The absence of mid-level talent in IT companies creates challenges in complex outsourcing deals, particularly in cloud migration projects.
The significant gap in the talent pool of middle management and senior executives in IT firms results in a loss of decades of institutional knowledge crucial to clients’ businesses. This widens the knowledge gap in utilizing tools, processes, governance, and risk frameworks for designing and transitioning solutions.
As companies strive to regain institutional knowledge, some large deals face pressure, leading to ramp downs. Additionally, the depletion of leadership bench depth forces customers to develop in-house tech skills, combining core and contextual knowledge.
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.”
According to a report by HfS Research and EY, 65% of organizations have invested strategically in the cloud, yet only 32% are meeting their goals. There seems to be a significant gap regarding cloud-driven business transformation between the supply and demand sides. To achieve a cloud-native organization, effective change management must adopt a product-centric mindset, scale devsecops, and achieve outcomes like increased velocity and faster time to market.
A recent report by ISG revealed that the annual contract value (ACV) for extension and renewal reached $15.4 billion in 2023, up from $12.9 billion in 2022, marking nearly a 20% increase. Conversely, the new ACV totaled $25.2 billion in 2023, down from $25.7 billion in 2022, indicating a 2% decrease year-over-year. This highlights a shift in buying behavior, emphasizing the importance of retaining talent for customers to assess their readiness to handle complex transformation projects. Additionally, IT firms are facing the challenge of mid-level talent migrating to global capability centers (GCCs).
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 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.”
