Russia-Ukraine war: 3 factors critical to IT services vendors and consultancies

Expecting little change but some opportunities in the near term

In the near term, ceased or slowed operations in Russia and Belarus will not significantly affect the revenues or strategic directions of most IT services vendors and management consultancies. Firms will stay clear of Russia, understanding any lost revenues will be well worth forgoing to alleviate the risks of running afoul of sanctions or committing a public relations blunder by staying on in an increasingly isolated country.

Within Europe, management consultancies and IT services vendors with strong consulting capabilities (such as Accenture and Capgemini) will likely see near-term opportunities to provide crisis management, operational expertise and supply chain consulting. Some vendors may repurpose pandemic-created solutions to meet the logistical challenges brought on by the mounting refugee crisis. PwC, for example, could apply the design and technology used to ensure its employees’ safety and security while working remotely during the pandemic to assist Ukrainian refugee families trying to stay connected across multiple borders and amid changing circumstances.

Three factors: Length and resolution, macroeconomic fallout, and risk

Over the remainder of 2022, how the war in Ukraine will change IT services vendors’ and consultancies’ European operations depends on three factors: the length and resolution (or lack thereof) of the conflict; the macroeconomic fallout; and each vendor’s willingness to take risks with talent, acquisitions and clients.

The first two factors necessarily influence each other. A hot war sustained throughout 2022 would severely curtail broader European economic growth, likely keep inflation high, and shift spending by governments and commercial clients alike. Cybersecurity and supply chain opportunities may flourish, but overall reduced spending and economic activity would slow or reverse growth, at least in Europe. A cease-fire and stalemate, with a low-intensity insurgency in eastern Ukraine coupled with an uneasy rebuilding in western Ukraine, would likely produce additional opportunities around risk management, compliance and Industrial IoT. Again, the growth associated with those new opportunities would be tamped down by overall economic uncertainty.

In both scenarios, energy costs in Europe and globally will provide persistent headwinds. TBR anticipates that in the face of persistent macroeconomic pressures in Europe, vendors already active elsewhere will accelerate those investments. In APAC, IT services vendors and consultancies have increasingly invested in regional opportunities, notably the Australian public sector, automation-enabled BPO in Japan, and digital- and e-commerce-driven demand for customer experience applications in many countries in Southeast Asia. In TBR’s view, vendors with the most diversified footprints are the best positioned to absorb new risks — not a novel observation but newly important.

A quick resolution, followed by a return to some measure of normality, would likely alleviate macroeconomic pressures while bringing forward the third factor: appetite for risk. IT services vendors and consultancies would have the opportunity to hire (or rehire) Russian consulting and technology talent, move quickly again on acquisitions, and re-evaluate taking on Russian clients, particularly those pledging to help rebuild Russia’s credibility and good standing in the global market. Clients, both European governments and multinational companies, looking to escape inflationary pressures and find quick growth after a war-based shock to Europe’s economy may look to vendors, particularly the management consultancies, for assistance. And these vendors will be forced to decide whether or not to help high-value clients resume their business in Russia. As quickly as the world closed the Russian economic spigot, it could be reopened.

The determining factor: Leadership

More than any other factor, leadership will determine how these vendors handle the war in Ukraine and its effects on their business, and TBR will be assessing leadership decisions, announcements and strategy shifts over the next few weeks for markers of the most likely near-term and 2022 outcomes.


In the end it is all about business outcomes

Digital is dead; long live business transformation

Although the term “digital transformation” has served an important purpose of focusing the attention of business leaders and the IT services and consultancies working with them, it has been among the most overused phrases of the last 10 years in technology. At the start of 2022, no one will need to be reminded that technology — digital — can drive transformation. Business transformation is returning to the forefront for enterprises as a result of the pandemic, the advantages of emerging technologies, and the generational shift in the C-Suite, with newly promoted decision makers fully soaked in all the possibilities of technology.

The shift from digital transformation to business transformation will accelerate in 2022, amid the change in buyers and as digitally mature businesses are more inclined to bring technology talent in-house. These trends, along with the return to in-person workplaces and a resurgence of innovation and transformation centers, will create opportunities for leading IT services vendors and consultancies to separate from the pack by expanding managed services, returning clients to in-person creative sessions, and shifting away from technology-first mindsets.

2022 will be a pivotal year for digital transformation … perhaps its last. 

2022 digital transformation predictions

  • As clients graduate beyond digital transformation, vendors scramble to stay relevant
  • Funky chairs only matter if you can physically sit in them: The resurange of innovation and transformation centers
  • New generation of business leaders expect business transformations, not digital ones


Send me a free copy of TBR’s Top 3 Predictions for Digital Transformation in 2022

Telecom Business Research’s 2022 Predictions is a special series examining market trends and business changes in key markets. Covered segments include cloud, telecom, devices, data center, and services & digital.

devices, data center, and services & digital.

Innovation and transformation centers: 4Q21 insights from TBR’s IT Services team

The silver lining of downward pressures that innovation and transformation centers are facing

Join Practice Manager and Principal Analyst Patrick Heffernan, Principal Analyst Boz Hristov, Senior Analyst Elitsa Bakalova and Senior Analyst Kelly Lesiczka Wednesday, Oct. 27, 2021, for an in-depth discussion on innovation and transformation centers, those places where IT services vendors and consultancies collaborate with clients and technology partners to create new business models and deploy emerging technologies to disrupt the market.

Don’t miss

  • Silver linings of all the downward pressures on in-person innovation sessions and physical centers
  • How these centers have evolved through the pandemic and what we can expect in 2022
  • Specific examples from vendors, including traditional strategy houses like McKinsey & Co. and Boston Consulting Group as well as Big Four firms, consulting-centric IT services vendors, tech-centric vendors and India-centric vendors

Register today to reserve your space

TBR webinars are held typically on Wednesdays at 1 p.m. ET and include a 15-minute Q&A session following the main presentation. Previous webinars can be viewed anytime on TBR’s Webinar Portal.

For additional information or to arrange a briefing with our analysts, please contact TBR at [email protected].


What happened to smart cities?

COVID-19 and cloud have overrun smart cities, for now

A question from a client spurred an internal discussion among TBR’s Professional Services, IT Services and Digital Transformation Services Team around smart cities and what the vendors we cover had been doing lately to advance what had been one of the hottest topics in 2017, 2018, 2019 and right up until March 2020 — when the pandemic and cloud seemingly drowned out smart cities.

But maybe not. Maybe smart cities just splintered into component parts until municipalities and sponsoring larger government entities can get back to large-scale, transformative projects not directly tied to public health. Maybe the underpinning technologies continued to mature, in both capabilities and adoption, so that the next couple of years will see a resurgence in smart city solutions. Maybe track-and-trace programs and vaccine rollouts have provided the test beds and built the relationships needed for investments to flow again toward smart cities. Maybe. Here’s what TBR’s Services team sees as the current state of play and what may come next:

The components never went away

If the smart cities umbrella faded as the pandemic surged, the technology components and services around them did not. IT services vendors and management consultancies continued to invest in and develop capabilities around analytics, edge computing, 5G and IoT — all key components in the smart cities ecosystem. TBR’s May 2020 Digital Transformation Insights Report: Emerging Technology, 5G described investments by Accenture, Infosys, Tata Consulting Services, Capgemini, IBM and Nokia, among others, while noting that engagement “opportunities centered on speed, connectivity and reliability help elevate 5G’s position in the crowded emerging tech market, but only if vendors can demonstrate the ecosystem will remain navigable.”

A similar report, TBR’s February 2020 Digital Transformation Insights Report: Emerging Technologies, Edge Computing — built upon three separate TBR market landscape reports covering telecom edge compute, 5G telecom and commercial IoT — commented that “embracing collaborative, edge-enabled digital transformation will benefit all parties if risk and responsibilities are shared,” reinforcing the sentiment across nearly all of TBR’s research into various technologies that ecosystem plays provided the greatest opportunities. Components, in other words, remained essential, but needed other components to be truly critical to harnessing digital transformation.  

Green trends, red tape and politics

As the pandemic fades, sustainability and standardization may provide levers to bring smart cities back to the forefront for IT services vendors and management consultancies. The Brooklyn Bridge has a new bike lane. New York City has new regulations around carbon emissions and commercial real estate. Municipalities faced with renewed interests in greening their infrastructure will look for consultancies and technology companies for help. And as federal dollars flow toward all infrastructure — brown and green — cities will look to consultancies with deep expertise in risk and compliance for assistance with standardization around what is and is not permissible around emerging technologies. One substantial caution: Priorities around which initiatives to pursue, even and maybe especially ones rooted in sustainability and standardization, remain political decisions typically disconnected from technology. Smart cities require political will, not just budgets and IT architecture.

TBR’s May 2021 Digital Transformation: Blockchain Market Landscape highlighted this confluence of political will and integrating technology components: “Contributing to the muted adoption of blockchain are many factors, including but not limited to: the outbreak of COVID-19, requiring customers to reprioritize budgets to maintain business continuity; the presence of blockchain alternatives that complement, rather than replace, existing IT environments; and a general lack of knowledge in the market, given the hype surrounding cryptocurrencies today. That being said, as consultancies continue to embark on their shepherding role to lead and manage community participants, they also must consider factors that are influencing buyers’ decisions to invest and/or purchase a blockchain solution, including: 1) solution feasibility, 2) solution integrability into existing IT environment and 3) solution accuracy.”

As always, data at the center

And then there is data, an obstacle even larger than political will but also a massive opportunity for IT services vendors and management consultancies that have been honing their capabilities around data collection, orchestration, distribution and security. Here, the pandemic may have provided technology test beds and relationship building for the vendors that participated in track-and-trace and/or vaccine rollout engagements with states and federal governments, building use cases for technology deployments within the public sector — that is, gateways to smart cities.

In 2022 TBR expects to see more announcements around smart cities, beyond the high-profile greenfield opportunities of brand-new cities or untested technologies. We anticipate vendors such as Accenture, PwC, DXC Technology and Infosys will return to investing in and marketing their smart cities portfolios, pulling together capabilities around cloud, IoT, 5G and analytics while emphasizing their roles within the larger ecosystem of connectivity, cloud and software vendors.

TBR will cover those developments across multiple reports, including our digital transformation insights reports, various telecom and cloud benchmarks and market landscapes, and sustained quarterly analysis of the most dynamic IT services vendors and management consultancies.  

Edge computing: 2Q21 insights from TBR’s Services and Cloud teams

Technology and complexity bring opportunities to services around edge

Join Patrick Heffernan, Boz Hristov and Nicki Catchpole for a cross-practice discussion on how the ever-evolving complexity of edge computing is impacting digital transformations and creating opportunities for IT services vendors and consultancies. TBR’s subject-matter experts will discuss edge-specific use cases across multiple industries and unpack implications for partnerships across the full digital transformation ecosystem.

Don’t miss:

  • Key trends driving the evolution and adoption of edge computing, as well as the current state of the market
  • Use cases for edge computing, including those stemming from the COVID-19 pandemic
  • Overview of the ecosystem of partners who come together to support growth at the edge
  • How IT services vendors and consultancies are responding to the uptick in demand for edge computing

Register today to reserve your space

2019 Services Predictions: Fix my business problem with a solution, not a slide — IT services and consulting for human-centric digital transformation

Trust in turbulent times: data access and management as the key to IT services and consulting success in an uncertain 2019

From London to San Francisco, macroeconomic shifts and unsettled political environments in both the U.K. and the U.S. will make the start of 2019 turbulent and likely troubled for many companies, including the IT services vendors and consultancies we cover within TBR’s Professional Services practice. These companies will face harder decisions around repositioning their investments to other geographies or finding more cost-conscious investments in new areas. We are expecting a slowdown in both countries — not necessarily in revenues, but in fresh ideas and creativity, service launches, and expansion in additional markets within both economies — driven by new uncertainty and well-founded caution. The U.S. has traditionally been the largest market for IT services vendors, and no single year will change that hard, economic fact. But where we have seen IT services vendors experiment with new consulting business models that blend emerging technologies into strategy consulting and embed codeveloped IP into outcomes-based IT services engagements, we expect a retrenchment as 2019 opens, with uncertainty lingering at least through the summer. By this time next year, we expect to see more initiatives in APAC leveraging that region’s faster adoption of 5G (and all that means for digital transformation at speed and scale). And we expect the three trends described below will be demonstrably evident in the strategies and performances of the leading IT services vendors and consultancies we cover.

Underlying all of our assessments, we are developing a new appreciation for the criticality of data. Beyond the cliché that every company is a data company or that data is the new oil, we have been seeing throughout 2018 the way IT services vendors and consultancies have begun investing increasingly in data management, cleansing and protection, all with the assumption that analytics, automation, artificial intelligence and every other emerging technology starts with and relies on clean and useful data. Smarter business decisions do not come from bad data, no matter how good the algorithm or analytics package. For 2019, this means data access becomes an opportunity to extend to all IT services, up to and including digital transformation, the same trust that comes with an audit or a multiyear outsourcing engagement. Imagine a consultancy working with unfettered access to every data element across a client’s enterprise. Getting there may take a changed regulatory environment and will definitely require that boards be willing to extend trust in new ways, a human limitation that may slow this new data access. But we see it coming. If politics and economics could cause stormy weather in the U.S. and U.K., the acceleration of digital transformation through data access may be the longer-term trend, the global warming lifting all boats on rising sea levels.