Companies that provide IT services to multiple businesses are indirectly exposed to the challenges of their customers. In addition, cloud-based service providers and niche technology startups are disrupting the existing model of the IT industry. New types of competitions are emerging from large customers that are venturing into digital and software services space.
Challenges bring dilemmas, and very dilemma comes with alternatives where no single choice appears satisfactory. What are some of the dilemmas faced by the IT industry today? And how can an IT organisation handle those?
Response to such questions may vary depending upon the strategy and context of an organisation. Here are three dilemmas facing the IT industry.
>See also: 5 fundamental elements of digital disruption
1. Digital as a service or digital as a solution
Every company needs one or more implementation partners in their digital journey. For example, to execute a data-driven strategy, an online retail business may seek help from an analytics lab. Most of the IT providers are positioning digital as a set of technology-driven services.
But as pointed out by a global study conducted by MIT Sloan Management Review and Deloitte, it’s the strategy and not technology that drives digital transformation. It also highlights that “maturing digital businesses are focused on integrating digital technologies, such as social, mobile, analytics and cloud, in the service of transforming how their businesses work”.
So every IT organisation must try to gain a competitive advantage by playing an active role in crafting digital strategy of a business. Instead of solving discrete problems, it can aspire to provide an integrated solution and help its customers reimagine their businesses. But to offer an integrated solution it has to first build credibility by successfully implementing digital as a service. Therein lies a dilemma.
2. Best practices or best paths
Best practices are effective in business as usual environment. In a volatile, uncertain, complex and ambiguous (VUCA) world, best practices do not guarantee success. As Peter Thiel, co-founder of PayPal and Palantir, mentioned in his book Zero-to-One, “Today’s ‘best practices’ lead to dead ends; the best paths are new and untried.”
However, many large customers still depend on traditional IT support. The well-established structures, processes and systems of IT service providers encapsulate the core competencies of the industry. IT organisations cannot move away from their existing model overnight.
Tomas Nielson and Patrick Meehan, in a recently published HBR article, highlighted that every organisation must continue to “focus on what the firm does today and optimise its current execution” while at the same time demonstrate “the ability – and courage – to challenge the firm’s current model”.
IT organisations are increasingly facing the dilemma of running the business more efficiently while trying to figure out a whole new approach to be future-ready. The digital age demands speed as well as agility. Best practices are necessary to increase speed. Experimenting on new ways can bring agility.
3. Decrease or increase temporary workforce
Contractors usually demand higher pay than the employees. Profit margin of a project takes a hit whenever the ratio of contractors to employees increases. So reducing the number of contractual workers or replacing them with employees is a standard way of improving a project’s profit margin. Moreover, a contractor may leave a project without giving any advance notice and that can create additional complications.
However, in a sharing economy, the trend is to have more temporary workers than employees. In the case of Uber, the ratio of contractors to employees is 80:1. In the US, 40% of the workforce is projected to be contractors by 2020. And the trend is also expected to impact IT organisations.
The days of long-term demand projection is over. IT organisations need to embrace agility and respond quickly to customer needs. Hence, on-demand contracting through talent assemblers may soon become a reality.
This is a dilemma where an IT company cannot take an extreme position but keep a balance between the permanent and temporary workforce. It should also contextualise the talent acquisition strategy based on customer’s business need.
Digital disruptions are posing overwhelming challenges to the IT industry. Being a service provider to several businesses, an IT organisation’s digital journey is intertwined with that of its customers. This association creates difficult choices.
Every IT organisation knows its business context best and hence should decide how to balance between the alternatives based upon its future strategy.
Sourced from Pranab Chakraborty, Wipro