailing Progress in Meeting SDG Goals

The Ukraine-Russia War has hindered the progress of nations and businesses toward achieving global sustainability goals. Along with its humanitarian and economic consequences, the crisis has altered investment in energy, defense, and autocratic states. Can the enthusiasm the world felt just seven years ago about reaching Sustainable Development Goals (SDGs) be recaptured, and what does the future hold for sustainability enablement service providers? Read on to find out.

The optimism around achieving SDGs, also known as the Global Goals, has waned since its adoption by the United Nations in 2015 with the promise of improving people’s lives and preserving natural resources.

Global sustainability initiatives have been impacted by the Ukraine-Russia War, the pandemic, and supply chain issues. According to the UN, income for about 60% of the global workforce declined during the pandemic. Supply chain issues further exacerbated the economic contraction and humanitarian losses by inflating food and fuel prices.

The war is impacting progress in accomplishing SDGs, directly through its humanitarian and economic consequences, and indirectly through its effect on Environmental, Social, and Governance (ESG) investments.

The following three major challenges have emerged due to changing perceptions about ESG investments in light of this crisis:

  • The war has ramifications on global energy transition

The Ukraine-Russia war has slowed down the global energy transition to renewables in two ways:

Increased metal and gas prices slowing renewable technology investment – The region is a leading supplier of “energy transition metals” like nickel, palladium, copper, and lithium. Russia accounts for 7% of the world’s mined nickel and 33% of the world’s mined palladium, which are used in electric vehicle batteries and to reduce automobile emissions, respectively. Ukraine is the largest supplier of noble gases like krypton, which is used in renewable technologies. The war has reduced the already sluggish rate of renewable technology investment by increasing the prices of these metals and gases.

Ramped up coal production and fossil fuel investment – Russia accounts for 17% of the world’s natural gas supply, which is perceived as a transition fuel globally. Before countries develop sustained sources of renewable energy, natural gas is replacing fossil fuels due to its lower carbon emissions. The issue is more pronounced in Europe, as about 80% of Russia’s natural gas is exported to Europe, fulfilling about 40% of Europe’s gas demand. The war has inflated gas prices. Although the US has agreed to supply more gas to the region, this raises the question of sustained gas supply and puts pressure on European governments to accelerate their net-zero strategies. The market is optimistic that Europe will transition to clean energy faster than expected because it needs to become energy self-reliant.

Slow investment in renewable energy has further dipped since 2018. While renewable energy requires patient and risk-tolerant investors, fossil-fuel investment generates considerable returns quickly due to the massive existing hydrocarbon infrastructure. In the war’s wake, fossil fuels are seeing an investment frenzy, with Canada, the US, Norway, Italy, and Japan increasing production. Many countries across Europe again are ramping up coal production to avoid depending on Russian gas. In the short run, it seems that the world has taken steps back on global warming

  • Investment in defense is being reclassified as sustainable

Before the war, steering away from investing in arms and ammunition was considered prudent and ESG conforming. However, the war has brought back fears of traditional warfare. Now, many nations have started taking a U-turn from this narrative by categorizing defense investment as sustainable for national security and global alliances. Many global defense suppliers’ share prices spiked upward the first day Russia invaded Ukraine.

Many European nations, including Germany, Poland, and Sweden, have announced increases in their defense budgets. SEB Investment Management, a leading asset-management firm in the Nordics, has revised its sustainability policy to allow some of its equities and corporate bonds to be invested in the defense sector. With skepticism associated with traditional warfare restored, investors and governments are bound to pump more money into arms and other defense products.

  • Investors are steering away from autocratic states

Investors are facing heightened reputational risks for associating with authoritarian regimes. The boundary between investing in government bonds of an autocratic state and investing in companies conducting business in/with the autocratic states is now blurred for investors. Western investors are striking Russia off their investment list, especially if the investment is ESG-compliant. This can dampen investments in other autocratic states and the businesses associated with them.

How does the war impact sustainability enablement service providers?

The war has temporarily derailed the uptake of renewable energy investments. To start, this will impact enterprises’ Scope 2 emissions reduction goals. Scope 2 emissions are generated from purchased electricity, and reducing these emissions requires enterprises to turn towards renewable electricity sources.

The sustainability enablement technology industry also will experience a short-term supply crunch of semiconductor chips, which is an important input in producing sustainability technologies.

To deal with these choppy waters, organizations will need help from consulting and technology providers to shift their sustainability mix to access net-zero strategies to still achieve their committed targets for global sustainability initiatives.

Moreover, as the sustainability ecosystem matures, forward-looking investments in scaling undertakings such as enhancing trust in data and reporting (avoiding greenwashing claims), scaling operations to accelerate net-zero targets, and creating persistent governance systems will continue to create momentum.

To further discuss global sustainability initiatives, contact [email protected], [email protected], and [email protected]

You can read more about the impacts of Russia’s military action in Ukraine on services jobs and global sourcing in our blog, “Will Ukraine’s Invasion Have a Domino Effect on Other Geopolitical Equations?”

 

Europe Embarks on a New Technology Regulation Wave

Big changes are coming as Europe moves toward digital empowerment by 2030. Governments are building frameworks for the regulation of emerging technologies to protect consumers and companies while promoting innovation and digital leadership. What impact will the drive toward technology sovereignty have on BigTech providers, buyers, and investors? Read on for the latest in our series on technology sovereignty.  

In our last blog, we explored the emerging and growing focus on technology sovereignty in the United Kingdom and Ireland (UK&I) and European markets. Let’s continue our discussion of this important topic.

The focus on Europe’s data sovereignty is back in the spotlight as a result of new European Union (EU) rules to limit big online platforms’ market power. The risk of global cyber-attacks by Russia as retaliation against Ukraine also has made this an issue to watch.

Europe’s latest moves for technology regulation are not in isolation. Representatives from business, politics, and science from Europe and around the globe have already been working together since 2019 to create a federated and secure data infrastructure through the GAIA-X initiative.

With data security, privacy, and technology sovereignty becoming key issues for the region, Europe is setting up new regulatory frameworks to protect consumers and companies, while trying to ensure a competitive market and encouraging innovation.

What does the Digital Markets Act (DMA) entail?

Under consideration by the European Commission, the DMA intends to ensure a higher degree of competition in the European Digital Markets, by preventing large companies from abusing their power and by allowing new players to enter the market.

Beyond the hyperbole that surrounds any technology regulation, the DMA provisions include:

  • New regulations on BigTech companies providing “core platform services” that are most prone to unfair business practices, such as social networks or search engines. These companies that have a market capitalization of at least €75 billion or annual revenue of €7.5 billion are considered gatekeepers
  • To be designated as gatekeepers, these companies must provide services such as browsers, messengers, or social media, which have at least 45 million monthly end users in the EU and 10,000 annual business users
  • Sizable messaging services (such as WhatsApp, Facebook Messenger, or iMessage) will have to open up and interoperate with smaller messaging platforms, if users ask, promoting more choice
  • Combining personal data for targeted advertising will only be allowed with explicit user consent from the gatekeeper. Similar to instant messaging, allowing users to freely choose their browser, virtual assistants, or search engines will be required
  • If a gatekeeper does not comply with the rules, they can receive fines of up to 10% of total worldwide turnover in the preceding financial year and 20% for repeated infringements. Companies who systematically violate the regulations could be banned from acquiring other companies for a certain period

In addition to DMA, the EU reached a consensus on the Digital Services Act (DSA) in April, which focuses on setting up a standard for the accountability of online platforms regarding illegal and harmful content. If voted into law, the DSA will apply across the EU within fifteen months or from January 1, 2024, whichever is later. Meanwhile, the DMA likely will go into effect next summer.

The battle for sovereignty and security is just getting started

While these acts are significant steps in Europe’s focus on curbing the perceived monopolistic power of BigTech, they are part of larger movements such as:

  • A growing global reckoning exists around BigTech companies that control multiple industries, such as enterprise cloud computing, consumer-oriented economies, and media and advertising, to name a few. Complicating this further is the way their roles (especially social platforms such as Meta, Twitter, etc.) are evolving into digital town squares, and the subsequent impact on democracy, free speech, and bullying
  • Most BigTech companies originated in North America but are now global businesses. There’s a degree of circumspection in how Europe views this shift in innovation and control and reining it in. These acts are a natural successor to Europe’s previous foray into data protection through the General Data Protection Regulation (GDPR), which came into force in 2018. It subsequently inspired other acts globally, including the California Consumer Privacy Act (CCPA)
  • The region’s increasingly fragile geopolitics is creating new implications for cyberwarfare and rogue state actors, fueling the desire to shore up digital resilience. We can also expect this to have a knock-on effect on other regions (the US is considering similar steps and Australia took measures to regulate the relationship between BigTech and traditional media, to name a few)

We expect this conversation on the regulation of emerging technologies to evolve and shape the future of technology spending and strategies in the region.

Implications of technology regulation for the European ecosystem

Owing to these triggers and the broader conversation around technology regulation, sovereignty, and BigTech reach, we expect the following three implications for buyers, providers, and investors in the European technology space:

  • Buyers should include sovereignty requirements in sourcing decisions: We are starting to see enterprise buyers of technology and services embed sovereignty of the tooling and service providers they choose in RFPs. Expect this to continue and become a hygiene factor for technology providers to showcase in the sourcing process
  • Establish regional market partnerships: BigTech companies are smart and understand they can’t be upstaged overnight. They are already establishing partnerships and tweaking their business model to ensure compliance with the evolving European regulatory environment. Look for more partnerships with specific players in the region to play by these rules (for instance, Google Cloud and T-Systems partnering on cloud sovereignty in the region). IT service providers will also train more people on BigTech technologies as a result
  • Look beyond sovereignty-washing: As with any big shift and trend, new and existing competitors to BigTech will latch on to this market theme. We foresee more press releases announcing the amped up focus on sovereignty. Investors, buyers, and partners should look beyond this marketing hype and truly understand how these firms are solving these issues. For instance, are they embedding sovereignty at the application or data layer? Where does the data reside, and who owns it? Answering these questions can help buyers spot the real innovators

We anticipate a floodgate of activities as we approach implementation timelines in the next 12-18 months. This will create a one-time discontinuity in the market and result in additional spending on compliance. However, market participants will be wise to consider the long-term impact of technology regulation in Europe on their strategies.

To discuss further, please reach out to [email protected] or contact us.

You can also tune in to our webinar, Discover 5 Ways to Transform Your Workforce and Location Strategy Amid Global Uncertainties, for key insights and strategies that global talent leaders can use to readjust their workforce strategies.

Can “Code Red for Humanity” Be the Signal for Using Digital for Good? | Blog

A landmark United Nations report issued an alarming warning on climate change, calling it a “code red for humanity.” While the situation seems dire, recent positive developments in the sustainability arena keep the hopes for a greener future alive. Read on to learn what immediate steps enterprises can take now to move the needle on sustainability goals through digital transformation.

The UN Intergovernmental Panel on Climate Change (IPCC) assessment report released last week continues to make waves across countries, governments, corporations, and non-governmental organizations (NGOs). It touched a nerve even with those segments of the population who are rarely engaged with climate issues, a sign of rising sustainability consciousness in the zeitgeist.

While awareness toward building a sustainable future has been in the spotlight for over a decade now, it is important to understand the following reasons why the IPCC report has managed to create significant noise:

  1. Timing of the report: Coming just a couple of months before the critical UN Climate Change Conference (COP26) this fall in Glasgow, Scotland, the new report will play a key role in the negotiations. IPCC’s previous assessment in 2013 and 2014 paved the way for the Paris climate agreement
  2. The warnings are clearer and direr: The confidence of the assertions made by the authors is the real strength of this new publication. The clearest of these points is humanity’s responsibility for climate change
  3. Visible effects: As countries continue to grapple with the pandemic, the climate impact over the past few months has significantly worsened. The dangers of climate change are no longer something far away in the future, impacting people in distant lands. It’s here and now and affecting every region and population segment across the world
  4. Rapid changes are needed now: Even after 197 countries signed up to the Paris climate agreement in 2015, the IPCC report claims that we won’t be able to keep the rise in global temperatures below 1.5 degrees Celsius or even 2 degrees Celsius this century unless immediate and sustained deep cuts in carbon take place

 

“Hope is a good thing, maybe the best of things, and no good thing ever dies…” 

The situation is a reality check. However, we see positive signs that possibilities still abound for a greener, cleaner future such as:

  1. Concerted, profound, and immediate efforts can avert the catastrophe: Immediate deep cuts in emissions of greenhouse gases could stabilize rising temperatures. Scientists believe if we can cut global emissions in half by 2030 and reach net zero by the middle of this century, we can halt and possibly reverse the rise in temperatures
  2. The rise of the environmentally-conscious Generation Green: Gen Z and millennials are rewriting the rules of conscious investments and consumption, and taking charge of the sustainability agenda by sustainable investing and their willingness to pay more for eco-friendly products and hold institutions accountable for their actions
  3. The report paves the way for directing accountability: By strengthening the scientific evidence between human emissions and extreme weather, the UN report provides a new, powerful means for stakeholders everywhere to hold corporations and governments legally accountable for the climate emergency
  4. Evolution from checkbook philanthropy to building purposedriven enterprises: While at the beginning of the sustainability journey, the focus largely remained on ad hoc initiatives, where now conversations have transformed into a purpose-driven movement. Businesses are not just focused on maximizing return for shareholders, but on overall stakeholder engagement to build purpose-driven enterprises

Four steps enterprises can take now   

Now that we have managed to grab the attention of all audiences, the need of the hour is to get the ball rolling. Here are some steps enterprises can take as they embark upon their sustainability journeys:

  1. Turn intentions into actions: Enterprises globally are pro-actively reporting sustainability. Over 90% of all S&P 500 firms do some sort of sustainability reporting, which is significantly higher than a decade ago. Supplier announcements of sustainability-specific investments have risen significantly over the last 12-15 months, highlighting the strong intent by both sides to drive environmental, social, and governance (ESG) messaging in the market (exhibit below).

 

However, despite having the right intentions, enterprises globally still struggle to envision a comprehensive and actionable ESG strategy that they can adopt. This is where the expanding sustainability vendor ecosystem can play an important role in bringing together the external expertise, tools, and offerings that can help enterprises succeed in their sustainability agendas.

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  1. Set more attainable targets based on accurate predictions: As the impact of greenhouse emissions becomes clearer, it paves the way for enterprises to define quantifiable targets and measure, monitor, and report these goals to guide all decisions and truly become purpose driven. Enterprises can get decision-making guidance from the rising number of specialized data providers who are going deep into ESG areas, focusing on specific industries, lines of business, and action items
  2. Leverage the technology ecosystem to build, implement, and scale sustainability agendas: With their massive and expanding footprints, it’s important for enterprises to think about the different layers within the sustainability technology stack from advisory to applications, data, cloud, and infrastructure. How enterprises scale sustainability across their technology landscape can have significant downstream implications. We believe that strategic partners who can assist clients in end-to-end ideation, implementation, and scaling their sustainability programs will play central roles going forward Picture2
  3. Institute an operating model for sustainability: Business operations and workflows need to embed purpose elements within core business strategies and processes as organizations move up the sustainability maturity curve. This requires thinking about the critical components of sustainability through an operating model shift. Our view of this operating model encompasses key elements such as data, technology, and operations, underpinned by a robust foundation of governance and talent as presented below: Picture3

We covered some of our thinking in a recent webinar on Digital for Good: Shape Your Sustainability Journey and will continue to share our insights as we monitor the latest developments in this space. How are you planning your sustainability journey? We’d love to hear from you by emailing us at [email protected] and [email protected]p.com.

Europe’s Critical Moment in Digital Transformation – Mission 2030 | Blog

The European market has been slower than other areas of the world in adopting digital transformation, but that’s changing. With new regulations opening up the digital marketplace for fair competition, sizeable strategic partnerships, and providers embracing the latest cloud, automation, and Artificial Intelligence (AI) capabilities, Europe is poised to seize a leadership position in the tech landscape. But the region needs to act quickly and grasp the right opportunities to prevail. Read on to learn more about Europe’s road to digitalization by 2030. 

COVID-19 accelerated the worldwide movement that has been underway for years by businesses to adopt digital initiatives. Amid the pandemic, digitalization was pushed into the spotlight as a means for businesses to survive by finding innovative ways to deliver services through digital media.

The European market, however, felt the impact because it has historically shown a slower rate of digital adoption in some segments and also bore the early onslaught of the global pandemic (starting with the outbreak in Italy).

Coupled with slowing macroeconomic growth and looming Brexit, enterprises in Europe have been facing significant challenges. The changes fueled by the pandemic have now pushed Europe to rethink its business models and talent and embrace accelerated digital transformation.

Gearing up for change

Combined with this market context, Europe’s dependence on global technology companies (versus homegrown firms) has increased. Various reasons exist for Europe’s perceived decline as the home of Big Tech companies, including a stricter tax regime, more active regulatory/legal frameworks, and a smaller homogeneous addressable market. Despite this, Europe outperforms the world in many pockets of innovation, such as financial technology (FinTech), blockchain, payments, creative agencies, and cybersecurity.

Now, new expectations that developed from the pandemic have led European organizations to gear up to fully embrace digital business models. According to an Everest Group key issues survey, customer experience is the most critical priority for enterprises and service providers over the coming few years, followed by operational efficiency, then launching new products and services. The image below illustrates Europe’s priorities in business model changes and areas of innovation.

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To improve the customer experience, European enterprises are offering digital solutions for conducting simple interactions without physically going to a location or speaking directly to a customer service agent and delivering more personalized experiences for language support, channels, and availability.

Europe’s transition to digital by 2030

Against this backdrop, Europe also is ramping up technology sovereignty efforts. Recently, the European Commission set the course towards a digitally empowered Europe by 2030. European governments and regulators are rethinking the enabling frameworks and legal structures to foster innovation and digital leadership.

The goal is to achieve digital sovereignty in an open and interconnected world and to develop digital policies that will enable businesses to adopt and seize a human-centered, sustainable, and more prosperous digital future.

Among the European Commission’s targets are ensuring 80 percent of all adults have basic digital skills, three-quarters of companies use cloud services, all public services are available online, and all households have gigabit connectivity.

To achieve these ambitious expectations, Europe will need to move fast.

The pathway to digitalization

To pave the way towards digital success, Europe has set in motion initiatives such as the Digital Markets Act (DMA), the Digital Services Act (DSA), and GAIA-X, a project to develop common requirements for a European data infrastructure supported by representatives of business, science, and administration.

With data security, privacy, and technology sovereignty becoming key issues for the region, Europe is setting up the following sanctions to protect companies and ensure a competitive market:

  • DMA: Ensures a higher degree of competition in European digital markets by stipulating large online platforms behave reasonably, creating a fairer business environment that encourages new emerging players to enter the market, and gives consumers more choice at competitive pricing
  • DSA: Protects all users, no matter where they live in Europe, by guaranteeing a safe and accountable online environment and opening up new opportunities to provide digital services across borders
  • GAIA-X: Strives to develop common requirements for European data infrastructure and to establish an interoperable data exchange where businesses can share data under the protection of European laws

With these new seminal regulations potentially changing the enabling framework of doing business across Europe, the market is at a juncture where it can take back the reigns of the technology landscape. But its success at capturing the next wave of digital transformation will hinge on how the region, its businesses, and regulators react to the current situation.

A bright future there for the taking

Europe has always had a broad range of innovative companies and countries with strong start-up and entrepreneurial cultures. Large partnerships over the past nine months that point to scaling digital transformation are also on the rise in Europe. These include deals like Wipro joining with Telefonica and METRO AG, Infosys with Daimler, and TCS with Deutsche Bank and Prudential Financial. For more details, please see our webinar, Why Europe is Poised to be a Major Factor in Digital Transformation Strategies, from earlier this year.

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With increased digitalization accelerated by COVID-19, European organizations are moving forward with top digital capability priorities like cloud, cybersecurity, and analytics alongside automation and advanced automation AI.

Europe also provides attractive options to meet the need to shift to digital with different constituent countries offering local language and cultural context, and easier intra-region mobility (Brexit notwithstanding). For instance, vibrant technology ecosystems are developing in different clusters such as Germany for hi-tech and automotive, Eastern Europe for product engineering, and the UK and Ireland for financial services, to name a few.

Poised to be one of the main drivers of digital adoption, Europe will retain its central place in the world’s technology economy. However, spotting the right opportunities and actions to grasp will be crucial over the next few years.

Europe must take advantage of current changes in the market by:

  • Adopting a design-led workforce strategy that enables it to leverage specific digital talent pools and re-skilling or upskilling current employees with needed digital skills
  • Increasing the numbers of global service providers and product vendors focusing on investments in Europe as an attractive location closer to clients or to reduce risks from hyper-competitive markets. This includes the diverse opportunity Europe offers across different regional clusters
  • Accelerating efforts by European governments and regulators to rethink frameworks and legal structures to foster innovation and digital leadership

Our recent research shows that European enterprises plan not just to recover but exceed projected financial goals. With the end of the pandemic in sight and the reopening of business throughout the continent, digital innovation and opportunities to scale will be ripe for Europe’s taking.

How do you view the European digital transformation opportunity? Share your thoughts by emailing [email protected].

Microsoft Goes All in on Industry Cloud and AI with $20 Billion Nuance Deal | Blog

Yesterday’s announcement of Microsoft’s acquisition of Nuance Communications signifies the big tech company’s serious intentions in the US healthcare market.

We’ve been writing about industry cloud and verticalization plays of big technology companies (nicknamed BigTech) for a while now. With the planned acquisition of Nuance Communications for US$19.7 billion, Microsoft has made its most definitive step in the healthcare and verticalization journey.

At a base level, what matters to Microsoft is that Nuance focuses on conversational AI. Over the years, it has become quite the phenomenon among physicians and healthcare providers – 77 percent of US hospitals are Nuance clients. Also, it is not just a healthcare standout – Nuance counts 85 percent of Fortune 100 organizations as customers. Among Nuance’s claims to fame in conversational AI is the fact that it powered the speech recognition engine in Apple’s Siri.

Why Did Microsoft Acquire Nuance?

The acquisition is attractive to Microsoft for the following reasons:

  1. Buy versus build: If Microsoft (under Satya Nadella) can trust itself to build a capability swiftly, it will never buy. Last year, when we wrote about Salesforce’s acquisition of Slack, we highlighted how Microsoft pulled out of its intent to acquire Slack in 2016 and launched Teams within a year. Could Microsoft have built and scaled a speech recognition AI offering?
  2. Conversational AI: Microsoft’s big three competitors – Amazon, Apple, and Google – have a significant head start in speech recognition, the only form of AI that has gone mainstream and is likely to be a US$30 billion market by 2025. Clearly, with mature competition, this was not going to be as easy as “Alexa! Cut slack, build Teams” for Nadella
  3. Healthcare: This is another battleground for which Microsoft has been building up an arsenal. As the US continues to expand on its $3 trillion spend on healthcare, Microsoft wants a share of this sizeable market. That is why it makes sense to peel the healthcare onion a bit more

 

What Role Does Microsoft Want to Play in Healthcare?

While other competitors (read Amazon, Salesforce, and Google) were busy launching healthcare-focused offerings in 2020, Microsoft was already helping healthcare providers use Microsoft Teams for virtual physician visits. Also, Microsoft and Nuance are not strangers, having partnered in 2019, to enable ambient listening capabilities for physician to EHR record keeping. Microsoft sees a clear opportunity in the US healthcare industry.

  • Everest Group estimates that technology services spending in US healthcare will grow at a CAGR of 7.5% for the next five years, adding an incremental US$25 billion to an already whopping $56 billion
  • The focus of Microsoft and its competitors is to disrupt the multi-billion ($40 billion by 2025) healthcare data (Electronic Medical Record) industry
  • Erstwhile EMR has been a major reason for physician burnout, which the likes of Nuance aim to solve
  • Cloud-driven offerings such as Canvas Medical and Amazon Comprehend Medical are already making Epic Systems and Cerner sit up and take notice

It is not without reason that Microsoft launched its cloud for healthcare last year and has followed it up by acquiring Nuance.

What Does it Mean for Healthcare Enterprises?

Under Nadella, Microsoft has developed a sophisticated sales model that takes a portfolio approach to clients. This has helped Microsoft build a strong positioning beyond its Office and Windows offerings even in healthcare. Most clients in healthcare are already exposed to its Power Apps portfolio and Intelligent Cloud (including Azure and cloud for healthcare) in some form. It is only a question of time (if the acquisition closes without issues) until Nuance becomes part of its suite of offerings for healthcare.

What Does it Mean for Service Providers?

As a rejoinder to our earlier point about head starts, this is where Microsoft has a lead over competitors. Our recent research with System Integrators (SI) ecosystem indicates that Microsoft is head and shoulders above its nearest competitors when it comes to leveraging the SI partnership channel to bring its offerings to enterprises. This can act as a significant differentiator when it comes to taking Nuance to healthcare customers as SI partners can expect favorable terms of engagement.

Partners' Perceptions

Lastly, this is not just about healthcare

While augmenting healthcare capabilities and clients is the primary trigger for this purchase, we believe Microsoft aims to go beyond healthcare to achieve the following objectives:

  • Take conversational AI to other industries: Clearly, healthcare is not the only industry warming up to conversational AI. Retail, financial services, and many other industries have scaled usage. Hence, it is not without reason that Mark Benjamin (Nuance’s CEO) will report to Scott Guthrie (Executive Vice President of Cloud & AI at Microsoft) and not Gregory Moore (Microsoft’s Corporate Vice President, Microsoft Health), indicating a broader push
  • Make cloud more intelligent: As mentioned above, Microsoft will pursue full-stack opportunities by combining Nuance’s offerings with its Power Apps and Intelligent Cloud suites. As a matter of fact, it plans to report Nuance’s performance as part of its Intelligent Cloud segment

Microsoft: $2 Trillion and Beyond

This announcement comes against the background of BigTech and platform companies making significant moves to industry-specific use cases, which will drive the next wave of client adoption and competitive differentiation. Microsoft’s turnaround and acceleration since Nadella took over as CEO in 2014 are commendable (see the image below). It is on the verge of becoming only the second company to achieve $2 trillion in market capitalization. This move is a bet on its journey beyond the $2 trillion.

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What do you make of its move? Please feel free to reach out to [email protected] and [email protected] to share your opinion.

Enterprises’ Satisfaction with Their IT Service Providers Jumped 21 Percent in 2020 | Blog

We’ve been publishing our IT Services Enterprise Pulse Report for four years and have never before seen a 21 percent jump in enterprises’ satisfaction with their IT service providers, but that’s exactly what happened in 2020. Despite – or rather because of – the enormous uncertainty and multitude of challenges enterprises faced with the global pandemic, the participants in our IT Services Enterprise Pulse Report 2021 approvingly recognized that their IT services partners understood their pain points and proactively supported them in adopting a digital-first operating model through their investments in cloud, security, and data. These investments have proven to help fill the supply-demand gap for next-generation digital technologies in the IT services industry.

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 What are enterprises’ future priorities?

As we move ahead into the post-pandemic environment, enterprises are mainly aim to fuel their investments in technology to reduce their costs, grow their revenue, and enhance their risk management and regulatory compliance measures.

Just over 80 percent of the enterprises cited cost reduction as their key focus as they start embracing the shift to a digital-first business model, consisting of increased automation initiatives, accelerated cloud adoption, modernization initiatives, and rationalization of their infrastructure, applications, and platforms landscape.

About 46 percent stated they are looking at innovative ways to grow their revenue channels, mainly through improving customer experience, delivering hyper-personalization, pushing newer products into the market, and expanding into new territories.

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What do they expect from their IT service providers?

The pandemic has created a need for service providers to up the ante and adopt a partnership mindset towards their clients. Enterprises want their service providers to stand beside, not behind them. That means IT service providers need to align their technical decision making with their clients’ strategic interests. They also need to be able to sell the business outcomes of their technology investments to their clients’ senior leadership.

With the increasing number of uncertainties created by the pandemic, enterprises stated that they prefer service providers who adopt a proactive, rather than reactive, approach towards monitoring potential challenges and are highly responsive to changes in the status quo. They want them to bring new and innovative ideas to the table and be up-to-date on the latest technologies and what their competitors are doing.

Businesses around the world struggled with managing onshore attrition and offshore productivity during the pandemic. To ease their talent management woes, the participants in this study made it clear they want their IT service providers to invest in local talent and resources so they can have feet on the street with better understanding of the regional regulations of their business.

The shift in value proposition and expectations

In a separate study we conducted – Recalibrating for Resiliency – 2021 Key Issues in Global Sourcing – Enterprise IT Perspective – we found that the top priorities enterprises expect from their IT service providers are productivity and service quality, followed by flexibility, ability to adapt to new business models, and the ability to bring innovative ideas to the engagement. These all map back to what enterprises stated in the various IT Services PEAK Matrix® reports in our IT Services Enterprise Pulse Report 2021.

Interestingly, more than 70 percent of the participants in our Key Issues study stated that they are optimistic about meeting or exceeding their 2020 targets, and about 70 percent of the participants in our 2021 Pulse Report expressed their satisfaction with their IT service providers.

To sum up, the pandemic has pushed the pace for adopting a digital-first and, in some cases, a digital-only working model for global enterprises. Service providers have made the right investments in cloud, security, and data, which helped fill the supply-demand gap for next-generation digital technologies in the IT services industry. This has led to an increase in enterprises’ satisfaction with their service providers who have fared well in fulfilling the sudden upshift in demand but has also set newer expectations going forward.

To take a deep dive into the specifics of enterprises’ priorities, how the demand is shifting, and how IT service providers need to adapt to changing expectations, read our report, IT Services Enterprise Pulse Report 2021, or reach out to us at [email protected] and [email protected].

BioClinica and ERT to Merge: Perspectives on Potential Synergies | Blog

On December 10, 2020, ERT, a clinical end-point data solutions company, announced its merger with BioClinica, a clinical trial management and imaging solutions company. The goal of the resulting enterprise will be to integrate the best of both worlds – ERT’s expertise in electronic Clinical Outcomes Assessment (eCOA), therapeutic expertise in cardiac safety and respiratory, and clinical endpoint measurement through wearables, with BioClinica’s expertise in imaging and clinical trial management solutions. The merger will equip the combined company to deliver data analytics, insights, business intelligence, virtual patient visits, and technology solutions to its clients.

In analyzing this development, we’ve taken a look at the hottest topics in the life sciences industry right now – decentralized and virtual clinical trials.

Virtual clinical trials – a revolution catalyzed by the pandemic

A virtual clinical trial is one in which certain parts of the clinical trial are conducted outside a clinical site, such as patient consent capture, trial data capture, or patient monitoring through sensors or wearables. The benefits to the pharmaceutical company include cost savings, better patient recruitment and retention, and improved data quality.

Earlier this year, we published a blog predicting that the 2020s would be the decade of virtual trials. It seems we were way off the mark – by about nine years. The year 2020 has already seen its fair share of virtual trials, as clinical trials that were put on pause due to lockdown restrictions were rescued by being converted to fully virtual or hybrid trials, such as cases in which clinical experts visited patients at their residences to collect vitals or samples, reducing delays.

#NoGoingBack

The virtual trial momentum isn’t temporary, and there’s increasing focus on virtual trials, even among investors. Not only this, many in the industry have pledged to preserve the progress they’ve made in clinical research due to the pandemic, including virtual trials.

On the same day the news of the merger was announced, the Decentralized Trials & Research Alliance (DTRA) was formed to unite stakeholders with a mission to make clinical trial participation widely accessible by advancing policies, research practices, and new technologies in decentralized patient-focused clinical research. Companies that are part of this alliance include technology vendors such as Medidata Solutions and Oracle Health Sciences, pharma companies such as Pfizer and Roche, CROs such as Parexel and Syneos Health, and others such as Amazon and the US Food and Drug Administration.

M&A and investment activity has increased, too. For example, Medable and Science 37 each received funding during the pandemic to advance their virtual trial offerings. And in November 2020, VirTrial, a telehealth platform for managing decentralized and virtual clinical trials, was acquired by Signant Health, a Clinical Trial Management System (CTMS) vendor, thus augmenting its virtual trial capabilities.

Clearly, virtual trials are a ripe area for M&A and investment activity given their disruptive capabilities and benefits. And we continue to expect more acquisitions, funding, and collaboration in this space in the near future.

What this all means for the merger

Our recently concluded PEAK Matrix assessment on clinical development platforms pointed out that BioClinica’s Cloud platform for clinical development does not have the capability to support virtual trials; we said it needed to invest in remote monitoring and eCOA capabilities to deliver on virtual trials. However, the solution does have a broad set of capabilities in the clinical, regulatory, and safety value chains.

As a result of the merger, however, BioClinica will be able to offer virtual trial capabilities to clients. ERT is one of the leading eCOA providers and through its wearable and sensor data capture capabilities, it is well positioned to conduct virtual trials in certain therapy areas. And it will be able to use the BioClinica Cloud offering to give clients a holistic clinical development experience, a win-win-win for ERT, BioClinica, and their clients.

Exhibit 1 shows the combined solution landscape.

Exhibit 1: The merger synergies

bioclinica

The merged entity will be able to showcase an end-to-end clinical development platform with enabling layers for virtual trial conduct. This move is definitely the right direction, at the most opportune time, and is just another sign of increasing interest in decentralized and virtual trials.

What are your views on this merger? Let us know your thoughts at [email protected] and [email protected].

Reflections on Cloudera Now and the Battle for Data Platform Supremacy | Blog

The enterprise data market is going through a pretty significant category revision, with native technology vendors – like Cloudera, Databricks, and Snowflake – evolving, cloud hyperscalers increasingly driving enterprises’ digital transformation mandates, and incumbent vendors trying to remain relevant (e.g., the 2019 HPE-MapR deal.) This revision has led to leadership changes, acquisitions, and interesting ecosystem partnerships. Is data warehousing the new enterprise data cloud category that will eventually be a part of the cloud-first narrative?

Last month I attended Cloudera Now, Cloudera’s client and analyst event. Read on for my key takeaways from the event and let me know what you think.

  • Diversity and data literacy come to the forefront: Props to Cloudera for addressing key issues up front. In the first session, CEO Rob Bearden and activist and historian Dr. Mary Frances Berry had an honest dialogue about diversity and inclusion in tech. More often than not, tech vendors pay lip service to these issues of the zeitgeist, so it was a refreshing change to see the event kicking off with this important conversation. During the analyst breakout, Rob also took questions on data literacy and how crucial it is going to be as Cloudera aims to become more meaningful to enterprise business users against the backdrop of data democratization.
  • Cloudera seems to be turning around, slowly: After a tumultuous period following its merger with Hortonworks in early 2019, Cloudera has new, yet familiar, leaders in place, with Rob Bearden (previously CEO of Hortonworks) taking over the CEO reins in January 2020. The company reported its FYQ2 2021 results a few weeks before the event, and its revenue increased 9 percent over the previous quarter, its subscription revenue was up 17 percent, and its Annualized Recurring Revenue (ARR) grew 12 percent year-over-year. ARR is going to be really key for Cloudera to showcase stickiness and client retention. While its losses narrowed in FYQ2 2021, it has more ground to cover on profitability.
  • Streaming and ML will be key bets: As the core data warehousing platform market faces more competition, it is important for Cloudera to de-risk its portfolio by expanding revenue from emerging high growth spend areas. It was good to see streaming and Machine Learning (ML) products growing faster than the company. In early October, it also announced its acquisition of Eventador, a provider of cloud-native services for enterprise-grade stream processing, to further augment and accelerate its own streaming platform, named DataFlow. The aim is to bring this all together through Shared Data Experience (SDX), is Cloudera’s integrated offering for security and governance.
  • We are all living in the hyperscaler economy: Not surprisingly, there were a share of discussions around the increasing role of the cloud hyperscalers in the data ecosystem. The hyperscalers’ appetite is voracious; while the likes of Cloudera will partner with these cloud vendors, competition will increase, especially on industry-specific use cases. Will one of the hyperscalers acquire a data warehousing vendor? One can only speculate.
  • Industry-specificity will drive the next wave of the platform growth story: I’ve been saying this for a while – clients don’t buy tools, they buy solutions. Industry-context is becoming increasingly important, especially in more regulated and complex industries. For example, after its recent Vlocity acquisition, Salesforce announced Salesforce Industries to expand its industry product portfolio, providing purpose-built apps with industry-specific data models and pre-built business processes. Similarly, Google Cloud has ramped up its industry solutions team by hiring a slew of senior leaders from SAP and the industry. For the data vendors, focusing on high impact industry-led use cases – on their own and with partners – will be key to unlocking value for clients and driving differentiation. Cloudera showcased some interesting use cases for healthcare and life sciences, financial services, and consumer goods. Building a long-term product roadmap here will be crucial.

By happenstance, the Cloudera event started the same day its primary competitor, cloud-based data warehousing vendor Snowflake made its public market debut and more than doubled on day one, making it the largest ever software IPO. Make of that what you will, but to me it is another sign of the validation of the data and analytics ecosystem. Watch this space for more.

I’d enjoy hearing your thoughts on this space. Please email me at: [email protected].

Full disclosure: Cloudera sent a thoughtful package ahead of the event, which included a few fine specimens from the vineyards in La Rioja. I can confirm I wasn’t sampling them while writing this.

GPT-3 Accelerates AI Progress, but the Path to AGI is Going to Be Bumpy | Blog

OpenAI recently released the third generation of Generative Pretrained Transformer or GPT-3, the largest neuro-linguistic programming (NLP) model ever built. It’s fundamentally a language model, a machine learning model that can look at part of a sentence and predict the next word. It’s been pre-trained on 175 billion parameters in an unsupervised manner and can be further fine-tuned to perform specific tasks. OpenAI is an AI research organization founded in 2015 by Elon Musk, Sam Altman, and other luminaries. It describes its mission as: to discover and enact the path to safe Artificial General Intelligence (AGI).

GPT-3 is breaking the internet

There’s been a lot of talk around the power, capabilities, and potential use cases of GPT-3 in the AI community. As the largest language model developed to date, it has the potential to advance AI as a domain. People have developed all sorts of uses – from mimicking Shakespeare, to writing prose, to designing web pages. It primarily stood out due to:

  1. Foraying into AGI. The language model isn’t trained to perform a specific task such as sentence completion or translation, which is normally the case with ANI, the most prevalent form of AI we have seen. Rather, GPT-3 can perform multiple tasks such as answering trivia questions, translating common languages, and solving anagrams, to name a few, in a manner that is indistinguishable from a human.
  1. Advancing the zero-shot/few-shot learning mechanism in model training. This mechanism is a setup in machine learning wherein the model predicts the answer only from the task description in natural language and/or maybe a few examples, implying that the algorithm can showcase accuracy without being extensively trained for a particular task. This capability opens the possibilities of building lean AI models that aren’t as data-intensive and don’t require humongous task-specific datasets for training.


So, this seems nifty – what next?

In addition to the flurry of standard NLP use cases that have been in existence for a while, which GPT-3 has advanced drastically, GPT-3 also has the potential to intercept the more technical and creative domains, which will lead to the democratization of such skills by making these capabilities available to non-technical people and putting business users in control, primarily by:

  • Furthering no-code/low-code by making code generation possible from natural language input. This is a step toward the eventual democratization of AI, making it accessible to a broader group of business users and has the potential to redefine job roles and the skill sets required to perform them.
  • Generating simple layouts and web templates to full-blown UI designs, using simple natural language input, potentially creating disruption in the design sphere. 
  • Shortening AI timelines to market. Automated Machine Learning (AutoML) creates machine learning architectures with limited human input. The confluence of GPT-3 and AutoML has the potential to drastically reduce the time it takes to bring AI solutions to production. It will take significantly less time and human intervention to train a system and build a solution, thereby reducing the amount of time needed to deploy an AI solution in the market.

GPT-3 is great, but we’re not in Space Odyssey yet

The massive language model is not without pitfalls. Its principal shortcoming is that, while it’s good with natural language tasks, is has no semantic understanding of the text. It is, by virtue of its training, just trying to complete a given sentence, no matter what the sentence means.

The second roadblock to mainstream adoption of the model is the fact that it’s riddled with societal biases in gender, race, and religion. This is because the model is trained on the internet, which brings its own set of challenges given the discourse around fake news and the post-truth world. Even OpenAI admits that its API models exhibit biases, and those can often be seen in the generated text. These biases need to be corrected before the model can be deployed in any real-world scenario.

These challenges certainly must be addressed before it can be deployed for actual, enterprise-grade use. That said, GPT-3 will potentially traverse the same trajectory that computer vision made at the start of the decade to eventually become ubiquitous in our lives.

What are your thoughts about GPT-3? Please share with us at [email protected] and [email protected].

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