Co-innovation is driving the $2 trillion technology services market — 48% of the $4.2 trillion tech economy. And it has been growing faster than GDP for decades. Why?

Simple: Companies and organizations run on technology. They turn to services providers to help them translate technology’s potential into customer and business outcomes. Successful companies don’t squeeze providers as vendors or manage them at arm’s length. They treat technology services providers as extensions of their own capabilities. They work in blended teams across a cohort of technology providers, services providers, and internal departments.

We call this co-innovation (more on that another time).

We recently surveyed 1,955 enterprise services decision-makers globally to find out how they select and work with technology services providers. What we learned holds important guidance for technology executives, including:

  • Providers bring more than capacity and expertise. The best providers bring large-scale hyperscaler and software partners. They also invest in emerging technology, and 29% of enterprise services decision-makers see that as a primary benefit. Generative AI — “There’s a ChatGPT for that” — is only the latest emerging technology to overhaul the way that technology drives productivity and outcomes. Providers are applying it in their own businesses.
  • Nearshore is on the rise. Fifty-two percent of services decision-makers expect their providers to source labor from Eastern Europe, and 41% expect it from Latin America. Why? Because these countries are adjacent to Europe and North America. It’s easier to do transformative work in blended teams when everybody’s in a nearby time zone. Keep your costs in check by working with onshore or nearshore providers for blended agile teams and offshore providers for large-scale development or operations projects.
  • There must be a commitment to coordination. Seventy percent of respondents using providers to implement business applications work with multiple providers. Half of them motivate providers to collaborate using outcomes-based contract terms, specifically “a common outcome metric that every provider is motivated to achieve.”

Let’s Connect

This is just a smattering of the data we have on 50 providers and nine lines of technology services, from app implementation and product development to cloud migration and security. If you’re a Forrester client and you would like to learn more, please set up a time for us to talk. You can also follow or connect with me on LinkedIn if you’d like. If your company has expertise to share on this topic, feel free to submit a briefing request.