The technology research firm Gartner has reported that as many as 20 of the world’s top 100 IT service providers could disappear by the end of 2014. According to Gartner, this is because over the last ten years many service providers have “dragged their feet in restructuring their business to cope with the new environment and firms have been slow to adapt and offer industrialised infrastructure outsourcing services”.

What?

In a report by Gartner, Market Insight: The Five Regrets of the Dying Infrastructure Outsourcing Provider, it is stated that many IT outsourcing companies have failed to make the changes needed to transform challenges within the industry into opportunities for growth and expansion. It is feared that this failure could lead to many traditional IT outsourcing providers being at serious risk due to various factors such as an increasingly competitive marketplace and innovative service-delivery models such as cloud, which while still a work in progress, is clearly the future of IT services worldwide. Therefore, IT service providers are warned by Gartner to quickly adapt or face extinction.

So What?

Strong pressures on price, service competition and a worsening economic scenario has, in Gartner’s opinion, brought much of the industry to breaking point as swathes of providers have failed to adapt from an operational point of view. The report argues that traditional infrastructure outsourcers can no longer survive in their current state as the market will not allow it due to the fact that customers are increasingly demanding much more. The tough economic backdrop has led to increased market consolidation, including the takeover of many service providers, while many others have been forced to fold leading to a concern that many companies are potentially very likely to disappear through mergers, acquisitions or divestitures. Indeed, divestitures and even full consolidation in the IT services sector is already well underway with recent examples including Atos’ purchase of Siemens IT Solutions and Services and CGI Group’s purchase of Logica.

The Gartner report predicts that purveyors of traditional infrastructure outsourcing approaches will ultimately become unable to deliver the continuous cost-reductions and operational efficiencies that customers now demand. Many of our clients of course are already well equipped to deal with the future. However, Gartner’s report is a good reminder of the need to continually keep looking at how you can stay ahead of and/or in the market going forwards.