Indian IT services providers Tata Consultancy Services (TCS), InfosysNSE 0.82 % and WiproNSE 0.93 % are betting on artificial intelligence (AI) platforms to improve delivery of solutions and drive faster growth from clients.
However, it could be a little off the mark to call these solutions AI platforms yet. Technology service providers “are conflating their investments in IP platforms with their investments in AI. For example, Ignio does have a small AI component, but most of the product is not AI but rules-based and procedural,” said Peter Bendor-Samuel, CEO of Everest Group, an IT advisory and research firm.
Read more in Economic Times
The Information Technology (IT) and Business Process Association of the Philippines (Ibpap) expects to finish next month its review of the industry road map, as it seeks to achieve the goals it set to remain significant in the ever-changing business environment.
“I think the target is within September we should be able to come up with the recalibration of the road map that happened two years ago,” BPAP Chairman Lito Tayag told reporters last week during the fiscal year-ender dinner hosted by Accenture Philippines for the media in Bonifacio Global City, Taguig.
According to him, they are still waiting for the final report of Everest Group, the research and consulting company they contracted.
Read more in Business Mirror
With the massive size of the public cloud market, it’s reasonable to assume that there’s plenty of pie for each the top three vendors –Amazon Web Services (AWS), Google Cloud Platform (GCP), and Microsoft Azure (Azure) – to get their fill.
But the truth is that they’re all battling to capture even larger slices. While this type of war has happened in other technology segments, this one is unique because the market is growing at 30-40 percent year-over-year.
Here are a few examples of the current ugly wars these vendors are waging against each other.
AWS is luring away Azure customers. Channel checks suggest that AWS is incentivizing clients to move their Windows workloads to Linux. The next step is to move their SQL Server workloads to other databases (e.g, PostgreSQL). Of course, it won’t stop there; there will be an entire migration strategy in place. And there have even been a few instances in which AWS has funded clients’ early PoCs for this migration along with the implementation partner.
Azure is pushing for AWS migration. It isn’t uncommon for many mid-sized implementation partners to make their client pitch solely on the fact that they can migrate AWS virtual instances to Azure and achieve 20-30 percent, or more, cost savings. It also isn’t uncommon for Microsoft to bundle a lot of its offerings, e.g., Office 365, to create an attractive commercial bundling for its broader cloud portfolio against AWS, which lacks an enterprise applications play.
GCP is pushing Kubernetes cloud and Anthos. GCP’s key argument against AWS and Azure is that they are both “legacy clouds.” The entire Kubernetes cloud platform story is becoming very interesting and relevant for clients. More so, for newer workloads, such as AI, Machine Learning, and Containers, GCP is pushing hard to take the lead.
Each of these vendors will continue to find new avenues to create trouble for each other. Given that Azure and GCP are starting from a low base, AWS has more to lose.
So, how will the cloud war play out? Three things will happen going forward.
The vendors have realized that clients can relatively easily move their IaaS, and even PaaS, offerings to another cloud. Therefore, they’ll push to make their clients adopt native platform offerings that cannot be easily ported to different clouds (e.g., serverless). While some of the workloads will be interoperable across other clouds, parts will run only on one cloud vendor’s stack.
Preferred partnership for workloads
While the vendors will acknowledge that implementation partners will always have cloud alliances, they’ll push to have preferred partner status for specific workloads such as database lift and shift, IoT, and AI. For this, most cloud vendors will partner with strategy consulting firms and implementation partners to shape enterprises’ board room agenda.
In 2018, Google acquired cloud migration specialist Velostrata. This year, both AWS and Azure launched migration kits targeting each other’s clients. This battle will soon become even fiercer, and will encompass not only lift and shift VM migration, but also workloads such as database instances, DevOps pipelines, application run time, and even applications.
With the cloud giants at war, enterprises need to be cautious of where to place their bets. They need to realize that working with cloud vendors will become increasingly complex, because it’s not only about the offerings portfolio but also the engagement model.
Here are three things enterprises should focus on:
- Ensure interoperability and migration: Enterprises need to make the cloud vendors demonstrate evidence of easy workload interoperability with and migration to other cloud platforms. They should also determine the target cloud vendor’s own native migration tool kits and services, regardless of what the selected implementation partner may use.
- Stress test the TCO model: Enterprises need to understand the total cost of ownership (TCO) of the new services offered by the cloud vendors. Most of our clients think the cloud vendors’ “new offerings” are expensive. They believe there’s a lack of translation between the offerings and the TCO model. Enterprises should also stress test the presented cost savings use cases, and ask for strong references.
- Get the right implementation partner: For simpler engagements, the cloud vendors are increasingly preferring smaller implementation partners as they are more agile. Though the vendors claim their pricing model doesn’t change for different implementation partners, enterprises need to ensure they are getting the best commercial construct from both external parties. For complex transformations, enterprises must do their own evaluation, rather than rely on cloud vendor-attached partners. Doing so will become increasingly important given that most implementation partners work across all the cloud vendors.
The cloud wars have just begun, and will become uglier going forward. The cloud vendors’ deep pockets, technological capabilities, myriad offerings, and sway over the market are making their rivalries different than anything your business has experienced in the past. This time, you need to be better prepared.
What do you think about the cloud wars? Please write to me at [email protected].
Key highlights from recent Everest Group custom research projects
Case #1: A leading BPS provider asked for our assistance in developing a differentiated value proposition in the healthcare market.
The client, a leading provider of healthcare payer and provider BPO services wanted to understand emerging trends and their impact on the claims processing ecosystem within the healthcare market. The client also sought to understand the key gaps in its current offerings portfolio and to develop a way forward to address these gaps.
Everest Group’s approach: Everest Group conducted a detailed assessment of the claims processing technology and services ecosystem, and identified and evaluated multiple paths that the provider could pursue. We also helped the service provider create a targeted pitch deck, along with internal strategy documents, to help the sales team effectively converse with clients.
Case #2: A leading Recruitment Process Outsourcing (RPO) provider engaged us to help in identifying, assessing and prioritizing target market opportunities.
Everest Group’s approach: We conducted a detailed analysis on more than 20 single-country markets and prioritized the identified countries based on market attractiveness of the opportunity. For each country, the analysis covered the following dimensions:
- Market size and growth (historic and projected)
- Potential and penetration
- Single-country and multi-country RPO prevalence
- Competitive landscape
- Opportunity size over the next three to five years
We presented detailed, actionable insights and recommendations for each target country on go-to-market strategy, target buyer segments, and solution elements to consider, all of which helped the client shape its approach, market entry, and growth strategy.
Back in December 2017, Altran’s acquisition of Aricent for US$2 billion was one of the biggest inorganic growth initiatives in the engineering services space. The acquisition helped Altran draw synergies across key verticals and strengthen its leadership position in the global engineering services space.
Fast forward just a short year and a half later to a much larger deal: Capgemini on June 24, 2019, announced its plan to acquire Altran for a cash consideration of ~US$4.1 billion and also assume Altran’s financial debt of ~US$1.6 billion, which is primarily attributable to its Aricent acquisition. The transaction is expected to close by the end of 2019.
Based on our calendar year 2018 estimates, the combined entity will hold over 10 percent of the global engineering services outsourcing market and will have nearly US$1.4 billion higher revenue than its nearest competitor.
1 Includes Everest Group estimates
The acquisition reinforces the fact that the global services industry views engineering services as an avenue to offset the low headroom for growth in the IT and business process services. While players such as HCL Technologies and Tata Consultancy Services have primarily followed the organic route to drive growth in this space (both the companies have a spot in the list of global top 10 engineering services companies,) Capgemini has become the largest engineering services company with this mammoth acquisition.
The acquisition also highlights how service providers are increasingly reckoning with the need to develop capabilities to cater to the Information Technology – Operational Technology (IT-OT) integration needs of today’s connected world. An IT-OT play helps service providers demonstrate capabilities across multiple value elements and capture a larger share of enterprise spend.
What this acquisition means for Capgemini
Altran reported year-on-year growth of 27.1 percent for calendar year 2018, and its organic growth stood at 8 percent. Capgemini will certainly benefit from Altran’s robust portfolio growth. But it stands to gain more benefits:
- Top spot in the engineering services industry: The combined entity will be the undisputed leader in engineering services, with over US$4 billion in engineering services revenue, and ~54,000 professionals
- Enhanced capabilities across key verticals: With Altran’s stronghold in the automotive, aerospace, electronics & semiconductors, medical devices, and software products spaces, and Capgemini’s strength in sectors including manufacturing and energy and utilities, the combined entity will have a leadership position across the majority of engineering verticals
- Asset and infrastructure dividend: Altran has developed numerous labs, solutions, innovation centers, etc., that will add rich depth and breadth to Capgemini’s capabilities
- Enhanced value proposition: Capgemini will not only be able to cross-sell its enhanced IT-OT value proposition to Altran’s existing, top R&D-spend clients – including six of the top 10 Independent Software Vendors (ISVs) and all of the top five automotive Original Equipment Manufacturers (OEMs) –– but also to its own engineering-heavy verticals
- Enhanced nearshore delivery capabilities: Altran has a sizeable delivery presence in Eastern Europe, which is a hub for high-quality engineering talent, and a significant delivery presence is viewed as a differentiator in the engineering services space
- Access to Altran’s hand-picked portfolio of companies: Capgemini will be able to enhance its capabilities in niche areas including design and cyber security through Altran’s previous acquisitions of companies like Frog Design and Information Risk Management (IRM.)
What it means for Altran
In its mid-2018 “The High Road, Altran 2022” plan, Altran presented the key objectives it aimed to achieve by 2022:
- Compound Annual Growth Rate (CAGR) of 6.5-7 percent (organic) during 2017-2022
- 25,000 engineers in near/offshore locations, including India, up from 16,000 in 2018
- Momentum in high-growth segments such as ISVs, electronics, automotive, and medical devices
- Leadership in North America, while pursuing selective growth in the APAC region
- Complete integration of Aricent by 2020
With Capgemini coming into the picture, the growth plan for Altran will likely be redefined. Nonetheless, assessing how Capgemini impacts the objectives Altran’s leadership laid down is still worthwhile.
While Altran has been managing steady growth on its own (8 percent year-over-year organic growth in calendar year 2018,) integration with Capgemini will help generate greater exposure to clients and accelerated market growth in North America. It will also accelerate Altran’s delivery expansion in offshore locations.
As a downside, Altran will be integrating with Capgemini – which could come into play as soon as early 2020 – while it continues to attain full synergy with Aricent. This multi-faceted integration will require meticulous planning and execution to ensure success. It may result in increased attrition among the talent Altran acquired from Aricent.
Cues for the broader engineering services outsourcing industry
This acquisition further enhances the dominance of Europe-headquartered firms on the leaderboard of the global engineering services industry. Further, once the acquisition is complete, Capgemini – as the largest engineering services provider – will have developed a sizeable offshore delivery presence and will be capable of going to market with an optimum combination of four key factors: capabilities, scale, client proximity, and cost-effectiveness. Offshore-heritage service providers will need to step up their game to continuously invest in building and enhancing capabilities for new and emerging areas.
We expect the inorganic growth wave to continue in this space. While it is unlikely that we will soon see another acquisition of this scale, we expect both large and mid-sized players to explore smaller acquisitions that address their unique objectives. While large service providers will flex their financial muscle to gain market share and niche capabilities, mid-sized service providers will look to build adjacent capabilities. And when this happens, both the providers and their clients will win.
When news first hit in late April 2019 of speculation around Medidata Solutions being acquired by Dassault Systèmes – a France-based software company that develops 3D design, 3D digital mock-up, and product lifecycle management software – Medidata’s stock value went soaring. The deal immediately made sense. The fact that Dassault Systèmes was looking to ramp up its offerings for life sciences companies made Medidata, which we recently recognized as a Leader and Star Performer in our PEAK Matrix™ for Clinical Trials Products 2019, an attractive acquisition prospect.
Fast forward to June 2019 and the deal is done. The all-cash transaction is valued at US$5.8 billion and represents Dassault Systèmes’ largest acquisition to date. It will finance the deal with a €1 billion loan, a €3 billion bridge-to-loan facility, and available cash. It’s the first time the French company has resorted to external funding, which only accentuates how much it prizes Medidata as an asset.
The strategic intent behind the deal
Dassault Systèmes began focusing on the life sciences market a few years ago with the vision to improve the penetration of digital technologies in the industry. Its last life sciences-focused acquisition was that of Accelrys in 2014, which helped Dassault Systèmes establish BIOVIA, its brand for biological, chemical, and materials modeling and simulation, research, and open collaborative discovery.
With the acquisition of Medidata Solutions, Dassault Systèmes makes a statement that it is serious about achieving this vision. The acquisition will make life sciences Dassault Systèmes’ second largest industry focus, after transportation and mobility. Medidata grew at a CAGR of 17 percent during 2015-2018, driven by its dominance in electronic data capture through its flagship product, Rave.
Dassault Systèmes prides itself on its 3DEXPERIENCE platform, which is meant to enhance digital collaboration in complex sectors like aerospace, infrastructure, and mobility. Dassault Systèmes now looks to extend these benefits to life sciences. By adding Medidata’s clinical and commercial offerings to its own 3D experience expertise, Dassault Systèmes aims to create a platform that offers complete digital continuity to the life sciences industry, addressing complex challenges such as personalized medicine and patient-centric experiences.
Unpacking the companies’ synergies
|Design, modeling, and visualization software, with leading capabilities for the aerospace, defense, and consumer goods industries. Dassault Systèmes now aims to bolster its life sciences division
|Life sciences clinical and commercial software pure-play, with deep domain expertise and strong consulting pedigree|
Coverage of the life sciences value chain
|Drug discovery, manufacturing, and supply chain||Clinical and commercial operations|
Key technology offerings
|Design, modeling, simulation, and virtualization software||Data capture, real world evidence, advanced analytics, AI-driven insights, and operations management|
|Customers are mostly in the aerospace, defense, and consumer goods industries
Sizable number of European life sciences clients, including medical devices firms such as Medtronic, FEops, Novo Nordisk, and Kavo Dental
|1,300 life sciences companies, three quarters of which are in America. This includes most of the Big Pharma and CRO firms|
Product coverage across the value chain
Dassault Systèmes is sitting on a lot of cash. This will give Medidata the financial muscle it needs to make the right investments in talent and technology to compete with the big players like Oracle Health Sciences and Accenture.
The integration of capabilities could lead to the creation of a unique end-to-end platform for life sciences across the entire value chain. Medidata has clinical and commercial capabilities, and Dassault Systèmes has offerings for drug discovery, manufacturing, and supply chain.
It’s not clear how the integration of Medidata’s products with the broader 3DEXPERIENCE platform will take place. It could be a challenge linking Medidata’s clinical trials and commercial operations solutions with Dassault Systèmes’ design and visualization offerings.
Dassault Systèmes’ has diversified offerings across several industries. In the long run, this may dilute Medidata’s brand image as a leader and focused player for clinical trials technology.
The life sciences industry needs aggressive digitalization to realize efficiency gains and reduce the lengthy timelines between drug conceptualization and drugs reaching the market. We’ve seen technology vendors coming up with integrated solutions for clinical trials to help enhance trial efficiency. While the need for a platform is evident, technical debt and change management issues hinder this platform-centric vision. This is a high growth market, which is likely to attract more interest in the coming 18-24 months. More SaaS companies will need to pivot to the platform conversation to scale and remain relevant. We will be tracking this space closely.
60-minute webinar held live on Tuesday, May 21, 2019 | 9 a.m. CDT, 10 a.m. EDT, 3 p.m. BST, 7:30 p.m. IST
As technology adoption increases exponentially, organizations are challenged by the proliferation of data that the technology generates. Increasingly, Shared Services / Global In-house Centers (GICs) are leading their organizations’ efforts to tame data and derive key insights from it.
Based on our recent Pinnacle Model research on data & analytics maturity in SSCs/GICs, this webinar will show executives how they can build capabilities in their SSCs/GICs to turn this challenge into a strategic asset, generating value and enhancing service delivery.
In this fast-paced session, we’ll answer the following:
- What roles do best-in-class GICs play in global data & analytics programs?
- How do best-in-class GICs attract and retain talent with relevant skills for data & analytics? What supporting programs have they developed to support these efforts?
- How are best-in-class GICs funding these initiatives?
- How are best-in-class GICs addressing associated technology challenges that impact their data & analytics teams?
- What actual cost savings and operational and strategic impacts are GICs creating for their parent organizations through data & analytics leverage?
Who should attend, and why?
The webinar content is geared toward global stakeholders responsible for Shared Services / Global In-house Centers (GICs) and Global Business Services (GBS), as well as their Heads of Human Resources and Senior Strategy Executives.
Attendees will walk away with five key differentiating capabilities that characterize Pinnacle, or best-in-class, GICs.
Can’t join us live? Register anyway!
All registrants will receive an email (typically within 1-2 business days of the live delivery) with the link to session slides and on-demand playback.
60-minute webinar held live on Thursday, May 9, 2019 | 9 a.m. CDT, 10 a.m. EDT, 3 p.m. BST, 7:30 p.m. IST
Do you know what you don’t know? The method and manner of pricing outsourcing deals never stops changing. Some trends are rapid and significant – and others simply incremental. Join us as we explore the pricing changes related to IT and BPO transactions, as reported by your peers.
We’ll cover major disruptions, the impact of geopolitical restrictions, and key commercial contract terms (nothing is taboo!).
From this session, you’ll be able to answer the following:
- What are the current pricing-related trends impacting both enterprises and service providers?
- Are there areas of high variation in my commercial contracts that could lead to seemingly counter-intuitive deal pricing behavior?
- Are there near-term price movements that I should expect and be prepared for?
- What direction are outsourcing contract tenets trending toward?
Who should attend, and why?
This webinar will offer results from our recent market survey on outsourcing pricing trends, coupled with our insights into what these trends mean for you and how to take advantage of them to drive business impact.
The content is geared to senior executives –
Enterprises: Strategic Sourcing, Vendor Management, Contract Management, CPO, CIO
Can’t join us live? Register anyway!
All registrants will receive an email (typically within 1-2 business days of the live delivery) with the link to session slides and on-demand playback. In addition, you’ll also receive details on how to participate in our labor rates special offer, covering complementary price checks for up to three standard roles in three different countries.
Chief Research Guru