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IT services market in transition
S&T benefits as Business Innovation and Transformation Partner (BITP)
This year’s international press conference for the S&T Group was dedicated to the rapid changes currently being experienced in the IT services markets, and their implications for providers and customers. More than 30 economic, finance and IT journalists from twelve Central and Eastern European countries participated in the conference in Vienna and discussed global and local trends as well as developments in the IT services sector with S&T board members, guest speaker Eugen Schwab Chesaru, Partner & Managing Director PAC Central & Eastern Europe, and Artur Borowski, Channel Manager Central & Eastern Europe EMC². “The future of the IT services market belongs to full-service providers such as S&T. To secure future growth, providers need expertise that goes beyond technology, industry and implementation know-how – they need to expand and combine this with management and process consulting,” explains Christian Rosner, CEO S&T.
Changes to customer requirements
Most large and medium sized businesses need to compete globally and are paying ever closer attention to the benefits and contribution of IT when it comes to value creation. This is resulting in more frequent purchasing or outsourcing of standard IT services, so that in-house IT departments can focus their resources on strategic projects. This is leading to a massive industrialization of IT and corresponding changes for providers. In addition, the innovative potential of a company is one of its central competitive advantages. IT is one of the fundamental innovation factors and thus influences turnover and financial results. In addition to innovation in products and services, innovative business processes have become increasingly vital for success – a trend that will continue in the future. “As a provider of IT services, this means that in the future, we will need to be able to convince customers of our expertise in process and management consulting,” explains Rosner. “In addition, customers naturally expect their IT partner to provide optimal support for change processes. This is because all companies are faced with constant change. In order to master the challenges that this presents, companies need to depend on an IT consultant and partner with change management expertise.” In addition, international companies demand that their IT partner’s services are available at consistent levels of quality throughout all of their locations. For this reason, IT providers must have global delivery and sourcing models on hand in order to create added value for their customers.
Market consolidation continues
Changes to customer requirements and the fact that companies increasingly prefer to work with as few IT partners as possible are creating ever-tougher global competition for IT providers. This competition is particularly evident between IT consulting and service providers, but can also be seen between national and regional providers. The result is a clear consolidation of the market, and the winners are already able to be identified. The consolidation is being driven by the so-called “Value Growers”, that is, companies that have already attained critical mass, geographic and service portfolio distribution, and offer IT consulting, systems integration, IT and business process outsourcing, as well as strategy and management consulting. Rosner: “In the last five years alone we have completed ten acquisitions to extend our portfolio and expand our geographic presence. Today we are a global one-stop shop for all service requirements.”
Clearly defined criteria for success
Market research experts at Lünendonk GmbH describe this new type of IT full-service provider as a Business Innovation and Transformation Partner (BITP). There are two criteria that distinguish BITPs from other providers. First, a BITP generates more than 60% of its turnover from consulting and services. Rosner: “This is precisely our strategic goal for 2010. In the first half year of 2008, 52% of our sales was already being generated from consulting and services projects.” Second, within consulting and services turnover, at least 10% needs to be generated from each of the following three service categories: management and IT consulting, systems implementation and integration, and IT system management (outsourcing) for customers.
Customer expectation is constantly raising the bar: when it comes to BITP full-service providers, they expect complete system and integrated solutions expertise, consulting competence, process and implementation experience and technology know-how. For this reason, they select IT consultants on the basis of five criteria: industry expertise, economic stability, management competence, innovative potential and technical competence. “Most customers simply expect their IT partner to be able to implement strategy concepts in business processes and vice versa: that implementation and associated responsibilities are already integrated at the strategy conception stage. We have been doing well for many years on account of our clear focus on customer needs,” says Rosner. “I am convinced that the number of providers in the market will be further reduced – not least because we ourselves will maintain our role as a consolidator through further acquisitions to expand our position as a BITP.”
IT market grows 9.5% in 2008
Despite a general slowdown in economic conditions, the IT services market has proven to be strong in the current year. At the end of July, experts at the IT market research and consulting company Gartner forecast a global market growth rate of 9.5% to US $819 billion. The largest share of this – US $256 billion – will be spent on consulting, development and integration projects. This is followed by IT management projects at US $220 billion and process management at US $121 billion. For the 2008 financial year in Europe, a growth rate of 5.3% to 211 billion euros is expected in the IT services market.
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