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Gartner Magic Quadrant: Data Center Outsourcing and Infrastructure Utility Services, North America

Quadrant: Challengers

Welcome to page 3 of 4 of our Gartner Magic Quadrant report coverage. Here, we look at companies in the Challengers quadrant. The quadrant includes the following companies sorted alphabetically:


1. Atos

GARTNER BACKGROUND: Gartner estimates Atos’ DCO/IUS business surpassed $3.9 billion globally. The company’s growth in North America from $229 million last year to $1.2 billion this year is largely the result of its acquisition of Xerox ITO. Atos continues to manage the shift to VMs with a 300% increase to over 65,500 VMs and a 130% increase in physical to over 33,800. Business changes include support for Oracle, with over 100,000 users, and SAP, with over 350,000 users. Atos is starting to offer host servers on AWS and Azure. Atos’ initiatives are focused on creating a digital data center with a software-defined layer allowing separation from the underlying physical infrastructure, enabling automated provisioning and management of compute, networks and storage infrastructure. Atos data center references had an average revenue of $39 million annually.

STRENGTHS

  • Atos continues to grow with the acquisition of Xerox’s ITO business in North America and improved coverage, with twice as many data centers, three times the number of servers under management and a presence in the mainframe service market.
  • Atos is automating its delivery capabilities with IPsoft-based automation. The company expects this, along with the adoption of ServiceNow, to result in an automation resolution rate of over 50% of the Level 1 and Level 2 incidents by 2018, resulting in faster and cheaper services. As part of its Atos Technology Framework (ATF) 2.0, the company is leveraging the Apache Brooklyn project framework to create application blueprints that enable portability across various cloud infrastructure offerings.
  • Some client references spoke positively about Atos’ flexibility and agile response to user demands. Some clients emphasized the ability to reduce cost and provide value to their operations.

CAUTIONS

  • With the Xerox ITO acquisitions, 80% of the revenue came from 25% of the clients. This indicates a smaller customer set that could be a challenge to manage while maintaining a desirable margin.
  • Atos’ efforts to manage SAP and Oracle ERP users are significant in the North American market, but the current volume of AWS for public cloud offerings, along with limited Azure public cloud clients in 2015, suggests a market challenge.
  • Some clients indicated Atos was slow in responding to pricing changes, deployment of new products and managing costs downward.

2. Capgemini

GARTNER BACKGROUND: Gartner estimates Capgemini’s DCO/IUS revenue reached $2.5 billion globally in 2015, with North America accounting for $479 million — an increase of 23%. Capgemini has eight North American- based data centers, and has been increasing its focus on RIM, automation, cloud migration, orchestration and brokerage services. The company continues to manage VMs with a 60% increase to over 30,000 and a 244% gain in physical to over 24,000. It has clients with 660 servers in its DCO/IUS offering that rely on cloud-based infrastructure with AWS and Azure partners. Capgemini supports Oracle with over 13,000 users — a reduction of 1% from last year — and SAP, with over 516,000 users and 23% growth. Capgemini data center references had an average revenue of $4 million annually.

STRENGTHS

  • During 2015, investments in support of Capgemini’s strategic direction included a $4 billion acquisition of Igate to expand its reach into North America. Capgemini’s DCO/IUS revenue grew by 19% in North America, where the company is consolidating data centers from 41 to 14 to reduce client costs. A balance of cost savings and customer satisfaction will be key to Capgemini’s near- term success.
  • Capgemini’s portfolio for automation, autonomics and cognitive and digital assistants with its “Autonomic Computing Platform” is on an aggressive timetable and should allow qualified clients to experience savings immediately as tasks are automated and costs are reduced.
  • Many client references cited strong overall satisfaction with Capgemini. Many stated that Capgemini is flexible with its contract structure and pricing and that they find its account managers to be open to negotiation for change requirements and treat the customer more like a partner. Capgemini also received high scores for the depth and breadth of service offerings and for having well-defined procedures for escalation.

CAUTIONS

  • While Capgemini is accelerating its commitment to data center consolidation, it must make sure clients are satisfied with its fledgling public cloud offerings (with most of the cloud developments taking place in 2016 and early 2017), the lack of growth of Oracle’s offerings and minor mainframe volume.
  • Capgemini was challenged by a lack of price reductions and price variability. This approach will change as it works to implement competitive pricing based on its total cost of operation (TCO) reduction. This needed change will help as clients get used to paying for what they use, with on- demand rates and variations expected with cloud-based infrastructure offerings.
  • Some clients reported that Capgemini has room for improvement in the area of automation and needs to improve its hybrid management offering (AWS/Azure).

3. Cognizant Technologies

GARTNER BACKROUND: Gartner estimates Cognizant’s DCO/IUS worldwide business is around $827 million, and Cognizant’s 2015 North American DCO/IUS revenue exceeded $650 million, a 24% year-over-year increase. Founded on its “constantly ready infrastructure” (CRI) framework, Cognizant’s key strengths continue to be a business-aligned infrastructure strategy that focuses on a vertical market alignment approach. Cognizant continues to manage the shift to VMs with a 75% increase to over 225,000 and a 30% contraction in physical to over 47,000. Cognizant has a small client base that uses cloud- based infrastructure from AWS and Azure partners. Cognizant supports Oracle with over 130,000 users, growing at 5%, and SAP with over 190,000 users, growing at 30%. Cognizant data center references had an average revenue of $7 million annually.

STRENGTHS

  • Cognizant achieved a growth rate of 24% by leveraging industry-specific platforms and industry- specific digital processes and technology expertise. Its CRI framework indicates an understanding and response to the market dynamics of a digital world. This has helped Cognizant to commit to year-over-year efficiency gains in the majority of its recent contracts. These initiatives support IT efficiency, process industrialization and business innovation activities.
  • Cognizant has made sound evolution toward a software-defined data center to support the new customer demand patterns. Cognizant’s automation approach is based on OnTarget (ITIL-based) and Cloud360 (automation-based, orchestration and governance), and the use of third-party tools and services like IPsoft, Ayehu and Arago.
  • Some clients commended Cognizant on its flexibility, continuous improvement processes and activities, as well as its attention to cost management. A few clients stated that Cognizant provided excellent value for the money, while providing timely, proactive, high-quality operations.

CAUTIONS

  • Cognizant has a heavy reliance on partner-owned data centers, with only two Cognizant-owned data centers in North America. This is an asset-light model that will work well for clients as long as data center costs remain competitive.
  • Cognizant faces a challenge as it works to deliver effective services to clients looking for public cloud offerings. The ability to offer a compelling broker solution for all cloud services in the present and near future will be a requirement, as clients with a cloud-first strategy can’t wait.
  • Some clients stated that Cognizant’s responsiveness to new requirements is subpar, and it needs to improve its approach to continuous improvement activities. Additionally, some clients stated that Cognizant was less than creative, and did not look for a better way to perform the day-to-day relationship management activities. Some clients reported that Cognizant’s inflexibility was a problem, as it used the contract to avoid having to perform some related tasks.

4. Dell

GARTNER BACKGROUND: Dell’s data center and cloud strategies revolve around four customer imperatives — transform, connect, inform and protect. Its data center services are delivered through nine Dell-owned multiclient data centers, plus 39 managed customer and colocation sites. While Dell does not report DCO/IUS revenue, Gartner estimates that its North American DCO/IUS revenue was $800 million this past year. Currently, the company is focused on the data center infrastructure, compute, network, storage and server markets. Dell consolidated workloads globally, resulting in VMs declining 1% to over 72,000 and an 18% decline in physical to over 37,000. Dell has clients with 7,078 servers in its DCO/IUS offering that rely on cloud-based infrastructure between its hosted private cloud and its public cloud partners AWS and Azure. Dell supports Oracle with over 60,000 users, growing at 20%, and SAP with over 32,000 users, growing at 19%. Dell data center references had an average revenue of $19 million annually. On 28 March 2016, NTT Data announced the acquisition of the Dell Services division, valued at $3.5 billion business. The acquisition is estimated to be completed during the fall of 2016, and organizations should be early and diligent in addressing changes as NTT Data brings the service offerings of both entities together.

STRENGTHS

  • Dell is focused on continuous portfolio enhancement, with innovative offerings in the DCO/IUS and cloud areas. Dell has focused on client satisfaction, resulting in very positive feedback in the market on Dell’s ability to be an effective technology partner for hardware, software, services and security.
  • Dell has worked to drive new security functionality and deliver industry-based solutions as it leverages industry insight from its large hardware installed base.
  • Some client references stated that Dell meets or exceeds its delivery of contracted-for SLAs. Dell had strong overall customer satisfaction results among client references, with an emphasis on its partnering approach.

CAUTIONS

  • Dell has not had effective growth in virtual servers, and its public cloud offering is minimal. Dell has also agreed to sell its services portfolio to NTT Data, which could result in a loss of momentum due to the distraction of an ownership change.
  • While Dell works to secure funding to acquire EMC, the services group has been challenged with the ability to invest in its products and capabilities.
  • Some Dell clients stated that Dell needs more initiatives around automation, citing that they are not able to see the results of Dell’s efforts in this space.

5. Infosys

GARTNER BACKGROUND: Gartner estimates Infosys had more than $9.5 billion annual revenue for the year ending March 2016. In 2015, Infosys’ DCO/IUS revenue in North America grew by 13% to $600 million, making North America Infosys’ largest DCO/IUS revenue producer. Infosys has adopted design-led thinking and changed its approach to optimizing customer experience by redesigning customer engagement processes around run, modernize, migrate and secure. Infosys continues to manage the shift to VMs with a 9% increase to over 124,000 and a 1% gain in physical to over 70,000. Infosys has clients with 300 servers in its DCO/IUS offering that rely on cloud-based infrastructure with AWS and Azure partners. Infosys supports Oracle with over 860,000 users, growing at 3%, and SAP with over 380,000 users, growing at 6%. Infosys data center references had an average revenue of $8 million annually.

STRENGTHS

  • Infosys’ growth in the North American market has slowed, but continues at a good pace of 13% with a client count increase of 19%. This underpins its integrated approach toward traditional infrastructure management and next-generation, cloud-based services, as well as its focus on hybrid IT management with the Infosys Infrastructure Management Suite (IIMS), which includes the Infosys Cloud Ecosystem Hub (CEH). Infosys hopes to drive a 50% reduction in data center operations cost using IIMS
  • Infosys continues to focus on human capital and reskilling its workforce with an investment in Infosys Mana, its knowledge-based AI platform and reuse (ongoing project productivity performances reported quarterly), zero distance (innovation and ideas generation) and partner orchestration.
  • Many clients provided positive feedback on Infosys’ skills and depth of knowledge. Some stated that Infosys can scale quickly with effective resources.

CAUTIONS

  • The staff count in North America is up 50%; by contrast, revenue increased by only 13%. This may solve some strains due to attrition, but could also result in margin erosion.
  • Most of Infosys’ investments are aimed at long-term growth. Its investments in innovation and commitment to operating cost reduction through innovation are at odds in the short term with the current hiring increase and low double-digit growth performance.
  • Some clients report that Infosys experiences challenges with consistency, and its ability to scale on-site resources for certain older technology is limited. Some clients also note that Infosys has language barriers, and some cultural barriers are a challenge.

6. Sungard Availability Services

GARTNER BACKGROUND: Gartner estimates Sungard Availability Services (Sungard AS) had close to $1.6 billion in annual revenue in 2015 and operates in 11 countries, serving over 6,600 customers. Gartner estimates DCO/IUS revenue in North America to be $960 million in 2015, a growth of almost 10%. Sungard AS provides cloud and managed IT services, disaster recovery services, business continuity management software and consulting services for its major businesses in North America, Europe and India. It has 19 data centers in the U.S. and three in Canada. Sungard AS continues to manage VMs with a 120% increase to over 3,000 and a 600% gain in physical to over 14,800. Sungard AS has a new brokerage service that uses cloud-based infrastructure with AWS and Azure partners. Sungard AS supports Oracle with over 5,000 users, growing at 40%, and SAP with over 6,200 users, growing at 27%. Sungard AS data center references had an average revenue of $20 million annually.

STRENGTHS

  • Sungard AS taps its history in disaster recovery to deliver resilient solutions to ensure that critical applications are available. Sungard AS has a full range of services, including hybrid infrastructure platforms, enterprise cloud, managed hosting and colocation for a fully managed, end-to-end infrastructure solution.
  • Sungard AS’s foundational mission-critical, recovery-based solution that is integrated with consulting services provides support to fully recover production operations to help ensure the right solutions to meet business needs.
  • Many clients stated that Sungard AS’s strengths include uptime reliability, solid and high- performing platform administration solutions, with a dedicated team of highly qualified technical and account management, all supported by its foundational high-availability infrastructure services capabilities. A few clients report that Sungard AS is cost-competitive, provides a broad base of services and is very flexible in delivering its services.

CAUTIONS

  • Sungard AS’s move into the managed data center services business with an emerging cloud brokerage solution is a large load to take on and could stretch Sungard AS’s cloud management and solution architect resources. Therefore, clients considering Sungard AS should make sure these issues will not interfere with the delivery of their required services.
  • With a large percentage of its customer count remaining in the business recovery and disaster recovery arenas, Sungard AS will continue to need to balance the transition of those clients to IUS and cloud-based solutions.
  • A few clients indicated that Sungard AS must shorten the time to make changes and respond to new requests to add clarity and flexibility.

7. Unisys

GARTNER SAYS: Gartner estimates Unisys had a 2015 global DCO/IUS revenue decline of 12% to $486 million, of which $300 million (with an 8% decline) is in North America. Unisys offers complete managed services solutions to align IT infrastructure to its customers. Technology development around software-defined enterprise, bimodal IT, cloud and security helps Unisys deliver a strong message to its customers on its readiness for future challenges. The company operates 36 data centers globally, with 14 residing in North America. Unisys continued to grow virtual and physical servers by 20% to over 14,000. Unisys has clients with 115 servers in its DCO/IUS offering that rely on cloud-based infrastructure with AWS and Azure partners. Unisys supports Oracle with over 3,500 users in a new offering and SAP with over 160,000 users, growing by a factor of 10. Unisys data center references had an average revenue of $6 million annually.

STRENGTHS

  • Unisys continues to modify its vision with an approach that includes establishing new digital business models, providing new products and services, and better engaging its customers, employees and partners. Unisys has an effective capability with AWS through its Unisys Stealth services. Cloud and infrastructure services integrate well for digital business via the Unisys secure digital enterprise. This allows a secure digital enterprise that includes speed, scale and big data analytics, all in a secure environment.
  • Unisys has a foundation for renewed growth with services designed to take clients to a “Business as a Service” and hybrid IT environment, along with its digital infrastructure services solution, underpinned by value-based offerings and transformational program services.
  • Many clients stated that Unisys provided excellent day-to-day delivery performance. Some clients reported that Unisys was flexible in meeting their business requirements and was responsive with customer service during problem times.

CAUTIONS

  • While easing slightly, as Unisys grows its commercial practice, the company continues to have a strong dependence on federal and other government contracts. This means that it must double its effort to reduce government deals as a part of its total infrastructure service portfolio. Relying on a single sector is risky.
  • While Unisys increased its cloud-based revenue, it has yet to generate the increased revenue that it needs to join some of its competitors as leaders in the cloud-based solution space. Continued investment in communicating its cloud-based resources and competencies in North America (indeed across the globe) is needed, as is a new approach for the Unisys sales force to sell cloud solutions more similar to the market than traditional services. Doing so will go a long way toward reversing the declining revenue stream.
  • A few clients stated that Unisys needs more staff with knowledge and experience in web application support, and that it needs to continue to minimize resource turnover as much as possible. Some clients also stated that Unisys needs to provide better costs for changes and make commitments quicker than it does today. Finally, some clients stated that Unisys must transition more quickly to a cloud broker/integrator service provider.

8. Wipro

GARTNER BACKGROUND: Gartner estimates Wipro’s global DCO/IUS revenue reached $1.4 billion in 2015, an 18% increase from 2014, with $650 million of that revenue coming from North America, which is 15% growth during the same time frame. It achieved this growth through significant cloud hybrid transformation deals and associated managed services with automation capabilities. During the past year, Wipro launched new services such as its Cloud Command Center, cloud brokerage services, a mainframe- as-a-service offering, connected intelligence IoT program, DevOps and a number of open-source- based data center solutions. Wipro continues to manage the shift to VMs with a 70% increase to over 390,000 and a 3% reduction in physical to over 140,000. Wipro has clients with 3,000 servers in its DCO/IUS offering that rely on cloud-based infrastructure with AWS and Azure partners. Wipro supports Oracle with over 2.4 million users, growing at 7%, and SAP with over 830,000 users, growing at 136%. Wipro data center references had an average revenue of $28 million annually.

STRENGTHS

  • Wipro’s digital innovation approach is to drive hybrid IT and a boundaryless data center, as well as focus on competitive automation as a market. A cloud-first approach with outcome-based and utility pricing is at the core of the new value proposition, with extension to mainframe services.
  • Increasing its hybrid infrastructure deals across the globe has Wipro positioned across top integrators and management for AWS and Microsoft. Wipro demonstrated significant client and revenue growth. Wipro is delivering on the promise of hyperscale efficiencies and automation, further demonstrated by its Holmes tool, which is adding notable value to key clients.
  • Many clients stated that Wipro is effective at delivering continuous improvement, is flexible in its approach to deal changes, and responds quickly and succinctly to new requests and changes to existing solutions. Some clients were delighted by Wipro’s ability to deliver vertically integrated solutions in a simple, seamless manner.

CAUTIONS

  • Wipro has offices in Broomfield, Tempe, Omaha, Atlanta, Leonia and Canada, as well as Mexico; however, nearshore capabilities remain limited at this time, and offshore resources, while plentiful, remain less than optimal at delivering solutions that a bimodal world requires.
  • Due to continued rapid growth, Wipro is experiencing challenges with customer satisfaction. Early signs of improvement are evident as Wipro implements the largest transformation in its history, the “Drive” delivery and customer satisfaction program, which is focused on restructuring, sales, delivery and customer satisfaction.
  • Some clients highlighted that Wipro has yet to fully develop and deliver on its hybrid cloud solution. A few clients stated that contract changes can take a little longer than expected. Some clients stated that Wipro needs to strengthen on-site delivery leadership to grow its accounts being addressed by “Drive.”

Continue to page 4 of 4 to see companies in the Leaders quadrant

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