After a year of interviews and a review of Forrester’s 20-year history of research into professional and technology services — global delivery, cloud integration, asset-based consulting, and digital transformation — we have reached a conclusion: We live in a post-cloud world. When companies can tap the value and innovation of 100,000 business and technology services over the cloud, it’s time to accept that the future is defined by innovation through ecosystems.
And for that, companies need a new kind of service provider. The old plan-build-run model of services with time-and-materials pricing is poorly aligned with innovation through ecosystems and with firms that embrace a future-fit tech strategy, where transformation is continuous, multidimensional, and carries the uncertainty of the unknown. We see a new service paradigm taking shape that we call co-innovation partnership in which service providers:
The Pivot To Co-Innovation Partnership Hinges On A New Business Model
Service providers are examining their fundamental business models. The threat is existential — fears that fees are under constant downward pressure and that providers could become irrelevant as clients and cloud and software-as-a-service vendors assemble solutions on their own. Much as the software industry moved from licenses to more value-based pricing (subscriptions, consumption, etc.) and hardware providers moved from racks and stacks to pay-for-use cloud computing, the services sector must move from fee-for-service to more value-aligned commercial models (fixed-price, milestones reached, cost or revenue outcome achieved, apps migrated, joint ventures, and subscriptions for assets). We see the co-innovation partnership as a better business model, one in which:
Our first three reports tell three sides of this story: the demand side, leader side, and service provider side. Clients can access them by clicking below. Today, they form the beginning of a new chapter in the future of services. We plan to tackle the elephant in the room next because procurement can make or break your innovation and transformation success.
The original article by Ted Schadler, vice president and principal analyst at Forrester, is here.
The views and opinions expressed in this article are those of the author and do not necessarily reflect those of CDOTrends. Image credit: iStockphoto/alphaspirit