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
- 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.