BENGALURU: The conspicuous case of missing middle (talent) in IT firms is posing newer challenges in complex outsourcing deals especially in cloud migration projects.
The huge vacuum in the installed talent pool of middle management and senior executives in IT firms has led to a decline in decades of institutional knowledge that was integral to a customer’s business.This has widened the knowledge gap of using tools, processes, governance, and risk frameworks to architect and replatform solutions. As companies are grappling with ways to restore the institutional knowledge, it has put some large deals under pressure resulting in ramp downs. The depth of the leadership bench has depleted too, forcing customers to build tech skills inhouse marrying core and context.
Phil Fersht, CEO of US IT advisory HfS Research, said, there has never been so much movement for client-facing services talent as what has been going on in the past year, which is causing a significant disruption in the industry. “Simply put, the importance of executive-client personal relationships cannot be understated during these turbulent times when clients are under huge pressure to drive out costs, fix broken cloud migrations and exploit AI opportunities. We will soon see the winners and losers emerge from the IT service providers which can retain and assemble the best quality client-facing executive teams.”
HfS Research and EY’s report showed that 65% of organizations have made strategic investments in cloud, but only 32% are achieving their ambitions. There appears to be a fundamental disconnect between the supply side and buy side when discussing business transformation through cloud. The report said to enable a cloud-native organization, you must drive effective change management to move to a product-centric mindset, scale devsecops (development, security and operations), and achieve outcomes such as higher velocity and faster time to market.
A recent ISG’ report showed that $15.4 billion of extension and renewal ACV (annual contract value) was signed in 2023, up from $12.9 billion in 2022. That’s a nearly 20% increase year-over-year. In contrast, $25.2 billion of new ACV was signed in 2023, down from $25.7 billion in 2022. That’s a 2% decrease year-over-year, the data showed. This underscores a shift in the buying behaviour and retaining talent becomes key for customers to assess their preparedness to handle complex transformation projects. Mid-level talent moving to global capability centres (GCCs) is another challenge faced by IT firms.
Hansa Iyengar, senior principal analyst in London-based Omdia, said, “In many ways, GCCs offer opportunities for the SIs (system integrators) around the BOT (build-operate-transfer) set of services that all of them provide – mostly in the hopes of rebadging them at a later stage when the cost savings run out. However, GCCs are also reshaping the talent landscape in India, and this is an opportunity to reimagine how SIs attract, develop, and retain their workforce. To stem the talent drain, Indian IT firms must prioritize creating an irresistible work environment that goes beyond traditional incentives. Embracing flexible work models, offering continuous learning opportunities, and offering non-linear career pathways are key,” she said.
Mrinal Rai, assistant director and principal analyst in global tech research and advisory firm ISG, said, providers are looking for more efficiency in operations and investments in AI technologies and for more efficient service delivery. “In the GCC context, we have recently said that clients with strong investments in GCCs are focusing on enhancing their talent, and this hunt for talent in niche areas will continue for providers and GCCs.”
The huge vacuum in the installed talent pool of middle management and senior executives in IT firms has led to a decline in decades of institutional knowledge that was integral to a customer’s business.This has widened the knowledge gap of using tools, processes, governance, and risk frameworks to architect and replatform solutions. As companies are grappling with ways to restore the institutional knowledge, it has put some large deals under pressure resulting in ramp downs. The depth of the leadership bench has depleted too, forcing customers to build tech skills inhouse marrying core and context.
Phil Fersht, CEO of US IT advisory HfS Research, said, there has never been so much movement for client-facing services talent as what has been going on in the past year, which is causing a significant disruption in the industry. “Simply put, the importance of executive-client personal relationships cannot be understated during these turbulent times when clients are under huge pressure to drive out costs, fix broken cloud migrations and exploit AI opportunities. We will soon see the winners and losers emerge from the IT service providers which can retain and assemble the best quality client-facing executive teams.”
HfS Research and EY’s report showed that 65% of organizations have made strategic investments in cloud, but only 32% are achieving their ambitions. There appears to be a fundamental disconnect between the supply side and buy side when discussing business transformation through cloud. The report said to enable a cloud-native organization, you must drive effective change management to move to a product-centric mindset, scale devsecops (development, security and operations), and achieve outcomes such as higher velocity and faster time to market.
A recent ISG’ report showed that $15.4 billion of extension and renewal ACV (annual contract value) was signed in 2023, up from $12.9 billion in 2022. That’s a nearly 20% increase year-over-year. In contrast, $25.2 billion of new ACV was signed in 2023, down from $25.7 billion in 2022. That’s a 2% decrease year-over-year, the data showed. This underscores a shift in the buying behaviour and retaining talent becomes key for customers to assess their preparedness to handle complex transformation projects. Mid-level talent moving to global capability centres (GCCs) is another challenge faced by IT firms.
Hansa Iyengar, senior principal analyst in London-based Omdia, said, “In many ways, GCCs offer opportunities for the SIs (system integrators) around the BOT (build-operate-transfer) set of services that all of them provide – mostly in the hopes of rebadging them at a later stage when the cost savings run out. However, GCCs are also reshaping the talent landscape in India, and this is an opportunity to reimagine how SIs attract, develop, and retain their workforce. To stem the talent drain, Indian IT firms must prioritize creating an irresistible work environment that goes beyond traditional incentives. Embracing flexible work models, offering continuous learning opportunities, and offering non-linear career pathways are key,” she said.
Mrinal Rai, assistant director and principal analyst in global tech research and advisory firm ISG, said, providers are looking for more efficiency in operations and investments in AI technologies and for more efficient service delivery. “In the GCC context, we have recently said that clients with strong investments in GCCs are focusing on enhancing their talent, and this hunt for talent in niche areas will continue for providers and GCCs.”