What Enterprise IT Services Clients Want in 2018

In the 12 months since it started its push into mainstream IT services research, HfS has interviewed over 1,000 enterprise IT decision makers globally, across industries, from organizations with revenues of over $1 billion. What have we learned from these interviews and discussions? [1]

Clients (Rightly) Want It All: Strong Innovation Pedigree and Stability

Some things never change, and in IT services, clients continue to demand a strong innovation pedigree from their service providers (see Exhibit 1). This has become increasingly important to the market for two major reasons. The first is the expanding scope of IT from its heritage as a key building block of business operations to a role in every aspect of modern business buoyed further by the increased dependence on digital technologies. Second, the environment fostered by digital hype has caused a mist of confusion to descend over modern business technologies, leading to more clients demanding proof before engagements—a growing level of cynicism that makes a track record of innovation vital to a provider’s success.

It’s perhaps the chaotic and confused digital market that is pushing clients to place a higher value on the financial security and overall stability of service providers—cited as a key influence by more clients than the traditional table stake of quality of service delivery. This duality between innovation and a safe pair of hands is fed from the ongoing CIO priorities that we have seen from IT over the past five years—a desire for simplification and innovation along with a desire to drive business outcomes for the organization while ensuring the core service is delivered.

Exhibit 1: Key Influences for IT Service Provider Selection

Source: HfS Research, 2018, n=302 IT Services Clients

• The ability to provide innovative IT solutions is the greatest influence on selection, highlighted by 30% of IT services clients.
• The financial stability and security of a provider is of increasing importance as the confused and hype-ridden market pushes clients to look for stability.
• Only 11% of clients cite the overall quality of service delivery as a key influence on selection ,followed closely by 9% highlighting the technical skills of professional staff.

IT’s Wishlist Is Long and Ambitious—Buyers’ Investment Priorities Are Realistic

The focus on stability and proof of innovation tells us an interesting story of the broader client perception of the IT services industry—specifically that to dig through the hype, you need a partner with a strong track record who is likely to weather the rough waters affecting the industry. Needless to say, as the unfillable promises of new digital technologies continue to batter the industry’s credibility, we’re likely to see this trend continue in 2018.

While the hype remained rampant in 2017—with many providers contributing to the rush for digital and promises of an automation and analytics revolutions—IT services clients have remained focused on realistic priorities (see Exhibit 2), many of which have sat at the top of the investment list for IT departments for years. Enterprises are focused on getting their house in order, with the vast majority piling resources into security and governance, a trend that will undoubtedly double as regulatory environments tighten in particular industries, such as banking after the financial crisis, and more broadly due to sweeping legislation changes in the form of GDPR.

Arguably, the most interesting insight we can take from this list is how far down technologies like AI, cognitive, and machine learning appear, in spite of the largest marketing and mindshare pushes imaginable. While these technologies may have captured the imagination of enterprises and the public alike, it’s clear that, frankly, enterprises have enough to worry about with their less glamorous investments. Indeed, the simple tasks associated with getting ready for digital show few signs of a fevered procurement of these somewhat still unproven technologies, at least from the IT department.The push to the cloud (discussed in more detail later in this report) has also taken more than its fair share of investment prioritization. This is unsurprising when we consider the significant number of enterprises focused on digital, of which cloud is a vital building block.

Exhibit 2: 2017 Investment Priorities for IT Services Enterprise Clients

Source: HfS Research, 2018, n=302 IT Services Clients

• Investment priorities from 2017 focused on the achievement of real goals, with IT security and compliance taking top position—no doubt spurred on by the strengthening regulatory environment around data management.
• Investment in areas that have been the beneficiary (or victim, dependent on perspective) of much of 2017’s digital technology hype, such as cognitive and AI, trail behind more pressing concerns such as customer experience and moving to the cloud.

The Insatiable Rise of As-a-Service and Enterprise Cloud

Any question mark that may have surrounded enterprise adoption of cloud faded away in 2017, with cloud continuing to bite huge chunks out of the traditional infrastructure space—even bringing in born-in-the-cloud provider AWS into the top 10 high value IT services list for the first time[1].

This trend is showing no signs of reversing as enterprise cloud continues to play a vital role in transforming enterprises and building that crucial foundational layer to digital transformation. In Exhibit 3 we can see this trend play out with almost all core IT process areas likely to see significant growth in the cloud.

The insatiable appetite for enterprise cloud and as-a-service models is creating considerable waves in the infrastructure industry—an area formerly considered to be a relatively safe haven. In more detailed reports we have considered the wider market impact of this trend and how the traditional market is swiftly adapting to pivot products and services that now hold traction with clients[2]. However, it is clear that providers still focused on delivering traditional infrastructure services are due for a difficult time in 2018 and beyond, as enterprises continue to feed their appetite for the cloud.

Exhibit 3: Cloud Delivery Changes for the Next Two Years

Source: HfS Research, 2018, n=302 IT Services Clients

• Overall, cloud delivery will see an increased volume and scope in all key IT technologies.
• The movement of enterprise applications to the cloud beats the average across other technologies slightly as clients prioritize core business technologies for cloud migration.

Cost and Flexibility Are Central to 2018 IT Priorities

Since the beginning of the information age, when modern enterprises started to integrate technology into their business operations, cost has been a factor. It was no surprise then to see driving down operating costs as a major priority for enterprises in 2017, and we’re likely to see it continue to hold a top position into 2018. However, we may begin to see this narrative change in the coming years as the loose definition of digital begins to make more sense as “new IT” in some enterprises. For these firms, the value a strong IT department brings to a modern digital organization will offset the core focus on reducing cost. Compounding this is the dawning realization that digital technologies that are essential to keeping a business competitive in the market don’t come cheaply.

Indeed, as if to reflect the dynamic and fast-moving modern business environment, the ability to design and deploy flexible and scalable services is highlighted by many IT services clients as a key priority, which, alongside accelerating speed to market with new products truly highlights how the overwhelming force of the modern competitive marketplace is influencing the strategic imperatives of enterprise clients. Indeed, the increased pressure to deliver and innovate in IT has grown exponentially and forms a growing part of the duality of the modern CIO, who is now required to balance the traditional focus of keeping the lights on and the machines running with the increasingly important role of driving real business value with technology. In Exhibit 4 we can see this growing importance take hold as priorities such as flexible services and accelerating speed to market with new products climb further up the list of priorities. And, indeed, a more focused example is the increased adoption of enterprise cloud we’ve seen, in which CIOs are swapping the traditional control of on-premise assets with the flexibility, agility, and speed of the cloud.

Finally, it’s important to draw attention to the increased priorities associated with getting clearer, real-time data sets that support proactive decision making. As a crucial building block of digital enterprises and HfS’ Digital OneOffice concept, it’s perhaps unsurprising to see data so high up the list of business priorities. However, it reinforces the discussion that enterprises are seeking to achieve realistic goals, build digital foundations, and make the most of what they have, particularly when we view the priority associated with some of those most-hyped-about technologies such as automation and cognitive in Exhibit 4. 

Exhibit 4: Enterprise Priorities

Source: HfS Research, 2018, n=302 IT Services Clients

• Driving down operating costs continues to be highlighted as the key priority for IT services clients.
• However, the increased duality of the modern CIO is shifting the landscape as the development of flexible services and accelerating speed to market move closer to the top alongside traditional priorities.
• Once again, the most hyped technologies have limited uptake from clients as they focus on delivering real business value.

Bottom Line: The Realism of IT Services in 2017 May Step Aside to Allow Digital Hype to Run Rampant – But We Hope It Doesn’t!

A CIO can no longer afford to be a one-trick pony, providing the safe pair of hands delivering on half of the duality of their role. It is not enough to simplify standardize and to secure IT. IT needs to provide innovation to the business and deliver business value through technology, not provide just innovative technology alone.

When we take a look at the piles of data and candid qualitative feedback we received from IT services clients in 2017, one theme emerges stronger than any other and it’s not that we should run and hide from automatons or robot overlords. It’s simply the desire to make the most out of IT, achieve realistic objectives through reasonable means, and start setting the foundations for more ambitious and widespread transformative activities.

We’re seeing a greater focus on data and a continued drive toward the cloud as the tangible means behind this, driving deals and engagements. We’re also seeing enterprises focus on more down-to-earth priorities like reducing cost and getting talent where it needs to be. Frankly, for many enterprises there are more pressing concerns to grapple with, like data and information security, governance, and changing regulatory environments, rather than a complex overhaul of their business as much of the hype would mandate. So, in many ways, 2017 was the year of IT realism—let’s hope that continues into 2018. 

[1] Quotes from client references have been made anonymous to protect client confidentiality.

[2] For more detail take a look at the 2017 Top 25 High Value IT Services report

[3] The HfS Report Turbulence Ahead: Major Trends Wreak Havoc in the Infrastructure Space takes a more detailed look at the trends at play in the infrastructure space.