The future of IT services industry: On demand IT delivery models

By: Samir Dhir, Head of India Operations, Virtusa

I believe a sea of opportunities and threats await the IT industry in the next 5-6 years. We are at a pivotal moment, a tipping point, if you will; as a new set of emerging delivery models become mainstream, already the anticipation on services like web platforms, SaaS (software as a service) and others have modified the requirements of clients as they increasingly pick these new options.

Globally, the ‘on-demand economy’ is majorly transforming commercial behavior and ‘On-Demand Economy’ is defined as that economic activity created by technology companies that fulfill consumer demand via the immediate provisioning of goods and services.

Transformation of IT marketspace

Alternative delivery models are expected to drastically transform the IT marketspace. Industry pundits are not wrong when they say that the very fundamentals of the IT industry are going to change and we will see services and solutions which have been the cash cows for this industry so far, getting transformed. Some of these will take a new avatar in the rapidly changing technology landscape while the others will forever disappear. These changes have led to the mushrooming of alternative delivery models which can be classified broadly as: a) business driven b) technology driven c) process or time to market driven and d) non-linear models.

Analysts predict that most of the change will be concentrated in the next five years in all aspects of the industry be it clients, investors, IT professionals and end –consumers. This is also expected to ‘separate the wheat from the chaff” where companies invested in innovation/differentiated offerings will get on a higher growth path. While most IT organizations are constantly struggling to demonstrate cost savings, some are focusing on ways to add value to the business.

Outcome based models

In business driven service models there is a need to align IT strongly to business and directly impact business performance. To succeed in such a scenario as an IT services partner we have to rapidly move from the traditional input based models measured by SLA adherence to outcome based models measured by performance on a specific business metrics. It means being able to take a top down view of customer’s business, understand what metrics are used to measure effectiveness of the underlying processes and then what IT can do to enable it. Outcome based models are also being used to drive financial gain sharing with IT partners. This gain sharing is based on our ability to meet and improve the business metrics and achieve desired outcomes.

Cloud leveraged environment

On the other hand, if we consider the technology impact on service delivery then we also see alternative models needed to meet the entire new gamut of services coming into play. In this cloud leveraged environment customers are looking at scalable, flexible pay per use service delivery. The delivery model has to be based on shared services with the ability to be extremely flexible and agile to deliver in the cloud paradigm. We need to track the customer demand for services and resources closely to be able to provide pay per use services along with the necessary orchestration platform and tools.

One such option is SaaS delivery which refers to a method of providing hosted software applications to clients in a cloud computing environment. SaaS delivery is the backbone of an emerging software model that eliminates the need for client organizations to incur the expense of purchasing or maintaining expensive application servers and software.

Agile-based delivery is big

There has also been process innovation in service delivery to enable faster turnaround times in projects along with tighter integration with customer requirements. Agile based delivery is a big move away from traditional waterfall models and it enables rapid prototyping and development to enable greater success in projects. It ensures that things don’t fall between the cracks when the project moves from design to build. Similarly, Devops is becoming increasingly popular service model for ensuring tighter handshake between build and deploy and hence faster and effective go live.

Finally, the IT services industry itself has been working on evolving non-linear models of service delivery which will provide scalability at reduced costs.

The businesses in this transformed economy are nothing but the manifestation of years of technological innovation and the rapidly evolving consumer behavioural patterns. These models have thrown open the doors to real-time fulfilment of goods and services that have been not only lapped by the consumers in an astounding way but also adding to economic momentum.

‘On-demand economy’

It is happening. The ‘On-Demand Economy’ is already revolutionizing the way people conduct businesses, influence governments and also create large-scale employment. Presently, the impact is among the tech-savvy urban user and the question that comes to mind is when the services offered in the new economy will be used by non-urban consumers. And when that happens, the ‘On Demand Economy’ will bring in a tectonic shift similar to what happened in the 1990s when internet made a splash

In my opinion, all these delivery models will co-exist and we will have to pick and choose the ones that fit the client’s objectives best. It will not be a ‘one-size, fits-all’ scenario as customers become increasingly discerning and the industry matures in use of these models. Sometimes, we will have to use more than one model for different aspects of the client’s requirements – outcome based model to demonstrate value to customer which could be the financial arrangement along with agile development for faster and effective delivery.

I believe that within the next couple of years all these models will become mainstream rather than alternative as we are calling them today.