Businesses turn to IT service providers during pandemic

The global study, which covered 200 large enterprises in sectors including finance, utilities, and technology, found that enterprises requested support from service providers to ease the impact of the pandemic on their business. This included asking for: longer payment terms (47%), price reductions (45%), or free support for more processes or additional services (41%).

This was widespread as enterprises struggled to cope with long periods of widespread economic shut-down. Most enterprises saw revenues fall (82%), faced operational challenges (78%), and over two thirds (68%) had to cope with service provider-related challenges.

Despite this, businesses continued to highlight the importance of working with service providers to deliver on critical digital transformation projects, with two-thirds (61%) saying they accelerated parts of their digital transformation. However, by prioritising business critical transformations, four-in-ten (42%) admitted they slowed on other projects.

And while three quarters (76%) of businesses expect to slow down some transformation initiatives during the next 24 months – due to either a reprioritisation of strategic objectives (74%) or the lack of financial resources (74%) – almost all (96%) expect to accelerate the execution of other transformation projects.

“IT service providers have played a key role in supporting businesses throughout the pandemic, from delivering additional capacity & capability, taken on lenient payment terms, sometimes proactively creating and offering new solutions to plug the gaps that were revealed in many organisations’ operations,” said Sukand Ramachandran, Managing Director and Senior Partner in BCG’s Digital practice.

The pandemic has also increased enterprises dependency on service providers, and consequently, 62% of enterprises say they are very likely to renegotiate outsourcing contracts in the future – with a focus on changes to contractual terms and conditions, pricing structure, delivery models, and scope of providers’ services.

Likewise, almost all businesses (90%) anticipate greater dependence on IT service providers in the next two years, with the same number admitting that access to digital talent is one of the biggest challenges that expect to face in the same period.

This is reflected in enterprises budgets, with half (50%) expecting to increase their investments in service centres that focus on specialised areas such as software architecture and engineering, applications development and maintenance, testing, product design, and business processes.

Sukand continued: “Post-pandemic recovery, service providers will need to re-evaluate the role they play with customers. Many enterprises have become more dependent on service providers to maintain business operations and will expect them to ensure high(-er) operational resilience in the future.”