Category: IT Services

The Battle Unfolds: MGAs as the Next Frontier for InsurTechs, Services, and Technology Providers

November 28, 2023

The Managing General Agent (MGA) sector is a bright spot in a turbulent insurance market. Technology investments and strategic partnerships will be key to redefining risk and driving innovation for these specialized insurance agents/brokers. Read on to learn more about the opportunities that await MGAs, or contact us to discuss further.

Despite the economic turmoil, global instability, prevalent inflation, and a volatile year shaking the insurance industry, faith in the MGA sector has not wavered. In this challenging environment, MGAs need to demonstrate steadfast strategic underwriting prowess, build a solid business case heavily focused on cost optimization, and exhibit excellent data and engineering capabilities.

Increasing demand for specialized products, the need to underwrite newer business lines, and a push for efficiency are driving insurers to build relationships with MGAs – all suggesting the upcoming years could be a golden era for MGAs.

The data provides a compelling sense that MGAs have a bright future ahead. Conning’s analysis of statutory filings found that premiums generated by MGAs for US insurance companies grew at a startling rate of 27% in 2022. Interest in the MGA market also has significantly rekindled in Europe and the US, gradually garnering prominence and capturing interest among carriers. Everest Group’s research shows just about half of the major US-based property and casualty (P&C) insurers utilize MGAs to cover specialized risk.

Unleashing the potential of technology

In this era of expanding MGA channels and relations, forward-looking enterprises have already made significant strides toward capitalizing on technology solutions. By strategically investing, they are enhancing the overall experience for agents, brokers, and policyholders. Simultaneously, they are seeking to enhance operational efficiencies and carve out a larger market share. Nevertheless, this merely marks the inception of a far-reaching goal, as there remains a multitude of tasks to be undertaken to fulfill the above-stated aims.

To support their vision, MGAs need modern, flexible technology that enhances customer experience and increases new business and retention. Additionally, these agents require a well-integrated and comprehensive partner ecosystem that can provide support while augmenting technical capabilities.

The prevailing economic sentiment has accelerated the trend toward investing in technology and data in more impactful ways. Regardless of MGA type, technology serves as a driving force to propel growth and enable innovation.

Clyde & Co research highlights that MGAs’ willingness to invest in technology far surpasses their insurer counterparts, with 80% of MGAs investing in technology or InsurTech in the past year, compared to only 55% of carriers. Automation, digital platforms, and data and analytics are the most prominent areas that have garnered considerable investment attention during this transformation era.

Notably, a growing number of MGAs have harnessed the potential of Artificial Intelligence (AI) and Machine Learning (ML) to optimize operational performance. Specifically, they are using these technologies to streamline and advance capabilities and underwriting processes, assess risk, and handle claims.

Digital platforms have assumed a ubiquitous presence within the MGA community, facilitating seamless engagement with customers, brokers, and carriers. They also empower MGAs to extend online quoting capabilities, expedite policy issuance, and streamline claims handling digitally.

Data and analytics play a pivotal role in delivering insights that can potentially unlock boundless possibilities in MGA’s operations. This intelligence can help them track specialized and upcoming risks that need attention, identify business opportunities for carrier partners, and develop more responsive and accurate pricing models. Additionally, these solutions can allow carriers to underwrite risks at higher margins, as well as offer more personalized coverage for policyholders.

Some examples include:

  • ZestyAI, an AI-powered specialist provider of climate and risk analytics solutions, partnered with Coterie Insurance, a focused MGA, to provide instant quotes and issue small business insurance policies leveraging data and AI
  • Gallagher recently partnered with Novidea to transform its services for a specialty client base and execute and tailor its broking cloud-based data platform to automate processes. The platform will save time, create efficiency, and turn data into actionable insights

MGAs: a low-hanging opportunity for the ecosystem partners

Platform and technology partners, as well as various InsurTechs and low-code/no-code providers, are making strides toward building dedicated playbooks and products to assist MGAs. Service provider partners have heavily invested in developing broader capabilities and solutions to tap into the growing technology adoption demands from MGAs.

Various platform providers such as Socotra, Majesco, Novidea, Cogitate, Insurity, and Instanda are launching cloud and Application Programming Interface (API)-based dedicated core platforms for MGAs. These platforms will help MGAs strengthen relationships with insurers, expand distribution, leverage a vast collection of third-party data and microservices for underwriting and customer experience, as well as achieve scalability. The solutions also will quickly offer products for complex insurance lines such as general liability, physical damage, auto liability, cargo insurance, and insurance for complex terrain or hard-to-underwrite commercial property.

Let’s take a look at the key strategic priorities for MGAs and an illustrative provider landscape in the exhibit below:

w1

Emerging risks fuel further tech investments and partnerships to drive innovation and redefine risk management

The evolving risk landscape and uncertainty are major drivers for MGAs to invest in data-driven technology tools because the current models may be inadequate for the growing number, types, and complexity of risks.

While MGAs have the expertise and models to evaluate risk, the industry is failing to capture the full spectrum of potential losses, and simultaneously capture and analyze newer data sources. The historical loss data that these traditional models rely on is less useful for projecting future losses, giving rise to the need for fostering strategic collaborations with third-party data intelligence and analytics partners, as well as other technology players.

We are seeing increased traction from the MGA sector in the following product and risk segments:

  • Cyber risk: The lack of historical data and inability to accurately price cyber risks remain a key challenge for traditional MGAs, leading to increasing loss ratios and declining profitability
    • Many InsurTechs dedicatedly track this space such as Coinnect, helping loss adjusters, brokers, MGAs, insurers, and reinsurers handle cyber risk
    • They offer a cloud platform and APIs and leverage proprietary cyber intelligence data to assess, mitigate, and respond to cyber risks of prospects and insured clients
  • Excess & Surplus (E&S): The inherent uncertainty of a changing environment, which leads to extreme climate events, is a major driver of premium growth in excess & surplus (E&S) lines. According to an AM Best Market Segment Report, the direct premium for E&S lines grew by 25% to a record US$82 billion in 2021
  • Parametric insurance: Parametric insurance demand also is on the upswing, requiring MGAs to pay attention and substantially invest in cutting-edge technology to develop relevant and targeted solutions

Forward-looking MGAs are progressively seeking to embrace cloud-based solutions and develop niche and sophisticated underwriting expertise as they shift their focus toward streamlining operations, driving cost efficiencies, and improving their ability for advanced risk modeling and resilience.

The MGA market is undergoing substantial transformations fueled by the desire to invest in tech, data, and AI to build robust risk selection and underwriting capabilities and foster good carrier relationships. Elevating the emphasis on bolstering the partnership ecosystem will be important, fueled by prevailing market dynamics, including faster speed-to-market, higher profitability, and maximizing value.

At the same time, focusing on emerging risk categories, growth in E&S lines, and high parametric insurance demand has created an urgency for MGAs to build close relationships with InsurTechs, carriers, service providers, platform and technology providers. This strategy will help MGAs drive value creation, capitalize on new opportunities, innovate and launch newer products to the market, and, ultimately, deliver exceptional value.

To discuss this topic further, please reach out to [email protected] and [email protected].

Don’t miss our annual webinar, Key Issues 2024: Creating Accelerated Value in a Dynamic World, to learn the major concerns, expectations, and trends for 2024.

Tech Services Forecast For 2024

November 28, 2023

In every quarter in 2023, the tech services environment became increasingly more difficult due to a growing more-for-less mindset instead of a build-for-the-future orientation. The discretionary spend component of the market largely evaporated. Here is an analysis of whether that will continue to affect the tech services market in 2024 and what it means for companies’ spending decisions.

Read more in my blog on Forbes

Exploring the Paradigm Shift of Experience Level Agreement-based Contracting and its Impact on Enterprises | Blog

November 17, 2023

Experience level agreements (XLAs) can foster service provider innovation and collaboration if structured with rewards for risks. While once a potent force, the XLA has lost its power as enterprises have transitioned to a penalty-only model, essentially reducing it to a standard service level agreement (SLA). Delve into the ramifications of this change and the potential dangers it poses to enterprises in this blog.

“Employee experience is critical to the success of any organization. Companies that prioritize employee experience see higher employee engagement, lower turnover rates, and improved business outcomes.” — CIO of a Fortune 500 company

41 % Enterprises have identified improving EX as the top objective of workplace transformation1

Undeniably, experience holds immense power and significantly influences business operations. The introduction of the Experience Level Agreement (XLA) (refer to exhibit 1) offers a method to quantify and subsequently enhance intangible aspects such as Employee Experience (EX), capturing the interest of businesses and senior stakeholders worldwide.

Slide1 scaled
Nonetheless, recent trends suggest that the way enterprises approach XLAs has notably shifted, moving from a risk-reward model to a penalty-only one. The full implications of this change seem to be lost on enterprises. In this blog, we will delve into this shifting approach to XLAs, discuss the associated risks, and clarify why, before making this decision, enterprises should err on the side of caution.
Slide2 scaled

Deciphering the Significance of an Experience Level Agreement: Navigating the distinction between SLAs and XLAs

Recently, there has been some uncertainty about the role of XLAs, with suggestions that they might replace SLAs or represent its next evolutionary phase. It is important to clarify that XLAs are not intended to replace SLAs but rather to complement them. Understanding the differences between the two, as presented below, is critical.
Slide3 scaled

Demonstrating the intended version of XLA-based contracting

Before the introduction of XLAs, experience was pursued on a best-effort basis, with no means of measurement. However, now with enterprises contractually committing to XLAs, it placed the onus on SPs to take ownership of the user experience and actively seek avenues for improvement.

By formally incorporating XLAs into contracts, both enterprises and SPs established well-defined roles and responsibilities, fostering a collaborative partnership with mutual advantages.

Initially, XLAs operated under a risk-reward framework (refer to Exhibit 2), providing SPs with strong incentives to exceed predetermined performance standards. Penalties for non-compliance motivated SPs to improve service quality, ultimately benefiting enterprises. Furthermore, enterprises had the authority to impose penalties.

Slide4 scaled

The current landscape of the Experience Level Agreement risk-reward model approach

This risk-reward model seemed to be the ideal path for both enterprises and SPs to follow. However, macroeconomic factors and a heightened cost-saving focus led enterprises to push for a penalty-only XLA model to save costs.

While SPs were hesitant, they ultimately agreed to this model. This has created the scenario where SPs are offering penalty-only XLA contracting by default for all digital workplace deals.

However, SPs diluted the XLA-based contracting construct by accepting lenient performance benchmarks and minimal penalties, eliminating their motivation to work beyond the agreed-upon baseline benchmarks. Additionally, SPs began templatizing XLAs, inadvertently diluting their fundamental intent and purpose.

The change in XLA contracts has ultimately led to a pyrrhic victory for enterprises. Although they might have succeeded in eliminating rewards in the short term, overall employee experience and innovation may suffer in the long term.

In essence, this has now become dangerous for enterprises, as illustrated below:

Slide5 scaled 

The way forward

This shift in approach diminished a once powerful tool in the hands of the enterprises, reducing XLAs into just another SLA, transforming a mutually beneficial partnership for growth into an environment fostering mediocrity.

Hence, enterprises must exercise caution in their approach towards XLAs. Instead of viewing XLAs as a means to cut costs or penalize providers, they should view them as a collaborative avenue for fostering innovation and driving growth.

Everest Group will continue to follow the evolution of the experience level agreement. To discuss your XLA journey or for help within an XLA co-creation workshop, please reach out to [email protected] and [email protected].

See our webinar, Forward-looking Sourcing for 2024: Outsourcing, Location, and Pricing Strategies in APAC, for 2024 outsourcing portfolio strategies.

1. Based on CXO responses from 442 enterprises with revenue greater than US$1 billion

2. Everest group research with 50 digital workplace providers

Source:  Everest Group (2023)

Everest Group’s AI Top 50™ List: Who’s Leading a Decade of Disruption? | Blog

November 16, 2023

With its first-ever AI Top 50™ list, Everest Group recognizes the exceptional business performance of AI technology providers globally. This valuable ranking serves as a useful tool for enterprise decision-making and provider comparisons. Continue reading to learn more about the leading AI-first providers featured, as determined by Everest Group’s comprehensive research.

Everest Group has launched its inaugural AI Top 50 list of the most prominent technology providers worldwide that prioritize artificial intelligence (AI) at their core. The list was determined by evaluating rigorous, objective criteria, which include AI revenues, total funding secured, share of funding received in the past two years, and company valuation. This vital report will be released annually.

See Everest Group’s Top AI 50 list.

Why is the Everest Group AI Top 50 important today?

In the past decade alone, over 5,000 AI technology providers have emerged with different specializations across various domains and geographic regions. The remarkable growth underscores AI’s critical role in shaping the future of technology and its enduring impact on daily lives. Recently, the introduction of large language models (LLMs) has further sparked an innovation wave across various industries, shaping interactions and decision-making and revolutionizing everything from chatbots to content creation.

With this rapid progression in the past few years, and even months, businesses across all industries are rushing to gain insight into the technology to stay competitive as it reshapes industries, streamlines processes, and redefines interactions between humans and machines.

The list will assist enterprises in identifying AI technology providers that have achieved notable scale. Businesses, investors, and industry professionals can gauge the providers’ competitive positioning and potential in the ever-evolving AI industry. Additionally, the ranking is a resource for AI-first technology providers to benchmark themselves against industry peers.

How does Everest Group define AI?

To define the terms in the report, we used a multi-faceted approach, drawing on a combination of exclusive proprietary data, including insights gathered directly from AI technology providers. Along with that, the methodology incorporates publicly accessible information such as reported revenue, total funding, and valuation data obtained from publicly accessible sources. This thorough methodology ensures the accuracy and breadth of the data.

How is the Everest Group AI Top 50 list determined?

From a database of 2500-plus AI providers, we narrowed the pool to 250 firms after initial preliminary screening. The selected AI technology providers were then evaluated and positioned based on a set of qualification criteria. The research findings provide a comprehensive snapshot of their standing in the dynamic AI landscape.

The AI Top 50 list represents AI technology providers that meet the following criteria:

AI-first

All the companies listed develop and integrate AI as a central and indispensable component of their products and solutions. In other words, their offerings would be fundamentally incomplete without AI.

Software-first

The featured providers develop and offer software-based AI solutions as their primary offering, meaning their core focus revolves around delivering AI through software applications.

Business-to-business (B2B) focus/offerings

The providers on the list tailor their software products and solutions to meet the technology needs of other businesses.

With AI becoming a more essential component of business and individuals’ daily lives, the Everest Group AI Top 50 list empowers organizations to navigate this dynamic field. See the Everest Group AI Top 50 list.

To learn more about the 2023 Everest Group AI Top 50, reach out to Priya Bhalla, [email protected], Vishal Gupta, [email protected], and Niraj Agarwal, [email protected].

Key Issues 2023: Assessing the Global Services Industry’s Performance Against Expectations | Blog

October 20, 2023

The global services industry’s confidence waned in 2023 after a banner post-pandemic year. Leaders were more cautious and prioritized cost optimization. To gain valuable insights into how the year unfolded compared to expectations, read on.

Participate in the Key Issues Survey 2024 to better understand the current thinking of industry leaders across the globe.

Coming off a bumper year in 2022 with double-digit growth driven by pent-up demand after the pandemic, the global services industry entered 2023 with macroeconomic uncertainty clouding the forecast.

As a result of these concerns, global leaders adopted a more cautious stance going into this year, according to Everest Group’s annual Key Issues survey of over 200 global leaders across industry enterprises, Global Business Services (GBS) centers, and providers.

In the survey, price and cost margin pressures ranked as the top business challenge expected in 2023, and subsequently, cost optimization emerged as the highest business priority for the year.

As 2023 nears an end and leaders start planning for 2024, let’s reflect on how the year fared against global services industry expectations of the industry.

1. Macroeconomic uncertainty subdued industry growth in 2023

In the face of macroeconomic uncertainty, most industry leaders felt cautiously optimistic about 2023. True to their expectations, results from the first three quarters of this year indicate subdued industry growth similar to the pre-pandemic numbers. A mix of macroeconomic concerns, rising prices, fiscal tightening, and geo-political tensions have resulted in a slowdown in customer demand and growing margin pressures on the global services industry. While revenues grew, the escalated cost and price pressure resulted in stagnant or even declining operating margins for most providers, as presented in Exhibit 1.

Exhibit 1: Key financial metrics for providers for 2022-23

Picture1 2

2. Talent demand and supply mismatch eased but remain challenging for niche skills

With attrition at an all-time high and growing industry demand, talent supply continued to fall short of the demand in 2022. The talent/skill shortage was the top concern industry leaders highlighted as part of the Key Issues Survey 2022. However, as the industry prepared for the looming uncertainty in 2023, these concerns took a back seat. In line with the industry expectations, the talent situation eased in 2023. Data for the first half of 2023 show that attrition rates have declined, and most delivery geographies are reporting a narrowing talent demand-supply gap. An assessment using Everest Group’s proprietary Talent GeniusTM tool indicates talent demand for delivery of IT and contact center services has declined substantially compared to 2022, as shown in Exhibit 2.

Exhibit 2. a: Talent demand across select countries for delivery of IT services indexed to January 2022 (Jan 2022 = 100)

Picture2 1

Exhibit 2. b: Talent demand across select countries for delivery of contact center services indexed to January 2022 (Jan 2022 = 100)

Picture3

However, this improvement in talent supply has not applied to all global services, especially those requiring niche skills. Digital and next-generation technology services continue to witness a mismatch between talent demand and supply. This disparity is especially true for emerging skills like generative Artificial Intelligence (AI), where talent supply is even more limited. Preliminary estimates by Everest Group show that only 1% of AI talent has expertise in generative AI, pushing companies to focus on upskilling and reskilling their employed talent pools to bridge this gap.

3. Offshore locations and tier 2/3 cities are being considered to optimize costs

To manage growing cost pressures, a key strategy for global leaders entering 2023 was continuing to leverage offshore locations and exploring alternative delivery strategies, such as leverage of tier 2/3 cities. Global services trends in 2023 resonate with this approach. Offshore locations like India continue to be the destination of choice for global service delivery, given the significant cost arbitrage opportunities. Similarly, enterprises and providers alike are more enthusiastically exploring tier 2/3 locations driven by needs of cost savings, talent access, employee preference, and market competition management. Exhibit 3 shows how the leverage of tier 2/3 cities witnessed growth in 2023.

Exhibit 3: Trends in center setup across Tier 1 and Tier 2/3 locations (2022-23)

Picture4

4. Provider bill rates increased but at lower levels than expected

Despite the prevailing macroeconomic pressures, providers maintained optimism about bill rate increases in 2023, although they were expected to be at a lower rate than in 2022. Unlike other economic downturns, provider bill rates have continued to show positive growth despite the growing cost and price pressures in the first seven months of 2023. However, with the macroeconomic scenario hitting much harder than expected, input-based pricing has been subjected to hard negotiations. This has led to muted growth (0.5-2%) in bill rates across different functions, much lower than provider industry expectations going into 2023. For example, provider bill rates for traditional applications skill delivery in offshore regions grew by only 0.5-1% compared to the expected growth of 2-5% from January to July 2023.

5. Provider portfolios underwent significant rebalancing and consolidation to ensure better deal terms

Enterprises reported much lower satisfaction with providers in 2022 compared to 2021 when providers played a key role in supporting enterprises in navigating the pandemic. The leaders cited a lack of innovation and communication as the key reasons behind this dissatisfaction. Consequently, procurement leaders expected a significant change in their provider portfolios. Additionally, with macroeconomic concerns clouding all strategies, enterprises looked to consolidate and rebalance provider portfolios to negotiate better deal terms with limited providers. As expected, 2023 witnessed a shift in provider portfolios, with major providers winning deals that had vendor consolidation components.

6. Investments in strengthening the digital core are a priority over moonshot endeavors

Prioritizing resilience through uncertainty, the focus of the global services industry continues to be on pragmatic digital investments like cloud solutions, cyber security, analytics, and automation. While the advent of newer technologies like generative AI has created an industry buzz, the primary focus continues to be on strengthening the digital core and building a resilient technological foundation. Most industry verticals continue to wait and watch before diverting constrained resources to newer projects with limited use cases and industry adoption.

As 2023 comes to a wrap, the global services industry is at the forefront of another transformative shift – the need to create value and the need to create it fast. This becomes especially imperative as technological advancements like generative AI threaten to shift the industry’s current equilibrium and potentially start the next phase of a technological revolution. The global services industry must adapt swiftly to stay ahead of the curve.

Participate in our Key Issues Survey 2024 to capture the pulse of Information Technology and Business Processing industry leaders across the globe and uncover major concerns, expectations, and key global services trends that are likely to amplify in 2024. To discuss further, or for any questions, reach out to Ravneet Kaur or Hrishi Raj Agarwalla.

Don’t miss the Key Issues 2024: Creating Accelerated Value in a Dynamic World webinar to gain valuable insights into 2024.

Unleashing IT Industry Growth Potential with Asset-Based Business Models | Blog

October 18, 2023

With slowed IT industry growth, service providers can drive momentum with asset-based business models that center on delivering services built on digital products and platforms or monetizing the platforms and assets themselves. To learn about the advantages and key questions service providers should ask to successfully move to this model, read on.

Contact us to explore this further.

After fast growth on a once expansive highway, the IT industry hit a roadblock in recent years and is now navigating on narrower lanes. Service provider leaders are grappling to help the IT industry find new avenues of growth. Asset-based business models that prioritize the monetization of digital products and platforms may hold the key to moving forward. Let’s explore this concept further.

Finding stability amid uncertainty

With IT revenue and operating margins already down (approximately 14% decline in operating profit per employee since 2018), larger macroeconomic and geopolitical disruptions will continue to impact the IT services industry as the sector interconnects ever more closely with enterprise operations.

This tough climate is pushing service providers whose traditional linear business model is oriented around services to seek innovative growth opportunities. Amid these challenges, the asset-based business model is attracting attention.

An asset-centric business model revolves around a strong foundation of digital assets like products and platforms. Asset-based models are appealing because they help promote client loyalty, streamline operational costs, expedite market entry, and provide a competitive edge.

Assets as catalysts for growth

Some may argue that the concept of harnessing assets isn’t new, as it has been a steadily growing trend for a long time now. While some suppliers use assets closely bundled with their services, others have been able to position themselves as product providers.

Some large system integrators record anywhere between 8-12% of revenue in 2022 through assets. Their lessons learned and success stories have paved the way for other service providers to explore and scale asset-based models.

For instance, Accenture’s acquisitions of Navitaire and Duck Creek Technologies showcased the power of assets, while TCS strategically positioned ignio™ as a transformation catalyst and upheld BaNCS as a revenue-generating platform within banking, financial services, and insurance (BFSI).

Some of the notable benefits realized by these leading players include:

Picture2

  • Revenue diversification: Relying solely on traditional services may no longer be sustainable. Integrating digital assets can create new revenue streams and ensure business sustainability
  • Time-to-market advantage: Developing digital products and platforms allows IT service providers to respond quickly to market demands, gaining a competitive edge
  • Reduced cost-to-serve: Automated and scalable digital assets enable cost efficiencies, enhancing profitability while delivering high-quality services
  • Talent solution: The scarcity of skilled resources in the market makes it imperative for service providers to embrace digital solutions and optimize their talent pool

 Embarking on the asset-based journey

 When considering moving to an asset-based business approach, providers need to answer key questions and consider their unique objectives, strengths, and market synergies. These include:

  1. What is the appropriate business structure? Should we opt for a specialized asset-centric business distinct from the services business or integrate assets within the existing services structure?
  2. How does an asset-based business model impact the existing service provider positioning?
  3. How do we select the products that can help drive long-term growth? Should we build or buy them?
  4. How does this approach change our talent model? Do we need a team of product specialists? How do we train sales teams to pivot to products from services? How will this impact internal collaboration?
  5. Who owns the responsibility of developing the asset and subsequent implementation?

When beginning this transformative journey, we recommend:

  • Pick the battle and weapons meticulously: The first and the most critical aspect is strategically selecting assets based on market potential and alignment with business objectives
  • Manage synergies internally and externally: Strike a balance between maximizing synergies and mitigating conflicts between the existing services business and the new asset-based ventures. Addressing any potential conflict in customers’ perception is crucial
  • Establish a holistic model: Forge a comprehensive asset-based business model, addressing strategic vision, organizational alignment, commercial models, talent strategies, and operational intricacies

Don’t miss Everest Group’s much-anticipated annual webinar, Key Issues 2024: Creating Accelerated Value in a Dynamic World, to gain valuable insights into the current perspectives of IT-BP industry leaders.

Picture1

Asset-based business outlook

With the bumpy road ahead in IT, the asset-based business approach gives service providers a new lane to accelerate in. By embracing this model, businesses have the potential to transform into innovative engines that can swiftly navigate obstacles and seize new opportunities.

To discuss strategies for adopting an asset-based business model, reach out to Alisha Mittal or Parul Trivedi.

 

Exploring Emerging Generative AI Trends in Technology | Blog

October 18, 2023

Generative Artificial Intelligence’s rapid evolution holds the promise to transform enterprise operations and decision-making across many industries. Several emerging key generative AI (GAI) trends can profoundly impact automation, productivity, and human expertise, but harnessing GAI’s many opportunities will come with risks that will require enterprises to make complex choices and strategically adapt. Read this blog for valuable insights to prepare for this new frontier. 

Developing Generative AI Trends and Innovations

The trends to watch in the near and mid-term:

  • The move from general to specialized models – As generative AI moves into specific industries and domains, more examples of models fine-tuned for specific purposes are expected to emerge. For instance, models could be specifically trained for banking, insurance, or Human Resources domains, with the capability to speak the language of these narrower fields
  • Applications built on top of foundational GAI models – Apps built on top of large language models (LLMs) or conditioned LLMs to solve for specific needs will likely proliferate. Beyond ChatGPT, we already see early-stage web navigation concierges, code development assistants, and more. Initially, business-to-consumer (B2C) contexts will rise, but once the risks around GAI are solved, business-to-business (B2B) or business-to-employee (B2E) applications also will surge in activity
  • Lower costs – GAI is still relatively expensive but prices already have dropped significantly. As infrastructure, hosting, training, and inference become more efficient and economies of scale improve, we expect further cost reductions

What the generative AI trends mean for enterprises

  • Automation, productivity, and skills – Automation of tasks by GAI will boost employee productivity and also change the nature of expertise. This shift will require enterprises to rethink their talent agenda, workforce planning, learning and development (L&D) programs, and so on. Consider the example of an entry-level developer. With the benefits of GAI, the traditional “skill” of knowing a particular syntax for a specific language will become much less important. As a result, the bar of “valuable” human expertise will be raised. Enterprises need to account for these changes by rebuilding skill taxonomies and subsequently reassessing talent planning
  • Focus on enterprise data strategy – The true power of GAI comes into play once enterprises go beyond the low-hanging fruit of using it to generate generic outputs, like text, images, or other media. For instance, we could envision a world where GAI creates appropriate business or IT workflows, creates complex documents from scratch, or generates marketing collateral tailored to a company. Getting to these use cases will require seamless access to enterprise data, regardless of the approach (whether specialized models built from scratch, fine-tuning, or in-context learning). While GAI will unlock the power of this data, enterprises will need to surface it for use. The enterprise data journey is not new, but GAI will require a renewed focus and potentially more investments to advance it
  • Competition, disruption, and lowered barriers to entry – As GAI enables significant automation, organizations can do more with less. With lower costs, fundamentally new business models will become more feasible in multiple domains. Similar to how digital banks, built from the ground up, started nipping at the heels of established brick-and-mortar ones, this technology can potentially give birth to new contenders. One possible scenario to imagine is a new video game company creating complex video games relying heavily on GAI with a dash of human ingenuity. Similarly, GAI has the potential to disrupt stock media, customer service, entertainment, and other industries.

Enterprises may face difficult future choices, including making massive pivots, cannibalizing existing revenue streams, etc. While these decisions will naturally be difficult, enterprises must be willing to make hard calls to rapidly evolve and stave off existential threats further down the line.

However, there is no need to press the panic button yet. By investing in leadership education, keeping on top of developments, being open to innovations, and investing in home-grown and external GAI solutions, enterprises can position themselves well for when the time comes to make those hard choices

But before putting the horse before the cart, the many primary risks around GAI need to be addressed for broad-based enterprise adoption. These include regulatory concerns (including intellectual property), data and privacy, explainability (to some extent, at least), and others. Based on early trends, at least partial workarounds or mitigation mechanisms will be developed, in the short-term.

Everest Group provides insights and guidance on the risks, use cases, pricing, and implementation strategies to best position enterprises across industries for GAI adoption success. To learn more about Everest Group’s generative AI research or to discuss generative AI trends, reach out to Anil Vijayan.

Don’t miss our webinar, Key Issues 2024: Creating Accelerated Value in a Dynamic World, to hear our analysts discuss major concerns, expectations, and trends for 2024.

Examining the Impact of the Israel-Hamas Conflict on Cybersecurity Innovation | Blog

October 17, 2023

The Israel-Hamas war has immediately increased cyberattacks, depleted technology provider resources, and postponed venture capital funding. While novel cybersecurity products from Israeli startups will face temporary setbacks, the situation may foster future cybersecurity innovation. Read on to explore the impact of this conflict on Israel’s cybersecurity firms, technology providers, enterprises, and venture capitalists.

Reach out to discuss further.

Israel’s cybersecurity innovation under attack

A powerhouse of cybersecurity innovation, Israel has nurtured a rich startup ecosystem that has skyrocketed to global fame. Companies like Orca, Imperva, CyberArk, Radware, SentinelOne, Wiz, and Snyk have broadened their wings to the US but maintain deep-rooted connections to Israel. Many cutting-edge cybersecurity solutions have emerged from Israel’s robust research and development (R&D) and product engineering foundation.

Let’s delve into how the ongoing conflict is impacting various areas:

  • Israeli technology providers

The conflict has reverberated across Israel’s tech landscape. The mobilization of reserve troops, many of whom play integral roles in cybersecurity companies, has created an immediate resource gap. Israel Defense Forces (IDF) veterans who established many of these startups have been deployed to the battlefield. The sudden staffing shift has caused internal R&D and engineering delays, hampering cybersecurity innovation and project timelines.

Looking ahead, the ramifications could manifest more significantly. The ongoing challenges may lead companies to strategically reshuffle and geographically diversify critical R&D endeavors to avert future disruptions.

This resource shift can have long-lasting impacts on global technology conglomerates that have deeply ingrained partnerships with Israeli cybersecurity startups.

The mobilization of Israeli cybersecurity specialists has created an expertise shortage likely to have a ripple effect, causing short-term disruptions in international alliances and collaborations. Consequently, global tech providers may face challenges in maintaining the innovation charter in cybersecurity solutions as their niche Israeli partners grapple with a temporary resource crunch due to the war.

In the long term, the heightened conflict could catalyze cybersecurity innovation, fueling the development of novel solutions tailored to an evolving threat landscape.

  • Broader impacts

The conflict has had repercussions in the digital domain. Recent cyber incursions targeting Israel’s missile alert systems and media outlets are mere precursors to potentially broader cyber warfare. The looming threat of escalated cyberattacks menacing critical infrastructures such as power grids, oil and gas installations, and telecommunication networks is palpable.

With its robust cybersecurity infrastructure, Israel stands well-poised to thwart these cyber forays. Yet, maintaining unwavering vigilance coupled with a strong response and recovery strategy is imperative to safeguard both national interests and ensure uninterrupted business operations.

  • IT service providers

Indian IT firms have limited exposure in Israel, which accounts for less than 1% of their revenue base. Nevertheless, even though these firms have a solid foundation due to offshore operational bases, the IT security services continuum is still vulnerable to the unfolding scenario.

A noticeable delay in the rollout of novel cybersecurity products from Israeli startups is anticipated, stemming from the reduced engineering and R&D workforce. As a result, service providers entrenched in the Israeli startup ecosystem aiming to drive innovation with clients stand to be the most impacted.

  • Venture capitalists

The venture capital ecosystem has been disrupted by the conflict with a few early-stage companies from Israel recently postponing funding announcements. Merlin Ventures, a US-based firm that invests primarily in Tel Aviv security startups, canceled its planned Israeli Cyber Showcase. We believe the war will not only slow new cybersecurity product development in the short term but also cause venture capital funds to divert attention to other geographies.

The outlook

The Israel-Hamas war highlights a complex scenario that arises when geopolitical discord and cybersecurity intersect. This situation has quickly elevated cyber threats and strained technology resources. However, in the longer term, it could lead to a new chapter in cybersecurity innovation to thwart the increased threats emerging from this conflict.

At Everest Group, we remain focused on following the evolving situation and providing insights to navigate cybersecurity challenges in these turbulent times. To discuss, contact [email protected].

Stay informed with Everest Group’s annual webinar, Key Issues 2024: Creating Accelerated Value in a Dynamic World, to gain valuable insights into the current perspectives of IT-BP industry leaders on trends for 2024.

India’s Infosys Cuts Top End of FY Revenue Outlook | In the News

October 12, 2023

Infosys (INFY.NS) cut the upper end of its annual revenue forecast on October 12, raising concerns about near-term demand for services provided by the US$245 billion Indian information technology sector. The No.2 Indian software services exporter said it now sees full-year revenue growth at 1-2.5%, excluding foreign exchange volatility, versus a prior view of 1-3.5%.

Considering the reluctance by clients to spend on discretionary projects, Peter Bendor-Samuel, CEO of Everest Group, said, “We continue to see a significant amount of market hesitancy resulting in delayed revenue. This is driven by uncertainty about the economic cycle and the increasing conviction that a recession is likely in 2024.”

Read more in Reuters.

Current Risks Involved In Adopting Generative AI Technology | Blog

October 4, 2023

There is no doubt that generative AI technology is incredibly important, extremely powerful, and will have a significant and disruptive effect on how businesses operate. The release of ChatGPT by OpenAI exposed Gen AI to the world and allowed people to experiment with it. This caught the attention and imagination of every business and every board of directors. It is certainly top of mind today for most senior executives. For example, one major corporation recently charged each of its departments to come up with actionable strategies to incorporate Generative AI into their operations.

Read more in my blog on Forbes
EG with tagline Neg
Linkedin-in Facebook-f Play Instagram
Better Decisions Powered by Tenacious Research    

Contact Us

Who We Are

About Us

Newsroom

Office Locations

Partners & Affiliations

What We Offer

Memberships

Custom Decision Support

Published Research

Careers

Why Everest Group

Explore Openings

Equal Opportunity Employer

Resources

Access Reports

Citation Policy

Everest Group Market Intelligence (EGMI)

Legal

Using the Reports Portal

©2023 Everest Global, Inc.         Privacy Notice          Terms of Use        Do Not Sell My Information

How can we engage?

Please let us know how we can help you on your journey.

Contact Us

"*" indicates required fields

Please review our Privacy Notice and check the box below to consent to the use of Personal Data that you provide.
Consent*