How Not To Become 'Irrelevant' In The Digital Economy

by Sohini Bagchi    Mar 17, 2015

digital

The combined forces of social, mobile, analytics and cloud (SMAC) is creating what we call the digital economy today, which in turn is reshaping markets and changing the way we work. In such a scenario,  Cisco CEO John Chambers is predicting that, as the digital economy takes shape, as many as half of today’s service providers could become “irrelevant” during the next 10 years.

Chambers and other experts foresee that this digital economy will shake up more than just service providers and tech companies, but also will be felt by governments and their citizens around the world. Today, companies are using digital technology to not only improve their internal processes, but to drive growth and likewise, service providers need to gear up and embrace the change.

Chamber’s view are echoed by a recent Gartner survey that found 70 percent of CIOs will change their technology and sourcing relationships in the next 2-3 years if they have to remain ‘relevant’ in the digital economy. 

“The picture is clear for service providers as clients are struggling to keep up with change,” said Eric Rocco, managing vice president at Gartner. “They are strongly considering changing the providers they work with as part of responding to this change. Market share will shift to service providers able to help clients respond to the business and IT opportunities and challenges that are overwhelming more than half of organizations today. Service providers need to convert this picture into an opportunity rather than a threat. 

As Paul Daugherty, CTO, Accenture recommends, “Rather than simply focusing internally, on improving their own operations, successful companies are looking externally to create and become part of digital ecosystems,” said Daugherty.  “They’re beginning to see the importance of selling not just products and services, but outcomes — and that requires weaving their businesses into the broader digital fabric that extends to customers, partners, employees and industries.”

Read more: How Digital Ecosystem Is Reshaping Markets

A very good example is Wipro, which is planning to focus on its digital business and to eventually convert it into a separate business entity. According to TK Kurien, the managing director and CEO of the company, “The biggest thing we are betting on in the next couple of years is what we call ‘digital’. We don’t believe we can do it in a traditional manner because the culture in ‘digital’ is going to be about speed, not how long one takes to develop something or how much it is going to cost based on the time deployed, and so we are going to have a separate team and separate leadership as it will address a completely different economic buy in a completely different way.”

Most big players in the IT sector in India are moving towards digital business in areas such as artificial intelligence (AI), automation, big data and Internet of Things (IoT). Recently Vishal Sikka, CEO and managing director of Infosys, emphasized ‘design thinking’ in the company. Tata Consultancy Services has also created ‘digital software and solutions group’, a possible $5 billion business in the next 5 years.

Rocco however states that neither every business fundamental will need to change to the same degree, nor will every technology driver have a role to play in every business scenario; however, businesses that decide to ‘wait and see’ are likely to become irrelevant.” He recommends that service providers of the future will have to articulate value in business terms such as key process outcomes and impact to key performance indicators (KPIs). Doing so requires deep vertical industry knowledge, and new go-to-market models, something service providers should start focussing on to survive or as Chambers says become irrelevant.