Corporate Strategy & The Services Industry

Shaded boundaries within the broader consulting services market are leading to heated competition among consulting firms around thought leadership and business model innovation. In this context, strategic management paradigms and models are playing a more important role in positioning providers' capabilities toward executive stakeholders on the client side.

Therefore, the providers' ability to quickly and effectively drive these models' development and integration into their portfolios as well as deliver client value based on these models will be key to market success going forward.

Service provider strategists will get a better understanding of the global determinants that drive consulting services innovation and can leverage this value chain as a model for analyzing and planning their innovation initiatives more effectively.

The IT services market is behaving peculiarly in this tech downturn. While project-based IT consulting and systems integration work is now falling, it:

1) held up remarkably well until Q4 2008;

2) is down less than other categories of IT spending; and

3) has good prospects for a solid recovery in 2010.

Many industry commentators were expecting outsourcing revenue to pick up and help close some of the gap created by the drop in project work, as happened in the 2001 to 2003 tech downturn. But this expectation has not been realized. In fact, in Q4 2008 and Q1 2009 outsourcing revenues for the major providers were down more than their project revenues. While some pick up in IT outsourcing deals and revenues is likely, secular trends point to slow growth in IT outsourcing even when the tech recovery occurs. This means that outsourcers will need to enter new markets and ruthlessly focus on profitability to survive.