Major changes will reshape the service provider landscape over the next several years as organizations struggle to adjust to a digital future, according to a report from IT research firm Gartner, which 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.
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.
"IT spending buying centers across industries have steadily shifted away from the central IT function and to business buying centers," Eric Rocco, managing vice president at Gartner, said in a statement. "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."
Cloud-based services are cannibalizing 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 are expected to dominate client IT architectures over the next several years, underscoring the importance of skills in the old-world legacy environments, as well as the new-world as-a-service operating models, the report noted.
"Digital business is an unstoppable and irresistible catalyst for change—change that will affect the fundamental foundations and baseline assumptions of every business," Rocco continued. "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."
The overall IT services market is forecast to grow 4.6 percent in 2014, with hardware support among the lower-growth opportunities in the IT services market.
Gartner sees the Nexus of Forces, where information is the context for delivering enhanced social and mobile experiences, forming the fiber that defines next-generation services. The report predicted services of tomorrow would lean on scaled and industrialized delivery models that provide clients access to services that are consumed to drive specific business outcomes.
"The impacts of the Nexus of Forces and digital business transformation are reshaping business processes and supporting IT strategies," Rocco continued. "Most buyers cannot simply adopt new services without making changes to existing processes and applications. Buyers want speed and agility. They recognize an innovation crisis exists internally, but few service providers are well-positioned to capture the opportunity."