Services Vendors Need To Move Beyond Trump, H1B, and Re-skilling Concerns

Constellation participated in the 25th edition of Nasscom’s India Leadership Forum 2017 (NILF17) in Mumbai at the Grand Hyatt.   Though everyone was here to Reimagine, not Re-engineer , during the off-stage conversations with technology buyers, IT services providers, and the press, the hot topics included:

• Ramifications of a Trump presidency.  The media hype created an uncertainty that required clarity.  Every conversation started with what do you think President Trump will do?  Constellation’s research shows that services providers will see an improved business climate replacing the uncertainty leading into the US presidential election.
  
  Point of view (POV): Constellation believes today’s IT services and BPO providers are well entrenched in the US to be able to weather any “hints” of protectionism.  The IT Services industry will not be paralyzed by Trump — it’s in process of trying to imagine what’s next.   The Constellation post-election analysis remains solid and can be read here. 

• H1-B policies.   Concerns over changes in US policy rose to the forefront of every conversation.  Almost every IT services provider felt exposed to any potential shifts.  The reality is that the global IT services workforce is very competitive with blended off-shore and on-shore delivery models.
  
  (POV): Constellation believes that the US legislative process will adjust to address skills requirements and could potentially increase the number of H1-B visa.  Constellation believest hat non-Indian IT services firms will also feel the same pressure as there is very marginal labor arbitrage left among global players. Constellation expects a bigger shift to near shoring by all players.

• Re-skilling requirements of the workforce.  Almost every IT services vendor CEO or exec Constellation spoke to openly acknowledged that trends such as AI and robotic process automation will require a reskilling of the workforce.
  
  (POV): Constellation’s research shows that AI will lead to “Augmented Humanity” rather than destroying jobs. Expect repetitive work and labor arbitrage to be replaced by software.  However, new work will emerge in creating these new models as well as shifting the labor pool to higher skilled tasks that require faster decision making skills and more human judgment.

In addition to the great conversations with clients, Constellation shared the latest research in a keynote on Responsive & Responsible Approach to Dynamic Leadership for Digital Transformation.  On stage with Persistent System’s Mritunjay Singh (ED & President – Services) as the session Chair the session drew a lot of interest in new leadership models. In addition, Constellation moderated a panel flaunting the best possible brand diversity.  Panelists included Ajay Arora (MD, D’Decor Home Fabrics Pvt. Ltd.), Alexandra Willis (Head of Communications, Digital & Content, The AELTC, Wimbledon), and Fareed Patel (VP & Head of Global Commercial Platforms, GSK) on Why Customer Experiences trumps communication in a digitally disrupted world.

Meanwhile Constellation also served on 2 TV panels where Digital Trends, and the Future of Outsourcing was discussed with 7 CEOs of tech providers, including the Nasscom President – R Chandrashekhar.

The Bottom Line: IT Services Industry Ripe For Disruption

Despite the overall concern expressed by the media and analysts, few IT services vendor executives openly discusse dthe need for business model transformation in the industry. Constellation’s consistent concern for the IT Services and BPO industry has identified the shrinking pie of traditional business models and the over capacity of too many players crowding the market.

Constellation expects three to five of the large services players to be acquired or merged in order to consolidate and stabilize the market.  On one hand, competition within the space has fiercely intensified, and on the other, ISVs and Cloud players are taking away the IT services pie.  Both threats will quickly turn into existential ones over the next 24-36 months , and Constellation believes that new business models driven by IP and based on the principals of “Networked Economies”, will define the successful players in IT Services space.

Your POV.

What do you think of your IT services vendor?  Do you see them as a strategic partner or just a cost play?  Do you plan to co-innovate and co-create with them?

@rwang0 @nasscom #NILF17Add your comments to the blog or reach me via email: R (at) ConstellationR (dot) com or R (at) SoftwareInsider (dot) org.