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Enterprises seeing savings, productivity gains from generative AI

Larry Dignan
Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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Enterprises are starting to drive productivity and cost savings from generative AI with AT&T among the most vocal about returns. The catch: These returns require investment in IT and data infrastructure.

Although it's early in earnings season, the early returns are that enterprises are seeing generative AI as a cost savings tool that's much needed given the higher cost of capital due to interest rates. Rest assured enterprise software vendors will be rolling out customer citations to prove their generative AI worth. Vendors are scrambling to provide a generative AI magic bullet with fun names, domain specific LLMs and add-ons that add up.

John Stankey, AT&T CEO, said generative AI is driving cost savings at the company. He said during the company's third quarter earnings call:

"While we're still in the very early stages of Generative AI, we're already seeing tangible AI-driven improvements in productivity and cost savings. Measurable progress has been made with lowering customer support costs, unlocking software development efficiencies, and improving our network design effectiveness. We expect these capabilities to play a key role in our continued efforts to achieve our future cost savings objectives."

AT&T didn't reveal the savings attributed to generative AI, but the technology is part of a bigger picture. The company is generating strong cash flow and paying down debt amid higher interest rates.

And AT&T isn't alone.

Related:

Wipro CTO Subha Tatavarti said during the company's earnings call that the company has "adopted Generative AI to streamline our technology business processes as well as people."

Tatavarti noted that it's early, but it appears that there are multiple areas of productivity gains. He said Wipro is seeing productivity gains in the following:

  • HR "especially around background checks." Tatavarti said generative AI is also playing a role in hiring, retention, training and managing.
  • Quality assurance and testing has used generative AI to cut the time and hours to perform functional testing.
  • Multiple other pilots are showing early gains. "A lot of our work is now being streamlined, at least in early parts of our work with Generative AI in are very positive and encouraging in terms of productivity gains," he said.

Domino's Pizza CEO Russell Weiner plans to streamline operations and quality control via a generative AI partnership with Microsoft. 

For Concentrix, Chris Caldwell, CEO, said on the company's earnings call that it is accelerating its generative AI adoption internally and with clients. Caldwell said:

"From an internal productivity perspective, our AI and Alex-based recruiting platform now supports 8.6 million career site visits and processes 3.3 million applications already this year. It has already allowed our team to scale more cost effectively and we see additional benefits as we continue the roll out across our enterprise."

Caldwell added that it is also using AI for its scheduling and peak management for staff as well as supply insights for daily work optimization.

Companies in the financial sector are also looking for efficiency gains with AI. FactSet CEO Phil Snow said generative AI is bolstering coding and customer service. Snow said:

"We also see significant opportunity for cost savings as a result of GenAI projects targeting our efficiency. In fiscal 2023, we began to pilot AI coding initiatives to improve the productivity of our technologists. We also started using our agent assist bot to help with client queries and we are accelerating the collection of unstructured data across our content refinery."

Blackrock CFO Martin small also said AI has the potential for internal cost savings as well as products for its massive client base. He said:

"We've been using artificial intelligence, machine learning, natural language processing in our systematic business going back 20 years. And we have teams all over these things for how we can scale trading, pricing, operations, client service and even automation to make our software engineers most productive."

"If you ask me, where are we going to focus investments going forward with a particular sharp eye, I look at our total annual operating expense of about $11 billion and our largest fixed investments by dollars and importance, that's our really talented BlackRock employees."

"Giving (employees) more tools to enhance productivity, from large language models to better CRM, tools that help clients customize and self-service, like our BlackRock Advisor Center, those are going to be some of our best opportunities to deliver long-term profitable growth."

UnitedHealthcare's Dirk McMahon, chief operating officer, said that AI is critical for productivity, but it's also about freeing humans up to engage customers.

"We're leveraging the latest technologies to create greater operational capacity and productivity, so we can better serve consumers and focus on the highest value work. Our teams are significantly improving how quickly we respond to the millions of benefit questions we receive each year. We are using AI and natural language processing to expedite call documentation, to rapidly generate accurate summaries of consumer interactions with our contact centers, saving millions of dollars in administrative work and freeing up capacity for our people to prioritize engagement."

These stories are notable at this early stage in generative AI adoption, but there is a rather large catch: You need to have your data game down. It's not a big surprise that the companies so far leveraging AI and driving returns have core businesses that revolve around data and IT. Other AI success stories include:

For the rest of you, it's imperative to shore up your data operations.

AT&T's Stankey tells the tale. The company has been overhauling its systems for multiple quarters but that ultimately sets up transformation enabled by AI. He said:

"I mentioned to you many quarters ago that we've been investing in our information technology infrastructure. It's been painful, it requires a lot of work, and it's very detailed work every time you change out a CRM system or billing system. You have to carefully deal with your customer base and your different distribution channels. We're now getting to the point where we're starting to turn some scale up on those platforms. That coupled with the fact that more of our activity is built on fiber and wireless is giving us a different kind of cost structure in the business."

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Digital transformation should pay for itself with real business value

Larry Dignan
Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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This post first appeared in the Constellation Insight newsletter, which features bespoke content weekly.

Digital transformation projects are colliding with productivity and efficiency initiatives for funding, but it's not a zero-sum game. Digital transformation projects should pay for themselves and drive business value.

According to Accenture, Infosys and Wipro, there are large digital transformation deals to be had, but there better be real value. Specifically, digital transformation projects must drive enough value-savings via automation, process improvement, productivity, or efficiency--to fund future projects.

From a business perspective, the idea that digital transformation should be held to real business metrics shouldn't be too shocking. However, enterprises are putting digital transformation and efficiency projects into two different buckets.

Accenture CEO Julie Sweet recently noted on the company's fiscal fourth quarter earnings call:

"I was with about 20 different CEOs, and they had three messages. Tech is super important, that's number one. Number two, they already have major programs underway, and they know they need to do a lot more. But number three is they're feeling cautious about the macro, and we've already seen that in the small deals. But they're asking us to help them save money and be more focused right now, even on the bigger programs."

What?!? You mean massive transformational tech projects need to drive business value?!?

Sweet said companies are looking to create digital cores, modernize and be data driven for future AI use cases. But only a third of Accenture's clients have "modern ERP programs." I've been around long enough to know that ERP implementations and upgrades don't exactly drive business value initially.

More on innovation and transformation:

Salil Parekh, CEO of Infosys, echoed Sweet’s take. Parekh, speaking on Infosys' third quarter earnings call said:

"We see that with our large deal wins in the past two quarters, we are winning market share in the area of cost efficiency, automation, and AI. As the economic environment changed, we rapidly pivoted from delivering transformation projects to also delivering productivity benefits and cost savings at scale."

Random thought: Transformation projects should have always delivered savings at scale.

Nevertheless, Parekh's comments indicate that enterprises still have cost savings and transformation projects in two separate buckets. "We are seeing discretionary spending come down and we saw that transformation programs being slowed," said Parekh, who said that cost savings programs should in theory fund future transformation projects.

Infosys said financial services, communications, utilities, manufacturing, and retail were all wrestling with transformation vs. cost cutting efforts.

Thierry Delaporte, Wipro's CEO, outlined the current tradeoffs with transformation vs. optimization projects. Speaking on the company's second quarter earnings conference call, Delaporte said:

"Clients are continuing to take a much more rigorous look at their investments. They are hyper-focused on efficiency, optimization of existing investments and faster return on new ones. Lower discretionary spending is a reality today. Transformation programs that are nearing their project term are being replaced by new ones, but at a slower pace."

Delaporte added that generative AI was a "part of every client conversation”, and clients are "exploring new use cases." A lot of those use cases are aimed at efficiency. "The attention to cost takeout, cost optimization, margin, productivity and so on has certainly been a lot bigger than it was some quarters ago. There is no doubt," he said.

Citigroup CEO Jane Fraser said the bank's clients are concerned about the economic backdrop and interest rates that will remain at current levels for longer. "I'm struck how consistently CEOs are less optimistic about 2024 than they were a few months ago," said Fraser.

Fraser also noted that Citigroup has its own transformation efforts underway, but her definition includes process improvements and automation. Process and automation drive the returns that can fund more transformation via lower headcount. She said:

"Transformation remains our number one priority. We're deep into the large body of work of automating manual controls and processes, consolidating fragmented tech platforms, and upgrading our data architecture. We're committed to doing this the right way, knowing it will take time to meet our regulators' expectations and to deliver a modern, more efficient infrastructure."

Citigroup CFO Mark Mason said the bank's expenses in the third quarter were up 6% in part due to transformation projects, but those expenses were partially offset by productivity gains. In the third quarter, Citigroup's technology spend was $3 billion "driven by investments in product development, platform enhancements, and improving the client experience." Mason added:

"Our transformation and technology investments span the following themes: platform and process simplification, security and infrastructure modernization, client experience enhancements, and data improvements. Our investments in the transformation will continue to enhance our data analytics and stress testing capabilities, enabling continued capital optimization."

Does Citigroup have the transformation playbook down? Not quite. Fraser was asked why Citigroup's latest transformation plan will be any different than the others launched in the last decade.

But I'm willing to bet that Citigroup's approach is on target at a high level. Digital transformation projects need to be integrated with continual process improvement, productivity efforts and a never-ending drive to be more efficient to drive real business value. If an enterprise can produce operating savings of 5% a year it can self-fund digital transformation projects going forward.

Somehow enterprises have siloed digital transformation projects away from other business initiatives. That's not real transformation. It's just legacy enterprise technology.

More transformation:

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INSIDE ADOBE MAX THROUGH THE EYES OF A MARKETER

Liz Miller
Vice President & Principal Analyst Constellation Research

About Liz Miller: Liz Miller is Vice President and Principal Analyst at Constellation, focused on the org-wide team sport known as customer experience. While covering CX as an enterprise strategy, Miller spends time zeroing in on the functional demands of Marketing and Service and the evolving role of the Chief Marketing Officer, the rise of the Chief Experience Officer, the evolution of customer engagement and the rising requirement for a new security posture that accounts for the threat to brand trust in this age of AI.  With over 30 years of marketing, Miller offers strategic guidance on the leadership, business transformation and technology requirements to deliver on today’s CX strategies. She has worked with global marketing organizations to transform…...

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There is an electricity that sweeps through Adobe MAX, the annual celebration of creativity, that is infectious. Nobody is taking themselves too seriously…everyone is in awe of everyone else’s work. Nothing is out of the realm of possible. Nobody is excluded from the great debate of “Should Comic Sans ever be used outside of an actual comic?” (Answer: Comic Sans is the “pineapple on pizza” of creativity...so no.)

This year, thousands of current, future, and aspirational creators came together and exhaled. We had collectively survived tumultuous times. We had tapped into the muscle memory of being back together and celebrating our craft. We had made it through the explosive onset of Generative AI—something that felt threatening and ominous a few months ago. We had made the shift from AI competing for our jobs to being our valued co-pilot who was thrilled at the idea of endless hours of repetitive production work. We could exhale and make space for innovation and opportunity.

One of the biggest opportunities that consumed conversation was the future of content, more specifically the discussion around Adobe’s take on the Content Supply Chain and where creatives would envision themselves in the ebb and flow between supply and demand.

The Supply and Demand of Content

A supply chain maps the system that converts raw materials into finished products, following those products through every stage of creation, packaging and, eventually, distribution to an end customer/consumer. It is a common concept in manufacturing settings, allowing visibility across all the materials, teams, talent, processes, logistics and end points of fulfillment and distribution. Supply chain management is, by extension, the design, planning, control, and monitoring of this complex web of actions and resources with the goal of deriving more value by building an infrastructure that can better orchestrate and synchronize and measure the performance of binding supply to demand.

Content, and the drive to create more of it more efficiently and effectively, is core to how growth in any enterprise is achieved. We can all talk ad nauseum about the skills of individual functions, but at the end of the day when our prospects and customers consume content, there is a moment…a reaction…that sparks the desire to shift from the status quo. And that moment drives more demand from both the consumers of content and the marketers that want to keep feeding that dynamic relationship. The entire system is a supply chain that can managed, monitored and measured from the moment of ideation through to fulfillment.

Marketers and creatives have long understood that the content supply chain has been fractured, segmented into a series of disconnected myopic projects that only focus on a single act or campaign. We have focused on getting the work done and empowering that work with collaboration and project management tools…we have failed to fully understand and empower the unique and wildly creative supply chain, acknowledged the raw materials and intentionally established infrastructure to best orchestrate this complex web of actions.

Enter GenStudio: Adobe’s Infrastructure for the Modern Content Supply Chain

Adobe is uniquely situated across the content supply chain, and arguably the customer relationship supply chain at a larger level, serving as a technology that can sit at the center of both creative and experience delivery. This is the introduction of Adobe GenStudio, a new end-to-end solution that brings key applications across Creative Cloud, Express and Experience Cloud, with Firefly generative AI, a notable new stage in the ongoing evolution of Adobe.

For those familiar with Adobe’s portfolio, the individual tools in GenStudio will be exceedingly familiar with tools like Workfront, Journey Optimizer, Experience Manager Assets and Frame.io to name a few. And while these individual solutions have their own unique standalone benefits, Adobe’s belief is that used together in GenStudio, customers can create, orchestrate, and activate in a more scalable, measurable, and effective manner. Simply: it connects the technology dots that underpin the work, impact and purpose of content.

What stands out is that this is the step so many of us in the market (OK me especially) have been barking about for years—for Adobe to deliver a more unified point of view that spans their traditionally segmented Creative and Experience Cloud offerings. GenStudio is as much of a recognition of what customers need to start to wrap their arms around the content supply chain as it is a recognition that the market has been looking for a “Holistic Adobe”, delivering right-sized tools for the right phase of the supply chain.

GenStudio has already delivered results with brands like Orvis realizing a 75% reduction in time to product project plans, T-Mobile increasing campaign output by 47% without adding headcount and Asics achieving a 30% reduction in waste through asset reuse. These results are likely just the beginning in how we see brands that embrace the challenge of building and optimizing a modern, digitally forward content supply chain. We will likely see more of the overarching Adobe portfolio be brought into to GenStudio capabilities, bolstering the main pillars of workflow and planning, creation and production, activation, and delivery.

Mapping the Trajectory for Content Velocity

In this time of buzz and hype-cycles, organizations need a blueprint for purposefully introducing tools like Generative AI and advanced analytics to help scale, automate and optimize. For organizations ready to think about their content supply chain differently, tools like GenStudio provide a very different foundation to turn AI projects and co-pilots from experiments to tangible business applications.

This foundation also allows teams to capitalize on some of the other big announcements and reveals made at MAX

Adobe Firefly: Firefly got several upgrades and additions at MAX with the reveal of the impressive Firefly Image 2 Model, Firefly Vector Model and Firefly Design Models. These aren’t just models creating…these models generating content that is safe and ready for commercial use. In a time when CIOs are actively blocking the introduction of GenAI tools to have time to properly assess the safety and security of data, training models and output, Adobe has done the ethical heavy lifting early on and put added measures in to not just train the models in a manner that prioritize safe commercial use, but also recognizes and rewards the complexity of the creator economy by identifying and respecting (and compensating) artists.

Adobe Express: Adobe’s free creative application is already jam-packed with creator tools and templates, but now users can use Generative Fill, the newly announced creative co-pilot powered by Firefly, to remove or even replace objects, people, backgrounds and more. The new Text to Template feature leverages the new Firefly Design Model to give users the ability to give a text description to generate editable templates. New drawing, painting and even translation capabilities turn Express into a tool for the casual creator designing a t-shirt or the marketing manager that just wants to prep some social cards and TikTok videos.

Content Authenticity’s Continued Success: One announcement that shouldn’t go unnoticed are the milestones Adobe has made around content authenticity and brand protections. As one of the leaders in the Content Authenticity Initiative, originally launched at Adobe Max 2019, Adobe has pushed industries and markets to elevate the awareness of content attribution and transparency. Adobe announced that thanks to the wave of interest around generative AI, 2,000 new members have joined including Dentsu, National Geographic Society, National Public Radio (NPR), Photoshelter and Publicis Groupe.

Riding on this wave of interest around visibility and authenticity, Adobe announced the introduction and adoption of an official Content Credentials “icon of transparency” that leads to a digital “nutrition label” for AI-generated assets. This label is attached to Adobe Firefly outputs and can show information including the creator’s name, edits made with Ai and tools used. Microsoft has introduced Content Credentials to all AI-generated images created with Bing Image Creator. Nikon showcased a specially equipped Nikon Z 9 camera, currently in development but sampled at MAX, included image provenance functionality via content credentials and can be verified in a user’s workflow.

Time to Celebrate

With so much upheaval in the market and in the world, it hardly feels like a time to celebrate. Chaos seems to lurk around every corner. But no matter the circumstance or scenario, it is usually creativity and artistry that connects people together by communicating in ways that can range from the deeply emotional to the comically sublime. Through it all content is the vehicle that carries that connection and creativity across channels and into the hands of an enterprise’s customer.

Accelerating the velocity, accuracy, impact and efficacy of the content supply chain is a worthy goal for any organization, regardless of size. With the innovations and announcements Adobe showcased at Adobe MAX 2023, expect to see even more creators step up to the plate and gladly accept their role in improving how the content supply chain is operated and managed.

Generated by Adobe Firefly Image 1 ModelGenerated by Adobe Firefly Image 2 Model
 

 

 

 

 

 

And YES...these were generated by AI. More specifically this epic reimagination is of my dog, a white Akita, who I asked Adobe Firefly to picture, wearing a chunky knit purple sweater, sunglasses, sitting in a city at golden hour.  The image on the right was generated by Adobe Firefly Image 1 Model. The image on the left was generated by Adobe Firefly Image 2 Model using the exact same prompt. 

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HPE bets AI, edge, supercomputing workloads will drive growth

Larry Dignan
Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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HPE outlined a three-year strategy that has its three fastest growing businesses--edge computing, high performance computing and artificial intelligence—representing more than 50% of the company's revenue by fiscal year 2026.

The strategy and outlook were outlined at HPE's Securities Analyst Meeting in New York. CEO Antonio Neri and interim CFO Jeremy Cox provided noted that the HPE can expand its total addressable market by almost $100 billion over the next four years due to AI use cases.

"HPE’s strategy is aligned to significant market trends around edge, hybrid cloud and AI – all of which create profitable market expansion opportunities," said Neri. "Customers continue to validate our strategy turning to us to power critical business transformations. And even in this micro economic environment, we continue to see them prioritize in data first digital transformation initiatives. And those initiatives increasingly include AI which is invigorating today's IT spending."

HPE's other big bet is hybrid cloud and HPC that can be delivered as a service. HPE is projecting revenue growth of 2% to 4% for fiscal year 2024 through fiscal 2026. However, it's big bets--AI, HPC and hybrid cloud--will grow faster over that time frame. HPE also said that it will return 65% to 75% of free cash flow to shareholders over the next three years, up from the 50% to 60% range today.

For fiscal 2024, HPE is expecting revenue growth to be 2% to 4% with non-GAAP operating profit growth of 3% to 5%. Fiscal 2024 non-GAAP earnings will be between $1.82 a share and $2.02 a share. Fiscal 2023 revenue growth will be 4% to 6% with non-GAAP earnings of $2.11 to $2.15 a share.

Not surprisingly, HPE's strategy has a heavy dose of Greenlake with a mix of subscription and consumption revenue streams, Aruba (Intelligent Edge) and supercomputing and AI infrastructure delivered as a service. HPE is betting it can take share as well as grow the total market.

Here's a look at the components of HPE's growth plans.

Intelligent Edge and Networking 

HPE's Intelligent Edge unit is on track to deliver $5 billion in fiscal 2023 revenue and drive the highest profitability.

According to the company, it will expand its market by gaining share in campus and branch networking, expanding in the data center and entering new security and 5G markets.

HPE also said that it will bet on network-as-a-service, which will leverage AI-driven analytics as well as automation for large enterprises and mid-market companies.

Hybrid Cloud

HPE's Hybrid Cloud unit combines storage and compute as-a-service offerings including HPE Greenlake Private Cloud and software. HPE Greenlake is going to carry the unit and already accounts for 70% of the annual recurring revenue for the company.

Constellation Research analyst Dion Hinchcliffe recently published a report outlining how CXOs are moving to private cloud models for cost savings. In a nutshell, public cloud providers haven't been passing on savings and encouraging enterprises to move workloads such as AI on premises.

According to the company HPE Greenlake has 27,000 unique customers and ARR growth of 35% to 45%.

AI

Supercomputing and AI is HPE's best shot for expanding its market. HPE is betting that its AI platform software, infrastructure and supercomputing powered by Cray will turbo charge the business.

As HPC scales, HPE will get more leverage and be able to shift more toward IP rich offerings and software.

HPE plans to expand into ModelOps as well as DataOps and manage clusters.

According to Justin Hotard, Executive Vice President and General Manager of High Performance Computing, AI and Labs at HPE, it's very early in generative AI use cases in the enterprise.

"Customers are investing in LLMs for broad commercial applications, but they're not deployed yet in the enterprise," said Hotard. "The enterprise buildout will be massive, but it's just beginning. There will be technical use cases, scientific models, financial and trading and those use cases will go on and on."

Neri added that most enterprises are looking to leverage LLMs for productivity and then focus on tuning. From there, they will look for generative AI to drive revenue.

AI is also expected to drive demand for HPE's compute due to tuning and inference workloads.

Constellation Research analyst Holger Mueller said:

"It is good to see HPE getting more revenue drivers, it previously shrank its offerings down to too much Greenlake. Its HPC portfolio has been strong all the time, so it is good to see it becoming its rightful visibility - the question now is - can they get the traction beyond the HPE/Cray installed base and take market share. The AI offering is equally interesting, more importantly viable - so it really comes to Antonio Neri & team to execute and go to market."

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A look at Tesla's method to the innovation madness

Larry Dignan
Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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Tesla is sacrificing operating margins for market share with its electric vehicles and that reality is making it look like just another car maker. But the big picture looks more innovative.

Ultimately, the Tesla debate will be settled by what the company becomes. Tesla will either merely be an auto manufacturer or be seen as a technology company. For now, operating margins in the third quarter were 7.6%, down from 17.2% a year ago.

While this Tesla debate ensues, there are a bevy of innovation lessons to ponder for the rest of us. Here are some of the innovation takeaways from Tesla's earnings conference call.

It's about the data. It's always about the data. Musk realizes that Tesla is really a data company. It sold EVs to collect data and build autos with full self-driving (FSD) capabilities. Tesla said in an investor presentation: "Our large installed base of vehicles continues to generate anonymized video and other data used to develop our FSD Capability features."

Musk elaborated on Tesla's earnings call. "Our vehicles are now driven over 0.5 billion miles with FSD beta, full self-driving beta, and that number is growing rapidly," said Musk. 

Data doesn't matter without compute. Tesla is building out AI infrastructure at a rapid clip. "We recently completed a 10,000 GPU cluster of (Nvidia) H100s. We think probably bring it into operation faster than anyone’s ever brought that much compute per unit time into production, since training is the fundamental limiting factor on progress with full self-driving and vehicle autonomy," said Musk.

Tesla has also built Dojo, a supercomputer for vision video processing and recognition. Will this AI compute be a service at some point?

Related: Nvidia, Foxconn aim to build AI factories, collaborate on EVs, robotics | How Kinetic aims to transform digital EV repair, maintenance and aftermarket

Keep it simple or be ready to pay the price for complicated. Tesla shares are under pressure largely due to Musk's comments about the Cybertruck, which has 1 million reservations even though the vehicle looks as if a DeLorean and Pontiac Aztec had a love child.

Musk on the earnings conference call moved to temper Cybertruck expectations. He said:

"I’ve driven the car. It’s an amazing product. I do want to emphasize that there will be enormous challenges in reaching volume production with Cybertruck, and then in making Cybertruck cash flow positive. This is simply normal for when you’ve got a product with a lot of new technology or any new vehicle, brand new vehicle program, but especially one that is as different and advanced as the Cybertruck, you will have problems proportionate to how many new things you’re trying to solve at scale. So, I just want to emphasize that while I think this is potentially our best product ever and I think it is our best product ever, it is going to be -- require immense work to reach volume production and be cash flow positive at a price that people can afford."

Some Cybertruck scale won't appear until 2025, but that timeline is Musk's best guess at this point. "It's not a demand issue, but we have to make it and we need to make it at a price that people can afford," said Musk.

The original business may just be the beginning. Amazon started as a bookstore and now it is a retail giant and cloud computing provider. Uber was a glorified taxi service and now it is about mobility as broadly defined as possible. Tesla is killing margins on its cars to gain share, but in the future, it can extend into multiple businesses including robotics and AI services as well as mobility via a fleet of autonomous vehicles.

If you view Tesla's EV business as just a precursor to other businesses, Musk's strategy to lower prices doesn't look too shocking. After all, you need to make your innovation affordable to collect the data needed for the next phases of the business. Musk said:

"If interest rates remain high or if they go even higher, it’s that much harder for people to buy the car, they simply cannot afford it. And we are tracking Model Y to be the bestselling car on earth, but not just in revenue, but in unit volume. If you compare that to the other vehicles that are number two and number three and whatnot, they cost much less than our car...

The thing that must be solved is to make the car affordable or the average person cannot buy it."

Companies need to evolve. Tesla's more interesting businesses have little to do with cars. The company's Optimus robot effort is notable as is its energy storage business, which along with services contributes more than $500 million in quarterly profit.

In the third quarter, Tesla's energy generation and storage business had revenue of $1.56 billion, up 40% from a year ago. Services and other revenue were $2.17 billion, up 32%. And total automotive revenue was $19.62 billion, up 5% from a year ago.

"We’ll continue to invest significantly in AI development, as this is really the mass game changer. And I mean success in this regard in the long term I think has the potential to make Tesla the most valuable company in the world by far. If you have fully autonomous cars at scale and fully autonomous humanoid robots that are truly useful, it’s not clear what the limit is," said Musk.

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SAP's 2023 outlook steady, S/4HANA revenue nears €4 billion annual run rate

Larry Dignan
Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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SAP said its third quarter cloud revenue growth was 16% and the company reaffirmed its outlook for 2023.

The enterprise software giant is in the middle of migrating customers to its SAP S/4HANA platform, so cloud revenue is closely watched.

SAP delivered total third quarter revenue of €7.74 billion, up 4% from a year ago. Cloud revenue was €3.47 billion, up 16% from a year ago. Of that sum, SAP S/4HANA cloud revenue was €914 million, up 67% from the same quarter a year ago, and approaching a €4 billion annual revenue run rate. Software license revenue fell 17% in the third quarter compared to a year ago.

As for profit, SAP reported a profit of €1.27 billion after tax. SAP ended the quarter with 106,495 employees, down slightly from a year ago.

CEO Christian Klein said the third quarter results highlight how it is accelerating its cloud growth and focusing on AI and innovation.

SAP said 2023 cloud revenue will be between €14.0 billion and €14.2 billion with total cloud and software revenue of €27 billion to €27.4 billion. A non-IFRS operating profit between €8.65 billion to €8.95 billion are expected. The guidance is in constant currencies.

Key items from the SAP conference call

  • RISE with SAP customers now top 4,300.
  • "We are removing the data silos with RISE with SAP and build one strong data layer to allow us to steer the business 360 with real-time data. RISE and GROW are also very exciting opportunities for SAP. The two offerings result in net new customers and an installed base maintenance conversion of more than 2x," said Klein.
  • "Business transformation is much more than the pure technical migration of ERP legacy landscapes to the cloud. It's key to connect end-to-end processes and the entire data and system landscape to drive tool transformation. In 2021, we acquired Signavio, covering the process perspective, and in Q3, we announced our intent to acquire LeanIX to cover the overall enterprise architecture perspective, making sure processes, systems and data are yielding the wide outcome for every SAP customer. Together, LeanIX, Signavio and SAP Cloud Application Lifecycle Management create a unique business transformation suite," said Klein.
  • Klein added that he met with Microsoft CEO Satya Nadella in Berlin. "Microsoft is extremely interested on how can we join forces to also further combine our data. And what is also very important in the B2B world, I already mentioned it. I mean, in the B2C end, you can ask ChatGPT for a question for speech and you get a proposal for a speech. In the B2B world, accuracy and data quality is of utmost importance," said Klein.

Here are the details behind SAP's cloud revenue.

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IBM, AWS expand partnership, watsonx headed to AWS Marketplace

Larry Dignan
Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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IBM will make its watsonx.data available on Amazon Web Services as a managed SaaS service available in AWS Marketplace. In addition, IBM Consulting will expand its AWS partnership to train 10,000 consultants on AWS generative AI services, use cases and best practices.

To start, IBM Consulting said its exclusive AWS partnership will focus on the following:

  • Contact Center Modernization with Amazon Connect, which will include summarization and categorization for voice and digital interactions with generative AI.
  • Platform Services on AWS, which will use generative AI to manage IP Ops, automation and platform engineering.
  • Supply Chain Ensemble on AWS, a virtual assistant designed to optimize inventory, cut costs, streamline logistics and assess risk.

The broadened partnership with AWS is a nice win for IBM, which is looking to make its watsonx platform more widely available. IBM said it will make watson.ai and watsonx.governance available on AWS by 2024. For AWS, the deal with IBM Consulting will add throughput in the enterprise.

Constellation Research analyst Holger Mueller said:

“Enterprises need to use AI to their advantage – but need help to implement it – so AI cloud vendors and system integrators expand their alliances to serve enterprises better. The IBM and AWS partnership is of interest due to the focus areas and possible prebuilt offerings. As a CxO looking for these use cases these partnerships are good news. It remains to be seen how long the exclusivity will hold but this is a coup for IBM.

More important than the service announcement is that IBM Is making watsonx available as first citizen on AWS Marketplace. It makes sense to start with watsonx.data – as data is the foundation of AI and joint customers will have to start there. It's good to see watsonx.ai and watsonx.governance following suite in 2024."

Other key parts of the IBM and AWS partnership include:

  • IBM Consulting will integrate AWS generative AI services into its IBM Consulting Cloud Accelerator.
  • IBM is one of the first AWS partners to use Amazon Bedrock.
  • With the addition of watsonx.data to the AWS Marketplace, IBM is expanding its footprint on AWS. The two companies have committed to making it easier for joint customers to use IBM's data, AI and security software on AWS.

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Nvidia, Foxconn aim to build AI factories, collaborate on EVs, robotics

Larry Dignan
Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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Nvidia and Hon Hai Technology Group (Foxconn) outlined a broad partnership to create so-called "AI factories" that will be based on Nvidia GPUs to transform data into AI models and tokens. The two companies will also develop systems for autonomous vehicles and robots.

If you boil down the Nvidia and Foxconn announcements, AI factories and other efforts will highlight what's possible on the Nvidia platforms. In other words, Nvidia's efforts with Foxconn rhyme with what Microsoft and Google have done with Surface and Pixel, respectively. Nvidia with Foxconn will have a showcase for its accelerated computing platforms, GH200 Grace Hopper Superchip and AI Enterprise software. The Foxconn partnership will enable Nvidia to show the art of the possible with standardization on its stack.

The announcement was made by Nvidia CEO Jensen Huang at Hon Hai Tech Day. The companies outlined electric vehicle plans on Nvidia's platform separately. Related:

Foxconn will also help Nvidia seed the market for its Drive Hyperion 9 autonomous vehicle platform and Drive Thor automotive system on a chip, Isaac autonomous mobile robot system and Metropolis video analytics platform for smart cities. Foxconn plans to design custom systems for all of Nvidia's products.

According to the companies, Foxconn's AI factory based on Nvidia's platform will enable it to train models for workflows and run simulations before building physical systems. In theory, these simulations would boost Foxconn's efficiency and operating margins.

Constellation Research analyst Holger Mueller said the Foxconn and Nvidia partnership could boost scale for AI workloads in manufacturing and OEM settings. He said:

"A few years back the future of Nvidia was not clear as the cloud vendors were using proprietary approaches to run AI. That is all history with Nvidia GPUs being added in all public cloud data centers across the world. Nvidia is now ready to partner with manufacturing and OEM providers – all to put out more of its platforms. The partnership with Foxconn is to be seen in this light – Foxconn standardizes Nvidia platforms and OEMs them to its customers. If Nvidia succeeds with this move it will increase footprint, relevance and likely growth by magnitudes."

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NetSuite launches new licensing model, generative AI features

Larry Dignan
Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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NetSuite is launching a new licensing model that will enable enterprises to use task-specific licenses for employees that don't need full access to the platform. NetSuite said it will initially roll out the new licensing plan for NetSuite Warehouse Management.

Details about the licensing model weren't immediately available, but NetSuite said a warehouse employee who only needed NetSuite access for receiving, put away, picking and shipping would have a license only for that functionality without a full subscription. NetSuite typically charges an annual license fee for core platform, optional modules and number of users. There's also a one-time implementation fee.

NetSuite, a division of Oracle, announced the new licensing model at its NetSuite SuiteWorld 2023 conference. The tweak is notable since that warehouse worker would typically be licensed as a full user. As a result, enterprises are more likely to forgo that license for a front-line worker. The bet is NetSuite can democratize use of its platform and its more than 37,000 customers can get a productivity bump.

Along with the new licensing model, NetSuite rolled out a bevy of features and generative AI capabilities across its suite. Here's a look at the additions.

  • Generative AI tools powered by Oracle's Cloud Infrastructure were launched across NetSuite. 
  • NetSuite Text Enhance to personalize content for any text in NetSuite for finance, human resources, supply chain, sales and customer support to name a few.
  • NetSuite Planning and Budgeting gets predictive algorithms that monitor and analyze plans, forecasts and variances.
  • NetSuite bill Capture, which will capture and categorize expenses and curb manual bill entry.
  • NetSuite Analytics Warehouse will use AI to consolidate and centralize data from multiple sources and visualize it in dashboards. NetSuite Analytics Warehouse is built on Oracle Analytics Cloud and Oracle Autonomous Data Warehouse.

In addition, NetSuite built out its financial and accounting features and launched NetSuite EPM, which will be available within the next year. NetSuite Planning and Budgeting and NetSuite Account Reconciliation will be sold separately and as part of EPM. Here's the rundown:

  • NetSuite EPM launched with automated account reconciliation to streamline closing processes and reporting.
  • NetSuite Capital launched as a embedded service focused on improving cash flow, reviews, pricing, invoicing and accounts receivable.
  • NetSuite Pay rolled out across the platform to onboard merchants and integrate payment processors with pre-negotiated rates and fees.
  • The company launched a new e-invoicing tool to optimize payment and cash collection reduce costs and streamline invoicing compliance.
  • NetSuite added Transaction Line Distribution, a tool that can split transactions across departments and subsidiaries.
  • The company outlined NetSuite Benchmark 360, a tool to benchmark enterprises in their industry and region.

NetSuite also targeted field service operations with the launch of Field Service Management, which offers scheduling and dispatch communications, inventory and asset management. The company also added tools to support subscription-based business models.

On the customer front, NetSuite announced Cohere as a customer along with others and said it will expand in Spain and Brazil. 

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Customer experience vs. efficiency and cost cutting: Which one wins?

Larry Dignan
Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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Customer experience has taken a back seat to cost cutting, declines in service and inflation and it's unclear whether new technologies such as generative AI can bail enterprises out.

That's my take on the Accenture Life Trends 2024 report, which is a handy read on macro and cultural trends. While Accenture's report focuses on consumers, the points about customer experience can easily apply to enterprise technology. Enterprises have been passing costs on to customers, but we're reaching the point where that's no longer going to fly.

Here are a few points from the Accenture report as well as my take and related reports Constellation Research.

Profit priorities trump customer experience. Accenture found that 37% of people worldwide think many companies are prioritizing profit over customer experience. And 40% of CxOs say they plan to raise prices to pass costs to customers. Accenture's report also found that customers feel less valued by poor customer service.

My take: CX is critical but it's clear there's going to be a widening gap in companies that keep it a priority. The idea that profits follow customer experience was fine when growth was easier to come by. Now efficiency is the mantra amid higher interest rates and margin squeezes for companies. Companies taught consumers that they should value something more than a mere transaction. Most surprising thing to me: Consumers apparently bought into the idea that brands were about more than the transaction. Follow the money people.

Here's the conundrum: Enterprises across all industries will have to become way better at customer service and do it cheaply. Related research: Connecting Experiences From Employees to Customers

Generative AI to the rescue--maybe. Accenture, which by the way will make a lot of revenue from consulting on generative AI projects, said conversational interfaces will change the game for digital interactions. Generative AI could be known as the great customer engagement enhancement. Accenture found that 39% of people aged 18-34 are excited about conversational answers over standard Internet searches.

My take: Accenture expects large language models (LLMs) to change the relationship between people and brands and I'd agree. What's unclear to me is whether the enterprises behind the big brands have the data to offer something unique with an LLM. Even more unclear is whether enterprises will be able to navigate internal silos to make sales, marketing and service cohesive. And even more unclear is whether vendors can provide a generative AI magic bullet with fun names, domain specific LLMs and add-ons that add up.

Related research: The Urgent Case for a Chief AI Officer | Constellation ShortList™ Customer Experience (CX) Operations Services: Global

Humans are getting wise to technology's pitfalls. Accenture noted that nearly a third of consumers say technology has complicated their lives as much as simplified it. The upshot is customers are tightening the reins on tech use by removing notifications, limiting screen time and removing apps.

My take: It's about time someone followed me and put their phone on silent. Brands will have a tough time adapting if consumers decide to prune digital channels. However, you can color me skeptical about humans downgrading their tech relationships. What people say they do with technology is vastly different than what they actually do. The notifications are still in charge.

Constellation Research's take

Constellation Research analyst Liz Miller said:

"While the report recasts the customer experience dilemma in the new extreme brightness that is generativeAI, it fails to issue a stark warning: None of these tools will solve for inauthentic, poorly crafted and value-less engagements. The reality of customer experience, even before the boom of GenAI, is wrapped in that adage: Garbage in, Garbage out. All AI will do to this process is accelerate the capacity to deliver, ignore and dispose of the garbage.

What far too many brands get horribly wrong is they believe Customer Experience is a technology, a function or a mantra that can be distilled into a pithy wall cheer like “Be Customer Obsessed!” If that is what CX is to a brand, no AI, no data, no technology stack can save CX…and in total blunt talk, that type of wasted budget should be cut.

CX is an enterprise-wide team sport that so deeply understands the customer and the decision glidepaths that bring that customer into a posture of durable profitability that the only decisions that can be made are those that work in the service of either accelerating or deepening that lasting bond between brand and buyer. CX isn’t customer service. CX isn’t marketing. CX isn’t packaging. CX is all of this and more. CX is the durable, profitable, authentic, and contextual relationship between a brand and its customers, partners and the market.

Without a true customer experience strategy that is embraced by the entire organization, orchestrated and connected by data and customer intelligence, no amount of GenAI can save that bottom line. Cost cutting will be the only path to survival. But, if an organization has thought of CX as more than a rallying cry of convenience, more thought and attention can be paid to HOW generativeAI can address including those conversations around why that ice cream bar is just a bit smaller now or costs a little bit more."

Next-Generation Customer Experience Data to Decisions Innovation & Product-led Growth Future of Work Tech Optimization Digital Safety, Privacy & Cybersecurity ML Machine Learning LLMs Agentic AI Generative AI AI Analytics Automation business Marketing SaaS PaaS IaaS Digital Transformation Disruptive Technology Enterprise IT Enterprise Acceleration Enterprise Software Next Gen Apps IoT Blockchain CRM ERP finance Healthcare Customer Service Content Management Collaboration Chief Information Officer Chief Marketing Officer Chief Data Officer Chief Technology Officer Chief Executive Officer Chief AI Officer Chief Analytics Officer Chief Information Security Officer Chief Product Officer
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