Forrester: Cloud foretells lean times for IT services sector


As more enterprises migrate to cloud computing, traditional IT service providers, like systems integrators and consultants, may feel a negative impact to their bottom line in the short run, according to Forrester researchers. But over the long haul, those same providers will likely come out ahead. 

In a report titled "The Coming Upheaval in Tech Services"--which CIO magazine's Thomas Wailgum calls "a tour de force examination of the IT services industry and the tectonic changes ready to erupt"--researchers John McCarthy and Pascal Matzke conclude that the $450 billion IT services business may see its traditional business model upended.

"The tough macroeconomic environment coupled with changes in pricing and delivery models will affect what we think of today as the IT services of consulting, systems integration and outsourcing," McCarthy and Matzke predict. "Price erosion and pressure on margins won't end after users renegotiate rates."

In the near term, the commoditization of IT services will produce some lower costs, but as companies grow to depend on services, the profit margins for the providers will rise.

For more:
- see Thomas Wailgum's article at CIO

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