In the intricate tech services throughout 2023, a seismic shift occurred. The backdrop transformed from a build-for-the-future mindset to a more-for-less orientation, akin to a tech services tango with a pinch of austerity. Discretionary spending, once a flourishing entity, decided to take a sabbatical, leaving the market grappling with uncertainty.
But, what does this tech turmoil mean for the coming year? Let's unravel the labyrinth of tech services, dissecting both the services provided internally by companies and those delivered by third-party providers.
As the curtains rose on 2023, a cautious breeze swept through technology spending, ushering in a retreat in tech services' discretionary spending. The era of significant post-COVID growth made a U-turn to cautious optimism, morphing into a more-for-less sentiment that overshadowed the market.
As we gaze into the crystal ball for 2024 at Everest Group, the more-for-less mindset doesn't seem ready to bid adieu. It plans to stick around for at least the initial two quarters, and perhaps, beyond. While discretionary spending remains a rare commodity, we anticipate this frugal sentiment to birth changes, and surprisingly, growth, in the tech services landscape.
AREAS OF GROWTH IN TECH SERVICES IN 2024:
New Greenfield Opportunities:
Companies, in their quest for cost savings, are eyeing offshore possibilities for their legacy estates. This treasure hunt for untapped savings is expected to continue, offering a clear path to achieving more for less.Vendor Consolidation Opportunities:
The talent shortage during the COVID boom led to a myriad of third-party service providers entering the scene. Now, companies are on a spree to streamline and consolidate their portfolios, aiming for fewer providers with larger contracts to leverage volume and reduce costs.Modernization Movement:
The pace of modernization, particularly the migration to the cloud, decelerated post-COVID in 2023. While the traditional argument of the cloud as a cost-saving haven has lost its sheen, there's still a hunger for modernization where it results in tangible, ongoing cost reductions—what Everest Group dubs as "self-funded modernization."Digital Run Opportunities:
Companies that have already invested significantly in digital tech are looking to further enhance areas with high-density tech. This entails adjusting the tech stack to align with evolving business goals, marking a shift from the unexplored to the intensified.Generative AI Opportunities:
The realm of generative AI is poised for significant growth in 2024. After a year of experimentation triggered by the ChatGPT phenomenon, the expectation is that companies will move from pilot projects to meaningful production, overcoming change management, legal, and security challenges.BPS Opportunities:
Business Process Services (BPS or BPO) is anticipated to witness accelerated growth in 2024. Companies, driven by the more-for-less and modernization trends, are inclined to merge technology with business operations to trim operating costs. BPS is positioned to outshine the technology services segment.
As the tech services narrative unfolds in 2024, it's a tale of navigating the delicate balance between tightening belts and uncovering avenues for strategic growth. The stage is set for an encore, and the tech world, ever the protagonist, readies itself for the next act in this unpredictable saga.