NelsonHall is conducting an analysis of the needs of IT services clients to understand their IT and business priorities and how the growth of digital is impacting their business. In a survey of ~1,000 IT services clients across 17 industries and every region of the world, NelsonHall has identified distinct patterns of user intentions, both in terms of how clients plan to change their external IT spending, and how they assess the capabilities of their IT services vendors. Here, I examine the key characteristics clients are looking for in vendors providing IT and digital services.

Even in the face of digital disruption, industry-specific knowledge is the key determinant of success

IT services clients overwhelmingly recognize that digital technologies will impact their business. Globally, 82% of respondents view digital as highly relevant to their future IT strategy. In contrast, less than 1% view it as being of low relevance.

Globally, the most highly sought characteristic by IT services clients when engaging a vendor is industry-specific knowledge, identified as highly important by 67% of clients. The value of undertaking digital transformation derives from addressing industry-specific business objectives, rather than solely reducing IT operating cost through automation and industrialization. This broader business case increases the need for IT services vendors to demonstrate strong industry understanding in a digital transformation context. 

Five other characteristics were identified as highly important by between 40% and 50% of clients:

• Ability to provide digital consulting services (48%)
• Ability to take a business perspective to the application of digital to the business (47%)
• Ability to provide a roadmap for adoption of digital (45%)
• Ability to undertake digital maturity assessments (44%)
• Use of agile development methodology (46%).

The first four of these characteristics reflect a need for IT services vendors to provide guidance in how to tailor investments in digital to maximize the value to be realized within the context of a particular client’s industry. They require vendors to possess a consulting capability that delivers a combination of digital technology and industry knowledge and to be able to assist client organizations in developing clear digital roadmaps. The fifth characteristic, the use of agile development methodology, reflects the need to react quickly in the face of disruption caused by emerging digital technologies and new competitors.

There were two characteristics identified by fewer than 30% of IT services clients as highly important:

• Cloud-native development capability (29%)
• Ability to bring own digital application platforms and tools (28%).

Many IT services vendors are investing in developing portfolios of proprietary digital solutions to either be delivered as a stand-alone software product or as complementary to other software (such as functional extensions for SAP S/4HANA) as well as skills in implementing key SaaS products. These are clearly viewed by IT services vendors as important differentiators, particularly in an industry-specific context, but are insufficient without the wider digital roadmapping capability required by clients.

IT services clients are shifting their spend focus to SaaS & niche digital consulting capabilities

Within a menu of six options for how they expect their IT vendor spend to change, only two options were identified by more than 30% of IT services clients as being undertaken to a large extent:

• Increasing use of SaaS software (47%)
• Increasingly using niche specialists in support of implementation of digital initiatives (45%).

IT services clients are looking for vendors who can deliver specific niche skills that enable expanded use of digital. And they are looking for these digital solutions to focus primarily on SaaS applications, helping to reduce application management and infrastructure costs going forward, as well as reducing time-to-market.

Early mover IT services vendors are investing in SaaS implementation capability and focused digital & industry skills

Acquisitions of niche consulting firms focused on a specific industry, SaaS technology, or geography have been a frequent announcement over the course of 2016 and 2017. Some specific examples include:

• Accenture has made over 20 acquisitions since the start of 2017, all of which provide a specific niche capability. Examples include:
  • solid-serVision, a Germany-based ServiceNow implementation specialist
  • Davies Consulting, a U.S. specialist in utility operational risk management, asset investment, and emergency preparedness and response
  • Phase One Consulting Group, Inc., a U.S. Salesforce specialist focusing on the federal sector
  • InvestTech Systems Consulting, a technology consulting and systems integration firm specializing in the capital markets sector
• Accenture was also active in 2016, acquiring DayNine, a Workday consulting and deployment services provider
• Capgemini acquired Itelios in March 2017, a provider of services around the SaaS applications of Demandware, now called Salesforce Commerce Cloud
• Cognizant acquired KBACE Technologies in 2016, a specialist in Oracle cloud applications implementation, in particular HCM applications
• IBM acquired Bluewolf Group LLC in 2016, a Salesforce consulting and implementation services partner (with 12 global offices and ~500 employees in the U.S., Europe, and Australia) and Promontory Financial Group, a global risk management and regulatory compliance consulting firm targeting the financial services industry
• NTT DATA acquired Carlisle & Gallagher Consulting Group (CG) a business and technology consulting group servicing consumer and commercial banking, wealth management, and capital markets clients
• NTT DATA’s itelligence unit acquired Symphony Management Consulting, an SAP and SuccessFactors partner in North America specializing in human capital management (HCM) consulting services.

While this is just a snapshot of IT services vendor acquisition activity, these examples demonstrate how IT services vendors are recognizing and addressing the demands of their client base for SaaS capabilities and targeted industry skills.