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Top 5 IT services trends for technology, service providers

As businesses embrace digital services, technology and service providers must align with five market-changing trends, according to Gartner analyst Twiggy Lo.

Today, the digital business services market provides channel partners with higher growth and margins than traditional, core IT services. It's a trend that is poised to continue. In 2020, Gartner sized the digital business service market at $317 billion and now anticipates the market to grow to nearly $489 billion by 2024.

The shift to digital services can be attributed to three key factors: the growth in cloud implementation services; the increased use of Agile, DevOps and product-centric development practices; and the added complexity of business and operational requirements.

Emerging digital technologies and their components can combine in different ways to drive innovation and positive disruptions for organizations. Technology and service providers (TSPs) must focus investments on the following five trends to help clients transform their business models.

1. Digital disruption

Digital disruption has far-reaching effects on client organizations. It fundamentally changes expectations and behaviors in an organization's culture, market, industry or process. If organizations aren't looking to respond to disruption, then they are looking to participate -- and, as a result, demand digital business services.

Since the beginning of the COVID-19 pandemic, the pace of digital disruption has only accelerated. One of the pandemic's most significant changes was the replacement of in-person contact with remote interactions. While it had previously been common to have some services delivered remotely from offshore or nearshore centers, the majority of work -- i.e., design, architecture, account management and business development -- was delivered at the client's site. For most buyers, the experience of collaborating remotely with service providers was either as good or better than before the pandemic.

TSPs should work backward from client business cases to determine how digital technologies can best serve each customer's business purpose.

TSPs should work backward from client business cases to determine how digital technologies can best serve each customer's business purpose. Additionally, TSPs must invest in the appropriate technologies based on their given digital maturity and close technical competency gaps via employee training programs, strategic workforce planning and similar efforts.

TSPs must also adapt their engagement models in anticipation of increased buyer expectations for remote collaboration. TSPs must learn how to maintain client relationships virtually instead of through on-site interactions, while also ensuring clients' intellectual property and consumer personally identifiable information are protected in a fully work-from-home environment.

2. Talent shortages

Since digital business requires multidisciplinary skills and collaboration across business units, service providers must develop the necessary skilled resources. Employees' skill sets will be indicative of a service provider's ability to keep up with fast-moving technology trends. Consequently, services firms must prioritize the creation of internal training programs, partnerships with universities and other methods of upskilling employees.

TSPs should improve bench strength in critical roles like change management and data science, while incorporating alternative sources of talent via the gig economy, such as online talent and crowdsourcing marketplaces.

3. A shift in buyers

IT spending has shifted from one tech buying center to multiple buying centers. In fact, industry line of business represents the largest group of business buyers at 47%. Consequently, IT investment decisions increasingly focus on business outcomes rather than technology functionality.

TSPs must consider this shift in buyers and evaluate potential risks overlooked by the business -- for instance, cybersecurity risks. TSPs must also work with marketing leaders to focus messaging on business outcomes and create industry-specific offerings targeted at business buyers.

4. Changes in competitive landscape

The competitive landscape in IT services continues to rapidly evolve. More and more new and nontraditional service providers are converging to approach the same market opportunities from different angles.

The changes in competitive landscape affect TSPs' business, go-to-market and ecosystem strategies, as well as use of technology and automation.

The convergence of digital technologies and skills in areas such as AI, robotic process automation and cloud has increased competitive pressure, too. Previously distinct provider types find themselves competing with a much larger and more diverse group of providers.

TSPs must have a clear strategy for current and future offerings and offer a greater diversity of delivery models.

5. Increased focus on environmental factors, security

Environmental factors, such as regulatory changes, sustainability, and diversity, equity and inclusion, could expose businesses to risks. As one example, in the just-released Gartner CEO survey, almost half of CEOs said they believe that climate change mitigation will have a significant impact on business operations.

The convergence of environmental factors provides two outcomes for TSPs. In some cases, TSPs will receive new opportunities to help clients manage these environmental factors. In other cases, these factors will force providers to find new ways of doing business altogether.

This is the impetus for TSPs to differentiate, innovate and scale their offerings, while expanding market share. Addressing environmental factors requires thought leadership, collaboration with regional and local government and business leaders, and other cross-sector solutions.

Additionally, the digitalization of business has expanded the role of security as it relates to privacy, digital trust and safety. Gartner recommends TSPs invest in people, processes and organizational changes to address these security risks.

About the author
Twiggy Lo is a senior research director at Gartner. Gartner analysts will be featured at the Gartner Tech Growth & Innovation Conference, July 20 to 21, in the Americas.

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