Why the IT Services Industry is Ready for Change

August 6, 2018

In this digital age, the IT services market is not working effectively for any stakeholder group – Customers, IT Professionals, IT Resellers, IT Vendors, and Distributors alike. Each remain exposed to critical risks and fail to realize the full promise of digital transformation.

Lessons from digital frontrunners in other industries strongly suggest that increased transparency and visibility is a vital requirement – and one that’s overdue in the IT industry.

A new context for the IT services industry

 
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  • The age of technological disruption: The cumulative impact of cloud computing, big data, IoT, mobile, social, AI, and machine learning has dramatically changed the landscape of available technologies and created many new exciting possibilities for organizations of all sizes. Digital technology now impacts virtually all aspects of how businesses and institutions must operate to effectively and efficiently serve the needs of customers and stakeholders, in the process rendering many existing business models and approaches obsolete. In short, “digital transformation” is key to survival in the modern age.
  • A new customer: In J.B. Wood’s Consumption Economics: The New Rules of Tech, he argues that today’s customer has evolved. Customers now wish to pay for technology only as and when they realize concrete business value. They increasingly reject outdated modes of technology consumption and seek to transfer the risk of technology selection and implementation to IT Resellers.
  • A shifting economy: New technical and purchasing trends fundamentally alter the economic logic for the entire IT industry, yet the way in which IT services are procured and delivered has changed very little. With rare exceptions, IT Reseller margins and profitability are consequently at all-time lows, and in many cases still falling. CloudSpeed Partner Strategy Survey (March 2018) found nearly half of the respondents were posting negative EBITDA levels. This indicates that Resellers simply cannot absorb the risk that customers are seeking to transfer to them.

New developments in other industries

 
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One of the key disruptive tactics monetized in the digital age is the provision of transparency and visibility of alternatives. There are a number of companies which show the IT services industry what it might be missing out on:

  • AirBnB now has 4 million listings in 191 countries and boasts a compound annual growth rate of 153% since 2009, without owning a single property. Perhaps more importantly, it has materially added to the economic health of the communities it is active in. For more info check out AirBnB’s economic impact study.
  • According to MSN money, TripAdvisor generates over $1.5b in annual revenue, has a market capitalization approaching $8b, and offers up 630 million reviews and opinions on 7.5 million accommodations, airlines, experiences, and restaurants worldwide, to an average 455 million monthly visitors. Again, without owning a single property.
  • HomeAdvisor is used by over 30m homeowners to locate and screen potential contractors based on over 5m submitted reviews.
  • JD Power’s online platform aggregates customer data across several industries, simultaneously allowing businesses to better understand their competitive position, and buyers to make more informed purchase decisions.

What it all means for the IT services industry

The fact is that such platforms provide immense value to all stakeholders and are becoming increasingly prevalent in almost every industry one can imagine. This is no accident. While firms like Gartner and Forrester provide Customers with insights on technology products, there remains a significant gap when it comes to insights on technology services.

In this digital age, and in the IT services industry, Dynasource believes that greater transparency and visibility is pivotal to a revamped and optimized value chain emerging that works for all stakeholder groups. Without it Customers, IT Professionals, IT Resellers, and IT Vendors/ Distributors all face material risk and will fail to achieve the full economic potential of digital transformation.

This content originally appeared on CloudSpeed.

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Learn more about the changes that are transforming the IT industry.

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