In a pre-digital era, IT companies often fell into following categories –

  • Pure-play Offshore providers who played cost-arbitrage card with heavy offshore model and managed low-complexity IT work including application maintenance / BPO, KPO work such as claims processing. They interacted with middle rungs of IT departments with limited view of client side of business.Any second tier IT firm will fit into this slot.
  • System Integrators who managed large-scale business transformations including ERP integrations with mix of onshore/offshore based model. They eventually ended up managing pure-play offshore providers. It included IT biggies like IBM, Accenture and other Indian Players. They often interacted with leadership levels of client and acquired industry expertise over time.
  • Consultants who mainly provided business process/specialized technology expertise to the clients like Deloitte, Ernst and Young, PWC etc.  They had leadership access to the client , but often lacked core technology expertise. So, delegated core IT work to first two categories.

While companies switched categories as per demands of client/expertise or business need, this picture remained consistent as high level.

Then, Digital Technologies came into fray including automation, so are the ‘asks’ for IT outsourcing.

I would expect that IT service providers will most likely end up in either of the following categories.

  • Front-office IT Outsourcers who will focus on bigger digital transformations. They will need to play a dual role of technologists as well change enablers.  Industry specialisation/expertise along with technology capabilities will be a key selling point.
  • Back-office Outsourcers who will continue to play guardians of legacy systems including big ERPs. They will be expected to bring in efficiency in terms of automation as well making legacy ready for digital capabilities. While they can still make noise about digital capabilities, their primary business will come from back-office.

It will be conscious (rather honest) business decision on IT providers part to figure out which category they would like to be in. Some of them would like to be in both, but it is going to be like stepping on two stones, maintaining the balance is KEY then.

While there is nothing wrong to choose Back-office, IT providers would be forced to  bring in efficiency/ cost savings to the table.

For front-office IT providers, industry as well as technology knowledge and readiness to invest in client’s digital journey will be a key. Key challenge for front-office ones will be managing the talent on digital capabilities, so expect some of the old, industrialized business practices to be re-worked from scratch.

While journey is expected to be roller-coaster for some time, whoever ends up on top, will be treated with amazing view (and payouts as well).

 

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