Index Insider: Managed Services Prices Decline Despite Wage Increases

Share: Print
Hello. This is Stanton Jones, Kathy Rudy and Chris Pattacini with your weekly briefing on what’s important IT and business services.
 
If someone forwarded you this briefing, sign up here to get the Index Insider every Friday.

BIG THREE THOUGHTS FROM 2Q22

Unit prices for IT managed services continue to hold steady – and in many cases continue to decline – despite recent wage increases. There are lots of reasons for this. Providers continue to aggressively automate everything from patching servers to re-writing legacy code. They are also focused on widening the bottom of their staffing pyramids. As we discussed a couple of weeks ago, 40% of staff have been hired within the last 12 months. For some providers, freshers (or recent university graduates) make up a quarter to a third of those recent hires.
 
Providers also continue to build out new delivery locations, using remote working models to tap into talent in smaller and lower cost cities across the globe. And, of course, competition for commodity IT services also continues to be intense, driving down prices to win new business.
 
You can see these changes affecting unit prices of many traditional IT services towers (see Data Watch).
 
Unit prices for server management are down between 2% and 4%, primarily due to increased levels of automation and standardization.
 
Storage and backup unit prices continue to decline but more slowly than in the past. Increased use of flash-based storage is increasing complexity, which is slowing unit price reductions.
 
And price declines for mainframe managed services are down – but only slightly – given the lack of qualified COBOL programmers and the steady rise in mainframe software costs.
 
My colleague Kathy Rudy will cover IT services pricing in more detail on the 2Q22 Index call on next Wednesday at 9:00 AM ET. Hope you can join us.

DATA WATCH

Index-Insider-Chart-74-Export_2022-7-07_v1_B_%402x.png

Share:

About the authors

Stanton Jones

Stanton Jones

Stanton leads ISG's Index research, helping providers, investors and ISG clients make sense of the global IT services sector. Stanton’s weekly newsletter, the Index Insider, is read by thousands of market stakeholders each week. An ISG Digital Fellow, Stanton has been quoted in Fast Company, Forbes and CIO.com, and has appeared on national cable news.

Kathy Rudy

Kathy Rudy

Kathy Rudy is Chief Data and Analytics Officer of ISG and a member of the ISG Executive Board. She was named to this post in January 2020. Kathy is responsible for the development of ISG data solutions and platforms to deliver new and even more valuable insights to our clients, as part of the overall ISG Platform strategy. She is working across the firm to enhance our data products, develop data-driven consulting assets, and increase our go-to-market effectiveness. Throughout her 20 years with the firm, Kathy has supported hundreds of client organizations as they leverage data to drive greater efficiency and effectiveness in their IT operations, build measurement programs and support critical sourcing decisions. She was responsible for the development of ISG Inform™, the firm’s next-generation data-as-a-service platform solution, launched in 2019. Before joining ISG in 2000, Kathy, a graduate of Michigan State University, was part of the Unisys team that managed the transition from internally delivered IT services to an outsourced environment for the City of Chicago.

Chris Pattacini

Chris Pattacini

Chris Pattacini is a Partner at ISG, with more than 30 years of industry experience. As an experienced IT outsourcing and benchmarking consultant, Chris is a recognized industry leader who utilizes state of the art benchmarking tools for project-based support of outsourcing transactions for large corporate clients. Chris’s expertise includes market price intelligence for various business and IT services. He currently manages the ProBenchmark platform.