SERVICES-AS-SOFTWARE: Why It's Do or Die for Small and Mid-Market Firms

The IT services industry is at a crossroads. Margins are shrinking, client demands are evolving, and larger players are setting a new benchmark. The time to pivot is now—or risk irrelevance

Let me be brutally honest with you as someone who's been in the IT services industry for decades - we're at a critical inflection point.

WAKE-UP CALL FOR IT SERVICES LEADERS:

Market Reality Check

• Your current business model is becoming obsolete faster than you think
• 60% of traditional IT services will be platform-driven by 2025
• Larger players are already making this transition with massive investments
• The window for transformation is narrow - 18-24 months at most

Why This Matters Now:"Let me put this in perspective with real market dynamics:

• Your traditional labor arbitrage margins are shrinking by 15-20% annually
• Clients are demanding platform-based delivery for cost and efficiency
• Tech giants and larger IT services firms are rapidly platformizing their offerings
• The talent market is shifting - the best talent wants to work with modern platforms

Starting Small but Smart:

For instance, if you are a company offering end to end services in ERP, CRM, Application Management, Managed Services, Application Modernization, Integrations, data and analytics, etc.,Here's how you can start.

Begin with One Service Line:

Quick Wins (3-6 months): 

• Application Management Services automation
• Integration services platformization 
• Data analytics foundation 

Focus on: - Immediate cost reduction - Improved delivery efficiency - Enhanced client experience

Practical Action Steps (first 90 days)

• Assess your strongest service line
• Identify repetitive patterns that can be automated
• Start with one key technology partnership
• Begin upskilling your core team
• Pick one client for pilot implementation

Investment Approach for Smaller Companies: (Smart Resource Allocation)

• Start with 2-3% of revenue for platform investments
• Leverage partner platforms initially
• Focus on building IP and assets gradually
• Invest in critical skills development

Risk Management: (Practical Mitigation)

• Begin with hybrid delivery models
• Use proven platforms rather than building everything
• Start with existing clients who trust you
• Focus on quick ROI areas first

QUESTIONS FOR CEOS:

Survival Questions: "Ask yourself honestly:

• How will your business compete when larger players offer platform-based services at 30-40% lower costs?
• What's your value proposition when clients demand automated, scalable solutions?
• How will you attract top talent if you're still operating in a traditional model?

Growth Questions: "Consider this:

• What's stopping you from starting this transformation today?
• Which of your service lines could benefit most from platformization?
• How can you leverage your smaller size for faster transformation?

Action Questions: "The critical decisions:

• Where will you invest your next $100K?
• Which client relationship can you leverage for initial transformation?
• What's your first step in this journey?

INSPIRATION FOR ACTION:

Success Stories from HFS Research Case Studies (2022-2024):

Scalability Through Platformization: Let me share a more nuanced view of transformation success:

• Happiest Minds Technologies: Grew from $45M to $171M in 24 months through their 'Born Digital' platform-first approach, focusing on automation and digital solutions
• LTIMindtree (pre-merger examples of mid-sized success): Demonstrated how focused platformization in data analytics and cloud services drove significant growth
• Mphasis: Their 'X2C2-TM' framework showed how mid-sized firms can leverage composable solutions for growth

Note: These examples are referenced from public earnings reports and company disclosures. What's particularly interesting is not just their growth numbers, but how they approached platformization:

• Started with specific service lines
• Built gradual platform capabilities
• Leveraged strategic partnerships
• Focused on IP creation

The key learning from these examples isn't the specific numbers, but the transformation approach that made them possible:

• Clear platform strategy
• Focused execution
• Partnership leverage
• Client co-creation

The Bottom Line: Here's my direct message to you as founders and CEOs: This isn't just another technology trend - it's a fundamental shift in how IT services will be delivered. You have two choices:

• Start transforming now and lead in your segment
• Wait and potentially become irrelevant in 12-24 months

The conversation we've just reviewed provides you with a detailed roadmap. The question isn't whether to transform, but how quickly you can start.

What's your first move going to be?

What’s your biggest challenge in transitioning to a platform-driven model?