HFS Top 10 Cloud Migration and Management Services 2019 Excerpt for IBM

HFS Research authors:

Ollie O’Donoghue, Research Vice President Jamie Snowdon, Chief Data Officer Martin Gabriel, Sr. Research Analyst August 2019 “Cloud is still the number one investment priority for enterprise IT. Providers need to demonstrate both delivery capabilities and a compelling technology roadmap.” — Jamie Snowdon, Chief Data Officer

Topic Page

Introduction 4 Research methodology 6

Provider profiles 16 Market direction and recommendations 17 Survey respondent demographics 21 About the authors 23

! Enterprise leaders continue to look to the cloud as the solution to their transformation woes—recent HFS research still places cloud high on the digital technology shopping list across verticals and regions. In part, this is driven by the need for enterprises to modernise their infrastructure. But, increasingly, other digital technology investments, particularly automation, analytics, and enterprise applications, come with a need to build out cloud environments.

! Throughout this research, HFS analysts conducted candid interviews with industry executives from both the buy-side and the sell-side to establish how the provider landscape is developing to cater to the insatiable demand for cloud services. One thing’s clear: public cloud is no longer a dirty word, and the relative maturity among decision makers is increasing exponentially as hyperscale cloud firms push convincing narratives out of IT and into the boardroom. However, for the high-value it services players that need to fit all the pieces of the cloud jigsaw together, there is a lucrative market to work in.

! Nevertheless, the market is highly competitive, and vendors need to come armed with a clear marketing narrative and the partnerships in place to support client ambitions—or risk losing ground to better equipped rivals.

The HFS Digital OneOfficeTM Framework While adoption of cloud services in The customer-centric digital organization The empowering Digital OneOffice the modern enterprise has been considerable over the past few years, engagements are often piecemeal Digital underbelly The nervous and linked to specific projects, or ● Digitization and automation of processes system they are part of a broader ● Cloudification and security transformation initiative. With more ● Unification of data enterprises focusing on the latter, The Intelligent support functions we’re seeing a maturity in the circulatory ● Autonomous and agile working culture conversations business and IT system ● Inclusive digital mindset leaders are having as they strive to Mobile and social ● Unification of outcomes build the digital underbelly needed interaction Real-time ● Lean and design thinking to support their digital organization. Touchless personalization Moreover, as enterprises strive for Predictive digital insights interaction Customer-driven The neural customer-centrism, predictive digital process design network ● Predictive analytics insights, and intelligent support ● Cognitive AI processes functions, the burden on the digital ● Machine learning underbelly, and, by association, ● Blockchain and IoT cloud services, increases exponentially. The market for cloud Collaborative, unified, dynamic, intelligent, responsive, simple services can only grow larger. Source: HFS Research, 2019

The research is the result of data collected in Q2 and Q3 2019 through provider RFIs, structured briefings, client reference interviews, and from publicly available information sources. This information is augmented by a large G2000 survey of enterprise leaders.

IT Services providers were assessed on the following three main dimensions:

33.3% 33.3% 33.3%

Voice of the buyer Ability to execute Innovation capability

● Candid feedback from client ● Partnerships and resources ● Vision for investments references and the results ● Breadth, reach, and scale ● Automation and integration capabilities from the IT services ● Execution capability and roadmap ● Marketing and thought leadership customer survey ● Pricing and commercial models ● Verticalization and industry-focused solutions

! The cloud migration services market continues to grow significantly as enterprises seek to modernize and optimize their infrastructure. While much of the market is still consumed through the modernization of legacy environments, we’re increasingly seeing leaders push for specific cloud environments to underpin specific digital technologies—particularly analytics and automation. As enterprises face more disruption from direct competitors and nimble disruptors, we will likely see more multi-year transformation engagements where cloud services form a central part of the project. The challenge, however, is deciphering the value assigned to specific cloud engagements, as they are often tied to broader projects such as forming the foundation for an application optimization and modernization program.

! The hyperscale public cloud giants—AWS, Azure, and Google Cloud Platform—are dominating much of the mindshare and market share in the global market. AWS continues to post high double-digit growth alongside strong growth from Azure and GCP. Underpinning the unstoppable growth of these firms, almost all of the IT providers have a partnership with all three firms. Nevertheless, there is also a richer ecosystem of service providers catering to the market—from competitive regional hyperscale firms such as Alibaba Cloud, to boutique and niche players such as nClouds (HFS Hot Vendor 2018) taking on specific industry challenges. As the market continues to evolve and grow, there should be plenty of opportunities for new and innovative firms to make their mark. However, as enterprises push to drive more value from cloud services, providers will need to work harder to impress.

! Next wave of re-platforming underway in cloud. As the emphasis shifts from pure virtual machine environments to containers and serverless cloud variants. This shifts the hybrid mix more toward public cloud and companies opt for multi-cloud solutions for compliance and regulatory reasons.

! Cloud wars continue to impact the market: The cloud wars in the hyperscale space continue to batter the market as AWS, Azure, and Google battle for market share. We’re hearing stories of vendor lock-in to retain clients that may bounce platforms to ultra-competitive initial pricing structures to lure unsuspecting IT teams onto new cloud environments. From a vendor standpoint, the market has also noted the speedy rise of Alibaba Cloud in the APAC region to rival the giants operating there. And while the firm’s heritage and reputation may stop it from expanding too aggressively in North America and Europe, its foothold in APAC could make it a dominant force on the global market over time.

! Cost isn’t a driver in cloud engagements: Based on discussions with leaders and client interactions, it has become increasingly apparent that cost is becoming less of a table stake when engaging for cloud services. Clients advise they are now driven by other factors such as time to market, client and user experience, and a need to boost IT efficiency. In many ways, this represents a maturity in the mindset of enterprise leaders as cost has been a core focus for cloud engagements for some time.

! Enterprises’ dependency on service provider for skilled talent: We’re continuing to see a heated talent war in the cloud services space, forcing enterprises to lean on service providers more aggressively to bring the skills and capabilities they need to modernise their environments. An aspect of the cloud wars is filtering down to the enterprise level as each layer of the value chain scrabbles for in-demand talent. It is at its most acute for service providers that are working to build innovative training and talent management capabilities to channel talent into high-demand areas. However, increasingly, key talent is moving from the service providers into the growing hyperscale cloud providers, causing resentment and concern for other stakeholders further down the chain.

Global size and forecast IT infrastructure management ($B) Cloud vs. traditional Market size ($B)

Cloud Traditional CAGR

143.2 145.5 2.1% ! 137.7 140.6 Cloud-centric infrastructure 131.3 134.6 management services start to 34.9 -16.3% dominate the market as old 46.1 56.7 contracts renew into hybrid and 66.2 cloud deals. 75.9 85.0 ! Market-within-a-market developing as customers move from virtual machines to containers and 110.6 19.0% serverless solutions on cloud. 97.1 83.9 ! Overall infrastructure management 71.5 58.7 market has started to grow as the 46.3 increase in new deals offsets the shrinking traditional market.

2018 2019 2020 2021 2022 2023

Global size and forecast cloud professional services ($B)

Market size ($B) ! The cloud and hybrid professional services market continues to grow rapidly as it forms the platform for digital transformation. 79.6 ! Cloud maturity across the industry increases as more mature 67.5 industries move toward new cloud CAGR=22.4% variants. Less mature industries 56.5 start to play catch up and start 46.5 shifting to hybrid and public cloud. 37.3 ! Additionally, we are seeing more spending on security services and 29.0 risk mitigation as enterprises use more public cloud. ! Expect migration discussions to continue as enterprises adopt increasingly aggressive cloud targets. 2018 2019 2020 2021 2022 2023

Highlight #1: Cloud investment Highlight #2: Cloud wars Highlight #3: Enterprise leaders Highlight #4: Enterprises are continues to rank high. continue amongst the look to multi-cloud for resiliency finding it hard to see hyperscale giants. and regulatory compliance. differentiation between providers. Enterprise leaders continue to A cause for concern for some Increasingly the “all-in” with one Enterprise leaders are finding it put cloud services high on their enterprise leaders is the cloud provider mentality has increasingly challenging to digital technology investment increasing hostility between the been set aside in favour of multi- differentiate between providers priorities list as they seek to cloud giants as they fight cloud engagements to ensure as the large public cloud vendors modernise and optimise their IT aggressively for market and infrastructure resiliency and provide somewhat of a environments and build the mindshare. The battle for talent regulatory compliance. benchmark for innovation. foundations necessary for new is the latest in a series of Dissecting the differing layers of technology investments. increasingly bitter conflicts in the value over the top of cloud cloud migration space. platforms is becoming increasingly challenging without significant research and investigation.

Execution Innovation Voice of Customer IBM Unrivaled reputation for delivery on cloud engagements Accenture Innovative market leader with a clear vision for the cloud migration space Atos Innovator in hybrid cloud bringing deep partnerships with hyperscale providers Cognizant Innovative provider offering breadth and scale HCL Trusted partner taking on incumbents in the market TCS Strong provider with proven delivery capabilities Infosys Strong track record of execution, and growing cloud services capabilities DXC Giant player in cloud space with global reach and scale Wipro Consulting-focused provider with strong track record of delivery in key regions Capgemini Cloud services major with developed partner ecosystem Unisys Provider with extensive heritage and trusted in key markets TechMahindra Strong vertical specialist with strong investment plan NTT Data Highly competitive provider with vertical focus Fujitsu Experienced provider with legacy of delivery in the space Hexaware Strong brokerage model and growing partnerships Genpact Strong vertical expertise driving focused cloud solutions

Ability to execute Innovation capability Execution Pricing and Automation and Marketing and Verticalization HFS Breadth, scale, capability and Partnerships and commercial Vision for integration thought and industry- Voice of the ranking and reach roadmap resources models investments strategy leadership focused solutions customer

Source: HFS Research, 2018

Dimension Rank Strengths Opportunities HFS Top 10 position #1 ● Strong market reputation: IBM continues to retain the market’s confidence ● Articulate the value of Red Hat acquisition: Acquiring Red Hat earlier this for its ability to deliver against cloud engagements. The firm has positioned year heralded a potential game changer for the market, helping IBM corner a Ability to execute itself as one of the strongest providers in the space. major section of the market. However, IBM and Red Hat should build a Partnerships and ● In-house developed automation engine: Leveraging IBM Watson and other clearer narrative for how the tie-up will drive greater business value for new #4 resources automation and analytics tools, IBM has been able to deliver significant and existing clients. business value as part of cloud migration engagements. ● Clear layers of commercial engagement: IBM’s clients frequently highlight Breadth, reach, and #1 ● Strong cloud practice across globe: Most of IBM’s competitors have the challenges they have navigating the firm’s sprawling business lines. IBM scale concentrated on specific regions, particularly in North America and Europe. must work harder to simplify the way its clients interact with different Execution However, IBM has leveraged its breadth and scale to spread its business business lines and must work to break down siloes across the business. capability and #1 across the globe in regions such as North America (40%), Europe (30%), and roadmap APAC (7%). Pricing and #12 commercial models

Innovation capability Acquisitions and partnerships Operations and key clients Vision for Key partnerships: ● #3 Delivery center locations: Asia Pacific, Europe, China, Japan, Latin America, investments ● Digital: Cisco, Citrix Middle East and Africa, North America ● Cloud: VMware, Box, Amazon, Microsoft, Google, Akamai, DXC, HCL, Marketing and #3 ScienceLogic, ThousandEyes ● thought leadership Key clients include: One of the leading Japanese automobile companies, ● Analytics: Juniper Networks, Twitter, Facebook leading telecom provider, Japanese leading financial group, one of the largest ● Automation and Service management: ServiceNow, Rittal, CA, CAST, Densify telecom companies in Australia, leading British multinational oil and gas ● #1 Automation: IPSoft, Blue Prism, Whispir, Automation Anywhere company, a leading Germany-based insurance company, North America’s integration strategy ● Mobility: Microsoft, ServiceNow, Citrix, VMware, Lenovo, Zebra, Tangoe, leading pharma and life science company Verticalization and Druva, JAMF, MobileIron, AirWatch, Flexxible industry-focused #2 solutions Acquisitions: 2018: Red Hat; 2017: Verizon, XCC, Agile 3 Solutions; 2016: Sanovi Technologies, Blue Wolf Group, Truven Health Analytics, The Weather Company, Voice of the customer #1 EZSource, Resilient Systems; 2015: Clearleap, Gravitant

! Despite a rapidly growing market, all of the providers covered in this research are working tirelessly to capture a greater share. Undoubtedly, enterprises will continue to invest in cloud services long into the future, but the challenge for providers is understanding the rapidly changing needs and demands of the modern business as it shifts from point solutions to broader transformation activities. ! Providers must also ensure they have the toolsets and partnerships in place to bring the fresh capabilities that clients are pushing for—whether that’s the growing demand for containerization and micro-services or the new innovations that are already beginning to enter the market. The insatiable appetite enterprises have for cloud services is dependent on the increasing levels of value they are able to generate from the technology, and service providers have an important role to play in delivering this. The challenge will be how they articulate the value of their role to the market; although the market is growing, competition is heated as competitors fight to capture executive mindshare. Across the board, providers are struggling with this particular facet of the market—whether that’s a major perception mismatch or challenges finding a foothold in particular regions or verticals. ! The overall market is mature but changing rapidly as enterprises with major war chests move in to develop cloud capabilities to pick up a portion of the lucrative space.

! Find a partner, not a provider: While somewhat of a cliché, in the complex and fast-moving cloud services space, enterprises need a real partner to help them navigate the changing ecosystem and landscape. In just a few short years, hyperscale public cloud providers have taken up huge chunks of the market, but even these firms aren’t immune to change as new players emerge to dominate regions and industries. A real partner is one that will guide enterprises through this evolving landscape. ! Know where you are: The biggest challenge enterprises face is understanding what their infrastructure estate looks like now so they can accurately prioritize and map out migration projects. To cater to this demand, providers and technology vendors have developed a raft of services and solutions to map out infrastructure estates and dependencies. Enterprise leaders shouldn’t dismiss this vital part of the journey; they can save significant time and resources by going into engagement with a clear view. ! Find pragmatic roadmaps: We’re hearing a lot about ambitious migration projects that on the face of them sound unrealistic; while some find success, the majority bump into roadblocks. Pragmaticism is vital in the cloud migration market to help enterprise leaders steer past hype and focus on real, achievable business objectives. Of the successful engagements we discussed with enterprise leaders in this research, all of them had one thing in common: they found a partner that was clear and honest to enable them to deliver real results over plotting out overly ambitious roadmaps.

! Find your differentiation: The challenge for providers in the cloud services market today is a clear lack of differentiation. Many are leaning into the hyperscale public cloud giants and developing layers of value over the top. This makes articulating a clear value proposition to clients a real challenge for most. As the market continues to grow, providers should engage with advisors, analysts, and clients to discover what their real point of differentiation is—and push this out to the market. ! Address perception challenges: As a result of challenges with differentiating and because the public cloud providers are pushing ambitious roadmaps already, many vendors are struggling with a perception gap in the market. For many, while their existing clients talk highly of their ability to innovate, this message isn’t filtering through to potential clients in the broader market. This will require some intelligent and focused marketing activities that push success stories that prove vendor’s innovation capabilities. ! Experiment with clients: To get the needed proof, providers should work with existing clients and push the boundaries of innovation in experimental initiatives. This approach provides clients with innovative and cost-effective solutions while building valuable proof of delivery capability and commitment to innovation. ! Build out your partner ecosystem: Providers must look beyond the usual suspects to find new innovators and disruptors. Already, new cloud firms are edging into the market to take on the hyperscale giants in particular verticals or regions, and boutique vendors are developing niche products to solve specific challenges—for the right firms, these are the partners that will help them evolve their cloud practice.

Survey 2017 2018

Geography Industry Number of Respondents Number of Respondents Other 38 30 US 117 180 Government 35 30 Insurance 35 30 Energy 34 30 Travel 33 31 Europe 71 62 Manufacturing 33 30 Utilities 33 30 Telecom 25 30 APAC 59 60 Banking 21 30 Healthcare 20 31

Company size (Revenue) Job Title Number of Respondents Number of Respondents

Director 185 178 Between $1B and $5B 166 168

Senior Vice President, Function Head 60 64 Between $5B and $10B 85 83 Vice President 62 55

Greater than $10B 56 51 CEO, C-Level or Executive Vice President 5

Ollie O’Donoghue Jamie Snowdon Martin Gabriel

Research Director| HFS Research Chief Data Officer | HFS Research Sr. Research Analyst | HFS Research [email protected] [email protected] [email protected]

Ollie O’Donoghue is Research Director, IT Services. With over Jamie Snowdon has primary responsibility for overseeing the Martin Gabriel is a Senior Research Analyst at HFS Research, five years experience in the IT services industry —as both a development of HFS’ Quarterly Market Index, in addition to tracking global outsourcing deals in IT/BPO/Engineering services practitioner and a research analyst—Ollie understands the managing and developing the firm’s data-centric products and and supporting different practice leads in secondary research, impact IT services have in the modern business environment. services. He works across the HFS analyst teams to define data analysis and research writings. evolving services markets and create market size estimates and Before joining HFS, Ollie was the Head of Research Martin has over 5 years of research, analytics, and market forecasts. intelligence experience in TCS and Xchanging. In his TCS role, he and was an Industry Analyst for an ITSM Practice . He provided He also manages HFS’ quantitative survey and benchmark data. worked on point-of-sale and consumer panel data and on IT service and support organisations with the resources to Jamie has over twenty years experience in the IT and Business analytical projects, providing business insights to clients. He was deliver greater business value. There he developed a Services industry. In that time he has worked in a variety of responsible for analyzing retailers and consumer behavior for comprehensive research portfolio for the industry. He has roles including sales, marketing, consulting and as an industry various FMCG/CPG products to address diverse business issues researched and presented on a multitude of topics including analyst. Jamie’s analyst career has largely been spent and provide actionable recommendations for the future growth automation, innovative support models, and real-time analytics. conducting data analysis including market size/forecast models, for clients. He performed extensive category reviews, brand In 2017, Ollie was named second on a list of IT and ITSM experts quantitative/qualitative survey analysis and competitive management and trend analysis based on point of sale and to watch. analysis. homes scan data along with information from secondary sources. At Xchanging, he was part of the market intelligence team that supports Xchanging’s vertical heads, strategy team and sales and marketing team.

HFSResearch.com | @HFSResearch