The Quiet Revolution in IT Services and How It Will Affect IT Service ProvidersBy Michael Vizard | Print
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The way IT services are delivered is changing, and those changes will also affect the demand for other products that IT services providers offer to their customers. Some IT services that don't have much profit built in now still offer IT service providers the opportunity to engage with their clients. But that will change as IT services become productized themselves.
There is a quiet revolution going in terms of how IT services are delivered that is going to have a substantial impact on the revenue streams of solution providers.
The first of three new trends in the IT services space is a wave of increased automation that has the potential to eliminate a lot of the remaining traditional break/fix IT services business that is out there. There's not much profit in this type of IT services business anyway. But it did create an opportunity to engage clients in a way that might possibly have led them to upgrade an existing product or buy another one.
However, much of that opportunity may disappear altogether as remote service tools take hold. For example, EMC, Quantum and NetApp are all working with a company called Axeda that provides a platform for performing remote diagnostics and delivering patches and updates. This doesn't mean that IT products will stop breaking, but it does mean that the number that do will be sharply reduced because maintenance services around any given product are going to be a lot more proactive.
Axeda today provides these services mostly through OEM partners, but the company is looking to work with an IT services company that may want to adapt its technology for delivering remote management services to any product that has a relatively open API capable of supporting a Web services framework.
Of course, just as this segment is changing, so too is the rest of the IT services business. In particular, the services themselves are becoming less time- and labor-oriented. Instead, they are being sold at a fixed price. In effect, the services themselves are being turned into products. Unfortunately, the problem with products is that they are all subject to the laws of diminishing profit margin as the product increasingly becomes a commodity.
One company that is trying to accelerate this trend is called Digital Fuel Technologies, which provides software that helps IT services companies organize and manage their product lines. The company most recently came out with a Service Catalog offering that essentially allows an IT services company to publish and manage a list of specific IT services that are available to its customers. The basic idea here is that there is no need to reinvent the wheel when everybody is basically providing a variation of the same types of IT services.
But while Axeda and Digital Fuel represent advancements in terms of automating IT services, the most profound change to the IT services model may be a new open model being put forward by Pepperweed Consulting.
Pepperweed has decided to open up its process model for delivering IT services to other companies. The move is part of an effort to create a larger ecosystem around a common IT services model that makes it easier for solution providers to partner with one another. This model recognizes that not everybody can be a master of every single IT specialty. But what most prevents solution providers from working together is the inability to integrate their different approaches to delivering IT services. The Pepperweed model is a major step in the right direction in terms of facilitating the development of partner-to-partner networks that ultimately lead to more business for everybody in the network.
Furthermore, if you don't have a structured approach to delivering IT services, the Pepperweed model gives you a proven framework that you can leverage without having to make that investment.
There's a lot profound change taking place in the world of IT services that will have substantial impact on the profitability of solutions providers. The more solution providers get in front of these trends the better off they will ultimately be because, when it comes to IT services, being proactive always beats being reactive.