Leadership Matters

Perspectives on the key issues impacting senior leaders and their organizations
August 23, 2022

Leadership in Tech Services: Five Trends Companies Need to Plan For

Every company operating today understands that technology is fundamental to its business. Operational execution, profit generation and customer interaction are all impacted by technology and the services it provides. Businesses within the tech services sector have seen tremendous growth over the past 10 years — with significant acceleration since the onset of the COVID-19 pandemic. Gartner estimates that the global tech services market will grow to $1.3 trillion in 2022, with strong continued growth forecast. Digital business projects such as cloud adoption, coupled with an ongoing IT skills shortage, will bolster the services sector going forward, and organizations will continue their reliance on service providers as digital initiatives accelerate and the resource gap endures.

Amid this rapidly evolving tech services landscape, global, large-scale, multi-service-line players are continuing to grow steadily, while at the same time, small and mid-cap companies are gaining significant momentum as well. Private capital firms see the value of the domain, with increasing investment activity – which in turn is accelerating sectoral growth.

At Spencer Stuart, working closely as advisers to leaders seeking to navigate this environment, we have identified five common challenges for this expanding industry as it seeks strategic ways to move forward. In future articles, we plan to address these five challenges in depth:

  • First-time CEOs. Many boards are seeking successors to their current CEO, or are looking to hire their first non-founder CEO. Tech services players are not unique in facing a serious leadership challenge as the demand for experienced talent outweighs supply. Therefore, many are turning to first-time CEOs to fill these leadership roles. This article will look at some insights into what allows first-time CEOs in the sector to be successful, and how we advise clients to evaluate potential leaders for these critical leadership roles.
  • Private equity’s rising presence. PE firms are increasing their activity and investment levels in the tech services space due to its steady growth, predictable margins and long-term contracts. These firms recognize that executive talent is essential to their investment theses and are seeking leaders who can help drive significant returns in shareholder value. As PE interest rises, there are several ways firms can enhance their talent evaluation processes before investing.
  • Talent migration. Services leaders are increasingly being recognized as good all-purpose athletes, with the ability to migrate relatively effortlessly between the adjoining worlds – professional services such as consulting and advisory, technology services, tech-enabled services, and professional services in product companies. With demand for top leadership across the industry burgeoning, companies need to identify, analyze and source top talent across a wider array of backgrounds.
  • Diversity and inclusion. Diversity, equity and inclusion efforts are under increased scrutiny in all industries, and tech services is no exception. Historically, the tech services industry has lagged behind other industries on inclusion. Yet as this sector expands to serve diverse markets, industries and clients, building a workforce representative of and responsive to ever-greater diversity is critically important. Organizations must be thoughtful about how this is represented in their leadership teams.
  • The CHRO’s role. At the forefront of these issues is the chief human resources officer, who is tasked with stewarding the process of developing and retaining top talent, identifying future leaders and creating equitable workplaces. In the wake of the “Great Resignation,” CHROs are entrusted not only with helping create career opportunities for prospective talent, but also building a strong employer brand. Overall, as the tech services space accelerates and the quality of talent in companies becomes a competitive differentiator, the CHRO role is more important than ever before.

Looking Ahead

Our future articles will explore how tech services companies can address the themes above. At the core of these themes, however, is leadership. As we see in our work with industry leaders, services companies are being asked to bring a transformation mindset to the conversations they’re having with their clients. To do this, they will also need to transform their own businesses.

As we continue to develop the theories, we welcome your thoughts and comments on each article, as well as other themes and developments you are observing in the market.