70% of CIOs will change their tech and sourcing relationships in the next three years

Torrential changes will reshape the service provider landscape over the next several years as organisations struggle to adjust to a digital future, according to Gartner, Inc. A recent global survey of CIOs by Gartner’s Executive Programs found that 70 percent of CIOs will change their technology and sourcing relationships in the next two to three years for a variety of reasons.

“The picture is clear for service providers as clients are struggling to keep up with change,” said Eric Rocco, managing vice president at Gartner. “They are strongly considering changing the providers they work with as part of responding to this change. Market share will shift to service providers able to help clients respond to the business and IT opportunities and challenges that are overwhelming more than half of organisations today. Service providers need to convert this picture into an opportunity rather than a threat.
[caption id=“attachment_79703” align=“alignleft” width=“380”]  Image: Thinkstock[/caption]
“Digital business is an unstoppable and irresistible catalyst for change - change that will affect the fundamental foundations and baseline assumptions of every business,” Rocco said. “The digital business revolution is underpinned and enabled by the macro technology forces of cloud, social, analytics, mobility and the Internet of Things. Not every business fundamental will need to change to the same degree, nor will every technology driver have a role to play in every business scenario; however, businesses that decide to ‘wait and see’ are likely to become irrelevant.”

Technology and service providers need to determine and demonstrate how their offerings can underpin, support, enable and accelerate the digital business revolution to remain relevant to their customers. Digital business requires providers to totally change the way they do things while helping their customers to do the same thing at the same time. This presents significant challenges with equally significant opportunities and risks. Traditional buyers will have a role to play but we will also see the emergence of a new breed of buyers and providers that must address their wants and desires if they are to earn the right to help in the transition.

More from Biztech

Future Group - Reliance Retail Deal approved by CCI RBI ban on cryptocurrencies takes effect; prohibition could force investors to tap the black market

Gartner believes that assisting clients in digital business transformation will be a driving factor in the majority of IT services opportunities. Consumerisation and its impact on buyer expectations for consumer quality service experiences will reshape provider evaluation and selection criteria. Consequently, finding and capitalising on unexpected sources of growth is the strategic issue facing all service providers. Gartner sees the Nexus of Forces forming the very fiber that defines next-generation services. Services of tomorrow will lean on scaled and industrialised delivery models that provide clients access to services that are consumed to drive specific business outcomes.

“IT spending buying centers across industries have steadily shifted away from the central IT function and to business buying centers,” said Rocco. “Service providers of the future will articulate value in business terms such as key process outcomes and impact to key performance indicators (KPIs). Doing so requires deep vertical industry knowledge, and new go-to-market models.”

The IT services market will not grow uniformly. The overall market is forecast to grow 4.6 percent in 2014. Hardware support is among the lower-growth opportunities in the IT services market. Through proactive and multivendor support models, these services will increasingly collide with outsourcing services.

Cloud-based infrastructure as a service (IaaS) and business process as a service (BPaaS) are the two fastest-growing segments, expanding 44.9 and 12.4 percent, respectively, in 2014. Agility, not cost, will be the primary reason that many organisations adopt cloud computing. Cloud-based services are cannibalising more traditional models. This is most apparent in infrastructure outsourcing where infrastructure utility services (IUS), managed services based on IaaS technology, and cloud IaaS growth include workloads moving from more traditional data center managed services to IUS and IaaS, respectively. Hybrid IT environments will dominate client IT architectures over the next several years. This underscores the importance of skills in the old-world legacy environments, as well as the new-world as-a-service operating models.

“The impacts of the Nexus of Forces and digital business transformation are reshaping business processes and supporting IT strategies,” said Rocco. “Most buyers cannot simply adopt new services without making changes to existing processes and applications. Buyers want speed and agility. They recognise an innovation crisis exists internally, but few service providers are well-positioned to capture the opportunity.”

Service industrialisation of the near future will be a combination of mature processes, automation, analytics and personalisation. Services will continue to productise and require greater service line management disciplines. Industrialisation and productisation must create enhanced value beyond cost reduction, or neither strategy will create a competitive advantage.

“The strategic challenge facing service providers is to better understand client value drivers, and to more effectively articulate their own value propositions,” said Rocco. “Our key recommendations, regardless of business model or service segments of focus, for IT services providers are to target new buying centers through the audacity of visionary thinking; articulate value in terms of business outcomes and KPI attainment; and to industrialise and productise, without losing sight of service value.”