Why Customers and Vendors Will Shift from Low-Margin IT Services to High-Value, High-Margin Outcomes

Today’s Indian IT services firms have maxed out their current business models. The shift in technology decision-making to the business side, along with buyers’ need for innovation and their move to purchasing business outcomes (rather than just technology), have altered the demand-side environment in the technology space. On the other hand, commoditization of services, vendor consolidation, erosion of the offshore cost advantage, and intense competition from the big multinational providers have all led to declining margins among most Indian IT services providers.

With cloud, mobility, social, Big Data, and unified communications and video becoming pervasive, four business models have emerged to not only meet client needs, but also spur non-linear growth for IT services firms. According to Constellation, by applying differentiated intellectual property (IP) creation, enabling Big Data business models, delivering innovation value chains and leading partner ecosystems, Indian IT services firms can create new high-volume, high-value opportunities to fend off margin threats and become truly global players.

As these changes take place, buyers will need to understand and adopt new ways of working with their Indian IT services firms as the vendor-customer relationship changes. Constellation recommends buyers focus on the business outcomes at hand, determine the strength of the partnership, learn how to fail fast, validate references and apply good vendor management governance.

Purpose & Intent: 

The business models of Indian companies providing information technology (IT) services have matured. Customers now require more than just staff augmentation, infrastructure, testing and advice. This Big Idea paper explores the future of the IT services market and helps buyers understand what to expect from Indian service providers in this shift to the next generation of IT services.

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