Monday's Musings: Can IT Services Firms Shift the Balance of Power To Create Choice for the Customer?

Current Model Lopsided Towards the Large ISV's
Rapid enterprise apps vendor consolidation over the past 5 years leave end user enterprises with fewer vendor choices and less competition.  The impact to services firms is a continued and increased dependency on the fortune and "good will" of the software vendor by IT Services firms.  However, ISV's now have the upper hand as IT services firms focus on becoming the "best" partners of the ISV's, not the other way around.  Case in point: the investment IT services firms are making in training and staffing for upgrades, partner solution certifications, and in some cases co-development.  This flow of activity and investment typically has been one way:

  • Requires investment expense by the IT services firm
  • Includes forfeiture of intellectual property rights
  • Provides no exclusive guarantees of go to market rights for any time period.

My question to the service vendors: does this have to be the way moving forward?
IT Services Firms Must Respond or Face An Increasingly Dominant ISV's
Rapid changes in business models, work force dynamics, geopolitical, and economic concerns, and technology advancements challenge IT Services firms to transform existing business models.  As IT Services leaders respond, they must determine which strategies will reduce the dependency on large ISV vendors while advancing market mind share.  IT services firms during this historical point in time have the opportunity to shift the balance of power in their favor. Seven critical strategies will include:

  1. Earn the role as a strategic adviser. Win on thought leadership, innovation, and relevance.
  2. Dominate a category. Focus on micro specialization pivot points such as industries, geos, market size, and roles.
  3. Build and delivery vendor agnostic IP. Use the power of the cloud (i.e. SaaS, PaaS, and Cloud infrastructure) to deliver solutions without being dependent on any one ISV.
  4. Lead your own solution centric ecosystem. Stop building someone else's ecosystem and focus on who your best partners are, not vice versa.
  5. Deliver on the failed promises of enterprise apps. Earn trust and relevance by focusing on lowering ownership costs, increasing flexibility through better integration, and extending functionality without the legacy packaged apps overhead.
  6. Win over customers with 3rd party maintenance. Like the stifling of software innovation in the 70's and 80's by hardware vendors requiring captive maintenance, software vendors today are stifling business process innovation with captive maintenance.  Have customers pressure vendors into offering third party options.
  7. Leverage social media to generate brand awareness. Build community and user generated content leveraging today's Web 2.0 tools.

The bottom line - IT services providers must win or end user customers will lose.
Continued domination by an ever shrinking base of ISV's means that consumers will see reduced choice and market competition.  As SaaS development and delivery costs lower the barrier of entry for new competitors, expect new vendors and choices to emerge.  Should the IT services providers make the transformation, the system integrators will be able to deliver unique IP and provide business process/transformation in the cloud like the service bureaus of the 1990's.
Your POV.
Do you think services firms have the discipline and skill to make the transition?  You can post here or send me a private email to [email protected].
Copyright © 2008 R Wang. All rights reserved.