Will 2016 be the year we find out which 'traditional' IT suppliers survive the digital revolution?

The combined revenue of the five biggest global corporate IT suppliers declined by more than $12bn over their past four financial quarters – at a time when the use of technology worldwide is booming.  

That $12bn isn’t money that has disappeared from the market – it’s simply being spent elsewhere. A growing number of IT leaders are turning to new sources of innovation – whether from startups, fast-growing firms in emerging technology areas such as cloud, or greater use of open source and in-house resources.

So perhaps the biggest question for 2016 is whether the traditional IT suppliers – the ones you formerly couldn’t get sacked for buying from – are able to reverse that slide by proving they can compete in a new digital world. If not, then by the end of this year we may be preparing a series of corporate obituaries for their slow, inexorable, inevitable declines.

Look at the corporate structures of some of these old behemoths and read their marketing messages – it’s all product, product, product. Yet there has rarely been a time when IT leaders are less interested in the latest product.

For most of the history of corporate IT, change has been driven by the newest products from the big suppliers. You all remember the acronyms – ERP, CRM, BPM and all the others. Each represented a new wave of software products, and a new source of income for their suppliers. Microsoft Windows was always the classic example – product sales driven by whenever Microsoft decided to release a new version.

That’s left many of those suppliers in the unenviable position of spending most of their multibillion-dollar research and development budgets on simply developing new functionality for their existing products – and their sales reps forced to push those products endlessly.

As a result, the amount of genuine innovation coming from those companies has dwindled – how many game-changing technologies have they produced in the last five years? And they all missed cloud, mobile, big data, social media – and will miss many future trends too.

The balance of power has changed, but traditional IT suppliers are having the same conversations with IT leaders they were 10 years ago. Those IT chiefs – dependent as they are on the suppliers’ legacy systems, for now – listen politely, but increasingly take their transformational digital spending elsewhere.

Some observers would say it’s already too late for many IT dinosaurs – and in some cases, they’re right. But there is no doubt the clock is ticking and the asteroid is approaching for all of them. By the end of this year, the purchasing decisions of IT leaders will give us a clearer view of their fate.

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Great article.

From my experience, I believe that most large suppliers have "woken up to smell the coffee" - some have more catch up than others.

As per your article, backed by the sales figures, points out the tech transformation impact can no longer be ignored at Exec level in large corporate vendors as it is being felt in the market share/the financials.

However, IMHO there are still too many "cash cow" opportunities due to the buy side. The buy side is often under less pressure to be wise to tech transformation, and it is possible that technical dinosaurs & (un)intelligent buyers may give some of the laggard vendors (who have been more resistant to change & market evolution) a bit of extra financial runway. Unfortunately for the purchasing companies, this will be at the expense of their own entity's future and/or cost base.

All views expressed are my PERSONAL opinion only.