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The future of IT services: how to prepare

The future of IT services: how to prepare

The IT services market will soon change drastically due to factors including global demographics and new delivery models, says Forrester Research's Christine Ferrusi Ross. Here's advice on how IT leaders can get ready.

We constantly hear hype about how a given market is changing drastically. And given the economy, many companies we talk to tell us that the only thing drastic happening in IT services today is the rate reductions they're asking from their vendors. But after years of moving forward slowly, IT services is in fact about to change drastically. Here are a few reasons why, and what you can do about it.

Changing Global Demographics

Baby boomers are getting set to exit the workplace at an astounding clip. In the United States alone, 76 million of these folks are hitting retirement age over the next decade. In the U.S. government, 30 to 40 percent of the IT workforce will retire during that timeframe.

Unfortunately for us, only 48 million will join the workforce to replace them. The United States will lose nearly a third of its workforce, which will only increase the importance of sourcing work to other regions of the world.

And other developed countries face the same challenge - economies such as the United Kingdom, Germany, and Japan have populations with a median age between 40-45 years old.

But now consider other countries - how about The Philippines where the median age is just 22.3 year old? Or India, with a workforce of 516.4 million people, where half the population is under the age of 27? Both regions are important to the future of services and sourcing but a clear concern for the foreseeable future will be finding senior talent in these regions. Notice that these are just two of the countries most often mentioned in offshoring and global delivery conversations.

The changing demographics will drive continued need for globalization of the labor pool - despite short term-driven political rhetoric to the contrary. These issues are going to drive changes in how IT gets delivered, and it will drive new investments in productivity technologies and services.

New Delivery Models

The lines between products and services are blurring - Software-as-a-service (SaaS), solution accelerators (pre-built code that systems integrators use to kickstart client projects), and cloud services are all examples. And while these hybrid solutions are often pitched as being less expensive in the near term, buyers also want them for more long-term strategic reasons too - more transparency into the cost structure of their IT delivery and less dependency on dedicated assets are two key long-term benefits.

One utilities firm told Forrester that while they could justify SaaS on cost alone, they were actually implementing it to get services to their business users faster, helping IT develop a better relationship with its constituents.

But SaaS is just one example. Solution accelerators are helping systems integrators deliver work to clients faster and more effectively today. But in the long term they're also changing the role of the integrator. Since a solution accelerator is a piece of code, it's turning many services firms into defacto software vendors - changing the way clients need to write their services contracts and the kind of work they expect from their providers.

Cloud services do something else too - they industrialize and compartmentalize traditional IT services, changing what clients are buying from outsourcers and other services firms. Tomorrow's outsourcing contracts might be nothing more than a bundle of pre-packaged cloud services rather than the custom-built solutions they are today.

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