Change is the only constant. In an ever-changing IT landscape, CIOs have to constantly meet business challenges through efficient IT adoption. With wide scale proliferation of Cloud-based solutions, there is a dramatic shift from traditional in-premise implementations towards cloud-based solution. As CIOs are actively taking their organization’s business to the cloud and adopting disruptive technologies like mobile computing, the IT service companies too have to evolve and align their offerings, capabilities and delivery models to cater to the enterprise of the future.
Enterprises have changed their focus on IT investment from capex to opex, which has resulted in more services based business spend rather than on IT infrastructure. Due to this trend the traditional or core IT services like ERP implementation, Applications Development, support and maintenance etc. have reached a plateau and are on decline in terms of enterprise spends. As they move progressively towards adopting more cloud-based services, they would concomitantly be reducing the IT investments on products and infrastructure. Cloud-based services enable the enterprise to assimilate and consume new services as a utility i.e. a subscription model. This model is very different to the traditional in-premise product implementation, where an enterprise would have to pay a fixed cost for hardware, software and implementation.
In the context of Cloud, the enterprise doesn’t have to risk huge upfront investment for an IT service, but pay only for what they consume. For instance, how many organisations today have e-mail servers as part of their own infrastructure? Over time, they have realized how expensive and cumbersome it is to own and manage their own e-mail servers. Hence they have shifted their e-mail setup outside of their premise, either onto cloud or managed by a vendor. This has drastically cut down their costs on hardware and maintenance. Likewise, there are several in-premise applications like ERP and CRM for which the IT companies themselves are offering a cloud based alternative as well.
On the contrary, the bread and butter for IT service providers used to be the traditional in-premise IT product or application implementation. With organisations opting to reduce their IT assets and move their business onto cloud, it becomes imperative for IT service providers to evolve their approach and adopt service delivery offerings on Cloud. As the differentiating line between products and services are blurring, the IT service providers have to think beyond product implementation expertise. They have to strategize on building competencies, envisage innovative solutions for the customers, reimagine delivery and business model for the solution, and most important of all the talent they would need for this transformation towards platform based service delivery.
There are opportunities for IT service providers to create value for enterprises by bringing new capabilities to the market. If they want a larger share of the enterprise’s incremental spending on cloud, then they need to expand their service portfolio to include cloud based solutions. Having domain knowledge of their customers would help IT service providers to build a platform or intellectual property to deliver specific services to their customers. IT service providers trying to foray into platform-based service delivery should seek to become leaders for a specific domain. They should invest on building platforms only when they have in-depth understanding of the customer’s business. Else, they will not be able to effectively address customer needs and provide unique solutions in this highly competitive Cloud market.
Enterprises do want to reduce spend on their existing core IT like ERP maintenance, application support and so on; but not all of these can be transformed into cloud-based services. Therefore, the focus of IT service providers should be on two fronts: To enhance core IT efficiency and to provide innovative platform-based services for non-core processes. For example, travel expense claims can be moved out of enterprise premises onto the Cloud. The enterprise will have to pay as per the number of travel settlements made rather than licensing and hardware costs. On the same lines, enterprises would not consider moving their existing ERP or Business Intelligence investments onto cloud, and would prefer to renovate the applications rather than making any further capital investment. The cloud based service delivery has brought a paradigm shift in enterprises’ IT spend and has also given them the flexibility to switch between service providers seamlessly, which is not possible with in-premise traditional model of IT delivery.
To survive and be successful in the cloud era, IT Service Providers must transform from traditional product & services to delivering new and exciting platform services that add value to the customers’ business. That alone will ensure their continued success and prepare them for the future.
