Six forces in the IT industry will present a fundamental threat to technology and service providers (TSPs) through 2025, according to Gartner, Inc.
“Forces outside of a TSP’s control demand a response – adapt to thrive or struggle to survive,” said Rajesh Kandaswamy, research vice president at Gartner. “Impact from six forces are already being felt by providers today, but over the next five years Gartner expects these forces to accelerate trends and pose problems that will demand providers create new models, products and relationships to survive and ultimately succeed.”
The six forces Gartner expects will have the greatest impact on TSPs into 2025 are:
Disruption from Geopolitics and World Events
Increasing global trade tensions are the most significant geopolitical risk in terms of impacts to global markets. As providers seek to serve global customers and drive geographic expansion, both global trade tensions and the erosion of U.S.-China relations become significant influences in terms of product strategies, customer acquisition, business performance management, and corporate development. TSPs expecting to approach global markets in 2025 as they do in 2020 will be displaced by competition that incorporates these new realities into their business and operating models.
COVID-19 has made remote work become the standard across many organizations. While the increasingly digital nature of human interactions presents numerous benefits to providers, including reduced travel expenses and improved relevance and responsiveness to buyers, it can present some negative side effects. Gartner predicts that by 2025, loneliness, collaboration and communication obstacles will be the top workplace struggle for 50% of remote workers. TSPs must adapt their talent management strategies to mitigate this risk and be aware that this trend influences not only their employees and contingent workers, but customers and buyers alike.
Changing Customer Demand and Expectations
Through 2025, TSPs must adapt to changing buyers and buying conditions driven by transformed organizations and technology buyers within them. Business-driven and line of business (LOB)-resident technology buyers will drive more purchases, hastening moves to cloud products and platforms, investing more in automation and online interactions in order to optimize business processes and compete more effectively. Products will address a broader variety of vertical market requirements through tighter partnerships and integrations among providers. Additionally, customers who will demand a clearer picture upfront of the value such solutions will deliver will also require technology providers to measure results postimplementation. Those that can’t prove realized value will fail to grow or renew their customers.
Disruption from Emerging Technologies and Trends
Emerging technologies enable TSPs to enter new markets, strengthen their products and services, ward off competition, and become more efficient. The proliferation of new technologies present opportunities and challenges for TSPs. The right levels of investments in the right emerging technologies at the right time are crucial for creating and capturing the most value from them.
Changing Industry Dynamics
Over the next five years, changing industry dynamics will force technology providers to adjust their strategies, routes to market, and their willingness to simultaneously collaborate and compete with other providers.
Challenges from New (and Old) Entrants
Changing industry dynamics and rapid development cycles make the dedicated pursuit of competitive intelligence an absolute must for technology providers. However, following the known list of competitors no longer is enough — TSPs must be particularly mindful of challenges from new entrants to the market. In some cases, providers in adjacent markets may move into new markets as a way of growing revenue and mind share.
TSPs should not only prepare for new and different types of competitors, but also consider ways to stay competitive. This may mean assessing purchasing models, ease of doing business, customer experience, generational demands and offerings — especially when many technology products and services will be built by nontechnology professionals.
“In the era where ‘every company is a technology company,’ product leaders will have to compete harder with former nontech providers, end users and megavendors for market share,” said Mr. Kandaswamy.
Disruptive Business Models
Through 2025, technological advancements, availability of capital and shorter development cycles will provide opportunities for innovative vendors leveraging disruptive business models. For example, leading providers will create generative solutions which create new value beyond traditional approaches through new combinations of information, technology and operations across an extended ecosystem. Gartner predicts that by 2025, the fastest growing major tech providers will generate 50% of revenue from generative or platform business models leveraging cloud computing.
More information can be found in “Tech Providers 2025: Prepare to Survive and Thrive With the External Forces That Will Impact Your Business.” This research is part of the Gartner Trend Insight report “Tech Providers 2025 Special Report,” a collection of research to help TSPs understand the long-term changes in their markets and the actions they need to take today to prepare. The research notes in the Special Report focus on key changes expected in the 2025 timeframe, including external forces that will have a large impact on the industry, key changes across the characteristics for a TSP, emerging trends and technologies, and implications and actions for leaders.