IT Services: Three Major Trends

The past couple of years have been a trying time for anyone involved in IT services in all parts of the world. The global economic slowdown has affected most sectors, leaving few end-user companies in a strong position, spending on IT for the future. Most have just been focused on budget cuts and strategy reviews.

The growth of IT services being delivered from central and Eastern Europe (CEE) boomed almost in parallel with the growth of delivery from more remote locations, such as India, but can the troubles faced by India help European technology firms? Outsourcing slipped down the management agenda during the recession and is now becoming a popular recovery strategy, so this combination could mean the CEE region has far more to gain from the recovery.

And even now some growth has returned – albeit still fairly weak – can the IT industry just deliver ‘more of the same’? The reality is that the IT services industry has to change if it is to grow and succeed in the long term. There is an emergence of some important new markets, being driven by what might be termed ‘mega-trends’ in society. While service sector firms can sit and wait for a recovery in retail or banking, it’s going to be these mega-trends that really shape the future of the industry.

First, the ageing population in developed ‘western’ societies. By the middle of this century it is estimated that fewer than half of all Germans will be economically active. The majority will be either elderly or children, neither contributing to government finances. So how can a developed country like Germany continue to expect economic growth at the same time as maintaining the existing social welfare standards – all with fewer people working and contributing to the economic welfare of the nation? They need to partner with local expertise to succeed.

Second, sustainability is back on the agenda. European governments are implementing a system of carbon reduction commitments in 2010 that will force companies to audit and reduce their carbon use. This push from government will change corporate culture across the entire European region – and beyond. Large European firms will need to partner with local expertise to succeed.

And security is becoming more important, with governments launching national identity schemes and improved border controls – all these new security systems are based on some form of technology. Large European firms will – once again – need to partner with local expertise to succeed.

These three major trends are going to change the shape of IT services in future. But how many executives on the buy or sell side of the outsourcing equation have considered just how much their own marketplace might change this century, especially in Europe?