Dr.Katy Ring, Practice Leader, Outsourcing, Ovum You Asked What will shape the IT sevices market in the future?

The customer will still be distinct from general procurement departments in 2010, and may still be known as the CIO. However, this individual's internal team will be far smaller than today, and the key individual that will be the IT services provider's customer will be responsible for partnership management within the CIO function. In other words, most enterprise-level IT will be provided by external service providers fulfilling the specific requirements of the customer organisation and managed by a partnering executive.

The IT services ecosystem

Looking a little further forward, the IT services ecosystem will consist of four main types of organisation - low-cost labour suppliers, management consultancies, utility infrastructure operators and customer-facing brands. Value creation will be concentrated in the hands of management consultancies and customer-facing brands, as these will 'own' the end customer and directly influence IT purchasing decisions. Consequently, most existing IT service organisations will not be in a position to create value unless they radically change their current strategic direction. Most are drifting towards a structure dependent on low-cost labour and commodity IT infrastructure, without fully understanding how drastically the shape of the IT services market is changing.

Low-cost labour suppliers

The use of low-cost labour in different parts of the world to develop, maintain and manage legacy IT systems and new application systems will be mainstream by 2010. Consequently, service providers based in China and other Far Eastern countries that Western markets have not heard of today will be delivering services within the IT services ecosystem. Some of these service providers will have customer-facing brands and others will act as sub-contractors to Western brands.

Management consultancies

As IT services become a less expensive capability, predominantly based on low-cost labour and standardised, commodity IT products, there is little point in IT service organisations owning business/management consultancies. There will remain a requirement for technical consultancy and for vertical industry expertise at account management level to aid the enterprise sales process. However, the connection between high-value management consultancy and lower-value IT service provision will largely be severed. By 2015, we doubt that there will be financial value in IT service organisations owning business consultancy capability. We expect that organisations will either decide to become IT utilities or to assume a mega-broker role in which the broker does not own the end-to-end service and product supply chain.

Utility infrastructure operators

With the development of both next-generation networks and of utility computing, it seems highly likely that most IT infrastructure will develop into a utility industry with big global IT utilities operating to provide the computing power required by most business and consumer customers. A few companies will develop a business model based on the wholesale ownership and management of the necessary IT and network assets. However, most others will prefer to act as virtual infrastructure operators, analogous to the mobile virtual network operators of today, selling services provided by others. Consequently, Tesco and Google may well be the future 'IT service' providers for smaller and mid-sized businesses that are powered by infrastructure utility services, provided by what we now refer to as telcos and global IT service players.

Customer-facing brands

Those supply-side organisations that will be able to directly influence IT decisions in the future (aside from pure management consultancies that retain their board-level influence) will have branding based on one of the following criteria:

• mega-brokers that can pull services together on behalf of the large enterprise customer, but do not directly own the end-to-end delivery capability
• global consumer brands that customers trust
• niche industry/regional specialists offering highly specialised solutions
• local service suppliers to support equipment on customer premises.