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Global IT talent: Accelerated hiring for IT services counters persistent attrition

In TBR’s latest Global Delivery Benchmark, one particular number leapt out as both surprising and indicative of the sustained battle for technology talent.

Digital transformation, cybersecurity and cryptocurrency: How the war in Ukraine will change technology forever

The war in Ukraine and ICT vendors: 3 coming challenges in a changed world

Less than two weeks into Russia’s invasion of Ukraine, TBR’s assessment of the effects on the ICT market remains necessarily constrained. The majority of the largest ICT vendors TBR covers do not have tremendous local market and/or client exposure to Russia or Ukraine, so the impact of the war on ICT companies, if the conflict remains limited to those two countries, will be marginal — not insignificant, but marginal — with some exceptions, such as Ericsson (Nasdaq: ERIC), Nokia (NYSE: NOK) and SAP (NYSE: SAP). Longer term, absent either a miraculously positive or an existentially negative development (peace blooms or mushroom clouds), TBR expects the pressures detailed below will force IT services, cloud and software, data center and infrastructure, and telecom vendors to adjust their strategies and their business models.

 

Digital transformations slow, opening new opportunities

Already stressed supply chains will experience additional sand in the gears, slowing down deliveries of essential hardware and delaying build-outs of data centers, enterprises’ IT infrastructures, and even the physical towers needed for telecommunications. While IT services vendors and consultancies have sold digital transformation (DT) as a method of addressing business problems through agile application of emerging technologies, enterprises and their technology suppliers need the actual physical components to make the “digital” part of digital transformation work. A slowdown in hardware availability will convert into a slowdown in enabled applications and soon everything around DT will become slower and more expensive.

 

In this DT winter, consultancies advising on supply chain issues and global systems integrators (GSIs) and their technology partners enabling hybrid cloud while bolstering on-premises enhancements will flourish. Chip manufacturing investors will receive government backing and may find technology vendors across the entire ecosystem willing to make long-term commitments to mitigate the risks they are facing now. In a reversal of fortune from the last few years in IT, third-party maintenance specialists — the very boring techies who are keeping the old systems running while the young geeks play with AI and the metaverse — may see a boom as a constrained chip supply and slowed digital transformations make keeping the current technology operational increasingly important.

 

Cybersecurity commands center stage (hopefully, for real this time)

In every survey TBR has conducted around IT services and digital transformation, buyers have prioritized cybersecurity as a top three — and frequently No. 1 — concern. And yet, enterprises underinvest and remain vulnerable, humans fail to take precautions and fall prey to ransomware attacks and worse, and cybersecurity remains more talked about than acted upon. Russia’s invasion of Ukraine will change that. While pre-invasion predictions anticipated an aggressive Russian cyber campaign, the first week of fighting featured exclusively kinetic military action, with limited, negligible cyber strikes. Analysis conducted in the middle of combat rarely survives intact once the smoke clears, but TBR believes a couple of scenarios could account for Russia’s relative cyber silence. The most encouraging one is that Ukraine’s defenses worked. While NATO, particularly the U.S., shared near-real-time intelligence in the lead-up to the invasion as a means of applying diplomatic pressure and denying Putin a war narrative suited to Russia’s needs, the West and Ukraine would be less likely to share cybersecurity victories in the same way military successes have been touted and with the same divulgence of critical intelligence. A less-encouraging scenario would be that Russia is saving its cyber strikes for an anticipated second stage of the war, when the shooting slows and economic and political wills are tested. Cyberattacks that take critical energy infrastructure offline in Western Europe would be damaging now but would have a greater effect on NATO countries’ populations during a prolonged economic slowdown tied to a standoff in Ukraine. In either scenario, consultancies, GSIs and technology vendors providing cybersecurity services and infrastructure will benefit from renewed concentration in the C-suite on cyber risks, provided those vendors have invested in country-specific, locally sourced, certified talent.

 

 

Logicalis: The partner for helping with today’s problems and providing solutions for the future  

In February 2022 TBR spoke with Logicalis Group Chief Operating Officer Michael Chanter and Chief Technology Officer Toby Alock for an update on the company’s strategy as well as an overview of the company’s new Global Services Organization (GSO), including its solutions portfolio and road map. The conversation, which contained specific details on strategy, was a continuation of the journey Logicalis embarked on nearly two years ago when it appointed Bob Bailkoski as CEO.  

In TBR’s special report Know-your-tech strategy could be invaluable as Logicalis aims to disrupt peers in cloud managed services, we wrote, “Logicalis’ efforts to optimize its legacy operations while doubling down on key growth areas such as cloud will largely depend on the company’s ability to develop integrated scale to ensure standardized service delivery.” The launch of Logicalis’ GSO highlighted these efforts and marked a new stage in the company’s ability to deploy practical solutions that build a foundation of trust with partners, employees and clients.  

Transforming into a modern managed services provider  

Logicalis Group’s executives understand the need to develop an ever-evolving strategy that allows the company to stay abreast of market trends. Pivoting from historically employing a regional focus to now building outcome-based solutions that are global in nature paves the way for Logicalis to build scale. Ensuring internal organizational silos are removed will be key, as clients expect vendors to deliver services locally through globally integrated operations.  

At the same time, Logicalis realizes the importance of nurturing local relationships, ensuring its consultants and professional services organization continue to operate as close to the customer as possible. Developing a “modern managed services organization,” as Chanter describes the company’s transformation, is not an easy task, especially when executed at scale.  

Accounting for the permeation of automation to drive efficiency and fine-tuning operations and business models to facilitate cloud-enabled sales, service delivery and support are among the key pillars of GSO. Continuing to provide existing clients with support also enables GSO to secure foundational revenues and maintain relevance, as often clients take time to move to the next phase of their digital transformation (DT) programs.  

When TBR asked about the change management that typically comes with such evolution, especially due to the increased use of automation in service delivery, Chanter provided a strong use case for how the company is handling it. Starting with the appointment of an executive dedicated to overseeing transformation, the main focus then has been teaching staff how to be agile while also considering new compensation models in connection with cloud-enabled service delivery.  

Providing support to external clients has been enabled by a three-part framework: Align, Transform, Scale. Logicalis first assesses where clients are in their DT journey compared to their desired outcome. The company then maps out the kind of support it can provide at different points in the journey, relying on its professional services organization to feed regional market nuances. With sales teams trained and certified before going to market, Logicalis also tries to align and close the feedback loop with staff at the Centers of Excellence (CoEs), which are typically responsible for the development and management of global solutions.  

As Logicalis Group aims to increase its share of the managed services market, we believe the company will continue to work toward striking the right balance between developing automation-enabled services P&L and achieving integrated scale. Previously, TBR wrote, “Logicalis has begun to identify areas across geos, industry verticals and horizontal areas that can support its goal of expanding share of highly profitable ‘as a Service’ managed service sales, which currently garner about 25% of its global revenues. … As Logicalis works out the details around managing its partner ecosystem, Bailkoski and [Chief Customer Experience and Service Transformation Officer Vincent] DeLuca are also increasing the company’s investments in internal portfolio offerings that will not simply standardize global service delivery but also pave the way for an innovative approach to engaging with clients. Launched in June, we believe Logicalis’ AI-enabled Digital Service Platform (DSP) will be the center node of Logicalis’ solutions and services ecosystem, similar to how iTunes has helped Apple (Nasdaq: AAPL) build a community of die-hard brand followers.”  

Logicalis is on the right path to achieving its managed services goals, but like many of its peers, it needs to partner better and differently than it has in the past, especially as buyer expectations around managing partner ecosystems also evolve. Meanwhile, expanding its global footprint, similar to opening an engineering center in Portugal to house about 200 employees in support of the Agile, Transform, Scale framework, will continue to bolster Logicalis’ resource bench for building and delivering solutions at scale as clients seek support around migrating and transforming operations. Chanter noted that the new Portugal facility will “help transform clients quickly and help Logicalis transform.” TBR notes this dual-track approach has proved successful for other IT services vendors undergoing their own digital transformations.  

2022 Predictions: IT Services, Management Consulting, Federal IT Services and Global Delivery


Join Practice Manager and Principal Analyst Patrick Heffernan, Principal Analyst Boz Hristov, Senior Analyst John Caucis, Senior Analyst Elitsa Bakalova and Senior Analyst Kelly Lesiczka for an in-depth look at TBR’s predictions for the IT services market, including management consulting, federal IT services and global service delivery, in 2022 as well as trends they expect to see during the year.

Don’t miss:

  • Services is still people, even as compelling new forces like environmental, social & governance initiatives and emerging technologies challenge IT services vendors  
  • Managing talent and restructuring and building decarbonization credentials will drive management consulting in 2022
  • Federal spending priorities shifting to favor civilian agencies
  • Fallout from the pandemic will lead to the most disruptive year in global delivery since the start of outsourcing

Mark your calendars for Thursday, Jan. 27, 2022, at 1 p.m. EST,
and REGISTER to reserve your space.

Related content: 

  1. Top 3 Predictions for IT Services 
  1. Top 3 Predictions for Management Consulting 
  1. Top 3 Predictions for Federal IT Services 
  1. Top 3 Predictions for Global Delivery 

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Top 3 Predictions for Global Delivery in 2022

Robots hire robots, talent uproots to anywhere, and TikTok takes on TCS

Fallout from the pandemic will lead to the most disruptive year in global delivery since the start of outsourcing

TBR anticipates sea changes on three fronts in 2022. First, accelerated adoption and sustained refinement of automation will lead to AI-enabled platforms determining the automation tools needed to optimize an increasing number of processes. And those AI-smart platforms will make procurement decisions independently. In short, robots are hiring robots, with all the implications on talent, productivity, KPIs and pricing.

Second, the pandemic proved IT services can be delivered from anywhere. In 2022 that reality will shift compensation models, as vendors begin to eliminate disparities based on location. Smart IT services vendors will hire talent anywhere and reward professionals who find ways to meet their colleagues in person. Lagging IT services vendors will cling to now-outdated compensation models that pay a professional in Boston more for doing the exact same job as someone in Bangalore, India.

Third, the rise of enterprises that are outside the software and IT services realm but differentiate based on software and IP will exacerbate the ongoing war for software developer talent. Is that too many mentions of “software” in one sentence in an IT services predictions paper? Yes. But the large IT services vendors with business models built around skilled developers will start losing talent to the likes of TikTok and Tesla, and may also eventually lose business to those new competitors.

We are not exaggerating: By the end of 2022, global delivery will be a different game. 

2022 global delivery predictions

  • The robots will hire each other, complicating the people part of global delivery
  • Get paid for what you do, not for where you live goes global, with business model and business culture implications
  • Software developers defecting to TikTok challenge IT services vendors’ talent models

Send me a free copy of TBR’s Top 3 Predictions for Global Delivery 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.

IT services market: 2Q21 insights from TBR’s Professional Services team

IT services market rebounding in 2021 after pandemic-caused trough

Revenue growth for TBR’s benchmarked IT services vendors was flat during 2020 as growth challenges stemming from the COVID-19 pandemic negatively affected vendors’ revenue generation. Investments in cloud, cyber, AI and industry specialization will accelerate revenue growth for benchmarked vendors during 2021. This pent-up demand is also fueling a rebound in additions of resources with skills in cloud, cybersecurity, AI and product engineering services, following year-to-year deceleration in 2H20. Vendors, though, must account for digital exhaustion, especially as remote working will likely continue for the time being. 

In this upcoming webinar, Patrick Heffernan, Boz Hristov, Elitsa Bakalova and Kelly Lesiczka will reveal insights and latest trends of the IT services market and global service delivery. The group will also discuss vendors’ roads to recovery post-pandemic based on findings in TBR’s latest IT Services Vendor Benchmark and Spring 2021 Global Delivery Benchmark.  

Don’t miss:

  • TBR’s overview of performance and key trends during 2020 for the 30 vendors in our IT Services Vendor Benchmark
  • How pursuing technology-enabled transformational opportunities will enable vendors to ramp up revenue growth during 2021
  • How vendors have managed resources amid the global pandemic, and what is next for their headcount strategies in 2021
  • State of adoption of automation in service delivery and the impact on vendors’ P&L

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.

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Headcount growth decelerated, revenue declined even faster as vendors felt the whiplash of pandemic-induced downturn

Headcount growth decelerated, revenue declined even faster as vendors felt the whiplash of pandemic-induced downturn

Overview

The 14 vendors benchmarked in TBR’s Global Delivery Benchmark 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.

As vendors went into damage-control mode amid the pandemic, most deployed proven legacy cost rationalization methods, including layoffs, salary freezes and limited SG&A spend to protect profitability.

COVID-19 has accelerated digital transformation-related opportunities around cloud, AI and cybersecurity, demanding vendors develop right-skilled and right-sized benches to provide support beyond technology excellence.

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.

Vendors’ ability to develop nonlinear revenue growth model will be tested once again as COVID-19 sets the stage for demand in ‘as a Service’ sales

Market overview

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.

Human-based service delivery vendors’ talent management strategies and revenue growth will be tested amid COVID-19

The 14 vendors in TBR’s Global Delivery Benchmark continued to hire and acquire resources ahead of revenue growth in 4Q19 as they geared up to address buyer demand for scaling digital transformation (DT) initiatives. Developing certified talent supporting Agile-based service delivery helps vendors build and solidify trust with enterprises seeking to optimize and/or modernize IT operations through next-generation technologies. While vendors will continue to act as price-competitive solutions brokers by developing teams at on-site and nearshore locations that can split the work and either execute on delivery or collaborate with offshore teams for support, the global pandemic will likely dampen buyer sentiment around DT spend, impacting vendors’ hiring initiatives in 1H20. Workplace management and security are two bright spots in in-demand skills during the pandemic.

Human-based service delivery vendors’ talent management strategies and revenue growth will be tested amid COVID-19

Headcount growth surpassed revenue growth, a trend we expect to continue, albeit at a lower pace as vendors stall hiring due to COVID-19

The 14 vendors in TBR’s Global Delivery Benchmark continued to hire and acquire resources ahead of revenue growth in 4Q19 as they geared up to address buyer demand for scaling digital transformation (DT) initiatives. Developing certified talent supporting Agile-based service delivery helps vendors build and solidify trust with enterprises seeking to optimize and/or modernize IT operations through next-generation technologies. While vendors will continue to act as price-competitive solutions brokers by developing teams at on-site and nearshore locations that can split the work and either execute on delivery or collaborate with offshore teams for support, the global pandemic will likely dampen buyer sentiment around DT spend, impacting vendors’ hiring initiatives in 1H20. Workplace management and security are two bright spots in in-demand skills during the pandemic.

TBR’s Global Delivery Benchmark documents vendor performance; attrition and utilization rates; and market, growth and profit drivers of 14 of the largest systems integrators globally.