How can they do this? Look at these new services in two primary, somewhat overlapping categories:

1. Sales and demand-creation services, including vertical, solutions-led sales services, business-process-consulting services and automated Web-based e-business services.

2. Delivery and management services, including new communications services, automated management services and a growing range of third-party, increasingly remote, IT delivery services, such as managed infrastructure, managed applications, IT outsourcing and business-process outsourcing (BPO).

Sales and Demand-Creation Services

Vertically focused business-process and IT consulting services are emerging as the foundations of new solutions-based selling models. These new consulting-based, solutions-selling services facilitate the IT sales process by integrating and simultaneously addressing the needs of general management and line-of-business executives, as well as IT managers. Then, once customers are sold on the types of products and services they need, they can use Web-based e-business services to define, select, buy and sometimes deliver their solutions.

Delivery and Management Services

Solutions that traditionally took the form of customer-resident and -managed hardware and software installations are being delivered over networks as managed, outsourced, subscription or even pay-per-use, utility-based services.

The Transition of Human Services Into Network Services

As if these changes weren't profound enough, a new, even more fundamental change is reshaping IT delivery and management. Services that used to be performed manually and, typically, in an individual, ad hoc fashion, are now being formalized, systematized and embedded into software. This automation of all various sales, configuration, integration, management and support services squeezes not only the labor costs out of these tasks, but also the inefficiency and inconsistency. This is resulting in a radical, industry-wide redefinition of all types of services — from upfront sales to ongoing life-cycle operations and management. As shown in the Figure, many traditionally informal or ad hoc manual services are being formalized, digitized and automated. Some of these new network-based services will replace manual services in toto. Others will reduce — albeit not eliminate — the need for these services.

Figure: The Internet Services Delivery Ecosystem

Redefining IT Business Models

The transformation from product-led to services-led selling is already leading to more business-responsive solutions, and the automation of the buying process is cutting both time and cost out of the process. Meanwhile, a new generation of operations-management, applications-management and services-management tools is systematizing and automating traditionally ad hoc and error-prone manual-management processes, reducing not only the cost of managing IT infrastructures and applications, but also the opportunity for human error — the number-one cause of IT downtime. What's more, the foundations are now being laid for even more dramatic gains, as in using Web services to simplify time-intensive application-integration tasks, and in using BPO to streamline and automate inefficient business operations. Combined, these services-based transformations promise to slash the costs of IT solutions and improve their reliability, thus better addressing real business needs.

The IT Vendor Mandate

These changes are already in process. And, guess what? One single vendor is leading virtually every one of them. IBM led the industry's move into services-led selling, and is already (through its systems-integration, strategic-outsourcing, e-hosting and applications-management groups) one of the two leading services-based solutions-delivery providers, along with EDS . IBM is also one of two (with Microsoft) leaders of the nascent Web-services movement. Finally, the vendor's acquisition of PwC Consulting promises to dramatically expand its vertically focused solutions-based selling, business-process consulting and BPO capabilities. (For detailed examinations of IBM's services strategy, see Summit Strategies' August 2002 reports, IBM and PwC Consulting: An Unbeatable Combination? and The New Blue: Can IBM Burn Down the IT Industry and Rebuild It in Its Own Image?) If IBM can accomplish its objectives, it could forever change the way customers view and buy IT, and the criteria by which they evaluate their IT providers. Although some of IBM's competitors are publicly condemning the giant's actions and motives, none is willing to bet heavily that IBM will fail in its goal of changing the ways in which customers evaluate, buy and deploy IT. In fact, every leading systems vendor, systems integrator, service provider and management-tools vendor in the industry is trying to catch up.

The Power of Partnerships
True, no single vendor or provider can hope to match IBM across the full span of disciplines required to power a true services-based business model. Nor should they try. Instead, they must partner to create services-based models that are both more flexible and comprehensive than IBM's, while simultaneously providing the same level of single-source accountability — and they must do so quickly. Accomplishing these tasks will require very different types of partnerships than any of these vendors have entered into before. They will have to create multisourcing ecosystems. These ecosystems, as we have discussed in multiple reports, require many types of systems, software, professional-services and managed-services firms to seamlessly and efficiently partner in such a way that one provider can maintain full accountability for ensuring business-based service-level commitments across the solutions' entire life cycle — just as IBM/PwC is promising.