"To improve is to change. To be perfect is to change often." - Winston Churchill
Forrester has a new report out discussing the dynamic evolution that traditional IT services providers are going to experience over the next several years. This analysis is very timely and it addresses a combination of external drivers that I have been writing and speaking about for the past several years. The authors, John C. McCarthy and Pascal Matzke have done a masterful job in codifying the thinking around these externalities and their impact to the existing IT service provider business model. This excerpt from the executive summary delivers the high-level on the emerging metamorphosis.
“The tech services market is about to undergo a massive transformation that will call traditional provider business models into question. Four factors will combine to dramatically change the dynamics, economics, and competitive landscape of IT services over the next three to four years: 1) the “restructuring economy”; 2) innovation moving to the edge of the enterprise; 3) the redefining of buying and governance dynamics in accounts; and 4) “as-a-service” becoming the norm.”
For those that have been engaged in surveying the technology market landscape over the past decade, the conclusions McCarthy/Matzke draw from their analysis is no surprise. Unfortunately, few of those individuals appear to actually work for the major players in global tech services because those firms have made few, if any, alterations to the business model they have employed for the past 15 years. As innovation in IT moved from the data center to the business units, on-demand/as-a-service and other cloud-based solutions gained traction, and social/mobile activity emerged as integral parts of the technology platform, Nero fiddled.
And the hits just keep coming. The Forrester report offers a forecast of why and how the IT services model of today will cease to exist by 2020.
- Forrester sees at least nine new services entering the market as cloud/SaaS redefine the services business.
- Selective sourcing and utility pricing models broaden their footprints.
- Digital natives and the advance of business (unit) buyers push traditional IT into the background.
- Standardization in cloud/SaaS solutions create pricing transparency and profound pricing pressure on traditional service models.
- Cloud/SaaS drive increasing standardization and process industrialization of services leading to delivery models based on solution partner ecosystems.
From my perspective, the most provocative item in the report is the following table that contrasts the top ten service providers in 2010 with a forecast of what the top 10 will look like in 2020.
Looks like a whole lotta growth, death and consolidation in the sector. Ten years may seem like a lot of time for the current top ten to embrace and adapt to this new environment, but the truth is that this evolution has been ongoing for at least five years. Too many of the incumbents lack the cultural and operational survival instincts to revolutionize their business models. Some of the logos we have come to recognize in the global tech services space have already vanished. It will be interesting to watch how this all plays out over the next decade.