Service Providers Must Prep for Next Digital Revolution

Service providers need to prepare for changes in their industry as enterprises start to deal with new digital business technologies—including cloud computing, mobility, analytics and the Internet of things (IoT). Gartner Research says there is a digital business revolution under way and service providers need to make some dramatic changes to turn the changing landscape into new IT opportunities.

While all business has been driven by digitally enabled technology, digital business revolves around a real strategy, Eric Rocco, Gartner managing vice president, told Channel Insider. “A digital business strategy creates value but more importantly creates revenue from digital assets. This is beyond simply applying automation to transform business models or customer access portals.”

“A true strategy needs to exploit the pervasive digital connections between systems, people, places and things,” Rocco said. He describes this as the connection points in the “Nexus of Forces,” which Gartner calls the convergence of social, mobile, information and cloud computing that reshapes the way businesses operate while creating new business opportunities.

One of the key reasons why it’s important that service providers start making changes now is that a large percentage of CIOs are not able to keep up with the pace of digital change, according to a recent global survey of CIOs by Gartner’s Executive Programs. The report finds that 70 percent of CIOs will change their technology and sourcing relationships in the next two to three years for a variety of reasons.

This will lead 46 percent of CIOs to look for a new category of partner like those that specialize in mobility, analytics or the cloud, said Rocco. Service providers that help their clients respond to these new business and IT challenges will be successful and gain market share, he said.

“The movement to the cloud, alone, challenges everything we ever thought of when it comes to who your established provider is today and who it will be tomorrow,” said Rocco. “When you’re moving from an operation in-house where you are spending capital dollars investing in software and hardware assets to run your business to the promise of moving towards operational expense dollars where you can essentially rent and access computing power, it is a fundamental shift which is going to require many new providers.”

Gartner believes that helping customers in digital business transformation will be a key factor in the majority of IT service opportunities. In order for service providers to leverage these opportunities, they need to focus on several areas—targeting new buying centers, articulating value in terms of key performance indicators, never losing sight of their service value, and attracting the right talent.

Gartner’s latest estimates indicate that 62 percent of IT spending is centralized with the remaining 38 percent of decentralized spending going to operations, finance, and marketing communications. IT buying centers across industries have moved away from centralized spending to business buying centers, including human resources, marketing, and sales, said Rocco.

Another change taking place is that service providers need to articulate value in terms of business outcomes and KPI attainment, said Rocco. When service providers understand the client’s value driver, they can better articulate their own value propositions and deliver the outcome the customer requires, he noted.

“Never lose sight of service value,” Rocco added. “Describing the company in terms of value and the values that you can offer is absolutely critical.”

Service providers also need to hire the right talent that has a mix of technical and business skills that can speak the digital business language while having deep vertical industry knowledge, said Rocco. “It’s not new to find people that know about business and technology but the new world of IT (around analytics, mobility and the Nexus of Forces) very much requires a new capacity for skills.”

Gina Roos, a Channel Insider contributor, specializes in technology and the channel.