Executive Summary: ISG Provider Lens™ Digital Business - Solutions and Services - U.S. 2021
To download the report for all quadrants, click the PDF on the right
The individual quadrant reports are available at:
- ISG Provider Lens™ Digital Business - Solutions and Services - Digital Customer - Experience Services - U.S. 2021
- ISG Provider Lens™ Digital Business - Solutions and Services - Digital Business Consulting Services - U.S. 2021
- ISG Provider Lens™ Digital Business - Solutions and Services - Blockchain Services - U.S. 2021
- ISG Provider Lens™ Digital Business - Solutions and Services - Digital Supply Chain Transformation Services - U.S. 2021
- ISG Provider Lens™ Digital Business - Solutions and Services - Sustainability & Decarbonization Services - U.S. 2021
Enterpises and IT Leaders in the U.S. Have now Shifted from Reactive to Proactive Phase in their Digital Transformation Initiatives
ISG rated 55 providers for the Digital Business Solutions and Service Partners 2021 report across five quadrants for the U.S. market. More vendors have participated in this year’s study compared to last year, with almost 60 percent demonstrating expertise across quadrants, indicating a stronger push for digital services. The changing priorities of businesses during the COVID-19 pandemic and during the current recovery phase are a major factor that drives the overall growth of digital services in the U.S. In addition to analytics, automation, cloud and cybersecurity, other trends such as the connected ecosystem, implementation of digital solutions using low-code/no-code platforms, immersive experience technologies, digital technology-enabled sustainability services and multi-cloud environments will further fuel the growth of digital transformation in the region. Data from the ISG Index™ finds that global demand for technology and business services reached a record high in the second quarter of 2021. ISG forecasts that the global market for cloud-based services (IaaS and SaaS) will grow 21 percent in 2021 and 9 percent for traditional managed services. ISG data shows that interest in cloud solutions grew significantly in the first half of the year, with the number of Forbes® Global 2000 companies indicating an increased buying intent more than doubling since December 2020, especially among larger companies. This signifies a strong push for digital business services that will continue to grow, as enterprises in the U.S. will now see digital service providers as core partners for achieving their digital transformation objectives.
The pandemic has accelerated digital transformation by three to five years and has created a robust demand environment for IT and service providers. Enterprise clients are looking to build IT ecosystems that are not only secure, agile and cost effective, but also capable of driving growth, innovation and an improved customer experience. In the U.S., there are still significant opportunities remaining, such as migrating and upgrading the significant legacy enterprise systems and applications as well as providing the edge computing necessary to collect and analyze operational data to improve decision making, performance and continuous innovation.
Digital transformation is one of the key trends in modern business. It refers to both the digitalization of existing processes and the development of new and digitally enabled ways of doing business. It is a broad term that encompasses many technologies and business processes. Many technology enablers such as automation, analytics, cloud and mobility will continue to dominate the trends for digital business transformation services, considering the demand for process efficiency and data-driven customer experience. But many new and evolving technologies, such as machine learning, digital twin, 5G and IoT, are accelerating these trends and leading to exponential changes in many areas such as supply chain, customer and employee experience and sustainability.
Digital transformation became important for enabling remote working, enhancing collaboration workflows, and streamlining operations from supply chain management to customer experiences. In 2020, the objective was to quickly deliver collaboration, workflow and analytics capabilities in the cloud. This trend will continue to dominate in 2021, but will witness a new phase and approach. IT leaders will shift from a reactive attitude to more engaging strategic digital transformation initiatives. Enterprises in the U.S. will become more dependent on digital service providers for building and refining digital business models, fostering a culture that prioritizes experimentation and using technology and data to establish competitive advantages.
Some notable trends in the U.S. market are as follows.
- Agile to remain key for reshaping business model: The move to agile practices and DevOps is the start of the enterprise journey to establish an agile business model that supports digital transformation. Enterprises are expected to invest more in agile management tools, adopt experimentation cultures and expand agile to their data science teams. There will be a multidisciplinary agile team consisting of people from various business functions, and change management programs will be a crucial part of the agile strategy.
- Use of low-code platforms for offering a better experience: Low-code platforms help in rapidly developing workflow applications, customer engagement applications, line-of-business applications and integration of automation. They play a crucial role in modernizing legacy applications and moving more workloads to the cloud for a better employee and customer experience and improved collaboration.
- Data-driven approach to continue mainstream: Most providers are leveraging analytics and AI to analyze data and provide a new-age customer experience for digital consumers in the new future. This approach is being leveraged to understand the changes in consumer behavior and not only adjust existing digital services for customer requirements but also to capture any new market opportunities.
- Outcome-based pricing model: Many providers are adopting outcome-based pricing models to deliver digital services to clients. Approximately 10-15 percent of service provider contracts are based on outcome-based pricing. With more enterprises adopting digital services, there has been huge percentage growth in demand for contracts in this pricing segment. This also indicates that providers are ready to put their profit in the game.
- Providers to continue investing in building in-house digital tools: The combined use of tools and accelerators for digital services as well as ready-to-deploy platforms helps providers position themselves uniquely in the market. They are investing in building industry-specific tools with proven use cases, and function-specific solutions. These tools help providers create the required differentiation in the competitive digital business transformation service market.
- MLOps is here to stay: The machine learning operations (MLOps) approach is modeled with machine learning, DevOps and data scientists. It offers users the opportunity to reduce deployment time and monitor machine learning models for model drift in production. It also provides a management and operational framework, allowing data scientists to focus on developing and testing datasets as well as creating AI models to carry out the analysis.
To better understand how suppliers are delivering digital services to clients, ISG has developed a framework with five broad service delivery areas:
- Digital business consulting services
- Digital customer experience services
- Digital supply chain transformation services
- Sustainability and decarbonization services
- Blockchain services
Digital Business Consulting Services
Consulting service providers have now modified their pandemic-specific offerings to help clients remain sustainable and capture new opportunities that arose during the crisis. They offer services such as digital strategy design, organizational change management (OCM), collaboration tools, digital culture consulting, process automation and omnichannel experience, along with support for digitalizing the supply chain and maintaining cash flow.
To achieve this and accelerate digital transformations, providers are adopting accelerators such as DevOps and DevSecOps methodologies for agility and security, and application programming interfaces (APIs) to boost efficiency and facilitate innovation. ISG observes that more consulting players are building greater capabilities in AI, machine learning, analytics, security, IoT, design thinking and prototyping to support clients in their digital transformations. Other services include benchmarking, digital maturity assessments and strategic research around market dynamics. Supply chain design, supply chain consulting, supply chain analytics, predictive analytics and related technologies such as blockchain and IoT are in high demand among clients.
Digital Customer Experience Services
With many businesses moving to online channels, service providers have been nimble and agile while building these applications for their clients in a shorter time. Such customer experience services have helped businesses to reach their clients and sustain day-to-day operations in a digital manner. The increased adoption of digital technologies has led to a significant surge in cloud-based implementations. Many providers have deployed customer experience services built on hyperscalers. With a continued focus on customer experience services, there has been a greater emphasis on building direct-to-consumer strategies and applications around them. With many distributors facing challenges in continuing with the physical workplace environment due to public safety precautions, businesses have built direct-to-consumer applications wherein services are directly delivered to consumers through digital channels.
Digital Supply Chain Transformation Services
Supply chain modernization is a central focus across industries in the U.S. To drive growth and business innovation, supply chains must be agile enough to cope with disruptions. This was made clear over the course of global events such as pandemic, Brexit and rising political unrest, as agile supply chains served enterprises by catalyzing new business opportunities in a uber responsive and scalable manner. A rigid or slow supply chain can have the opposite effect, slowing down or even running a business’ ability to deliver a strong customer experience into the ground. Advances in supply chain related systems, services and technologies, together with more efficient network orchestration and network capacity, have the potential to solve seemingly uncompromising business problems. Areas where there have been promising advances include network capacity optimization, digital twins, orchestration of data across systems, AI and machine learning, and ethical sourcing.
Sustainability And Decarbonization Services
Service providers have specific offerings to help clients in this segment. These include assessing and measuring carbon emissions, identifying aspects/areas where there could be possible reduction/exclusion of carbon footprint, and using digital technologies to strategize and plan decarbonization across business units. Some enterprises are also targeting to achieve circular economy leading to zero waste and to create sustainable supply chains for specific industries.
Blockchain Services
While there is a high dependency on the underlying infrastructure requirements and the complexity of various components working together for a successful blockchain implementation, there have been certain specific areas where there is traction for blockchain. The adoption of blockchain has gradually increased this year, along with many early blockchain initiatives and use cases ranging from proofs-of-concept (PoCs) to pilot and production stages. Based on their qualifications and expertise, prominent platforms in this space are Hyperledger Fabric, Ethereum and R3 Corda. The growth of blockchain services in the U.S demonstrates enterprise readiness and is moving beyond the hype growth phase. The technology is continuing to witness cross-industry adoption, led by many new use cases and application areas for blockchain such as fraud management, counterfeit management, identity management, capital markets solutions and industry-specific use cases such as supply chain solutions for pharmaceuticals, energy management and sustainability.
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