Does the traditional IT company have a future?

With the rise of commercial cloud services and increasing digitization, a major revolution is taking place in the IT industry. The traditional business model of IT companies is under considerable pressure. New competitors are the so called “hyperscalers” with a business model that differs greatly from the traditional IT outsourcing model.

Business software is increasingly offered as SaaS from the cloud and the market for Infrastructure-as-a-Service (IaaS) is growing by more than 40% annually. Because of this, the traditional outsourcing model – largely based on economies of scale – is no longer effective, resulting in decreasing revenues and loss-making contracts. This development is happening so fast that many traditional IT companies are forced to take drastic measures.

For Europe this development is even more dramatic since the public cloud market is dominated by American companies.

The accompanying article discusses these market developments and the consequences for the traditional IT company. Possible survival strategies are outlined.

In follow-up articles, European cloud initiatives and the position of regional IT companies will be discussed.