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Between Arnie’s revelations and DSK’s advances, it’s been a tough week for the service industry. And, while shorter on hanky panky, the outlook for Uncle Sam’s help ain’t very romantic. Torn by a series of tech trysts - cloud, data center consolidation, consumerization, mobile apps - seems the Fed/contractor marriage is coming unglued. Around the Beltway and across America, SIs are waking up to the prospect of the single life. There are two types of SIs in the future - those that shift and those that shrivel.

Hasta La Vista - Baby?

This is more than the cyclical ebb and flow of insourcing. And, it’s more than budget pressure. Though both compound the couple’s woes. The simple truth of the matter is they’ve grown apart. Cloud jilts custom development. Data center consolidation means less bedside care. Mobile apps will hang up on call centers. Even the Fort and Pentagon ghost was shot dead in Abbottabad. Uncle Sam doesn’t need the help - and pointedly can’t afford it.

I’ll Be Back?

As D.C. kicks contractors to the curb, is it heartbreak for everyone? Don’t be so silly. Uncle Sam will need highly skilled help to support slick new IT models - and pointedly the transitions. But, he’ll do more with less. Those SIs that focus on the high-skill areas and really differentiate will win and prosper. Those that try to stick to the past will fade away. And, the winners have to anticipate sharing the smaller pie with pure-play cloud vendors - Google, Amazon, Rackspace - as well as OEM/telco cloud players - Microsoft, IBM, HP, Oracle, Terremark. And, to add insult to injury, the new FAPIIS database will make it tougher for SIs to shake old bad relationships.

Terminator?

So, what does all this mean for D.C. - is it a new beginning or the beginning of the end? I’m thinking the former. A highly skilled labor pool and abundant capital will find new inspiration as corporate America stirs from its beauty sleep. If you don’t trust me, check in with the match makers at Carlyle...

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