Future of Technology Services 2.0 – Reassessing the Outlook

Technology services industry has experienced unprecedented growth and transformation over the past two years, since COVID-19. Many of the trends that we had noted at the start of 2021, in Future of Technology Services 1.0 (FTS 1.0), have seen an accelerated trajectory, e.g., growth in cloud and digital, rise in enterprise tech spending, intensification of war for talent, among others. This study, Future of Technology Services 2.0 – Reassessing the Outlook, is a refresh of our perspective by examining the current state of the industry, exploring shifting trends and drivers and highlighting the imperatives for providers to remain competitive in an ever evolving and volatile landscape.

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Key Findings

Between 2020-2022, the tech services industry has tracked along the outlook presented in FTS 1.0

Tech intensity averaged 4% in 2022, on track to reach 5% by 2030
Cloud and digital spend grew at 20%+ CAGR, higher than the expected 18-20% rate
Alliances and partnerships will be key to growth
Higher-than-anticipated wage inflation and higher attrition will drive-up war for talent
Market leaders will continue to outperform with newer DTX models

Tech services growth to return to the pre-pandemic levels, registering a slowdown by 3-4 pp

70% CIOs expect economic slowdown in the next 18 months
80% expect ~15% reduction in discretionary spend, with key initiatives to continue with reduced scale and scope, rather than a complete halt
4-6% growth expected to continue, driven by accelerated spend in cloud and digital
Consensus analyst estimates indicate that Indian HQ providers will clock 8-10% growth rate in 2023

Spend priorities for CIOs indicate focus on strengthening the core, with transformation partners becoming more strategic

~75% of CIOs plan to increase spend in cloud and digital
60%+ to focus on variabilization of cost structures
More than half of the CIOs plan to switch or consolidate service providers in atleast 1 service line
IT buyers are likely to favor proactively originated deals as they look for transformation partners, not just technology vendors

Future bets are driven by more resilient and integrated technology use cases, and changes to op. models

Nearly 30 resilient hotspots likely to see 20%+ growth, proactive origination key to win deals
Buyers would invest big in 3 value pools around 5G/Edge/IoT, Sustainability, Metaverse
Providers will strive for efficiencies through operating model changes (hybrid work models and smart location strategy), value-based pricing, and intelligent hyper-automation in 2023

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