How the IT Service Providers Will Grow in 2020

The business with IT is in transition. The move away from pure infrastructure services, the digital transformation and the proliferation of the cloud has led to a major change in the traditional IT supply chain. The market is on the move and many companies are offering cloud services. Where will the market be in the next two years and what role will the technology providers play in this?

Cutting-edge technology and visionary AI and IoT devices are making headlines, but when it comes to the cloud, the supply chain and service providers are at the forefront of the cloud business. It is therefore not surprising that the technology supplier plays an immensely important role in this context. The digital transformation of service providers must, therefore, go hand in hand with the (re) alignment of their business models – only then can the full potential be exhausted.

Growth from partnerships and ecosystems

We already know today that the digital transformation is a fundamental top-down shift that has a measurable impact on revenue and customer loyalty. Studies have shown that 80% of generated revenue comes from other non-infrastructure areas. Suppliers are currently growing rapidly in the areas of application services as well as managed services and professional services. However, this growth can only be sustainable if the relevant partnerships and ecosystems exist.

The companies offering cloud services reporting more or less in unison that their profit margins are quite solid. The managers we spoke with are confident that this trend will continue over the coming year and even pick up. For example, 70% of companies expected to adjust their business plans over the next two years.

High customer satisfaction rates and attractive margins for application services, managed services, and professional services create optimism – and the willingness to scrutinize business plans and partnerships. At the moment, the typical cloud service provider reports 80% renewal rates and can look forward to an extremely high level of customer loyalty with 90% – which, of course, has a positive effect on sales. How can you benefit as a technology provider?

Security and cloud infrastructure offer opportunities for the service providers

We see that most cloud service providers are confident about their growth opportunities and know-how and with what they will make money in 2020. They will do their utmost to bring their new services to market. The provision of technology, platforms and support plays a key role – but not the only one.

Other opportunities for the service providers

Last year, we saw investment growth in infrastructure and IT procurement, innovative technologies and novel service offerings. Security and all types of cloud infrastructures are the drivers of above-average investment, with customer experience management and mobility also playing an important role. Although new technologies are supported, they are even less common – AI and ML services are the exception, and we expect significant momentum in the next 18 months. With robotics, AR and wearables, the chances for service providers, apart from a relatively manageable number of specialists, are lower – accordingly, the planned investments are below average.

As a technology provider, these services should already be related to your service partners. Since these are growth markets, know-how can certainly be missing, the personnel situation can be difficult and it requires appropriate orientation and advice. This may sound exhausting, but provides a first-class foundation for long-term, solution-oriented partnerships. These are complex and may require a new strategic direction.

Conclusion

All areas of a service provider organization are affected by this evolution, from services to sales/marketing to business analytics, risk management – just to name a few. Providers who support their partners in achieving their goals will sustainably strengthen their business relationships. They can provide technology and platform support, advise, and create an overall ecosystem where everyone can thrive. So the role of technology providers is becoming more and more important as the digital transformation of service providers correlates more and more with changing business models and new opportunities for ever-new cloud services.