Just about a year ago, I published my 2014 cloud computing predictions. It’s been an amazing year in cloud computing, with a few of these highlights:

  • Amazon Web Services continues to grow and innovate. At its November Reinvent conference, the more than 13,000 attendees learned about its many new services, including new Lambda, as well as new instance types (and Intel appeared, talking about how it had designed a new, highest-performing-ever chip just for Amazon).
  • Microsoft, charging from behind, seems to be making up lost ground, and, according to all reports, is now a significant player, leveraging its capability to deliver a homogenous hybrid cloud offering.
  • Google made it clear that it wants its place in the cloud universe, using price slashing (historically the tool of a new player trying to squeeze its way into a market) as its weapon.
  • Both HP and IBM brought new public offerings to market (Helion and BlueMix, respectively), indicating they aren’t planning to forfeit the public cloud computing market by staying stuck in their legacy on-premises businesses (although, to be noted, both provide on-premises solutions that are compatible with their public offerings, thereby providing customer value through consistency and portability).
  • The OpenStack Foundation held two Summits with rapidly growing attendance, indicating high level of both vendor and user interest. While OpenStack the platform is still maturing, it’s clear that, as an industry, we have chosen OpenStack as the only meaningful nonproprietary software platform for operating cloud infrastructures.
  • More generally, cloud computing is continuing its journey to becoming *the* de facto enterprise computing platform. It’s still early in this journey, but I’m no longer hearing skepticism about cloud’s benefits, as I did even two years ago. Today, the industry — both vendors and users — is trying to figure out how to best extract value from cloud. The discussion about whether cloud computing is real, however, is done. It’s obvious it’s real; now the question is how, not why (although, sadly, there is still too much fixation on what, as in “what is cloud computing,” as though a definition needs to be fixed before getting on with the job).

Given these developments, I thought it would be worthwhile to revisit my 2014 predictions, both as a perhaps-humbling effort to evaluate my foresight, but also to measure how the torrid pace of innovation in the cloud market has supported or outstripped what I expected to see during this year.

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“Nobody ever got fired for buying IBM,” as the old IT bon mot goes. The corollary for today’s cloud-based world could well be, “Nobody ever got fired for signing a deal with Amazon.com.”

Inking a standard infrastructure-as-a-service deal with the big-name provider has clear benefits for many companies–scalability, flexibility, lower capital costs. But in exchange, cloud customers have typically given up much control.

When Chico’s CIO Eric Singleton first signed a deal with Amazon Web Services to put the retailer’s new customer information analytics systems in the cloud in mid-2013, that was a reasonable trade-off. He wanted to get up and running quickly with a small pilot.

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The NASA Jet Propulsion Laboratory (JPL) is famous for the Mars Curiosity Rover, the Explorer spacecraft, the Voyager program and countless other history-making missions. But behind all those landmark events are IT systems enabled by the cloud, analytics, big data and consumer technology.

JPL’s cloud strategy goes back six years to when CIO Jim Rinaldi decided he’d rather rent than buy cloud capabilities. Today, JPL’s cloud infrastructure includes a public, private and hybrid cloud that will all soon run from a single data center and power all the organization’s missions into space.

“One of the things in our hybrid cloud that’s going to make this so different for people involves mission work,” Rinaldi says. “To be able to provision the compute and storage resources as they need enables mission folks to work differently than they ever have before.”

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Welcome back to Social Digest, the fortnightly round up of all things social, straight from Social@Ogilvy London. So, for the last time this year, enjoy! 

 

3 THINGS YOU NEED TO KNOW

 

 
 
 

2014 on…

 

 

In other news…

 

  • Skeletor + Honda = A pretty cool Twitter takeover that many initially thought was a hack
  • And finally, want a LinkedIn endorsement from Liam Neeson? Good luck
 

Just for fun

 

  • Oh Benedict… first otters, now milk
  • And finally, help yourself to a badass job title here
 

 

Worth a Watch

 

 

GIF of the Fortnight

 

Okay folks, since it’s the last Social Digest of 2014, I thought I’d treat you to a triple dose of wonderful GIF awesomeness…

“You take over from here”


 
 
Steady…. steady… hold it… aaaand RUN

 
 
Too eager 

 

 

See you in 2015, folks!

 
Bizhan
 
PS: To all you wonderful people who have read this little newsletter all year, clicked away at the little links, and giggled at the little GIFs, I thank you. Please keep reading, keep sharing, and as ever, if you see anything noteworthy or lolworthy, I’d love to see it too: @biz987

Google is offering a Java SDK to integrate with the Google Cloud Dataflow managed service for analyzing live streaming data as part of its effort to broaden support for the platform.

By sharing via open source, the SDK provides a basis for adapting Dataflow to other languages and execution environments, said Sam McVeety, Google software engineer, in a recent bulletin. “We’ve learned a lot about how to turn data into intelligence as the original FlumeJava programming models (basis for Cloud Dataflow) have continued to evolve internally at Google.”

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The Facts

On 18th December 2014, Atos, a leading European IT service provider, announced the acquisition of the IT outsourcing (ITO) business of Xerox. The ITO business was part of Xerox’s services unit that also delivers Document Outsourcing (DO) and Business Process Outsourcing (BPO). The acquisition does not impact Xerox’s DO or BPO businesses, and signals an intent from Xerox services to focus entirely on those businesses.

Atos is paying US$1.05 billion in cash with an additional consideration of US$50 million subject to fulfillment of certain conditions, and will add ~US$1.5 billion of ITO revenue to Atos’ topline. Post completion of the acquisition, revenues from the United States will almost triple for Atos, making it the single largest operating geography. This acquisition will also add 9,800 professionals to Atos’ existing 85,000+ employees. Further, Atos will become the primary IT services provider to Xerox (~US$240 million annual revenue) and also have the right to first refusal on collaborative opportunities with Xerox. The acquisition is expected to close by Q2 2015.

The Good

Atos has faced perennial organic growth challenges with 2-4% annual revenue decline that it countered by large acquisitions such as Siemens Information Systems in 2010 (for US$1.1 billion) and Bull in 2014 (for US$830 million). Both of these were focused primarily on the European region. Xerox ITO derives ~93% of its business from North America with an estimated 250+ clients in this region. Xerox’s ITO business (acquired with ACS in 2010), has witnessed growth of above 5% CAGR over the last 5 years. This should help Atos partially address its own growth challenges.

Atos’s 2016 ambition is to become a Tier-1 “global” (read non-European) service provider with significant presence in the North American region for traditional and next-generation services such as big data, cloud, and digital. The acquisition provides a strong foothold in the North American market that is growing faster than Atos’ European stronghold. Moreover, Atos’ plans of achieving ~US$1.2 billion from North America by 2016 are easily surpassed by this acquisition. Xerox ITO will more than triple the contribution of the U.S. market and increase the region’s share to 17% from the current 7%.

Atos performed an extensive due diligence on assets and analyzed over 85% of existing Xerox’s ITO contracts to ensure alignment with strategy. Given that Xerox’s ITO business is exclusively focused on infrastructure managed services, Atos can possibly cross-sell system integration, consulting, big data, cloud and BPO services to these clients. Despite limited presence in North America, Atos is a recognized brand and now with Xerox’s capabilities, it can meaningfully penetrate this market. Conversely, for Xerox, it can leverage Atos’ European presence to expand its BPO business beyond its U.S. stronghold.

This acquisition is an important milestone in achieving Atos’ 2016 ambition of growing IT services by ~5% in 2014-2016 largely through “external initiatives”. Further, Atos has aggressive “offshore-leverage” plans for its global delivery organization with over 60% of incremental hiring planned in these regions. Xerox brings 40-45% of resources in these markets, which are higher than Atos’ overall offshore-leverage of 25-30%. This will also aid Atos’ 2016 ambitions of improving operating margins by 100-200 bps.

The two companies are also highly technology focused and could join forces to come up with new innovative ways of doing business particularly in the world of all things digital.

For Xerox, the divestiture of the ITO business signals a strong commitment to the DO and BPO segments within services, and will allow Xerox the capital to continue making investments in advancing service delivery capabilities in the BPO market which is facing significant disruption due to technology and service delivery automation.

 The Uncertain

History indicates that acquisitions fail due to a variety of reasons, the biggest being culture misfit. However, we believe it’s impossible to predict the outcome of an acquisition based on cultural conflicts and therefore, this is best left for the future.

Yet, there are some risks and challenges Atos will needs to address. For example, despite Xerox adding to “low-cost” headcount, Atos still significantly lags major Tier-1 providers such as IBM, Accenture, TCS, and Capgemini. These incremental low-cost resources do not meaningfully enhance Atos’ commercial flexibility to offer attractive pricing to its clients. Xerox ITO has a long-tail of clients where ~80% of clients contribute only ~15% of revenue. Atos may need to trim this long tail and carefully evaluate Xerox’s presence in the mid-market segment. Moreover, the aspiration of selling IT services to ~800 of Xerox’s BPO clients will require sustained efforts given a significant number of these will already have strong incumbents.

Atos is making considerable investments in digital and cloud services with its Canopy subsidiary and recent acquisition of Bull. However, it lags peers such as Accenture, Capgemini, and IBM in offering big data and digital services. Despite Xerox’s ITO investments in cloud (eight private cloud set-ups, seven multi-cloud hubs), it is not recognized as a leading cloud provider. We believe that the Xerox ITO addition will not add meaningfully to Atos’ branding for cloud services in the North American market. From a scale stand-point, a US$1.7 billion revenue from North America pales in comparison to IBM’s $20 billion, Accenture’s $10 billion, TCS’ $7 billion and even “European” Capgemini’s US$2 billion from this market.

Moreover, Atos will need to closely manage internal organizational dynamics as the North American operations become increasingly influential. Currently most major decision making is centered in Europe. Atos will need to ensure that the North American leadership is suitably empowered to grow the business and meet the aspirations of becoming a major provider in that region. The go-to-market and sales strategy need to be adjusted with greater decision-making authority given to the front line team in North America.

The two companies’ leadership talk about their BPO offerings as being complementary. In fact, there is some overlap, certainly in healthcare administration with Atos having a strong presence in healthcare assessments in the UK public sector and Xerox in the US healthcare administration. Both companies also offer payment processing. We see some potential for “coopetition” in these lines of business.

The Road Ahead

Both organizations are very committed to making the acquisition a success with a formal strategic governance board including the respective CEOs to ensure smooth collaboration. Moreover, they will combine go-to-market strategy for select products and services across the client base. We expect Atos to transform the pure “managed service” focus of Xerox ITO by introducing its broader next-generation services to North American clients. We believe Atos has the capabilities and the investment DNA to carry out this transformation. The combination creates a powerful alternative infrastructure services provider for the North American market. Xerox ITO provides a good platform for Atos to strive towards its aspiration of becoming a major North American and Tier-1 global IT service provider. Whether this provider can offer next-generation cloud and digital services, and whether the North American clients will embrace it, only time will tell.

 

Screen Shot 2014-12-19 at 15.23.39

Well isn’t this lovely?

Just over a year ago now, Marshall Manson and I smashed our heads together for several hours and came up with a fairly lovely document covering off our trend predictions for the year ahead.

Such was the warmth of the collective feedback of said presentation, we’ve done it again this year. Hurrah and hurrah again.

The document outlines a brief review of those ideas as well as a more in-depth look at the thoughts, trends and predictions for next year. However, if you’re a big cheat and don’t want to read the presentation (seriously, what kind of monster are you?) here are the cliff notes:

Trend predictions for 2014: Review
Marshall and I scored four for four with, ‘Disposable Content’,Brand Banter’, ‘Facebook as a Paid Media Channel’, and a little thing called ‘Sub-dividing Communities’. Each and every one of them came true and, well, we’re pretty chuffed about that (the proof is in the deck below).

So without further ado, let’s move on to our Trend predictions for 2015:

Trend 1. Twitter Zero
Algorithmic content serving is coming very soon and, when it hits, and very much like Facebook before it, brands will need to understand not only what paid products are available but also how to use them.

Trend 2. The Video Battle Royale
‘Video’ was one of my ‘things that are not trends for 2015‘ however the BIG BATTLE FOR VIDEO AD DOMINANCE is 100% going to be a thing next year. With Facebook and Twitter both going all in on video-based ad products, we’re also predicting that Instagram’s existing ad products will also soon include video. Did you know Facebook outdid YouTube, on the video front, in 2014? We don’t think Google will let that lie… do you?

Trend 3. Teens & Anonymous Platforms
Less of a trend prediction more a piece of social / anthropological commentary, this section is about there now being a generation of teens who have grown up not knowing a world without an Internet. So what does ‘youth Internet’ look like? And why?

Check it out, you’ll see.

The presentation is embedded below.

And hey, tell us what you think on Twitter (@whatleydude or @marshallmanson) – we’d love to get your feedback!

 

As I recently looked at service providers’ PowerPoint decks pitching their as-a-service offering, the well-known tangled-web-we-weave quote from Sir Walter Scott’s 1808 poem “Marmion” came to mind. It’s very clear that the industry is interested in moving to platform services. And it’s a fabulous idea — great content reduced cost, agility and focus on the customer’s business. The problem is no providers have actually done what they tout in their decks.

Service providers discussing their offerings with analysts or potential customers use decks that make it seem that they have a great deal of experience in as-a-service offerings and they do this work all the time. However the truth is that they have done only pieces of these offerings and they have done many elements in isolation. But pulling it all together — not so much. When you push them on details, they fall back on a blizzard of integrated charts.

Oh what a tangled web we weave when first we practice to deceive. But when we practice quite a while, it improves our style. (from “Marmion”)

Over the past seven months I’ve seen glossy charts getting better by the moment and pitch decks becoming much more impressive. But still they deceive; no one has actual experience in the complete journey. Everest Group is working with providers that are on the way to doing it, but it takes three years.

Here’s my advice to providers that don’t want to suffer the embarrassment of customers realizing their deception: the truth will set you free. Acknowledge that you can prove it now only in part and the rest will come about over the next two years.

 

ITO in HC provider Annual Rep 2014, I1

Healthcare provider ITO services are (somewhat) global: In spite of the risk-averse nature of healthcare services providers and data security concerns, pockets of expertise are emerging around the globe

 

ITO in HC provider Annual Rep 2014, I2

2016 is a significant year for healthcare provider ITO contract renewals