A Software Insider's Point of View

Event Report: Capgemini Business to Planet Connect at Climate Week New York

rwang0 — Fri, 27 Sep 2024 21:40:46 +0000

Event Report: Capgemini Business to Planet Connect at Climate Week New York rwang0 Fri, 09/27/2024 - 14:40

Five Trends From Capgemini's Business To Planet Event

On September 25th, 2024, Capgemini hosted delegates as part of Climate Week 2024 in New York. Attendees learned how organizations and their leaders have transformed operations, built sustainable supply chains, and applied AI to improve their green strategies.

Sustainability by design addresses root causes. Attendees and speakers reiterated how important product and service design plays a role in enabling sustainability. From low carbon package design to efficient energy consumption, many organizations have achieved quantifiable achievements.
Circular economy business models show promise. In many sessions, concrete examples include product use extension, resource recovery, sharing platforms, resource efficient production, and recycling of waste to material. These circular business models consider circular inputs, value chains, and market places.
Pragmatic decarbonization lower costs. Investment has increased in increasing energy efficiency, developing lower carbon products, electrifying processes, replacing thermally-driven prices, and collaborating around the supply chains. Users see a benefit with a comprehensive approach in reducing carbon emissions with consderation of cost, timing, impact, and feasibility.
Data-driven AI supercharges sustainability. Today's projects often involve a heavy digital and data component in not only quantifying inputs, but also reducing outputs. The heavy use of sensors and computing at the edge enables both digital and AI capabilities. Consequently, this has led to a rise in new startups putting this data to good use in operational efficiency, regulatory compliance, and revenue growth.
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Advances in climate tech create new opportunities to democratize action. New climate tech startups focus on bringing hard earned advances to the masses. Some examples include:

Altana - helping companies see intelligent maps of the global supply chain
BeZero - carbon credit rating systems
BioPlaster Research - seaweed based biodgradable packaging
Form Energy - long duration energy storage
Harvest Thermal - home heagina nd colling
InFarm - urban and vertical farming
OCN.Ai - a movement towards a healthier, more resilient ocean,
ZeroAvia - hydrogen fueled aviation

The Bottom Line: The Pendulum for Climate Solutions Has Shifted

Most attendees at Climate Week and at the Capgemini event shared similar insights on the climate for sustainability policies. In the US, boards have pushed back on DEI and ESG. The combination of a public wary of greenwashing and a tighter economic environment has led to the deprioritization of green policies. Policies that show a green bottom line such as circular economy, waste reduction, and compliance have had the most success.

Your POV

How far along are you with your sustainabilty projects? Are you ready to put these into full production? What risks have you overcome?

Add your comments to the blog or reach me via email: R (at) ConstellationR (dot) com or R (at) SoftwareInsider (dot) org. Please let us know if you need help with your strategy efforts. Here’s how we can assist:

Developing your metaverse and digital business strategy
Connecting with other pioneers
Sharing best practices
Vendor selection
Implementation partner selection
Providing contract negotiations and software licensing support
Demystifying software licensing

Reprints can be purchased through Constellation Research, Inc. To request official reprints in PDF format, please contact Sales.

Disclosures

Although we work closely with many mega software vendors, we want you to trust us. For the full disclosure policy,stay tuned for the full client list on the Constellation Research website. * Not responsible for any factual errors or omissions. However, happy to correct any errors upon email receipt.

Constellation Research recommends that readers consult a stock professional for their investment guidance. Investors should understand the potential conflicts of interest analysts might face. Constellation does not underwrite or own the securities of the companies the analysts cover. Analysts themselves sometimes own stocks in the companies they cover—either directly or indirectly, such as through employee stock-purchase pools in which they and their colleagues participate. As a general matter, investors should not rely solely on an analyst’s recommendation when deciding whether to buy, hold, or sell a stock. Instead, they should also do their own research—such as reading the prospectus for new companies or for public companies, the quarterly and annual reports filed with the SEC—to confirm whether a particular investment is appropriate for them in light of their individual financial circumstances.

Contact the Sales team to purchase this report on a a la carte basis or join the Constellation Executive Network

News Analysis: Capgemini Research Institute's Latest Sustainability Report Shows Prioritization For Regulatory Compliance and Operational Efficiency

rwang0 — Mon, 23 Sep 2024 07:02:11 +0000

News Analysis: Capgemini Research Institute's Latest Sustainability Report Shows Prioritization For Regulatory Compliance and Operational Efficiency rwang0 Mon, 09/23/2024 - 00:02

Broad Reaching Survey Shows Insight Into Both Progress and Trends In Sustainability

In the third annual “A World In Balance 2024” report by Capgemini Research Institute, 6500 consumers over the age of 18 and 2152 executives employed at 727 organizations with more than $1 billion in annual revenue were surveyed on their views, investments, and progress in sustainability. Overall findings show how organizations have prioritized investments with tangible return on investment (ROI), improved sustainable design, and doubled down on measurement. Key regulations such as the European Union’s corporate sustainability reporting directive (CSRD) will drive continued investments to address regulatory compliance.

The report provides Chief Sustainability Officers (CSOs) with recommendations on how to accelerate their sustainability initiatives. Moreover, the insights in the report lay out a case for business leaders in strategy, marketing finance, human resources, procurement, manufacturing, and sales to make investments in a sustainable approach.

Progress On Sustainability Remains Steady And Impactful

Capgemini Research Institute developed a 93 question sustainability index. Some highlights of the report include how countries such as Australia have shown the most consistent progress year over year while the Netherlands have maintained relatively consistent progress in the index. From an industry view, consumer products manufacturing has made the most consistent progress year over year with financial services improving the most in 2024 versus 2023.

Organizations have prioritized circularity projects to achieve operational efficiency and cost savings. The survey showed that 72% of all organizations see recycling products as a key aspect of their programs. Sustainable design creates cost savings in both the supply chain and the recovery process with 67% of executives redesigning products to have lower impact on forests. Furthermore, the push for better measurement has led to improved methods to measure industrial process energy.

Stewardship of water resources have also yielded cost savings. Over 75% of organizations have implemented a water stewardship program, up from 55% in 2022. On the biodiversity front, 66% of executives surveyed from the report agree their organizations invest in conserving natural habitats. On the topic of regulations, regulations have played a key role in driving reporting and compliance, though only 38% of organizations are ready to report Scope 3 emissions.

The Bottom Line: Enter The Age Of Pragmatic Sustainability

Capgemini Research Institute’s latest report provides a clear progress report on the past three years. External forces such as geopolitics, regulation, and pace of innovation have played a key role in shaping sentiment and investment. With growing geo-political risk, organizations may be tempted to de-prioritize sustainability investments.

However, the opportunities to apply exponential technologies to help with sustainability bring hope that stakeholder and shareholder interests can be balanced while achieving both required and self-imposed goals to deliver more with less. Advancements in analytics, automation, and AI play a key role, however, it is the human touch required to lead organizations through this transition that brings the research finding to the forefront of pragmatic approaches that have massive improvements for society.

Your POV

How far along are you with your sustainabilty projects? Are you ready to put these into full production? What risks have you overcome?

Developing your metaverse and digital business strategy
Connecting with other pioneers
Sharing best practices
Vendor selection
Implementation partner selection
Providing contract negotiations and software licensing support
Demystifying software licensing

Reprints can be purchased through Constellation Research, Inc. To request official reprints in PDF format, please contact Sales.

Disclosures

Contact the Sales team to purchase this report on a a la carte basis or join the Constellation Executive Network

Monday's Musings: How To Deliver On Both Performance And Diversity Amidst The DEI Backlash

rwang0 — Sun, 07 Jul 2024 17:20:48 +0000

Monday's Musings: How To Deliver On Both Performance And Diversity Amidst The DEI Backlash rwang0 Sun, 07/07/2024 - 10:20

The Backlash On DEI Is Based On Lack Of Performance

The recent backlash on diversity, equity, and inclusion (DEI) programs stems from both the lack of quantitative data showing how diverse teams improve performance and the discriminatory nature in how these teams were constructed. In 2015, a "seminal" McKinsey study lauded the dividends to be gained from diversity. The well meaning Davos set used this study to launch a movement for diversity, resulting in hundreds of billions spent on diversity programs across businesses, the public sector, and non-profits over the past decade.

Why? In that 2015 study, McKinsey's researchers focused on superficial diversity metrics of gender, ethnic, and racial makeup of top management teams and boards across a number of industries in 2014. They then took an analysis of EBITDA between 2010 and 2013 and came to the conclusion that businesses with more gender diverse leadership were 15% more likely to report financial returns above their national industry median. Teams with more ethnic diversity were 35% more likely to have financial return that outpaced their industry.

Unfortunately, the amount of investment and efforts have not financially paid off and since 2020, companies have cut back on investment into diversity programs. Furthermore, the landmark McKinsey study has never been replicated and the results are now in question. The backlash has been well documented in a series of media reports:

What You Measure Matters In High Performing Diverse Teams

The push back on diversity goals and reduction in investments is a reflection on the lack of promised gains. However, the failure of these programs is based on a fundamental flaw - how diversity was defined and how identity politics failed to address performance from diversity. In fact, diversity was often defined by external factors of gender, ethnic, and racial make up. These attributes of diversity are often out of the control of the individual. One does not choose their gender nor race nor ethnicity. In fact most employees recognized this flaw that addressing diversity based on external factors did not achieve the spirit of diversity

For example, if the goal is to provide more opportunities for disadvantaged youth to attend elite colleges, preferences by race should not be the factor. Why? A very wealthy fourth generation, well connected, and educated child in one racial classification would benefit at the expense of the intent of the policy. Using first time college families would be a better approach to achieving the spirit of providing more opportunities for first time higher education families without using race and achieving diversity.

In the corporate world, diversity of thought provides a key role in accelerating performance. For instance, successful innovation teams with a majority of STEM folks (e.g. engineers, scientists, and mathematicians) know that they need a balance of humanities experts (e.g. ethnographers, sociologists, philosophers, and historians). This balance of perspectives and level of diversity is critical especially with the rise of artificial intelligence and the need to ensure a holistic point of view to address unintended consequences and biases. However, there is an assumption that these members of diverse teams have achieved a level of competency and mastery in their profession, unlike many of the external and superficial definitions of diversity in corporate DEI programs.

Apply The Five Levels Of Diversity When Hiring For Performance

In over 100 conversations with CXO's in the Constellation Executive Network over the past 12 months, a realization that broader measures of diversity can address the performance gap in Level 1 diversity program design. Success will require a flip in the prioritization of diversity from Level 1 external/superficial factors to Level 5 prioritization (see Figure 1)

SUPERFICIAL EXTERNAL FACTORS APPROACH

In many DEI programs today, leaders start with Level 1 as the key filter. This has led to the lack of performance and backlash.

Level 1 External/Superficial Factors: attributes out of one's control such as race gender, and ethnicity.
Level 2 Competencies: attributes earned such as hard skills, educational background, and training
Level 3 Experiences: attributes based on years of experience such as duration in a role, advancement in a profession
Level 4 Performance: attributes based on success in past roles
Level 5 Values: attributes based on core principles, values, and beliefs

FLIP THE PYRAMID APPROACH

By flipping the pyramid and starting with Level 5, organizations will improve both diversity and performance:

Level 5 Values: attributes based on core principles, values, and beliefs
Level 4 Performance: attributes based on success in past roles
Level 3 Experiences: attributes based on years of experience such as duration in a role, advancement in a profession
Level 2 Competencies: attributes earned such as hard skills, educational background, and training
Level 1 External/Superficial Factors: attributes out of one's control such as race gender, and ethnicity.

Figure 1. The Five Levels Of Performant Diversity

The Bottom Line: Apply A More Comprehensive Approach For Performant Diversity

Achieve performant diversity by starting with Level 5 Values and working through each level in hiring decisions and performance evaluations. Move from Level 5 to Level 1 as one measures diversity among all five attributes. Track patterns of performance and deficiency to understand how to align diversity with financial objectives, innovation goals, and regulatory requirements

Your POV

How are you achieving high performance teams with diversity? What are you doing to improve opportunities?

Developing your metaverse and digital business strategy
Connecting with other pioneers
Sharing best practices
Vendor selection
Implementation partner selection
Providing contract negotiations and software licensing support
Demystifying software licensing

Reprints can be purchased through Constellation Research, Inc. To request official reprints in PDF format, please contact Sales.

Disclosures

Contact the Sales team to purchase this report on a a la carte basis or join the Constellation Executive Network

Monday's Musings: Progress Through The Five A's of AI

rwang0 — Mon, 24 Jun 2024 13:00:31 +0000

Monday's Musings: Progress Through The Five A's of AI rwang0 Mon, 06/24/2024 - 06:00

Take A Measured Approach To AI Adoption

The rush to AI projects often comes as an all or nothing approach. However, lessons learned from Constellation's Executive Network (CEN) members show a gradual and measured approach. Constellation sees five phases to adoption from both a business and cultural point of view:

Augmentation. Organizations begin by finding tasks that benefit from augmenting existing work flows and learning where exceptions are needed.
Acceleration. As more data is taken into consideration and training improves, false positives and false negatives are worked out to accelerate progress.
Automation. Once a level of confidence has been achieved as more data points are assimilated, organizations can act with confidence towards automation.
Agent. Automated agents play a role in improving personalization at scale.
Advisor. Advisors can provide capabilities in prevention and prediction built on the overall accumulated knowledge and insight from the business graph.

The Bottom Line: Three Questions To Ask Before Your AI Project Goes Public

AI projects have amazing potential, yet they must meet the following three question tests before impacting external stakeholders such as customers, partners, and suppliers. Ask these three questions as a test before putting your AI project into the wild:

Do you have enough data to achieve a level of precision that your stakeholders will trust?
When and where will you insert a human?
Who do you sue if something goes wrong?

Your POV

How far along are you with your AI projects? Are you ready to put these into full production? What risks have you mitigated?

Developing your metaverse and digital business strategy
Connecting with other pioneers
Sharing best practices
Vendor selection
Implementation partner selection
Providing contract negotiations and software licensing support
Demystifying software licensing

Reprints can be purchased through Constellation Research, Inc. To request official reprints in PDF format, please contact Sales.

Disclosures

Contact the Sales team to purchase this report on a a la carte basis or join the Constellation Executive Network

News Analysis: Only A Few Companies Will Win In Fueling The Age of AI

rwang0 — Sat, 22 Jun 2024 05:58:50 +0000

News Analysis: Only A Few Companies Will Win In Fueling The Age of AI rwang0 Fri, 06/21/2024 - 22:58

AI Begins And Ends With Nvidia

Despite the massive buzz on AI, only a few core companies that power the Age of AI will succeed. The high capital costs of research and development investment, the time required to take a product to market, and the ability to cross competitive moats create a massive barrier to entry. In fact, only a few vendors have shown significant profits in AI:

Nvidia
Adobe
TSMC
Oracle
HPE
C3
Palantir

Given the level of investment by Meta, Microsoft and Google, expect these vendors to show significant revenues in the next three to four quarters.

Nvidia's Success Is Built On Seven Moats

Nvidia is the foundational stock in the Age of AI. CEO Jensen Huang intends to achieve vertically integrated domination from silicon to software through partnerships and direct routes to market. Unlike the PC age where Microsoft, Intel, and Cisco served as a triumvirate foundational players, this new era will have new players all tied back to Nvidia.

Constellation believes that Nvidia has seven moats that will drive the company's success:

Visionary founder-led CEO
High barrier to entry in the chip market
High switching costs, especially the CUDA software layer
Dominant market share
Strong product roadmap and research bench
GPU is the default standard for AI inference and training
Growth numbers don't lie with gross margins of 78%

Your POV

Who do you think are the winners in the Age of AI? Do you think Nvidia will maintain its dominance in the market?

Developing your metaverse and digital business strategy
Connecting with other pioneers
Sharing best practices
Vendor selection
Implementation partner selection
Providing contract negotiations and software licensing support
Demystifying software licensing

Reprints can be purchased through Constellation Research, Inc. To request official reprints in PDF format, please contact Sales.

Disclosures

Contact the Sales team to purchase this report on a a la carte basis or join the Constellation Executive Network

Event Report: IBM Think Accelerates Accessible Gen AI For Clients

rwang0 — Sat, 25 May 2024 01:39:00 +0000

Event Report: IBM Think Accelerates Accessible Gen AI For Clients rwang0 Fri, 05/24/2024 - 18:39

IBM's Focus On AI Built From Data And Cloud Competencies

Four and a half years after Arvind Krishna was elected as IBM's Chief Executive Officer, today's IBM is a much different organization. A tight focus on data and cloud has helped IBM think through what clients need to not only be AI ready, but also AI first. With over 30,000 attendees at the Boston Convention and Exhibition Center gathered at IBM's biggest event, the mood was energetic and excited about the possibilities for the Age of AI.

Among the myriad of announcements, four key messages came through loud and clear:

1. Expect More AI Powered Automation

Much conversation was made about IBM Concert (GA in June 2024). This central nervous system of one's enterprise technology and operations uses AI from Watson X to identify, predict, and suggest fixes for problems. Cosntellation expects more bite-sized solutions for clients over time

2. Start Generative AI Projects With Granite Models

IBM's family of Granite Models will continue to grow over time. These open-source Granite models
are available under Apache 2.0 licenses via Hugging Face and GitHub. Customers gain a 3B to 34B parameter models. Constellation expects customers to apply use cases for code generation, complex applications modernization projects, code documentation acceleration, repository maintenance, and bug fixes at scale.
Customers can use these Granite models as a launch point.

In addition, customers can overcome the challenge of multiple forks of a single open-source model, Using a new methodology called LAB (Large-Scale Alignment for ChatBots), these LLMs can be pretrained on large sets of unstructured text, enabling these ChatBots to learn many new tasks more quickly once they see labeled instructions during the alignment stage. InstructLab—an open-source project by IBM Research and Red Hat uses the LAB technique to advance language model development.

3. Use IBM watsonX assistants

Constellation sees a progression from augmentation, acceleration, automation, agents, and advisors over time. WatsonX assistants are the first step to that journey. A few announced at IBM Think include:

IBM watsonx Assistant for Z to transform how users interact with the system to quickly transfer knowledge and expertise. (GA June 2024)
IBM watsonX Code Assistant for Z Service expansion with code explanation to help clients understand and document applications through natural language. (GA June 2024)
IBM watsonX Code Assistant for Enterprise Java Applications.(GA October 2024)

4. Partner With Everyone That Matters

IBM announced a slew of partnerships that will help IBM customers ease into and future proof their Generative AI investments. IBM is bringing third-party models onto IBM watsonx, and offering IBM Consulting expertise for enterprise business transformation as the enabler for clients .A few announcements of note include:

AWS - IBM watsonx.governance and Amazon SageMaker
Microsoft – IBM watsonX on MIcrosoft Azure
Adobe - watsonx.ai comes to Adobe Experience Platform
Meta - Meta Llama 3 now accessible on IBM watsonx,
Mistral - Availabity on IBM watsonx
Saudi Data and AI Authority (SDAIA) - the largest Arabic LLM now on IBM watsonx

These partnerships are important and allow end-user customers to adopt and scale AI solutions
that are specific to their business needs.

The Bottom Line: Accessible Generative AI Projects Are Coming To Customers Via IBM

While Generative AI is the number one priority inside board rooms, building a foundation for successful projects is not a skill many organizations can master. IBM recognizes this opportunity and has amassed a strategy to improve accessibility to generative AI projects. This progression from augmenting to advisors is coming soon to customers.

IBM has learned the lessons from their previous IBM Watson offerings and has been honing in on AI middleware, strategic partnerships, and AI and cloud prowess. By helping customers get their data house in order, customers will have a shot at making generative AI work for them.

Your POV

Are you an IBM client? Is IBM on your short list of vendors to deliver on Generative AI for your organization?

Developing your metaverse and digital business strategy
Connecting with other pioneers
Sharing best practices
Vendor selection
Implementation partner selection
Providing contract negotiations and software licensing support
Demystifying software licensing

Reprints can be purchased through Constellation Research, Inc. To request official reprints in PDF format, please contact Sales.

Disclosures

Contact the Sales team to purchase this report on a a la carte basis or join the Constellation Executive Network

Monday's Musings: Margin Compression - Tech Vendors Are You Leading The Way Or In The Way?

rwang0 — Sun, 12 May 2024 20:24:25 +0000

Monday's Musings: Margin Compression - Tech Vendors Are You Leading The Way Or In The Way? rwang0 Sun, 05/12/2024 - 13:24

Margin Compression Is Pernicious, Disruptive, and Exponential In Impact

Technologies for the enterprise have often been seen as enablers for disruption and change. Over the past five decades as one technology or vendor would come to prominence and dominate a market, challengers would apply new technologies or business models to topple the legacy market and create new markets. Silicon Valley built its credibility on these disruptive market entrants. This cycle would continue to repeat itself until the next challenger became the market leader and struggle to hold on to its lead while meeting the demands of investors and the market.

Across the board in almost every market and every industry, an inflection point on margin compression is here. Take the following examples:

In the Persian Gulf, $100 drones are battling against $1 Million missiles.
India's payment system, UPI, operates at pennies per transaction while SWIFT and other payment rails operate from $1 to $25 per transaction.
Prescription drug prices in the United States are significantly higher than in other nations, with prices in the United States averaging 2.78 times those seen in 33 other nations, according to a new RAND report.
Enterprise software vendor Zoho can deliver most capabilities a company under 500 employees needs at $100 per user per month vs $1000's with other providers

Recently, the impact on cloud and cloud economics have disrupted on-premises vendors. In the past the move from client-server to the Internet created new winners and losers. Today, AI and automation will play a key role in creating the new market leaders.

Technology Vendors Face Pressure To Meet Revenue Targets At Their Customer's Expense

Recent conversations with more than 100 CXO's in the Constellation Executive Network indicate that their satisfaction with technology vendors have reached an all time low. One CRM software vendor tried to propose a $20 million increase in licenses when the client was trying to reduce their spend by $20 million. Another executive dealing with an acquisition of a key virtualization supplier lost all of her executive contacts in the midst of the merger and contract renegotiation. In the case of a large global manufacturer, their ERP vendor attempted to use financial engineering jujitsu to convince them to upgrade to the cloud without success. Across the board, sales executives continue to push for increases in their total annual contract value to make quota at the expense of clients who are trying to reduce spend.

Customers seek vendors who can help them consolidate their vendor landscape AND reduce total spend across the board. With the mantras of exponential efficiency in full force and a hope for AI arbitrage driving exponential cost reductions, CXO's are under a lot of pressure from their boards to lower their overall spend. In a recent interview on Fox Business with Stuart Varney, three vendors who lead this charge were featured:

ServiceNow. Customers confirm they are consolidating onto ServiceNow in order to drive down costs, build the last mile, and place an innovation and AI layer over their transactional systems in order to achieve AI arbitrage.
Oracle. The full RedStack from Oracle Cloud Infrastructure to Database to Apps is providing significant cost savings for many customers using the Red Stack for margin compression.
UIPath. From bots to AI capabilities, UIPath's customer are taking advantage of AI arbitrage to achieve exponential effiicency.

In addition, vendors such as Rimini Street also play a key role in driving down costs by cutting the cost of vendor maintenance and freeing up money for innovation.

The Bottom Line: Vendors Please Lead Or Make Way For The Next Disruptors

With only two to three options in almost every industry, market, and category, switching between vendors has become more difficult. The intensity of market consolidation in a winner takes all market leaves customers with few choices. For example, cloud vendors were supposed to be the good guys in the market with pay as you go pricing, short term contracts, and flexible terms. Today, many cloud vendors are the enemy with vendor lock-in, price increases, and endless pressure to raise their ACV while making it difficult to reduce spend. The BPO market used to be a market of cost savings, but today the inability to move BPO operations to software based entities adds exponential cost to operations.

With so many opportunities for innovation, expect innovative startups to disrupt what was once the innovative companies who have now just become legacy.

Your POV

Which vendors are leading the way in driving margin compression and which are barriers? Let us know!

Developing your metaverse and digital business strategy
Connecting with other pioneers
Sharing best practices
Vendor selection
Implementation partner selection
Providing contract negotiations and software licensing support
Demystifying software licensing

Reprints can be purchased through Constellation Research, Inc. To request official reprints in PDF format, please contact Sales.

Disclosures

Contact the Sales team to purchase this report on a a la carte basis or join the Constellation Executive Network

Monday's Musing: When The Hunters Become The Hunted

rwang0 — Mon, 22 Apr 2024 11:49:10 +0000

Monday's Musing: When The Hunters Become The Hunted rwang0 Mon, 04/22/2024 - 04:49

Expect Software Giant Hunters To Soon Be The Hunted In A Digital Giant's Quest For Growth

Six of the Magnificent Seven (Microsoft, Apple, Nvidia, Alphabet [Google], Amazon, Meta [Facebook]) stocks have entered the four comma club -over $1 trillion in market cap. With a combined market cap of over $13.2 trillion, these six players continue to defy physics with continuous quarters of double digit organic growth. Digital giants by definition have deployed five key strategies:

Build the biggest network
Own and disintermediate the customer relationship
Compete for data supremacy
Deploy digital monetization models
Take a long term growth mindset

In the enterprise software category, the largest enterprise software vendors are nowhere close to $1 trillion in market cap. In fact, they have a long way to go. Here's their market cap as of May 3rd, 2024

Oracle $318.27B
Salesforce $265.45 B
Adobe $217.80 B
SAP $214.12 B
Intuit $176.18 B
IBM $152.22 B
ServiceNow $147.18 B

While these software vendors have been seen as the acquirers for quite some time, market conditions could shift quickly making them attractive targets for acquisition by a hungry Digital Giant seeking growth.

Running Out Of Runway For Double Digit Organic Growth Means More M&A In The Future

Should economic conditions take a turn for the worse, the digital giants will have to find inorganic opportunities. Technically digesting companies one-tenth to one-fourth their size would be very possible. In fact, if it weren't for a hawkish anti-trust stance by the current presidential administration, one could expect a faster rate of mergers and acquisitions. Most of the digital giants could find adjacencies to support their growth.

Concurrently, hardware and chip companies such as Broadcom have entered new markets by moving from chips to hardware to software. The next set of players below the trillion dollar market cap club will most likely consolidate in the next three years to gain scale and meet financial targets. With software a highly profitable endeavor, low margin players will likely find themselves drawn to an acquisition of software assets

The Bottom Line: End Of Zero Interest Rates Changes Everything

The end of zero interest rates have shown a confluence of forces in exponential efficiency, AI arbitrage, and margin compression. Each of these factors have transformed market conditions and forced management teams to rethink their business models. As digital giants struggle to achieve double digit growth and maintain their astronomical market caps, inorganic growth may be the only option. Expect a string of strange mergers and acquisitions with a change or presidential administrations in the quest for alpha. New tech conglomerates will emerge to challenge the digital giants. More importantly, new digital giants will emerge to disrupt the incumbents.

Your POV

Where do you see the next set of mergers? Do you think we'll see more bulking up by category or across category?

Developing your metaverse and digital business strategy
Connecting with other pioneers
Sharing best practices
Vendor selection
Implementation partner selection
Providing contract negotiations and software licensing support
Demystifying software licensing

Reprints can be purchased through Constellation Research, Inc. To request official reprints in PDF format, please contact Sales.

Disclosures

Contact the Sales team to purchase this report on a a la carte basis or join the Constellation Executive Network

Tuesday's Tip: Why Unethical Marketing Costs Tech Vendors 100’s of Millions Every Year

rwang0 — Tue, 26 Mar 2024 21:06:19 +0000

Tuesday's Tip: Why Unethical Marketing Costs Tech Vendors 100’s of Millions Every Year rwang0 Tue, 03/26/2024 - 14:06

What Every Tech Vendor CEO and CFO Should Know About Their CMO’s Wasted Investments In Vanity Metrics

Marketing professionals face massive pressure to show that their marketing investments have paid off. In a zero-interest rate environment, budgets were flush and marketers had a lot of leeway in building brand, hosting amazing events, and buying ads to improve market presence. However, a shift to a five percent interest rate environment has many CMO’s focused on performance marketing, showing return on investment, and moving MQLs from SQLs as fast as they can.

Why? CFO’s like making money from interest in the bank and marketing is often seen as overhead that needs to be justified.

Thus, marketing professionals must defend their budgets via metrics. But, not all metrics are created equally. Since the dawn of time, the urge to show performance has often led to shady strategies to boost numbers to game the system with metrics such as views, likes, subscribers, and impressions. To be fair, sometimes these efforts were valiant to prove a trend or take a stand. Other times, these were short sighted to justify an untenable position.

Unfortunately, many marketers have resorted to vanity metrics, metrics not tied to financial numbers or outcomes, that often have no correlation to the ultimate outcome – revenue.

The consequences of such actions have led to hundreds of millions in wasted in marketing investments that CEO’s and CFO’s should investigate. Vanity metrics provide a temporary saccharin high, and then the sugar crash results in a lot of wasted investments.

ACTION ITEM: Develop metrics with marketers that are tied to short-term, medium-term, and long-term revenue outcomes. Create a balanced portfolio of initiatives.

Fake Media Takes Paid Media To New Lows

The good news, in a digital world, the ability to show performance is easier. The bad news, faking performance has become easier due to a class of bad actors espousing unethical practices. The rise of paid media continues this trend by marketers to reach and influence decision makers. To be clear, paid media has a place in building, nurturing, and developing a community when there is a real audience of human prospects on the other end.

Regrettably, many large tech vendors with flush budgets often spent money for permanent paid blogs on prominent business publications like Forbes, in lieu of earned coverage. Why work so hard when a million dollars bought a page or subsite on a well-read business blog? The assumption that readers could not tell the difference between authentic content and paid media was fatally flawed. Most educated buyers ignored these properties due to the lack of original or novel content. In fact, the views were low unless they also paid for a media strategy firm to “juice’ the numbers.

ACTION ITEMS: CFO’s and CEO’s should spend time rewarding performance metrics for the long term and not the quarter to quarter vanity metrics that often are reported. Don’t let marketing professionals fall into the vanity metric trap.

Marketing Strategy Firms Posing As Unethical Fake Analysts Waste Millions Of Dollars

On the video front, other marketers thought it was okay to pay for views for videos no one would watch. Hardware and chip manufacturers technology vendors were the worst offenders often paying for videos about products no technology prospect cared about. This failed tactic required marketers to spend money with “fake” analysts or marketing strategy firms posing as analyst influencers to reach views on videos with no audience.

Using bot farms and mechanical turks from Asia, they provided “views” for the CMOs to show off to executives. The called it "paid" media. These unethical firms even disclosed these practices on their websites to justify their existence. In fact, a few of these “fake analyst firms" tried to pawn off their fake bot media efforts as paid media, pulling the wool over the eyes of CFO’s and CEO’s who thought they had 30,000 views on mundane topics such as “ The future of dot matrix printing” or “Networking and AI in the 21st century”. The reality – these topics would be lucky to garner 100 views on a great day. So, instead of paid media to grow an audience, they had an audience of none.

The marketers who made these decisions wasted millions of dollars with bots who would never spend one single dollar. To be clear, paid media campaigns with a real audience can augment a marketer’s strategy to grow community. However, fake paid media, with zero real audience of buyers, is a disservice and a complete waste of marketing dollars.

What’s the point of having 29,000 views from bots who will never buy? Who would believe a social media influencer, who used to be a plumber living in the Southeast, now calls herself an analyst, could garner 536 likes on 4 views for a podcast no one has ever heard of? And even funnier, these type of fake analyst firms generate 29,000 views 24 hours later. Really? These folks don't even pass the sniff test.

Sadly, the industry has a small class of social media influencers pretending to be analysts who often pay bot farms to fake views and then show their clients that they are “influential”.

These analysts are so unethical that they even threaten technology vendors who don’t pay them, that they will say “bad” things about them when they show up on TV. This type of "extortion" is not good for the credibility of the industry and should be called out and stamped out. The good news, this isn’t the norm and hopefully marketers will wake up and shut them down.

ACTION ITEM: CFO’s and CEO’s should demand the cancellation of these fake paid media dollars and replace them with long-term programs that grow audience.

The Bottom Line: There Are No Shortcuts For Good Marketing

Smart and savvy marketers know that communities and relationships are built on trust and authenticity. Real programs take time but payoff. CFO’s and CEO’s can eliminate millions of dollars of marketing waste on fake paid media and the unethical analyst firms who propagate these tactics. It’s time to root out the bad actors and end these dark arts. CEO’s and CFO’s can help their marketing brethren stay on the straight and narrow path of truly creating impactful and performance marketing that last the test of time.

Three Easy Steps To Root Out Unethical Marketing

The defensibility of vanity metrics no longer has a place in modern marketing. In fact, fake media practices are very unethical.

To identify fake paid media, one can take the additional security step of asking for proof on where the paid media comes from. A simple Google analytics log could help one's team identify if all the views come from the same IP or were all generated at the same time period. Any marketing strategy firm that can not come up with these stats or show this report is more than likely lying about their paid media efforts.

Here are three steps to root out this cancer in your marketing organization.

Focus on performance metrics, not vanity metrics.
Identify the bad actors in the space and put procurement bans on these players for five years. These actors could be media outlets, marketing strategy firms, media influencers, and unethical analyst firms.
Build long term relationships with ethical organizations to grow prospects, partner for thought leadership, and create original content.

Your POV

Will your CMO stop using fake analysts, and paying for fake views? Need help in identifying the unethical actors in the industry?

Developing your metaverse and digital business strategy
Connecting with other pioneers
Sharing best practices
Vendor selection
Implementation partner selection
Providing contract negotiations and software licensing support
Demystifying software licensing

Reprints can be purchased through Constellation Research, Inc. To request official reprints in PDF format, please contact Sales.

Disclosures

Contact the Sales team to purchase this report on a a la carte basis or join the Constellation Executive Network

New Analysis: Nvidia GTC 2024 Is The Davos of AI

rwang0 — Mon, 18 Mar 2024 13:01:56 +0000

New Analysis: Nvidia GTC 2024 Is The Davos of AI rwang0 Mon, 03/18/2024 - 06:01

New Chips, New Business Models Ahead In Accelerated Computing

Nvidia stock is up 267% YoY. With over 10,000 people in physical attendance and up to 100,000 people virtually attending, this could be the largest AI conference. All eyes on the next wave for AI with CEO Jensen Huang ready to keynote at 1:00 pm PT at the SAP Center in San Jose. The key things to look for in the keynote:

New B100 Chip replacement. Built by TSMC, the new chips are expected to be advanced 3nm design. NVIDIA will take advantage of the two dieTSMC's CoWoS-L (Chip-on-Wafer-On-Substrate-L) advanced 2.5D packaging technology to get larger processors. Should Nvidia move from the monolithic design to a multi-chip module (MCM) approach, the chip maker could create faster derivatives and shorten its product cycle.
CUDA advancements. This is the software layer that allows software companies to harness the power of the GPUs
Key vertical expansion. Healthcare, pharma, defense, and public sector consume massive workloads.
Partnerships across the AI ecosystem. Expect announcements from partners such as OpenAI, Microsoft, Amazon, and Google, Meta, Micron, Oracle, Super Micro, Dell, Intel, and more.
Sovereign AI growth. Nvidia is focusing beyond data centers and serving governments for sovereign AI.

Chips Are The Foundational First Inning Of A Nine Inning Age Of AI

The winners of the internet weren’t the early infrastructure companies They were the companies that built their business model on the internet as a key distribution channel. In AI, it will be the companies that take advantage of the full-stack of AI. Software companies will drive the second inning. But the third and fourth innings will be the innovative companies who use AI as their core business model. For example, in the war for refrigeration, it wasn't the appliance manufacturers that won, it was actually Coca Cola that innovated a new market for cold beverages.

Your POV

Will you be ready for Nvidia's new AI chip? Can competitors catch up?

Developing your metaverse and digital business strategy
Connecting with other pioneers
Sharing best practices
Vendor selection
Implementation partner selection
Providing contract negotiations and software licensing support
Demystifying software licensing

Reprints can be purchased through Constellation Research, Inc. To request official reprints in PDF format, please contact Sales.

Disclosures

Contact the Sales team to purchase this report on a a la carte basis or join the Constellation Executive Network