Hybrid Multi-cloud: Why IT Coexistence Strategy Prevails

The original concept of 'Hybrid Cloud' service deployment now seems outdated. In practice, few enterprise IT organizations have embraced private cloud models. And, even fewer will modernize their legacy non-cloud IT applications or the systems where they reside in the corporate data center.

That said, new IT infrastructure investment continues to shift as more leaders execute their digital transformation plans. Many enterprise CIOs and CTOs prefer to develop customer-facing applications within public cloud environments, and then connect those Web services to apps and data that reside on legacy systems within their on-premises data center. The vendor impact is apparent.

Vendor revenue from sales of IT infrastructure products (server, enterprise storage, and Ethernet switch) for cloud environments -- including public and private cloud -- increased 2.2 percent in the first quarter of 2020 (1Q20) while investments in traditional, non-cloud, infrastructure declined 16.3 percent year-over-year, according to the latest market study by International Data Corporation (IDC).

Cloud IT Infrastructure Market Development

The economic impact of COVID-19 pandemic was a major factor in the first quarter. Widespread lockdowns across the world and staged reopening of economies triggered increased demand for cloud-based services that fueled procurement of server, storage, and networking infrastructure utilized by public cloud service providers.

As a result, the public cloud was the only deployment segment escaping year-over-year declines in 1Q20 reaching $10.1 billion in spending on IT infrastructure at 6.4 percent year-over-year growth. In contrast, spending on private cloud infrastructure declined 6.3 percent year-over-year in 1Q to $4.4 billion.

IDC expects that the pace set in the first quarter will continue through the rest of the year as cloud service adoption continues to get an additional boost driven by demand for more efficient and resilient infrastructure deployment.

For the full year, investments in cloud IT infrastructure will surpass spending on non-cloud infrastructure and reach $69.5 billion or 54.2 percent of the overall IT infrastructure spend.

Spending on private cloud infrastructure is expected to recover during the year and will compensate for the first quarter declines, leading to a modest 1.1 percent growth for the full year.

Spending on public cloud infrastructure will grow 5.7 percent and will reach $47.7 billion representing 68.6 percent of the total cloud infrastructure spend.

According to the IDC assessment, the disparity in 2020 infrastructure spending dynamics for cloud and non-cloud environments will ripple through all three IT infrastructure domains -- Ethernet switches, server compute, and storage platforms.

Within cloud deployment environments, compute platforms will remain the largest category of spending on cloud IT infrastructure at $36.2 billion while storage platforms will be the fastest-growing segment with spending increasing 8.1 percent to $24.9 billion. The Ethernet switch segment will grow at 3.7 percent year-over-year.

At the regional level, year-over-year changes in vendor revenues in the cloud IT Infrastructure segment varied significantly during 1Q20, ranging from 21 percent growth in China to a decline of 12.1 percent in Western Europe.

Outlook for Cloud IT Infrastructure Investment

Long term, IDC expects spending on cloud IT infrastructure to grow at a five-year compound annual growth rate (CAGR) of 9.6 percent, reaching $105.6 billion in 2024 and accounting for 62.8 percent of total IT infrastructure spend.

Public cloud data centers will account for 67.4 percent of this amount, growing at a 9.5 percent CAGR. Spending on private cloud infrastructure will grow at a CAGR of 9.8 percent. Spending on non-cloud IT infrastructure will rebound somewhat in 2020 but will continue declining with a five-year CAGR of -1.6 percent.

Given the current trends, the opportunities for adapting legacy software applications via modernization and refactoring -- enabled by transformation into cloud services and/or container-based microservices -- must be carefully considered. Existing IT workloads rarely migrate fully to cloud service equivalents. Instead, new cloud-native apps can tap into the resources on legacy systems via RESTful APIs.

Furthermore, mature workloads infrequently move from one public cloud service provider to another. The term 'Multi-cloud' more often means the selection of independent purpose-built cloud services that remain with the best-fit hyperscale service provider. Working together, these clusters of independent services coexist with each other, but without significant integration. Why? By design, the cloud service environment is loosely-coupled. That's why an open IT architecture is an advantage.

The most effective 'well-architected framework' is open, to enable customer choice. I believe that savvy leaders will perform a detailed analysis to fully comprehend the business value and operational cost of maintaining legacy systems, versus the expense of public cloud service subscriptions. Both IT delivery models have benefits. Plus, both models can be enhanced by a progressive DevOps growth mindset.

New Digital Security Solutions for the Internet of Things

Many organizations that have already considered applications for the Internet of Things (IoT) will eventually explore the related device security issues. So, what's the evolution of the IoT hardware security value chain, and which emerging technologies are gaining momentum?

By 2026, IoT connections will exceed 23 billion across all major IoT markets.

Almost all those connections will be faced with incessant and constantly evolving cyber threats, forcing implementers and IoT vendors to embrace new digital security options to protect managed fleets and connected assets.

IoT Security Market Development

Secure device authentication currently stands among the top-tier investment priorities for key IoT markets. According to the latest worldwide market study by ABI Research, hardware-focused IoT authentication services will reach $8.4 billion in revenues by 2026.

"There are several key technologies revolving around authentication security that currently transform the IoT device value chain. Chief elements among them revolve around IoT identity issuance, provisioning, authentication, encryption key lifecycle management, access management, and attestation," said Dimitrios Pavlakis, industry analyst at ABI Research.

These are the prime focus of IoT vendors who capitalize on the emerging threat horizon to better position their services and explore new IoT monetization models.

As it currently stands, the IoT is not a secure place for future deployments and both IoT players and digital security vendors are aware of that.

The good news is that the recent change in thinking has caused a noticeable mentality shift and investment surge for secure authentication technologies across the IoT ecosystem.

However, according to the ABI assessment, this also gives rise to many IoT management offerings with questionable levels of security and intelligence.

IoT authentication services must consider a plethora of variables -- sharing operational, connectivity and security characteristics. Just because cybersecurity investments need to enter deeper into the IoT deployment equation doesn't mean that operational variables will be left unaccounted.

Bandwidth capacity, connectivity requirements, operational specifications, and device heterogeneity, digital footprint and processing power, edge-cloud dependencies, telemetry and intelligence are all key factors that need to be addressed to obtain sustainable growth for the IoT going forward.

Outlook for IoT Security Solutions Growth

Many IoT security vendors are taking advantage of the recent IoT investment surge to increase their market footprint and deliver security-first authentication and management services for the IoT supported by a multitude of flexible pricing models.

Market leaders and innovative companies offering IoT security services operating in different areas of the IoT value chain include Intel, Microsoft Azure, Amazon Web Services, Entrust Datacard, Rambus, Data I/O, and Globalsign.

That said, the increasing cyber threat landscape is forcing IoT implementors and IT vendors to embrace and prioritize new hardware-focused digital security options. This is a high growth market with many upside opportunities for forward-thinking organizations.

Supply Chains: The Localized Manufacturing Advantage

Delaying your investment in supply chain digital transformation is unwise. Why does it matter? Innovative supply chain technologies are proven to deliver a measurable outcome for people, process performance and industry leadership.

Gartner studied current strategic supply chain technology trends that have a high potential for enabling a transformational impact. Some are now reaching critical tipping points in capability and maturity.

"The vast majority of organizations have a cautious approach to adopting supply chain applications and technologies," said Christian Titze, vice president analyst at Gartner.

Local Supply Chain Market Development

According to Gartner study findings, only 21 percent of survey respondents are willing to consider or adopt early-stage technologies. However, even cautious supply chain leaders must keep an open mind and embrace long-term perpetual change. This is the path to rapid progress and growth.

Here are the key trends from their latest study findings:

Hyper-automation: it's a framework to mix and match a vast array of technologies in the best possible way -- such as historic legacy platforms with recently deployed tools and planned investments.

The term means different things for different organizations, so supply chain leaders must first find their individual definition. If deployed correctly, hyper-automation can encourage broader collaboration across domains and act as an integrator for disparate and siloed functions.

Digital Supply Chain Twin: it's a digital representation of the physical supply chain. It is derived from all relevant data across the supply chain and its operating environment. That makes the DSCT the basis for all local and end-to-end decision making.

"DSCTs are part of the digital theme that describes an ever-increasing merger of the digital and physical world," Mr. Titze added. "Linking both worlds enhances situational awareness and supports decision-making."

Continuous Intelligence: it's one of the biggest opportunities for supply chain leaders to accelerate their organizations’ digital transformation. It leverages a computer’s ability to process data at a much faster pace than people can.

Supply chain leaders -- or other systems -- can look at the processed data in near real-time, understand what is happening and take action immediately.

"There are already several use cases for CI in decision support and decision automation. For example, retailers utilize CI to automatically react to customer behaviors when they shop online. This enables better customer service, more customer satisfaction and tailored offers that lead to higher sales revenue," Mr. Titze explained.

Supply Chain Governance and Security: it's an increasingly important macro trend, as global risk events are on the rise and security breaches impact companies on both the digital and physical levels.

"Gartner anticipates a wave of new solutions to emerge for supply chain security and governance, especially in the fields of privacy as well as cyber and data security," said Mr. Titze. "Think advanced track-and-trace solutions, smart packaging and next-gen RFID and NFC capabilities."

Edge Computing and Analytics: it's the rise of edge computing -- where data is processed and analyzed close to its collection point -- coincides with the proliferation of Internet of Things (IoT) devices. It’s the technology you need when there is a demand for low-latency processing and real-time, automated decision making.

Edge computing is right now making its way into the manufacturing industry. For example, some organizations have adopted driverless forklifts for their warehouses. Heavy equipment sellers can use edge computing to analyze when a part needs maintenance or replacement.

Artificial Intelligence: deploying AI in the supply chain consists of a toolbox of technology options that help companies understand complex content, engage in a natural dialogue with people, enhance human performance and take over routine tasks.

"AI technology is present in a lot of already existing solutions, but its capabilities evolve on a constant basis," Mr. Titze added. "Currently, the technology primarily helps supply chain leaders solve long-standing challenges around data silos and governance. Its capabilities allow for more visibility and integration across networks of stakeholders that were previously remote or disparate."

5G Wireless Networks: when compared to its predecessors, 5G is a massive step forward with regards to data speed and processing capabilities. The ubiquitous nature of 5G boosts its potential for supply chains. For example, running a 5G network in a factory can minimize latency and enhance real-time visibility and IoT capabilities.

Immersive Experience: technology that improves or enhances the user experience -- such as virtual, augmented and mixed reality -- has the potential to radically influence the trajectory of supply chain management. Those new interaction models amplify human capabilities.

Outlook for Supply Chain Solutions Innovation

"Companies already see the benefits of immersive experiences in use cases like onboarding new factory workers through immersive on-the-job training in a safe, realistic virtual environment," Mr. Titze concluded.

I believe that as more manufacturing returns to a local operations business model, once again, the requirement for supply chain innovation intensifies. It's a key point of competitive differentiation.

Chinese manufacturers will likely continue to emphasize their low-cost advantage, but many of these government-controlled organizations are unable to respond to meaningful and substantive digital transformation. Therefore, it's a huge upside opportunity for changing the rules of the game. China can be disrupted.

Cross-Border B2B Payments will Reach $35 Trillion

How companies pay each other is important. All enterprises need access to effective B2B (Business to Business) payment systems in order to compete effectively. So, what's changed, given the current economic environment?

The payments market has been the target of disruption.

That said, despite the introduction of new innovations, traditional payment methods are still dominant in the B2B marketplace. It's a highly challenging financial system for many businesses, with a lack of transparency causing difficulties for decision-makers.

Traditional commercial bank transfers are not fast enough to make B2B payments management a streamlined process. In the cross-border arena, these challenges are magnified due to high costs.

Furthermore, the slow digital transformation of B2B payments means that established systems are unable to cope with the current global pandemic. Therefore, the B2B payments ecosystem must evolve.

B2B Payments Market Development

According to the latest worldwide market study by Juniper Research, the total value of B2B cross-border payments will reach $35 trillion in 2022. That's up from a COVID-related low of $27 trillion in 2020, representing 30 percent growth.

However, the long-lasting economic impact of the pandemic means that cross-border values will only exceed 2019 values by 2022, highlighting the effect that this major economic disruption will have on businesses around the world.

In the post-pandemic recovery phase, businesses will be more cost-conscious, meaning that cross-border payments vendors must offer compelling lower-cost solutions to their customers, or they will fail to recover lost transaction traffic.

The new market study identified that instant payments, services where funds settle in 10 seconds or less, will account for 9.3 percent of B2B transactions by volume in 2022 -- that's up from 6 percent in 2020.

Meanwhile, instant payments will only account for 6.3 percent of B2B transactions by value in the same year, illustrating the predominantly low value of these payments, due to low transaction limits.

Moreover, the greater value of B2B instant payments adoption is in new capabilities.

"Instant payment schemes are built on ISO 20022, which unlocks additional messaging capabilities. These can be used to inject transparency and build new services such as automation, which will add significant value to complex accounts payable processes," said Nick Maynard, lead analyst at Juniper Research.

Outlook for B2B Payment Transaction Innovation

According to the analyst assessment, this efficiency -- enabled by services including RippleNet and Visa B2B Connect -- will be critical in allowing these financial services operators to compete with innovative fintech start-ups and other non-bank industry players.

Legacy financial service providers must trial new systems now, and refresh their business models, or they will likely lose market share in a highly commoditized post-pandemic B2B payments environment.

Given that the current method of processing invoices and payments is so manual, there is significant upside potential for the introduction of automation to reduce transaction costs, increase processing speed and avoid currency exchange rate calculation errors.

IT Converged Systems Revenue Reached $3.9 Billion

The public cloud market has shown renewed enterprise IT investment. Meanwhile, converged systems' growth continues. Worldwide converged systems market revenue increased 4.5 percent year-over-year to $3.9 billion during the first quarter of 2020 (1Q20), according to the latest market study by International Data Corporation (IDC).

"The overall converged systems market showed resilience during a difficult macro environment in the first quarter of 2020," said Sebastian Lagana, research manager at IDC.

While the hyper-converged system market expanded, the 'Certified Reference Systems & Integrated Infrastructure' segment posted its best quarter of growth since the second quarter of 2019 (2Q19) on the strength of sales for demanding workloads in industries such as healthcare and telecommunications.

Converged Systems Market Development

Regarding market segmentation, the IDC converged systems view includes three vendor segments: certified reference systems & integrated infrastructure, integrated platforms, and hyperconverged systems.

The certified reference systems & integrated infrastructure market generated just over $1.4 billion in revenue during the first quarter, which represents a growth of 4.4 percent year-over-year and accounts for 36.8 percent of all converged systems revenue.

However, integrated platforms sales declined 8.7 percent year-over-year in 1Q20, generating $478 million worth of revenue. This amounted to 12.3 percent of the total converged systems market revenue.

Sales of hyperconverged systems grew 8.3 percent year-over-year during the first quarter of 2020, generating just under $2 billion worth of revenue. This amounted to 50.9 percent of the total converged systems market.

IDC offers two ways to rank technology suppliers within the hyperconverged systems market: by the brand of the hyperconverged solution or by the owner of the software providing the core hyperconverged capabilities.

For the branded view of the hyperconverged systems market, Dell Technologies was the largest supplier with $666.3 million in revenue and a 33.6 percent share.

Nutanix generated $260 million in branded hardware revenue, representing 13.1 percent of the total HCI market during the quarter.

Hewlett Packard Enterprise finished the quarter in the third spot with $118.7 million in revenue, which amounted to a 6 percent share.

Converged Systems Software Market Share

The rankings based on the owner of the hyperconverged software show that new systems running VMware hyperconverged software represented $841.2 million in total 1Q20 vendor revenue or 42.4 percent of the total market.

Systems running Nutanix hyperconverged software represented $561.7 million in first-quarter vendor revenue or 28.3 percent of the total market. Both amounts represent the value of all HCI hardware, HCI software, and system infrastructure software sold, regardless of how it was branded at the hardware level.

According to the IDC assessment, as hardware sales are a major factor in these market share data, it should not be assumed to solely reflect -- or completely align with -- the respective companies' overall software performance.

Enterprise Edge Computing and 5G Network Synergies

The global pandemic has created many ongoing challenges for IT vendors and public cloud computing service providers. That said, there are also numerous opportunities for compelling new technology use cases and associated digital transformation solutions.

Cloud computing and secure storage platforms should be as close to the source of customer data as possible. That's why 'edge computing' is gaining market momentum with fifth-generation (5G) wireless communications, which form a symbiotic association for infrastructure evolution.

Edge computing will drive new revenue growth in the telecom sector. Revenue from cloud-edge artificial intelligence (AI) chipset sales will grow from $2.6 billion in 2020 to $12 billion in 2025, at a compound annual growth rate (CAGR) of 36 percent, according to the latest worldwide market study by ABI Research.

Edge Computing and 5G Market Development

The synthesis of cloud-edge and 5G presents an opportunity for communications service providers to provide complete end-to-end solutions for large enterprise vertical industry applications.

For example, with their robust network connectivity and 5G assets, AT&T, Telefonica, Verizon, and Vodafone could move up the enterprise value chain to the service enablement layer for IoT, analytics, and other horizontal capabilities.

"A combination of cloud-edge compute and 5G ultra-reliable low latency connectivity is going to be the bedrock to propel post-COVID-19 growth. This growth is not just for telecoms, but also for a multitude of asset-heavy industries as they embrace digital-first processes and operations," said Don Alusha, senior analyst at ABI Research.

At present, there is no perfect business model for cloud-edge deployments. A key strategy for vendors like MobiledgeX, Ericsson, and Nokia is to target their products at the circumstances in which enterprises find themselves, rather than to enterprises themselves.

In other words, the critical unit of analysis must be existing operations and associated commercial circumstances, not the customer. There is a mass of enterprise requirements that must be satisfied with cloud-edge implementations that do not fit the ‘one-size-fits-all’ profile.

The ability to deploy edge-clouds across dispersed sites and supply chains in a uniform fashion is bound to be the defining feature to accelerate edge-cloud diffusion. This is particularly significant in a post-COVID-19 world where local compute, 5G, and fiber will continue to be the foundation for continued innovation and value creation.

According to the ABI assessment, as telecom service providers look more closely at current market dynamics for cloud-edge opportunities, the key is to understand where it stands in terms of existing assets and complementary control points.

Moreover, the market for cloud-edge deployments promises growth, but it is composed of a plethora of players and technologies which must be intimately understood. The vendor competition to create a superior partner ecosystem is likely to be fierce.

At present, the vendors don't have all the answers but should realize the choke points in the near term to obtain growth in the long run. For example, telecom providers need a sense of the industries they currently serve and what additional opportunity falls within the boundary of cloud-edge apps.

Outlook for Edge Computing and 5G Applications Growth

Lastly, hyperscale cloud service providers, such as Amazon, Microsoft and Google, are taking advantage of their lean operations to launch compelling cloud-edge offerings. They have the vision to build capabilities close to the edge, but they do not necessarily have the distribution capabilities.

"Clearly, there is an opportunity to be addressed by somebody, but the jury is still out on who captures what parts of the emerging cloud-edge and 5G ecosystem," Alusha concludes.

I believe that major public cloud service providers will continue to pursue the immediate upside opportunities, such as unified communications and collaboration services, where demand is currently the greatest. Then, as they uncover additional mainstream market use cases, they will apply edge computing solutions to further disrupt the legacy on-premises IT vendors.

Cloud-Native Apps and Developers Drive Digital Growth

Server virtualization was one of the key steps toward further IT infrastructure abstraction. Every enterprise CIO and CTO knows that managing a server farm is problematic. That's why the quest for container and serverless platforms is driving more organizations to reassess their data center.

Cloud container management revenue will grow from a small base of $465.8 million in 2020, to reach $944 million in 2024, according to the latest worldwide market study by Gartner.

Among the various sub-segments, public cloud container orchestration and serverless container offerings will experience the most significant growth. Here are the study findings.

Container Management Market Development

Container management provides software and related services that support the ongoing operation of containers, at scale, in production environments. But production applications are uncommon.

"There has been considerable hype and a high level of interest in container technology, but a lower level of production deployments to date," said Michael Warrilow, research vice president at Gartner.

Containers are useful because they provide a tool for addressing several critical concerns of software application developers -- including the need for faster delivery, agility, portability, modernization and life cycle management.

Gartner predicts that by 2022, more than 75 percent of global organizations will be running containerized software applications in production -- that's up from less than 30 percent today.

"Understanding of ‘cloud-native’ varies, but it has significant potential benefits over traditional, monolithic application design, such as scalability, elasticity and agility," said Mr. Warrilow. "It's also strongly associated with the use of containers."

That said, several factors will restrict container adoption among organizations developing or modernizing custom applications. Despite the need to support digital transformation, initiatives will be curbed by recessed economic conditions for at least the medium term, as organizational priorities shift to cost optimization.

Gartner expects that up to 15 percent of enterprise applications will run in a container environment by 2024 -- that's up from less than 5 percent in 2020, hampered by application backlog, technical debt and IT budget constraints.

According to the Gartner assessment, the enterprise deployment bottleneck will be the speed at which software applications can be refactored and/or replaced. Using containers for mainframe modernization projects is a good example.

Direct revenue for container management software and services will remain a small portion of the container ecosystem. Additional revenue will come from a range of adjacent segments that are not included in Gartner’s container management forecast.

These additional revenue opportunities include software application development, managed services, on-premises hardware and infrastructure as a service (IaaS) among other segments.

Outlook for Container Management Adoption Growth

For example, the IaaS revenue associated with container management is expected to reach $1 billion before 2023. Many of the adjacent segments are already reported in existing Gartner forecasts.

"Although the direct incremental revenue may be less than many expect, containers may have a different role to play," said Mr. Warrilow. "Containers could ultimately fuel an open ecosystem similar to Linux."

So far, no single IT vendor has a differentiated solution. The marketplace is somewhat saturated by a lack of meaningful and substantive innovation. To stand out from the crowd of me-too players, it's going to require some imaginative go-to-market strategy that creates a compelling movement.

Commercial Asset Tracking Market will Reach $33 Billion

Intelligent fleet tracking of commercial vehicles requires online connectivity tools and management software, which enables fleet managers to track driver behavior, as well as vehicle location and route.

Asset tracking solutions enable enterprises to track cargo from dispatch to final destination -- with increased transparency and more accurate delivery dates. Commercial logistics is the activity of transporting those goods to customers and involves the tracking of related assets.

The Fleet Tracking and Logistics market is now driven by the introduction of new technologies. Edge computing brings computation and some data storage closer to the location where it is needed, therefore improving response times and reducing communication network latency.

Fleet Tracking and Logistics Market Development

Edge computing is the fusion of cloud-based storage and local computing, where the cloud stores centralized data assets, while locally-connected devices can perform the real-time compute function. However, edge computing could create increased security concerns, as cybercriminals may try to steal the data stored on endpoint devices.

The number of businesses using asset tracking solutions will reach 90 million in 2020, and exceed 114 million by 2025 -- that's a growth rate of 27 percent over the next five years, according to the latest worldwide market study by Juniper Research.

Their new study found that this growth in adoption will be driven by the need to increase resilience in supply chains, as the ongoing COVID-19 pandemic highlights the need for real-time data on location and delays to logistics operations.

The study findings identified low-cost connectivity technologies, such as Radio-Frequency Identification (RFID) and Low-Power Wide-Area (LPWA) networks as critical technologies that will enable logistics operations to achieve this desired business outcome.

That said, China will lead the asset tracking market, generating $3 billion of spending in 2020. This investment will increase to $11 billion by 2025 -- representing 34 percent of the total global spend.

China’s dominant role as a global exporter, combined with a strong base of the internet of things (IoT) deployments, means that China will strengthen its position during the increasing acceleration to eCommerce as a result of COVID-19.

Expectations from Western consumers on the traceability of assets will drive Chinese manufacturers and logistics operators to implement asset tracking solutions.

According to the Juniper assessment, failure to provide up-to-date asset tracking information will lead customers to source alternative suppliers, even if this comes at a higher price.

Outlook for Fleet Tracking and Logistics Application Growth

The analyst findings now forecast that $33 billion will be spent on asset tracking in 2025 globally -- that's up from $10 billion in 2020. Investment in tracking solutions provides enterprises with a compelling return on investment, through the improvement of customer experiences and reduction of attrition.

Furthermore, smaller enterprises that rely on customer retention to offset initial onboarding costs will find these intelligent fleet tracking solutions particularly beneficial and financially rewarding.

Artificial Intelligence Drives Superior Business Outcomes

Across the globe, more CEOs and their leadership team now say that business process automation has become a key driver of their organization's digital growth. Moreover, a survey of more than 2,000 Information Technology (IT) and Line of Business (LoB) decision-makers confirms that the adoption of artificial intelligence (AI) is growing rapidly.

Over a quarter of all AI initiatives are already in production and more than one third are in advanced development stages. Besides, organizations are reporting an increase in their AI technology investment this year, according to the latest worldwide market study by International Data Corporation (IDC).

Artificial Intelligence Market Development

Delivering a better customer experience was identified as the leading driver for AI adoption by more than half the large companies surveyed. At the same time, a similar number of survey respondents indicated that the greatest impact of AI is helping employees to improve productivity.

The study findings are conclusive: whether it is an improved customer experience or better employee experience, there is a direct correlation between AI adoption and superior business outcomes.

Early adopters report an improvement of almost 25 percent in customer experience, accelerated rates of innovation, higher competitiveness, higher margins, and better employee experience with the rollout of AI solutions.

"Organizations worldwide are adopting AI in their business transformation journey, not just because they can but because they must be agile, resilient, innovative, and able to scale," said Ritu Jyoti, vice president at IDC.

While there's agreement on the benefits of AI, there is some divergence in how companies deploy AI solutions. IT automation, intelligent task or process automation, automated threat analysis and investigation, supply and logistics, automated customer service agents, and automated human resources are the top use cases where AI is being currently employed.

While it's true that automated customer service agents and automated human resources are a priority for larger companies (5000+ employees), in contrast, IT automation is the priority for smaller and medium-sized companies.

Despite the benefits, deploying AI continues to present challenges -- particularly with regard to data preparation. Lack of adequate volumes and quality of 'training data' remains a significant development challenge for software developers and their LoB leaders.

Data security, governance, performance, and latency (transfer rate) are the top data integration challenges. Solution price, performance and scale are the top data management issues. And, enterprises report the cost of a solution to be the number one challenge for implementing AI.

According to the IDC assessment, as enterprises scale up their efforts, fragmented pricing across different services and pay-as-you-go pricing models may present barriers to further AI adoption.

Key findings from the IDC survey:

• Enterprises report spending around one-third of their AI lifecycle time on data integration and data preparation vs. actual data science efforts, which is a big inhibitor to scaling AI adoption.
• Large enterprises still struggle to apply deep learning and other machine learning technologies successfully. Businesses will need to embrace Machine Learning Operations (MLOps) – the combination of machine learning systems, software development, and IT operations – to realize AI/ML at scale.
• Trustworthy AI is fast becoming a business imperative. Fairness, explainability, robustness, data lineage, and transparency, including disclosures, are critical requirements that need to be addressed now.
• Around 28 percent of the AI/ML initiatives have failed. Lack of staff with the necessary expertise, lack of production-ready data, and lack of integrated development environment are reported as primary reasons for failure.

"An AI-ready data architecture, MLOps, and trustworthy AI are critical for realizing AI and Machine Learning at scale," added Jyoti. We'll continue to monitor the evolution of machine learning operations best practices, and report on other insightful survey and market study findings.

Open Innovation Upside Potential for Telecom Services

A creative Open Innovation strategy promotes a mindset for collaboration that is counter to the 'closed silo' approach of most legacy organizations. That said, the benefits of increased openness are apparent. Open technology ecosystems have driven ongoing cooperation in the Global Networked Economy.

Open source software (OSS), and to a lesser degree open source hardware, serves as the foundation of IT infrastructure worldwide. It enables many eCommerce platforms and innovative over the top (OTT) service providers to bring new offerings to market quickly.

OSS is gradually driving the innovation agenda for communications service providers (CSPs), and by extension, it is now challenging the dominance of proprietary solutions in the telecommunications sector.

Telco Open Innovation Market Development

OSS holds the potential to play a key role in telco cloud deployments, a market that will potentially grow to $29 billion by 2025, according to the latest worldwide market study by ABI Research.

According to the ABI assessment, telecom service providers that want to compete with OTT service providers and hyperscale companies may have to implement the same technologies and agile business processes to innovate more rapidly.

OSS and cloud computing technologies enable operational nimbleness, but it's unclear if telecom service providers can seize the digital growth potential. Telecom companies are typically constrained by standard bodies that have long cycle times to next-generation technologies. On the other hand, open source is characterized by an agile approach.

"Though CSPs are at different timeslots in their digitalization journey, they should collectively propel the open source agenda forward. A close collaboration between standard bodies and open source communities is a step in that direction," said Don Alusha, senior analyst at ABI Research.

Furthermore, a key consideration for OSS success is the means of monetization. There are two main models that vendors can potentially use to commercialize OSS. Namely, there is a customer support model. And, the alternative where the core of the product is open source software. However, some vendors add proprietary features and capabilities on top of the open code.

Red Hat pioneered the customer support model, and it remains the leading IT vendor commercializing OSS using that option. Other companies such as Cloudera and Hortonworks have successfully embraced underlying OSS to offer enterprise-grade modules under a commercial license.

In telecoms, the adoption of OSS is already underway among CSPs and it could be in the mainstream by 2025. For example, CSPs like Orange and Bell Canada have created internal open source groups in a bid to become more well versed in interacting with community-developed software.

To that end, CSPs no longer hold reservations in adopting OSS but are now considering ways to include it in their network operations and commercial undertakings. In fact, the industry at large stands to benefit from OSS innovation with the introduction of IT and cloud solutions.

But, unlike the general-purpose IT infrastructure domain, telecom infrastructure is characterized by stringent performance, reliability and security requirements that require telco-specific arrangements.

Outlook for Open Source Applications in Telecoms

Commercial models notwithstanding, telco system vendors can potentially leverage OSS to realize performance and scalability as they transition their products to more cloud-native equivalents.

At present, OSS serves as an enablement technology for these vendors, rather than a catalyst to build a new business case for OSS. But eventual diffusion of 5G may drive vendors to invest significantly in open source projects to develop carrier-grade products and services in the next five years.

"When that takes place, telecom vendors will need to channel time and investment to establish a presence in open source communities," Alusha concludes.