As noted in my description, I lead a branch of a IT services firm in central Ohio. We help clients who are challenged by new technology, who are struggling to get projects done, or need help finding the right people to fit in their environment. It is a great company led by smart people who get the business.
Note that my thoughts and opinions here are mine only and do not reflect those of my employer, its management, or its employees.
Information Technology at large is a maturing field. While there will continue to be technology advances that will change how IT is levereaged to help people and business, it is unlikely that there will be revolutionary changes similar to those of the past 15 or so years (the Internet, Distributed Technology, etc.).
Much of what I am seeing is that the IT services sector is following a traditional product life cycle:
- Market introduction stage: Costs high, sales volume low, no/little competition, demand has to be created, etc.
- Growth stage: Costs reduced due to economies of scale, sales volume increases significantly, profitability, competition begins to increase, etc.
- Mature stage: Costs decline as you are well established in market and there is public awareness, sales volume peaks, increase in competitive offerings,
prices tend to drop, etc.
- Saturation and decline stage: costs become counter-optimal, sales volume declines or stabilizes, prices and profitability diminish, profit becomes more a challenge of production/distribution efficiency, etc.
Depending on what segment within IT services that you look at, the sector is somewhere in the mid to late Growth stage or early in the Mature stage.
Why is this noteworthy?
Virtually all of the people employed in the IT services sector – Developers, Analysts, Exectives, Project Managers, Engineers, Sales people, etc. – joined the industry when it was in the heart of the growth phase. We have enjoyed great careers, significant compensation growth, and job security. However, our world is changing and we aren’t used to it.
This is causing discomfort for many:
- People used to 6 figure incomes are faced with a potential decline or adjustment.
- Companies accustomed to traditional profit margins have to reengineer the way they do business as well as adjust their mix of services to stay vibrant and growing.
- Customers for IT services are changing how they have to buy these services as formal procurement and supply chain practices are applied to what is a significant expenditure for companies.
What we are seeing is more fundamental than a temporary drop in demand like we saw early in this decade. It is a major realignment of the sector.
Now, more than ever, it is critical that IT services providers:
- Have 100% clarity and definition as to what business they are in.
- Understand how their business and target markets are evolving.
- Adjust their operational models and tactics to align with the direction in which the sector is moving.
Some thoughts on the implications of this later.