The 14 benchmarked vendors continued to hire and acquire resources, albeit at a much slower rate in 1H20 than in 1H19 due to COVID-19, a trend we expect to accelerate in 2H20. 1H20 was a tale of two quarters as vendors had to swiftly change priorities and mobilize their staff to work remotely while continuing to provide support to ongoing digital transformation (DT) projects. As COVID-19 accelerated in late March and April, buyers paused many of their DT programs and increased focus on run-the-business projects, compelling vendors to adjust their hiring and reskilling programs and demonstrate capabilities in cloud, cybersecurity and workplace solutions management. Vendors can learn from their own experience three years ago when revenue contracted much faster than they were able to adjust hiring before rebounding back to maximize productivity and ROI.
Automation and profitability
As vendors went into damage-control mode amid the pandemic, most deployed legacy, proven, cost-rationalization methods, including layoffs, salary freezes, and limited SG&A spend to protect profitability. Automation also continued to play a role in this effort but was not, as many had hoped, the single most important variable in offsetting top-line and cost of services pressure associated with the legacy labor arbitrage model. With the consulting model most challenged due to limited face-to-face interaction, we expect vendors to begin exploring new channels to increase share of profitable sales. Vendors could either accelerate bringing consultants back to clients’ sites to increase higher-value advisory opportunities or begin to add digital routes as a sales channel to attract new buyers, particularly in the SMB space. Either scenario carries its challenges and opportunities, but in the long term, as vendors strive to increase “as a Service” sales, KPIs and expectations must also be aligned.
The Global Delivery Benchmark provides efficiency comparisons, assessments and insights into global delivery strategies and investments across 14 leading IT services firms. The research highlights overarching resource management market trends, discusses implications to operations from increased labor automation and examines disruptors that shape new business models and KPIs.