Industrialized, Low Cost IT Services The New Norm

By Ericka Chickowski

Gartner this week touted the adoption of industrialized, low-cost IT services (ILCS) as one of the best ways CIOs can reduce the cost of keeping the lights on in the coming years. A subset of both managed services and cloud services--certainly leveraging the benefits of cloud architecture--ILCS is best seen in the burgeoning infrastructure utility services market that has started gaining steam recently.

ILCS services offer managed, multitenant, ready-to-use IT services. Unlike many customizable cloud choices that may deliver only one pocket of IT or offer tons of different add-ons and price tiers, ILCS services are, automated and scalable, with a very low price per user per month (PUPM). Gartner says the classification guidelines for the category require the service to be outsourced, industrialized by standardizing design, implementation and options, and then promoted and delivered through a low-cost business model.

"While there are multiple ways to reduce the cost of IT delivery, as well as to increase the value of IT, the trend towards ILCS will become paramount for end users to trade nonessential customization for better and less expensive services," said Claudio Da Rold, vice president and distinguished analyst at Gartner.

Gartner predicts by 2015, ILCS will represent more than 30 percent of the IT services market with raking in $177 billion by then. The firm predicts that infrastructure utility services in particular will increase at a 30 percent compound growth rate for the next three years. Analysts with the firm predict that in two years, low-cost IT services will 'accelerate innovation, hinder market growth and depress traditional vendors' capitalization. '

Gartner believes that the biggest driver of the ILCS trend will be the two competing priorities in IT today to deliver differentiation while reducing the cost of IT. ILCS services allow CIOs to spend less on the day-to-day operations that can be standardized and delivered at low cost while spending more on high-value projects.

"ILCS will force providers and recipients to redefine the way they use, pay for and access services similar to how customers buy and consume utilities; cost and rationalization will be key drivers," wrote Da Rold in a recent report. "This is just the beginning of what will be a much larger transition from traditional professional services toward industrialized, one-to-many services and differentiating business value services."

This article was originally published on 2011-09-28