Technology Industry Archives

Building Purpose-Driven generative AI (gen AI) – Why We All Have a Role to Play in the Future Success of the gen AI Ecosystem  | Blog

October 1, 2024

Gen AI’s rapid adoption is evident from its early success; for example, ChatGPT 3.5 amassed one million users within five days of its 2022 launch, and now has over 180 million users – these numbers simply can’t be ignored!

Organizations across industries are now leveraging gen AI to transform operations, enhance decision-making, personalize customer experiences, and foster innovation.

However, this rapid adoption comes with significant environmental and social challenges. Our analysts have delved deeper into the topic, to decipher how and why gen AI needs to be nurtured and understood throughout every ‘step of the ladder’ in the marketplace.

Reach out to discuss this topic in depth.

The current landscape:

The environmental footprint of gen AI is notable; generating a response from gen AI uses six to ten times more energy than traditional internet searches, exacerbating the information technology (IT) carbon footprint in every sector.

Socially, gen AI also faces issues such as bias and ethical concerns, with biases in gen AI outputs perpetuating discrimination and misinformation. The particular concern around fair use doctrine is also emerging, with the New York Times suing OpenAI to use its news articles without permission, to train its model.

To address these multifaceted challenges, it is crucial to understand the roles of various stakeholders in the gen AI ecosystem. Each plays a distinct part in promoting sustainability and mitigating negative impacts.

The gen AI’s ecosystem involves various stakeholders—technology providers, service providers, enterprises, regulatory bodies, and research/coalition building organizations. Technology providers can enhance model efficiency and inclusivity, while service providers develop energy-efficient and responsible artificial intelligence(AI) solutions.

Enterprises, as end users, can demand sustainable practices and influence market demand. Regulatory bodies also play a crucial role by establishing and enforcing standards and regulations. Meanwhile, research and coalition building organizations drive innovation and offer insights into emerging best practices and technologies for sustainable gen AI. Together, these stakeholders form a cohesive ecosystem essential for advancing sustainability in the gen AI landscape.

Everest Group explores how key stakeholders influence gen AI’s path to sustainability

At Everest Group, we view gen AI’s sustainability through the lens of the planet and people. To ensure a sustainable future for gen AI, we have identified three themes:

Decarbonization and energy management: Reducing energy consumption and lowering the carbon footprint of gen AI technologies.

DEIB (Diversity, Equity, Inclusion, and Belonging): Promoting inclusive and equitable practices within gen AI development and deployment.

Accessibility: Ensuring gen AI technologies are accessible and usable for everyone, regardless of their disability status.

Three stakeholders—technology providers, service providers, and enterprises—are pivotal in translating these mandates into practical actions. Understanding their contributions is essential for advancing gen AI sustainability.

Technology providers, service providers, and enterprises are directly involved in implementing and influencing sustainable practices, making their involvement critical for tangible progress. While regulatory bodies, governments, and research organizations and industry coalitions play a complementary part by establishing standards, regulations, and guiding research, the immediate impact on sustainability stems from the actions and commitments of these primary stakeholders.

Everest Group has developed an assessment framework to define the roles the primary stakeholders play in making gen AI more sustainable.

Our ROLE framework evaluates how much pressure existing AI regulations place on stakeholders, their operational control across the gen AI value chain (from conceptualization to end-of-life), their leadership in partnerships and engineering research & development (ER&D), and their expertise in shaping sustainable gen AI.

The ROLE framework is depicted in Exhibit 1.

After scoring the three stakeholders across the parameters defined in our ROLE framework, our assessment has categorized stakeholders into three roles:

Architect: Reflects stakeholders with high engagement and significant influence on advancing gen AI sustainability.

Technology providers are currently in the role of Architect. They drive innovation and set the standards for sustainable gen AI technologies. Their involvement spans the entire lifecycle of gen AI, from development to deployment, and they are at the forefront of integrating sustainability into their solutions.

Contributor: Indicates stakeholders who actively support and engage with sustainability efforts but do not lead them.

Service providers fall into the Contributor category. They play a vital role in implementing and supporting sustainable practices within gen AI solutions, yet their influence is more supportive rather than leading the charge in sustainability initiatives.

Influencer: Denotes stakeholders who monitor or follow sustainability developments with minimal direct involvement but may shape discussions and perceptions through their observations.

Enterprises are classified as Influencers. While they adopt gen AI solutions, their involvement in driving sustainability is limited. They largely follow industry trends without actively shaping or leading sustainability efforts. However, they can shape the demand for more sustainable gen AI through discourse, forming industry-coalitions to adopt best practices, or co-innovating sustainable gen AI solutions with tech partners.

The ROLE framework provides a comprehensive assessment of the market and the contributions of various stakeholders.

It categorizes stakeholders based on their overall impact within the ecosystem. However, we recognize that some players are making exceptional efforts that could elevate their roles—from Influencers to Contributors or from Contributors to Architects. This nuanced view acknowledges that individual players can surpass their general category and assume a more influential position in driving sustainability.

The evolving roles of technology providers, service providers and enterprises present valuable opportunities for further advancements. By exploring these dynamics, we can better understand how each stakeholder can contribute to a more sustainable gen AI ecosystem.

Everest Group will keep digging deeper to understand the gen AI sustainability ecosystem better. Stay tuned for our upcoming blogs, where we’ll explore strategies for tackling gen AI’s complex sustainability challenges. We’ll delve deeper into each stakeholder’s evolving role and offer insights on bridging the gaps in their current efforts.

If you found this blog interesting, check out our recent blog focusing on Unleashing The Power Of Advanced AI Engines: Transforming Business Operations For The Future | Blog – Everest Group (everestgrp.com), which delves deeper into the topic of advance AI and gen AI.

If you have questions or want to discuss these topics in more depth, please contact Meenakshi Narayanan, Rita N. Soni and Cecilia Van Cauwenberghe.

Unlocking Growth in Semiconductors: Outsourced Semiconductor Assembly and Test (OSAT’s) Pivotal Role and Emerging Opportunities for Service Providers | Blog

September 30, 2024

The semiconductor industry, a cornerstone of the modern technological landscape, is experiencing rapid growth, fueled by advancements in AI, consumer electronics, automotive innovations, and the widespread adoption of connected devices.

Central to this expansion are Outsourced Semiconductor Assembly and Test (OSAT) services, which play a crucial role in bridging the gap between wafer fabrication and the production of functional integrated circuits.

Once semiconductor wafers are fabricated, they must undergo assembly, packaging, and extensive testing to meet strict performance and specification standards. This is where OSAT providers come in, offering specialized services that include die assembly, packaging solutions, and integrated circuit (IC) testing.

By managing these complex and critical processes, OSAT firms allow semiconductor companies, particularly fabless ones, to concentrate on design and innovation while ensuring their products meet the rigorous standards required by diverse end markets.

Reach out to us to discuss this topic further with our expert analysts. 

Key drivers shaping the OSAT market

Geopolitical fragmentation and regional investments: The OSAT industry is becoming more geographically fragmented, due to rising geopolitical tensions, leading to a diversification of manufacturing hubs away from traditional regions including Taiwan.

Emerging markets in the Asia-Pacific (APAC) region, including Malaysia, Vietnam, and India are becoming critical players, with substantial investments in advanced semiconductor packaging and testing. Malaysia controls around 13% of the global OSAT market and has attracted key players such as Intel and Infineon. Vietnam is also making significant strides, with Amkor recently opening a facility to provide advanced packaging solutions for sectors including automotive and high-performance computing. Furthermore India, is positioning itself as a growing player, with increasing investments in OSAT capabilities, including partnerships with companies including Foxconn. These shifts reflect the need for resilience in semiconductor supply chains, especially amidst US-China trade tensions and global chip shortages. For service providers, this diversification presents opportunities to establish stronger ties with semiconductor manufacturers looking to tap into these emerging markets.

Rising demand from the automotive and electronics Sectors: The increasing complexity of semiconductors required in automotive applications, such as electric vehicles (EVs), advanced driver-assistance systems (ADAS), and autonomous driving, has significantly boosted OSAT demand. The electronics sector, driven by innovations in smartphones, internet of things (IoT) devices, and 5G infrastructure, further fuels this demand. As the complexities of chip design and manufacturing increase, there is a growing need for sophisticated testing and packaging, a niche in which OSAT providers excel.

Industry insight

As semiconductor companies shift focus towards more advanced technologies, understanding the shifting landscape of OSAT presents both challenges and lucrative opportunities for service providers.

For engineering service providers, this opens the door to new partnerships and outsourcing contracts, particularly in engineering research & development (ER&D), supply chain optimization, and the deployment of advanced packaging solutions.

The convergence of semiconductor innovation with other technological domains, such as artificial intelligence (AI), also presents opportunities to create differentiated offerings that cater to specific verticals.

Opportunities for service providers

Advanced packaging and testing solutions: The rise of advanced technologies, such as high-bandwidth memory (HBM) and system-on-chip (SoC) solutions, demands cutting-edge packaging and testing.

Service providers can develop advanced testing methodologies and employ tools such as digital twins for simulation. Incorporating AI into these processes can enhance predictive analytics and optimize testing protocols, significantly reducing time and costs.

Process automation and efficiency enhancements: The need to enhance efficiencies and optimize costs has emerged as a key priority for OSAT companies. Service providers now have an opportunity to work with these firms to identify processes that can be automated and enhanced using digital technologies. Incorporating IoT solutions for instance, can provide real-time data analytics for monitoring production lines, allowing for proactive adjustments and maintenance.
Talent development: One of the biggest challenges for the OSAT industry comes within building the talent pool needed to support rapid growth. Countries such as Vietnam are already investing in talent development, with a goal in place to train 50,000 semiconductor engineers by 2030. Service providers can support these initiatives, by offering tailored training programs or collaborating with universities and local governments, to create specialized workforce development programs and offering the requisite talent to OSAT firms.
Infrastructure investments: Infrastructure investments, particularly in labs and ER&D centers, are also becoming crucial to meet OSAT needs, presenting another opportunity for service providers to offer high-value support. Service providers can assist OSAT companies by developing state-of-the-art facilities that enhance research capabilities and support advanced manufacturing processes.

Conclusion: A strategic entry point for service providers

The OSAT market, currently valued at $40-45 billion, is poised for significant growth, driven by increasing demand for advanced semiconductor technologies.

Service providers that align their capabilities with semiconductor clients’ needs—through advanced packaging, talent management, or ER&D—can capitalize on this expanding market by positioning themselves as strategic partners in the global semiconductor value chain.

Service providers targeting this opportunity will need to segment the market, identify key opportunities, and develop focused attack strategies based on actionable market intelligence, which is something our expert team can provide in the form of insights, needed to effectively navigate this ever-changing landscape.

Additionally, OSAT firms looking to partner with an outsourcing firm or improve their understanding of the outsourcing market can benefit from our upcoming Semiconductor Engineering Services PEAK Matrix® Assessment, which assesses service providers across the semiconductor engineering services value chain, including OSAT services. Stay tuned to www.everestgrp.com for more information.

If you found this blog interesting, check out our blogs page, which delves deeper into a wide range of topics.

 To discuss this topic in more detail or for an even more detailed analysis, please contact Kritika Chawla and Nishant Udupa.

Race for Artificial Intelligence (AI) Infrastructure: Navigating the Best Path to Supercharge Your AI Strategy | Blog

September 27, 2024

As we stand on the brink of a new technological era, the rise of AI is reshaping our interactions with the digital world.

The rapid proliferation of AI has intensified the demand for scalable, high-performance computing resources, in the process exposing the limitations of traditional infrastructure.

Enterprises are now seeking significant upgrades and expansions to their traditional information technology (IT) infrastructure, in order to keep up with the rising demands of AI workloads.

This has since driven considerable investment into specialized AI infrastructure and tools and services, that can now create the necessary environment for core hardware and infrastructure components to operate at their best.

According to Everest Group research, 81% of enterprises plan to allocate 50% or more of their infrastructure budget this year to upgrading capabilities specifically for AI

Managing Investments in the Face of Rising AI Demands and Evolving landscape

To accelerate AI development and maintain an edge in the evolving digital landscape, enterprises are increasingly investing in core hardware and infrastructure components. This had led to the surge in demand for high-performance critical computer hardware, networking, and storage infrastructure necessary for AI computations and data management including (Graphics Processing Units) GPUs, (Tensor Processing Units) TPUs, and Virtual Storage Platforms (VSP).

As per Everest Group research, 46% of enterprises prioritize upgrading computing power such as, graphics processing units (GPUs), central processing units (CPUs), and tensor processing units (TPUs), as one of their top three priorities in AI infrastructure investments

Reach out to discuss this topic in depth.

Providers are now significantly increasing investments to upgrade their supply and secure their positions in a rapidly evolving marketplace.

They are adopting multifaceted strategies to differentiate themselves, secure market share, and address the evolving needs of enterprises for their AI needs. As the market transforms, leading players are making bold strides in the AI arena:

As Nvidia rides the AI wave, AMD battles to disrupt its market dominance in the GPU market

Nvidia, known for its high-end graphics cards for gaming personal computers (PCs), has now crossed US$3 trillion in market cap, owing to the rising demand for its AI chips, critical for advanced AI infrastructure. As Nvidia stands at the forefront of the AI infrastructure market, its GPUs are indispensable for training and deploying sophisticated AI models, including OpenAI’s ChatGPT, leading to its market dominance in the GPU sector.

While Nvidia remains a dominant force in the AI field, other competitors are gradually emerging, aiming to gain market share and driving innovation to break Nvidia’s dominance.

AMD presents a significant challenge to Nvidia in the GPU sector and is working on providing compelling alternatives, particularly for budget-conscious buyers. AMD’s MI300 chip has gained substantial traction amongst startups, as well as with technology giants like Microsoft. It is also constantly investing in this space to bolster its position, as evidenced by its recent multi-billion-dollar acquisition of ZT Systems.

Intel – the computing giant facing challenges, but could that change soon with Gaudi 3?

Intel, traditionally focused on CPUs, has faced challenges in gaining a strong foothold in the GPU market and has been facing stiff competition from competitors, with Nvidia surpassing Intel in annual revenue.

Intel is now intensifying its efforts to close the gap in the AI market. At the recent Intel Vision event, Intel highlighted the forthcoming release of Gaudi 3, an AI accelerator, claiming to be able to outperform Nvidia’s powerful H100 GPU in training large language models (LLMs).

Intel also stated that the Gaudi 3 could deliver similar or even superior performance compared to Nvidia’s H200 for large language model inferencing. Additionally, it claims that Gaudi 3 is focused on reducing energy consumption and has greater power efficiency than the H100, for specific use cases.

Intel’s strategic push to challenge Nvidia’s dominance occurs against a backdrop of persistent shortages in AI accelerator chips, which has created substantial obstacles for tech companies.

Hyperscalers – Nvidia’s largest customers today, potential rivals tomorrow?

Major cloud providers such as Google, Microsoft, Amazon, and Oracle, who together contribute significantly to Nvidia’s revenue, are making a strategic shift toward developing their own processors and in-house chips, to reduce dependency on Nvidia’s GPUs, as well as to drive their own innovation.

Amazon has been rolling out its AI-focused Inferentia and Tranium chips for AI inference and training, offering these through Amazon web services (AWS), as cost-effective alternatives to Nvidia’s products.

Google, a long-time advocate of its Tensor Processing Units (TPUs), recently introduced Trillium, its sixth generation TPUto power its AI models, which it claims is 5 times faster than its predecessor.

Microsoft is also making strides by developing its own AI processors and chips, including the Cobalt 100 CPU, an arm-based processor used for running general purpose computer workloads on the Microsoft Cloud and Maia 100 AI Accelerator.

Emergence of new players and trailblazing startups – Disrupting the AI landscape with innovative approaches?

Several startups are making significant strides within the AI infrastructure landscape, with their innovative approaches.

Cerebras Systems, known for its Wafer-Scale Engine (WSE) designed for high-performance AI workloads, has recently introduced an AI inference service that it claims to be the fastest in the world.

Groq’s Language Processing Unit (LPU) stands out for its high speed in AI inference tasks, offering substantial performance gains for large language models. Groq has also recently raised $640 million for its AI chips.

Groq’s rival SambaNova, has also launched its AI inference platform SambaNova cloud. Similarly other startups like Blaize, an AI chip maker, is developing competitive AI chip technology, with its own unique focus and specialization.

Although Nvidia holds a dominant position, Groq, Cerebras Systems, SambaNova, and other startups are emerging as serious contenders in the marketplace, offering innovative and competitive solutions. It will now be interesting to see how the new players in this space can challenge the technological giants.

Exhibit 1: AI chips and accelerators landscape

How to take the next steps?

As the AI landscape continues to evolve, challenges remain, as enterprise demand for GPUs exceeds supply, leading to a shortage.

This imbalance, combined with high demand, has also driven up GPU prices, making it challenging to find affordable alternatives. As a result, organizations are increasingly exploring alternatives to the dominant players in the AI chip and accelerators market.

But, with so many options, it’s crucial for organizations to carefully evaluate their requirements, budget, and strategic goals, to choose the most suitable options for leveraging AI power effectively. We suggest a two-pronged approach to align organizational AI strategy:

Assess and analyze

Assess your requirements on parameters such as:

Organizational capabilities and budgetary flexibility: Assess which strategy would suit your budget – purchasing or renting GPUs. Weigh in the initial investment needed, maintenance costs, and long-term operational savings

AI current workload requirements: Analyze your requirements based on the types of AI workloads and business use-cases (e.g., is your need centered around high-performance training or low latency inference or both)

Future adaptability: Consider whether your AI workloads may evolve, necessitating reconfigurable hardware or if the efficiency of specialized chips is more important

Power and space: Assess your organization’s energy efficiency, hardware footprint, and power consumption needs

Align and augment

After the initial assessment and once you have a clear understanding of your AI requirements, develop a roadmap that supports your AI strategy, taking the 5 S into consideration – Scalability, Sustainability, Security, Simplicity, and Stability.

Ensure your AI strategy is directly aligned with business objectives, such as innovation, operational efficiency, or scaling products, while also being adaptable to future AI workloads
Augment existing AI infrastructure by partnering with the right vendors that can help you meet your AI workload demands

Exhibit 2: By adopting this two-pronged approach, you can effectively chart the best path to supercharge your AI strategy.

If you found this blog interesting, check out our report, Navigating AI Infrastructure: The Backbone of the AI-Driven Era.

If you have any questions, would like to gain expertise in artificial intelligence, or would like to reach out to discuss these topics in more depth, contact Praharsh Srivastava, Zachariah Chirayil, and Tanvi Rai.

Navigating the Evolving Private Equity Landscape: Driving Value from Technology and Collaborative Ecosystems | Blog

August 14, 2024

In a rapidly shifting global economic environment, private equity (PE) firms are confronting a myriad of challenges precipitated by heightened interest rates, macroeconomic uncertainties, and constrained liquidity in entry and exit channels.

At the same time, the industry is sitting on a record level of dry powder, highlighting the stark contrast between available capital and viable investment opportunities. In this blog, we delve into the current state of the private equity market, identify the strategic priorities reshaping PE firms’ approaches, and explore the transformative role of technology and service providers in this sector.

The last 18 months presented a significant period of recalibration for the private equity market. Elevated interest rates sharply reduced the availability of inexpensive debt, and fundamentally altered the dynamics of leveraged buyouts.

Simultaneously, mounting recessionary fears dampened overall market optimism, resulting in subdued deal activity and challenging exit strategies. Despite these headwinds, the industry’s unprecedented levels of dry powder present both a challenge and an opportunity – compelling PE firms to deploy capital with greater precision, whilst meticulously selecting investments poised for higher returns.

Looking ahead, the next 12 months offers a cautiously optimistic outlook, with early signs of growth anticipated to materialize in the latter half of the year.

Current macroeconomic conditions, an evolving regulatory landscape, advancements in technology, and a focus on diversification and Environmental, Social and Governance (ESG) are some of the major factors influencing the private equity industry.

The macroeconomic effect on the PE industry– Current economic conditions and fears of a recession have slowed growth in the private equity industry. Consequently, there has been a decrease in deal activities and a shift in focus toward tightening the bottom line and managing risks. Investors are also actively monitoring changes in inflationary trends, interest rates, and asset allocation levels as they navigate economic uncertainty.
A substantial accumulation of dry powder– Having significant dry powder means that PE firms are ready to act quickly when opportunities arise. This can be particularly advantageous in the current period of economic downturns, where the ability to swiftly execute transactions can differentiate a PE firm from its competitors.
Regulatory compliance – With stricter regulations, the due diligence required before making investments has become more complex and thorough. Regulatory requirements can also influence the structure of deals. For instance, regulations around financial disclosures, anti-money laundering (AML) standards, or cross-border capital flows can dictate the terms and conditions of investments, affecting everything from the valuation of assets to the exit strategies.
Diversification in investment areas – Many PE firms are looking beyond their traditional markets to invest in emerging markets, where higher growth rates can potentially yield higher returns. They are also diversifying their investments across various sectors to capitalize on new technologies and evolving consumer preferences. Sectors such as technology, healthcare, renewable energy, and consumer goods are particularly attractive due to their growth potential and resilience to economic downturns.
Technology and digital transformation – Technological advancements are reshaping the PE industry. Data analytics, artificial intelligence (AI), and machine learning are enhancing deal sourcing, portfolio management, and risk assessment. Digital transformation is enabling PE firms to improve operational efficiency, enhance decision-making, and drive value creation.
The rise of thematic investing – Thematic investing has gained prominence as investors look to capitalize on long-term trends. Strategies focused on ESG, impact investing, and technology are propelling the industry forward, with ESG integration becoming a competitive advantage. Impact investing, which aims to generate both financial and social returns, is increasingly popular as investors seek to align their portfolios with their values.

Strategic priorities for PE firms

To address these multi-faceted challenges and capitalize on new opportunities, private equity firms are now prioritizing several key strategies. These include optimizing working capital management to enhance financial stability, focusing on targeted value creation through strategic transactions like carve-outs, integrating advanced technologies for operational efficiency, and developing robust leadership within portfolio firms to drive sustainable growth.

These priorities are critical in helping firms manage risk and maximize returns in a fluctuating economic environment, in order to navigate the evolving private equity landscape.

Technology as a strategic lever in private equity

In the dynamic and competitive private equity landscape, amidst shifting strategic priorities, technology is not merely a facilitator, but a transformative tool that can reshape investment landscapes and significantly drive value creation:

Strategic integration of technology

Due diligence: Advanced analytics and AI technologies can redefine due diligence by providing deeper, actionable insights much faster than traditional methods. These tools can enable PE firms to perform predictive risk assessments and scenario modeling, offering a detailed understanding of potential investments and market conditions.
Operational agility: The integration of Internet of Trusted Things (IoT) and cloud technologies across operational frameworks can allow PE firms to enhance agility and responsiveness. This capability is crucial for adapting to market changes and operationalizing data-driven strategies swiftly and effectively.

Driving value creation with technology

Enhanced portfolio performance: Digital tools like AI-driven predictive maintenance and personalized customer relationship management (CRM) systems through machine learning, can transform portfolio companies from operational and customer engagement perspectives. This approach can lead to cost savings, open new revenue streams, and enhance customer retention.

Innovative market positioning: Technology can enable portfolio companies to pioneer new market spaces and innovate existing ones. For instance, deploying blockchain technology to create transparent supply chains can appeal to a growing market segment concerned with sustainability and ethical sourcing.

Optimization and scalability

Scalable solutions for growth: Technologies such as scalable cloud infrastructure and automated business processes can enable portfolio companies to grow without proportional increases in operational costs. This scalability is vital for PE firms looking to expand their market footprint without diluting managerial focus or financial resources.
Sustainable operations and ESG compliance: Technology can play a pivotal role in monitoring and managing environmental impact and governance frameworks. Digital platforms can track and analyze carbon footprints and automate compliance reports, making it easier for companies to adhere to evolving ESG standards and regulatory requirements.

Preparation for exits

Digital transformation as a value multiplier: Before exiting an investment, PE firms can increasingly focus on digital transformation initiatives to boost the underlying value. This might involve implementing state-of-the-art enterprise resource planning (ERP) systems or digital marketing strategies that solidify the company’s competitive edge and market position.
By harnessing these technological strategies, private equity firms can navigate the complexities of today’s investment environment more effectively, ensuring robust returns and sustainable growth.

Role of service providers in the evolving private equity landscape

The evolving needs and strategic shifts of PE firms present substantial opportunities for service providers. Service providers are essential in enabling PE firms to navigate the complexities of the current economic landscape through strategic advisory, technological deployment, and operational support.

Service providers are poised to deliver comprehensive solutions that encompass risk management, compliance adherence, and the integration of cutting-edge technologies such as AI and cloud computing. These collaborations are crucial, enabling PE firms to enhance their operational agility, drive innovation, and ultimately, realize superior investment returns.

Key benefits for PE Firms

The collaboration with service providers offers PE firms significant benefits:

Enhanced competitive advantage: Leveraging service providers’ expertise and technology to stay ahead in the market
Improved financial stability: Through cost optimization and effective financial management strategies
Increased operational efficiency: Streamlining operations leads to more efficient and effective management
Sustainable value growth: Ensuring long-term growth and value creation through strategic and operational enhancements

The road ahead

Looking ahead, the role of service providers will become increasingly pivotal. As private equity firms continue to navigate the intricacies of the evolving economic and private equity landscape. As well as this, the strategic integration of technology and expert advisory will be critical.

Service providers will not only need to offer innovative solutions that address immediate operational efficiencies, but also support long-term strategic goals, fostering both stability and growth.

The successful navigation through these challenging times will likely define the new paradigms of excellence in the private equity industry, emphasizing resilience, adaptability, and proactive growth strategies.

To discuss more on this topic, please reach out to Ronak Doshi, Kriti Gupta and Akshay Rajput.

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

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 Genius^TM 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)

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

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)

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.

Product Manager Role In Selecting Value Partners Or Best-of-Breed Service Providers | Blog

February 28, 2023

We’ve had ten years of digital transformation initiatives. Companies that have reached a maturity level now invest in software-defined operating platforms. These platforms are tech stacks that evolve and become very intimate with company operations. Companies need to think about these platforms holistically and develop a road map for the platform and operations together. Consequently, the core versus non-core aspect of technology services is no longer a useful construct for selecting third-party service providers or vendors. That old model is changing.

ChatGPT – A New Dawn in the Application Development Process? | Blog

February 17, 2023

ChatGPT, the advanced Artificial Intelligence (AI) chatbot that’s taken the world by storm, can potentially accelerate various stages in the Software Development Lifecycle (SDLC), from gathering requirements to design and testing, and also enhance developers’ productivity, among other benefits. But it still has limitations. Read on to learn more.

ChatGPT made headlines when it reached 1 million users in just five days after being unveiled in November 2022. Not only was the tech community awed, but it also has interested a wider audience, from students to industry veterans, and attracted more than 100 million users by the end of January 2023.

ChatGPT and other AI chatbots, such as DALL-E, are poised to radically disrupt multiple professions, including education and healthcare. In our ongoing coverage of this trending topic, we’ll explore how these recent developments may rapidly advance the application development process.

What is ChatGPT, and why is it creating major upheaval?

ChatGPT (Chat Generative Pre-Trained Transformer) is a chatbot built by AI firm OpenAI. It is based on Generative Pre-Trained Transformer (GPT-3) architecture, a neural network Machine Learning (ML) model that generates human-like responses to natural language text inputs. Its ability to converse like a human, answer follow-up queries, and reject inappropriate queries makes it more special than its predecessors. Its capabilities include language translation, text summarization, and text generation.

We tried our hands on ChatGPT and asked it to write a blog on itself, and the results amazed us. See the exhibit below for the blog that ChatGPT generated.

Next, let’s explore in more detail how ChatGPT could be embedded in the Software Development Lifecycle (SDLC) to create applications and the associated benefits.

The avant-garde movement in application development

While low-code/no-code and AI-assisted application development made leaps and bounds in this field, ChatGPT has the potential to step up the game even further. This potent AI tool can be used to accelerate different processes at various phases of the SDLC, leading to faster development cycles, enhanced productivity of developers, and quicker value delivery to enterprises.

Here are the potential benefits of each phase:

Requirements gathering: ChatGPT can significantly simplify the requirements gathering phase by building quick prototypes of complex applications. It also can minimize the risks of miscommunication in the process since the analyst and customer can align on the prototype before proceeding to the build phase

Design: DALL-E, another deep learning model developed by OpenAI to generate digital images from natural language descriptions, can contribute to the design of applications. In addition to providing user interface (UI) templates for common use cases, it also may eventually be deployed to ensure that the design of a given application meets regulatory criteria such as accessibility

Build: ChatGPT has the capability to generate code in different languages. It could be used to supplement developers by writing small components of code, thus enhancing the productivity of developers and software quality. It even can enable citizen developers to write code without the knowledge of programming language

Test: ChatGPT has a major role in the testing phase. It can be used to generate various test cases and to test the application just by giving prompts in natural language. It can be leveraged to fix any vulnerabilities that could be identified through processes such as Dynamic Code Analysis (DCA) and perform chaos testing to simulate worst-case scenarios to test the integrity of the application in a faster and cost-effective way.

Maintenance: ChatGPT can significantly improve First Contact Resolution (FCR) by helping clients with basic queries. In the process, it ensures that issue resolution times are significantly reduced while also freeing up service personnel to focus their attention selectively on more complex cases.

While ChatGPT has an important role to play in automating more cognitive tasks in the SDLC, users must be aware that security and privacy concerns with the current version still need to be properly addressed.

Now let’s cover a few issues with the tool.

Five possible roadblocks to ChatGPT adoption

Privacy and security – Privacy and security are concerns with the current tool. As it learns from each query, keying in any sensitive data would have drastic repercussions on enterprises. Amazon has reportedly warned employees to not put confidential data on ChatGPT, fearing security concerns
Limited knowledge – ChatGPT currently is not connected to the internet and has limited knowledge of the world and events after 2021, meaning the code it generates will not be in line with the latest security patches
Potential Bias – While OpenAI has added guardrails against bias in responses, users can occasionally get around this by rephrasing their questions or asking the program to ignore its guardrails
Inaccurate responses – ChatGPT responds to queries based on the patterns it learned from the training dataset and also can generate fictitious responses that cannot be verified for accuracy. Although the tool is still evolving, inaccuracy in responses can be a major hindrance to its adoption
Energy Consumption – As an advanced AI-based tool, ChatGPT takes a huge amount of computing power to process the information, leading to high energy consumption and carbon emissions. With environmental, social, and governance (ESG) becoming a key mandate across geographies, enterprises may be apprehensive about large-scale adoption

The way forward

ChatGPT is seeing rampant adoption among the developer community, and as it gains further traction, enterprises need to ensure suitable governance models are in place. Service providers need to collaborate with tech players like OpenAI and DeepMind to proactively shape the market and build capabilities for efficient application development.

As details unfold on how this technology will revolutionize the application development process, enterprises and service providers need to closely monitor this space and make proactive investments – clearly, the cost of missing out is too great.

For our other recent blogs on how ChatGPT will impact various industry sectors, see Can BFSI Benefit from an Intelligent Conversation Friend in the Long Term and ChatGPT Trends – A Bot’s Perspective on How the Promising Technology will Impact BPS.

We’ll investigate the implications of ChatGPT for the technology services industry in more detail in a follow-up blog.

To discuss how ChatGPT will impact the application development process, please reach out to [email protected], [email protected], or [email protected].

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Category: Technology Industry