Francisco D'Souza on why the tech services industry is at a unique moment

Francisco D'Souza, Cofounder, Recognize
 
History has shown that technology innovation, macroeconomic cycles, and business model shifts have been the primary drivers of change in the technology services industry. We’re at a moment when all these forces are impacting the industry simultaneously—creating opportunities for disruption and a reshaping of the industry.

Technology innovation has always been the main change driver in the tech services industry. Each new tech generation triggers a parallel change in the tech services industry. What’s different this time around is the tremendous fragmentation and speed of technology innovation. The underlying components of ‘digital technology’ like cloud, artificial intelligence (AI), 5G and Internet of Things (IoT), to name just a few, could not each be more distinct and profound.

Macroeconomic cycles like the great recession and the brief Covid recession have equally been drivers to reshape the structure of the tech services industry. The pandemic changed the relationship between employees and employers, and this will impact the services industry, changing the model of managing people and enabling a greater number of gig workers from around the world to join the industry. Finally, in the last three decades, we witnessed a single instance of a fundamental change in the business model of tech services as ‘offshoring’ became mainstream, driven by the convergence of high-quality global talent and low-cost bandwidth. Today, AI is initiating another business model shift, transforming what and how services are delivered to clients, and automating internal operations.

This realisation and the opportunity to innovate at the intersection of these three powerful change vectors for the industry led me to co-found Recognize. The pace of innovation and change in the industry in the past five years has been breathtaking—perhaps even more so in the last 12 months.

Recognize sees an opportunity to work with the next generation of services winners to create new models to deliver technology services and respond to the trends of technology innovation, specialisation, fragmentation, new human capital models and AI-driven business models.

We believe that the next generation of services winners will be companies like Ciklum, Blend360 and SpringML that embed ever more intellectual property into everything they do. This intellectual property will take the form of software, data and AI algorithms. AI promises to reshape what we deliver to clients (every application will be an AI application), how we deliver to clients (using productivity tools like Copilot and CodeWhisperer) and how we run our businesses (hyper automation of internal activities).

Also read: Cognizant founder to PE: Inside Francisco D'Souza's new innings

We are also investing in companies that have a new approach to human capital— tapping new talent pools around the world and bringing them to bear in new functional areas or business domains. We call this ‘New shoring’, and our investments in TORC (along with their developer productivity IP, Codealike) and Qubika are focussed on bringing new talent pools to the fore.

Lastly, services businesses need to focus on results for clients, pricing and creating commercial relationships based on outcomes, instead of the traditional input-focussed model. This will be even more critical since firms will need to capture part of the benefits of advanced AI-based automation. Our investments in 2X, a marketing-as-a-service company, and AST are great examples of this thesis.

Recognize is focussed on building a set of services company winners that are focused on AI and other IP embedded with services, the future of work, and outcome-based models.  It is an exciting time in the industry, and we look forward to being at the forefront of these changes.