HNY 2019

10 predictions for how the tech industry will change in 2019 and beyond

By 2023, nearly every enterprise will act like a digital native, as the digitized global economy continues to expand, according to a Tuesday report from the International Data Corporation (IDC). The organization set out to make 10 predictions for the IT landscape moving into 2019 and beyond, as IT and business leaders continue to undergo digital transformation.

Organizations are being rebuilt around 3rd Platform technologies like cloud, mobile, big data analytics, and social media, and are further enabled by "innovation accelerators" such as the Internet of Things (IoT), artificial intelligence (AI), and augmented and virtual reality (AR/VR), the report found. While many organizations are well on their way to transforming using these technologies, the next chapter of innovation will require companies to expand their digital reach, improve intelligence, increase app and service development, and meet increasing customer expectations and security needs.

"As industries - and the global economy - rapidly realign and consolidate around digital innovation, CXOs must race to reinvent their organizations for the fast-paced multiplied innovation world," Frank Gens, senior vice president and chief analyst at IDC, said in a press release. "This means reinventing IT around a distributed cloud infrastructure, public cloud software stacks, agile and cloud-native app development and deployment, AI as the new user interface, and new, pervasive approaches to security and trust at scale."

Here are IDC's top 10 worldwide IT industry predictions, according to the report.

1. By 2022, over 60% of global GDP will be digitized with growth in every industry driven by digitally-enhanced offerings, operations, and relationships.

Digital transformation efforts must rise to the top of every business leader's priority list, the report said. Those who fail to transform their operations and offerings will lose out to the competition as traditional marketplaces are disrupted.

2. By 2023, 75% of all IT spending will be on 3rd Platform technologies, as over 90% of all enterprises build "digital native" IT environments to thrive in the digital economy.

Nearly half of enterprises said that they are "digitally determined," meaning they have already set out to develop an integrated digital strategy and architecture that mimics those of digital native organizations, according to IDC. This means they are using the cloud, agile and DevOps practices, digital innovation platforms and communities, and integrated data management and monetization, the report noted.

3. By 2022, over 40% of organizations' cloud deployments will include edge computing, and 25% of endpoint devices and systems will execute AI algorithms.

Cloud infrastructure and enterprise applications and services are already shifting to the edge for increased proximity to devices and data sources, the report said. "AI services will be among the first - and most transformational - of public cloud capabilities being distributed across the edge," according to the release.

4. By 2022, 90% of all apps will feature microservices architectures that improve the ability to design, debug, update, and leverage third-party code; 35% of all production apps will be cloud-native.

In the digital economy, companies must deliver high-quality applications very quickly to meet business needs. This is driving the shift to "hyperagile apps," or those that are highly modular, distributed, continuously updated, and using cloud-native technologies like containers and serverless computing, according to the report. Combining these apps with agile and DevOps approaches, enterprises can speed their ability to innovate compared to past methods.

5. By 2024, a new class of professional developers producing code without custom scripting, will expand the developer population by 30%, accelerating digital transformation.

The rise of low code and no code development platforms and model-driven development tools will give organizations access to a new class of developers who can deliver digital solutions more frequently, the report said. By 2024, these new developers will expand the global developer population by nearly one third, according to IDC.

6. From 2018 to 2023, with new tools/platforms, more developers, agile methods, and lots of code reuse, 500 million new logical apps will be created, equal to the number built over the past 40 years.

The shift to hyperagile app technologies, and the explosion of the developer population thanks to low code and no code tools, will lead to rapid growth in app and services development, and deployment pace and scale, the report noted.

"The ability to accelerate digital innovation volume and pace will be the most critical new benchmark for organizations competing in the digital economy," Gens said in the release.

7. By 2022, 25% of public cloud computing will be based on non-x86 processors (including quantum); by 2022, organizations will spend more on vertical SaaS apps than horizontal apps.

The number of use cases served by IT will grow significantly in the coming years, creating a wide variety of specialized IT needs, the report said. AI processing requirements are driving the need for stronger processors, and organizations are choosing vertically-specialized Software as a Service applications nearly twice as often as horizontal applications, IDC found.

8. By 2024, AI-enabled user interfaces and process automation will replace one third of today's screen-based apps. By 2022, 30% of enterprises will use conversational speech tech for customer engagement.

AI will increasingly be used as the main UI for a number of apps and services, while at the same time, AI-driven process automation will streamline and replace human tasks. This will increasingly become to norm to maximize employee productivity, according to the report.

9. By 2022, 50% of servers will encrypt data at rest and in motion; over 50% of security alerts will be handled by AI-powered automation; and 150 million people will have blockchain-based digital identities.

Emerging technologies like pervasive encryption, blockchain, machine learning, and analytics will be used to improve security measures across the enterprise.

10. By 2022, the top four cloud "megaplatforms" will host 80% of IaaS/PaaS deployments, by 2024, 90% of G1000 organizations will mitigate lock-in through multi- and hybrid cloud technologies and tools.

In the coming years, enterprises will embrace integrated hybrid and multi-cloud tools and strategies, the report said. "Lack of an integrated strategy will result in suboptimal resource allocation, limited access to best-available technology innovations, longer problem identification and resolution times, and limited vendor leverage," according to the release.

Top 10 Strategic Technology Trends for 2019

The future will be characterized by smart devices delivering increasingly insightful digital services everywhere, which Gartner calls Intelligent digital mesh.

The Gartner Top 10 Strategic Technology trends highlight changing or not yet widely recognized trends that will impact and transform industries through 2023.

Some of the top strategic technology trends include quantum computing, augmented analytics and artificial intelligence that will drive disruption and new business models.

Blockchain, quantum computing, augmented analytics and artificial intelligence will drive disruption and new business models.

Although science fiction may depict AI robots as the bad guys, some tech giants now employ them for security. Companies like Microsoft and Uber use Knightscope K5 robots to patrol parking lots and large outdoor areas to predict and prevent crime. The robots can read license plates, report suspicious activity and collect data to report to their owners.

These AI-driven robots are just one example of “autonomous things,” one of the Gartner Top 10 strategic technologies for 2019 with the potential to drive significant disruption and deliver opportunity over the next five years.

“The future will be characterized by smart devices delivering increasingly insightful digital services everywhere,” said David Cearley, Gartner Distinguished Vice President Analyst, at Gartner 2018 Symposium/ITxpo in Orlando, Florida. “We call this the intelligent digital mesh.”

• Intelligent: How AI is in virtually every existing technology, and creating entirely new categories.
• Digital: Blending the digital and physical worlds to create an immersive world.
• Mesh: Exploiting connections between expanding sets of people, businesses, devices, content and services.

“Trends under each of these three themes are a key ingredient in driving a continuous innovation process as part of the continuous next strategy,” Cearley said.

The Gartner Top 10 Strategic Technology trends highlight changing or not yet widely recognized trends that will impact and transform industries through 2023.

Trend No. 1: Autonomous things

Whether it’s cars, robots or agriculture, autonomous things use AI to perform tasks traditionally done by humans. The sophistication of the intelligence varies, but all autonomous things use AI to interact more naturally with their environments.

Autonomous things exist across five types:

• Robotics
• Vehicles
• Drones
• Appliances
• Agents

Those five types occupy four environments: Sea, land, air and digital. They all operate with varying degrees of capability, coordination and intelligence. For example, they can span a drone operated in the air with human-assistance to a farming robot operating completely autonomously in a field. This paints a broad picture of potential applications, and virtually every application, service and IoT object will incorporate some form of AI to automate or augment processes or human actions. Collaborative autonomous things such as drone swarms will increasingly drive the future of AI systems

Explore the possibilities of AI-driven autonomous capabilities in any physical object in your organization or customer environment, but keep in mind these devices are best used for narrowly defined purposes. They do not have the same capability as a human brain for decision making, intelligence or general-purpose learning.

Trend No. 2: Augmented analytics

Data scientists now have increasing amounts of data to prepare, analyze and group — and from which to draw conclusions. Given the amount of data, exploring all possibilities becomes impossible. This means businesses can miss key insights from hypotheses the data scientists don’t have the capacity to explore.

Augmented analytics represents a third major wave for data and analytics capabilities as data scientists use automated algorithms to explore more hypotheses. Data science and machine learning platforms have transformed how businesses generate analytics insight.

“By 2020, more than 40% of data science tasks will be automated”

Augmented analytics identify hidden patterns while removing the personal bias. Although businesses run the risk of unintentionally inserting bias into the algorithms, augmented analytics and automated insights will eventually be embedded into enterprise applications.

Through 2020, the number of citizen data scientists will grow five times faster than professional data scientists. Citizen data scientists use AI powered augmented analytics tools that automate the data science function automatically identifying data sets, developing hypothesis and identifying patterns in the data. Businesses will look to citizen data scientists as a way to enable and scale data science capabilities. Gartner predicts by 2020, more than 40% of data science tasks will be automated, resulting in increased productivity and broader use by citizen data scientists. Between citizen data scientists and augmented analytics, data insights will be more broadly available across the business, including analysts, decision makers and operational workers.

Trend No. 3: AI-driven development

AI-driven development looks at tools, technologies and best practices for embedding AI into applications and using AI to create AI-powered tools for the development process. This trend is evolving along three dimensions:

1. The tools used to build AI-powered solutions are expanding from tools targeting data scientists (AI infrastructure, AI frameworks and AI platforms) to tools targeting the professional developer community (AI platforms, AI services). With these tools the professional developer can infuse AI powered capabilities and models into an application without involvement of a professional data scientist.
2. The tools used to build AI-powered solutions are being empowered with AI-driven capabilities that assist professional developers and automate tasks related to the development of AI-enhanced solutions. Augmented analytics, automated testing, automated code generation and automated solution development will speed the development process and empower a wider range of users to develop applications.
3. AI-enabled tools are evolving from assisting and automating functions related to application development (AD) to being enhanced with business domain expertise and automating activities higher on the AD process stack (from general development to business solution design).

The market will shift from a focus on data scientists partnered with developers to developers operating independently using predefined models delivered as a service. This enables more developers to utilize the services, and increases efficiency. These trends are also leading to more mainstream usage of virtual software developers and nonprofessional “citizen application developers.”

Trend No. 4: Digital twins

A digital twin is a digital representation that mirrors a real-life object, process or system. Digital twins can also be linked to create twins of larger systems, such as a power plant or city. The idea of a digital twin is not new. It goes back to computer-aided design representations of things or online profiles of customers, but today’s digital twins are different in four ways:

1. The robustness of the models, with a focus on how they support specific business outcomes
2. The link to the real world, potentially in real time for monitoring and control
3. The application of advanced big data analytics and AI to drive new business opportunities
4. The ability to interact with them and evaluate “what if” scenarios

The focus today is on digital twins in the IoT, which could improve enterprise decision making by providing information on maintenance and reliability, insight into how a product could perform more effectively, data about new products and increased efficiency. Digital twins of an organization are emerging to create models of organizational process to enable real time monitoring and drive improved process efficiencies.

Trend No. 5: Empowered edge

Edge computing is a topology where information processing and content collection and delivery are placed closer to the sources of the information, with the idea that keeping traffic local will reduce latency. Currently, much of the focus of this technology is a result of the need for IoT systems to deliver disconnected or distributed capabilities into the embedded IoT world. This type of topology will address challenges ranging from high WAN costs and unacceptable levels of latency. Further, it will enable the specifics of digital business and IT solutions.

“Technology and thinking will shift to a point where the experience will connect people with hundreds of edge devices”

Through 2028, Gartner expects a steady increase in the embedding of sensor, storage, compute and advanced AI capabilities in edge devices. In general, intelligence will move toward the edge in a variety of endpoint devices, from industrial devices to screens to smartphones to automobile power generators.

Trend No. 6: Immersive technologies

Through 2028, conversational platforms, which change how users interact with the world, and technologies such as augmented reality (AR), mixed reality (MR) and virtual reality (VR), which change how users perceive the world, will lead to a new immersive experience. AR, MR and VR show potential for increased productivity, with the next generation of VR able to sense shapes and track a user’s position and MR enabling people to view and interact with their world. 

By 2022, 70% of enterprises will be experimenting with immersive technologies for consumer and enterprise use, and 25% will have deployed to production. The future of conversational platforms, which range from virtual personal assistants to chatbots, will incorporate expanded sensory channels that will allow the platform to detect emotions based on facial expressions, and they will become more conversational in interactions.

Eventually, the technology and thinking will shift to a point where the experience will connect people with hundreds of edge devices ranging from computers to cars.

Trend No. 7: Blockchain

Blockchain is a type of distributed ledger, an expanding chronologically ordered list of cryptographically signed, irrevocable transactional records shared by all participants in a network. Blockchain allows companies to trace a transaction and work with untrusted parties without the need for a centralized party (i.e., a bank). This greatly reduces business friction and has applications that began in finance, but have expanded to government, healthcare, manufacturing, supply chain and others. Blockchain could potentially lower costs, reduce transaction settlement times and improve cash flow. The technology has also given way to a host of blockchain-inspired solutions that utilize some of the benefits and parts of blockchain.

Pure blockchain models are immature and can bedifficult to scale.  . However, businesses should begin evaluating the technology, as blockchain will create $3.1T in business value by 2030.  Blockchain inspired approaches that do not implement all the tenets of blockchain deliver near term value but do not provide the promised highly distributed decentralized consensus models of a pure blockchain.

Trend No. 8: Smart spaces

A smart space is a physical or digital environment in which humans and technology-enabled systems interact in increasingly open, connected, coordinated and intelligent ecosystems. As technology becomes a more integrated part of daily life, smart spaces will enter a period of accelerated delivery. Further, other trends such as AI-driven technology, edge computing, blockchain and digital twins are driving toward this trend as individual solutions become smart spaces.

Smart spaces are evolving alone five key dimensions: Openness, connectedness, coordination, intelligence and scope. Essentially, smart spaces are developing as individual technologies emerge from silos to work together to create a collaborative and interaction environment. The most extensive example of smart spaces is smart cities, where areas that combine business, residential and industrial communities are being designed using intelligent urban ecosystem frameworks, with all sectors linking to social and community collaboration.

Trend No. 9: Digital ethics and privacy

Consumers have an growing awareness of the value of their personal information, and they are increasingly concerned with how it’s being used by public and private entities. Enterprises that don’t pay attention are at risk of consumer backlash.

Conversations regarding privacy must be grounded in ethics and trust. The conversation should move from “Are we compliant?” toward “Are we doing the right thing?”

Governments are increasingly planning or passing regulations with which companies must be compliant, and consumers are carefully guarding or removing information about themselves. Companies must gain and maintain trust with the customer to succeed, and they must also follow internal values to ensure customers view them as trustworthy.

Trend No. 10: Quantum computing

Quantum computing is a type of nonclassical computing that is based on the quantum state of subatomic particles that represent information as elements denoted as quantum bits or “qubits.”

Quantum computers are an exponentially scalable and highly parallel computing model.  A way to imagine the difference between traditional and quantum computers is to imagine a giant library of books.

While a classic computer would read every book in a library in a linear fashion, a quantum computer would read all the books simultaneously. Quantum computers are able to theoretically work on millions of computations at once. Quantum computing in the form of a commercially available, affordable and reliable service would transform some industries. 

Real-world applications range from personalized medicine to optimization of pattern recognition. This technology is still in an emerging state, which means it is a good time for businesses to increase their understanding of potential applications and consider any security implications. Aside from a select group of businesses where specific quantum algorithms would provide a major advantage, most enterprises could remain in exploration phase through 2022 and begin exploiting the technology later.

FEATURE 7 hot IT outsourcing trends — and 7 going cold

As IT organizations become more strategic, so too do their partnerships with IT outsourcing providers. Digital transformation, automation,
cognitive capabilities, and the data revolution are not just shaking up how IT operates, they are greatly impacting the kind — and quality — of services under contract with IT outsourcing firms.

Here is a look at the technologies, strategies and shifting customer demands shaking up IT outsourcing right now and the once-hot developments that are beginning to cool. If you’re looking to leverage an IT outsourcing partnership, or want to make good on the market for IT outsourcing as a provider yourself, the following heat index of IT outsourcing trends should be your guide.

Heating up: Competitive sourcing

The increased adoption of as-a-service options and intelligent automation are enabling more IT services integration and true vendor agnosticism, making it possible for IT leaders to adopt more of a competitive sourcing model where service providers vie for the enterprise’s business.

“In such a model, the ‘champion’ is rewarded for delivering business outcomes and transformative performance in the knowledge that a designated ‘challenger’ is also at work — albeit to a lesser extent — and ready to scale up and assume the future role of a champion,” says Craig Wright, managing director with business transformation and outsourcing advisory firm Pace Harmon. “Leveraging service integration and management allows clients to engage champion and challengers in a seamless service experience by utilizing shared methodologies, processes, and tools.”

Cooling down: Jacks of all trades

IT service providers eager to go after the rapidly expanding market of digital technology services initially tried to be everything to everyone, but now rationalization and specialization are taking over.

“We’re seeing the large IT services providers spend some real time figuring out what they’re not going to cover. The digital services market is now so complex and cluttered it simply isn’t possible to be a master of everything, and vendors are realizing this,” says Ollie O’Donoghue, research director for IT Services at HfS Research. “We’re already hearing firms selectively align their offerings to core markets — while bringing in partners to tackle the rest.”

Heating up: Re-platforming

As transformation has evolved from buzzword to business opportunity, more IT leaders are looking to shift their entire platforms to something more adaptable and scalable by leveraging automation, cloud, and modern enterprise applications.

“In response to this, we can expect providers to put more emphasis on the fundamentals of business technology, alongside broader consulting services to help their clients through an extensive re-platforming exercise,” says Jamie Snowdon, chief data officer at HfS Research.

Cooling down: Traditional IT metrics and SLAs

One of the biggest changes facing the IT services industry in this period of business transformation has been how to quantify services. Contracts are shifting from traditional input or transaction models to those built on business metrics and results.

“As-a-service delivery models and services-centric IT frameworks continue to drive IT to re-package and better orient services and performance towards business consumable metrics and work-products,” says Wright of Pace Harmon.

When it comes to workplace services, for example, “enterprises are increasingly asking for experience-level agreements—or XLAs,” says Yugal Joshi, vice president of information technology services at Everest Group. “There has been an increase in the number of contracts where enterprises have Net Promoter Scores or Customer Experience Index as the primary evaluation criteria for the service partner.”

Heating up: Robotic process automation (RPA) at scale

“Various service providers confused the market with unrealistic commitments around the impact of automation,” says Joshi of Everest Group. “Enterprises have learned from their mistakes and are now demanding real working solutions that go beyond simple prototypes.”

Real results of RPA at scale are driving automation going forward.

“Enterprises are now working with providers and partners to really leverage and industrialize the technology and drive real business impact,” says Phil Fersht, CEO of HfS Research. “This is a decisive moment for the outsourcing industry — where automation at scale will significantly impact roles and business models — and providers will need to intelligently assess how they can build and reinvigorate their automation services and solutions, as well as rolling it out internally to boost efficiency and drive down cost.”

Automation is reducing the labor component of outsourcing deals by an average by 40 percent, according to Steve Hall, a partner at ISG.

Meanwhile, automation offerings are getting smarter. “Intelligent automation, machine learning, and cognitive analysis are no longer the exclusive domain of the Tier I service providers. Such capabilities and tools are available and affordable for niche players as well as clients,” says Wright of Pace Harmon. “Such tools and capabilities remove barriers to periodic competitive sourcing and allow clients to take back strategic control of the environment while benefiting from the significant labor cost elimination through the deployment of robotics and AI.”

Cooling down: Low-cost service desks and call centers

CIOs and IT leaders quickly realized that outsourcing the “face to the business” to a third party may not be in their best interests. We will continue to see more creative, on-site and integrated solutions as organizations integrate a complete workplace solution into their delivery models.

“The role of the service desk is being redefined,” says Wright of Pace Harmon. “‘Shift left’ strategies have historically been focused on shifting service desk work to self-help, self-heal user portals, or key users; however, increasingly the expectations are that through the bundled award of synergistic applications and infrastructure work or deployment of a service integration  layer across an ecosystem of service, there is a real opportunity to shift more technically challenging IT support to service desk agents without compromising quality of service, speed of answer, contact handle times, or first contact resolution.”

Outsourcing clients are willing to pay a small premium for the improved customer experiences and quicker resolutions such transformed service desks can deliver.

Heating up: Platform services

With IT leaders more interested in business outcomes than how they’re achieved, discussions are now focusing on the intellectual property platforms service providers bring to the table. “For now, the key areas of focus are IT operations and quality assurance,” Joshi says. “However, going forward most of application services and user experience will come under the premise.”

Cooling down: Traditional sourcing models

Old-school outsourcing has been under fire for some time and the steep decline in traditional approaches is expected to continue. “Digital services and the as-a-service model continue to offer enterprises more bang for their buck, alongside scalability and adaptability,” says Snowdon of HfS Research. “But we’re also seeing commercial models catch up and pricing is starting to more readily align with client outcomes. These new pricing models don’t sit well with traditional outsourcing, signaling another blow to an already struggling model.”

Heating up: Onshore digital services

There’s no question that digital transformation is driving most IT decisions today. “Every conversation started and ended with digital this year,” says Hall of ISG. “Costs saving were interesting, but the market was defined by significant investments by the business and IT to all things digital.”

One result of that is that outsourcing IT functions closer to home is very much back in vogue. “Enterprises want to be part of their digital transformation journey and there’s an appetite for getting ‘hands on’ in the ideation and development of solutions,” says O’Donoghue of HfS Research. “For providers, this has meant building capabilities onshore and nearshore to facilitate a more tactile approach to service delivery that they would struggle to offer through traditional offshore models.

However, that doesn’t mean offshoring for cost savings is dead. “Right-shoring of labor may not be a popular topic to discuss; however, many organizations are still wrestling with suboptimal project engagement and operating models as there is an over-indexing of resources to higher-cost IT service locations close to business delivery center and their major marketplaces,” says Pace Harmon’s Wright. “Shared services in the form of Global Delivery Centers (GDCs) or through third-party outsourcers is still a major source for cost-optimized IT delivery capabilities.”

Cooling down: Cloud as infrastructure

Cloud is no longer just a tactical hosting choice, but a strategic platform upon which enterprise IT leaders plan to build cloud-native service to increase resiliency, scalability, and flexibility. “This is the reason the proportion of enterprises adopting cloud to drive transformation has gone up in the last three years from 30 percent to 43 percent,” says Joshi of Everest Group. “These enterprises view cloud as an underlying consistent platform to be leveraged to build cloud-native services.” 

Heating up: Increased focus on compliance and security

IT outsourcing customers are focusing even more on providers’ data security and regulatory compliance capabilities. “Clients’ intensity on this front has only gotten more focused as public awareness has magnified,” says Ken Dort, a partner at law firm Drinker Biddle, noting that some are demanding that data sets are fully encrypted.

There is also increased diligence around cloud security. While the move from servers to cloud-based services has been a learning experience for IT security functions, there is growing acceptance that many cloud security failures have been the customer’s fault, according to Wright of Pace Harmon.

“The speed at which workloads are moving to the cloud is increasing, aided and abetted by increased design for security, whereby security is no longer a retrofit or afterthought,” Wright says. “Leveraging the full benefits of public cloud requires consistent, automated protection across a multi-cloud deployment to mitigate the threat of attacks. New generations of tools allow organizations to simplify cloud security management and achieve the desired consistency in protection.”

Cooling down: Promises of digital payback

Service providers have and continue to be reluctant to commit to a specific payback period on digital initiatives, says Joshi. Many service providers, for example, promise to deliver results in 18 to 24 months, but are rarely contractually obligating to do so.

“Enterprises are losing patience with such engagement models. We believe enterprises are seeing through the classical ‘save costs through outsourcing to fund digital’ trap and don’t want to get into long-term engagements to wait for savings to accrue to fund digital initiatives,” Joshi says.

Instead, they’ll begin to demand that service providers build a more bulletproof case for digital ROI and contractually commit to those returns. “The service partner will be held responsible to orchestrate the solution elements across technology, services, change management, and financing,” Joshi adds.

Heating up: Rapid software development

IT organizations have been looking for partners who can work with them as they embrace agile development and DevOps approaches, and this shift has only gotten hotter since our last look at outsourcing trends. Since then, the embrace of design thinking to solve complex business problems is another key driver.

“By embracing these three approaches, partners can deliver innovative solutions, whereby the design thinking process allows IT to engage much earlier versus traditional models to empathize with the business and help define and visualize the human-oriented problem statement,” says Wright of Pace Harmon. “It can then brainstorm in order to ideate on problem solutions and gain additional learning and insights through prototypes and tests. Due to this earlier discovery, IT is then better equipped and their third-party partners are better able to rapidly move the solution into the next IT development and delivery-centric stages and rapidly deliver them to the marketplace. The iterative and orderly agile and DevOps processes connect seamlessly from inception to operationalization with creative, iterative and user-oriented design thinking.”

Cooling down: Organic growth

2018 has been an active year for mergers and acquisitions (M&A) in IT services, with 225 acquisitions through October, according to ISG. “These acquisitions are completely redefining the space,” says Hall. “Scale is important as demonstrated by the Atos/Syntel acquisition. But capabilities are even more important.”

Industry watchers expect more M&A activity to come. “With decelerating growth, converging services, non-differentiated tooling, and non-obvious paths to any game-changing services or delivery, there is certainly scope for consolidation of Tier I and II service providers. Buying market share through labor arbitrage and diversification across multiple low-cost delivery countries is being further complicated by current devaluations and inflationary pressures, combined with continuing worries regarding the ability to retain hard-gained capabilities that are vested in scarce, but highly recruited, resources,” says Wright of Pace Harmon. “To maintain or grow market share and continue to be eminent in hot technologies, M&A strategies are a potential future play.”

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