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Overview of the IT Services Industry

The IT services industry is vast, fragmented and going through very meaningful changes. E.g. Gartner is forecasting 4-5% growth or more than $1 trillion in worldwide end-user spend, across consulting, implementation, business process outsourcing, managed services and cloud infrastructure services.

An area of relative strength remains in consulting, where digital and security are driving spend. Cloud-based infrastructure and business process services also continue to outperform. Conversely, traditional areas in data center outsourcing continue to shrink, and heavily labor-based initiatives, like service desk outsourcing, are showing the effects of automation.

The market dynamics are important. Over the last couple of years, companies’ weaknesses are increasingly exposed — whether due to a poorly diversified service offering, lack of vertical diversification, limited scale in digital, the inability to be flexible and innovative with clients, and delivery models that are not keeping up with market shifts.

Looking into the next few years the trend will continue, and growth rates will remain relatively the same. So the ability to outperform and win market share will come from the following factors:

  • Winning new customers by displacing incumbents in contract renewals. Competing providers are well positioned to win businesses that incorporates solutions in a way that the incumbent providers can’t due to potential revenue decrease.
  • Capturing the incremental revenue of creating digital business. This requires a holistic service and solution offering with strong industry-specific capabilities. It also requires a robust ecosystem of partnerships with key vendors and emerging technology vendor community.
  • Platform-based solutions are also a new opportunity for incremental growth, but require investment and scale. Providers that are not transitioning in this direction fast enough will be marginalized over time.
  • Acquisitions will remain a critical path to expand in the newer areas of spend and capturing new skills and capabilities around design, strategy, development, security and intellectual property.