This year marks the tenth anniversary of my retirement from the role of group IT vice president and CIO of ICI to start portfolio life as non-exec chair of several young technology ventures and as consultant and strategic coach. It also marks the fifth anniversary of a move into a more active role within the UK IT vendor community. Possibly gamekeeper-turned-poacher, but also an opportunity to develop insights into the fundamental changes at work in this still young industry.

In my previous 11 columns I have articulated a framework of my insights so to mark the 12th I set out here some, possibly trenchant, observations that I hope give further practical dimensions.

My first is that the sector of the IT industry we label as IT services is really misnamed. These may be technology-enabled business services, but business services are what they are in practice. Where they are best procured, they are procured for their business value, not for their technological underpinnings. The technological label implicit in the term ‘IT services' risks inward vendor focus on the glories of their technical skills rather than an outward focus on customer value delivered. The reality is that IT services are business services, no more and no less.

My second observation is that the suppliers of these business services face an overhaul of their business models. Two key aspects of these models have been their high people-intensity and their degree of direct supplier/client engagement. Pioneers in technology-enabled consumer services have replaced people-intensive business models with technology-intensive ones, and innovatively reworked their client engagement models. Think Google and Amazon, and Betfair. The profitability of most of these longer established technology-enabled business services companies thus lies in delivering ‘bums on seats' business models.

Earlier this year I mentioned the Google desktop business service priced at £33 per user per year, self-procured off the internet. Some UK government departments still source these services in-house at costs of over £1000 per user per year - and the best government outsourced service deals come in at between £700 and £900 a year. At times of great financial stringency, it takes some bottle to justify what is in essence a 2000 per cent price premium for what is now a very routine business service.

And so to my third observation - whither ‘pure play' software businesses? These heartland bums-on-seats firms now face their Rubicon moment. To continue as people-intensive businesses, they must reposition into business services where the human contribution will be sustainably rewarded into the future: deep expertise in helping clients deliver and develop the nuances of their specialist core competitive competencies. Or they must decide that their future lies in delivering highly automated infrastructural business services like data processing and storage, and high-volume generic transactional business services such as payroll.

However, these two business models are so fundamentally different in their management focus that they cannot easily coexist within a single enterprise framework. Strategic decisions must be made, and individual Rubicons crossed.

And my fourth observation? I am leading the launch of an initiative in the IT industry to spur the use of Outcome-Based Agreements (OBA). As I set out in my most recent column, the sharp CIO will procure generic back-office and underlying infrastructural stuff as commoditised services, and will then focus his or her applied technology agenda on the better exploitation of those key core competencies vital to the business. And this is where the integration of the classic trio of people, process and technology is now so intimate that, in the view of those of us backing the OBA initiative, established procurement structures based on technically-drawn input/output service level agreements (SLAs) and adversarial bidding processes clearly fail to deliver.

In the OBA world, attention is focused on delivering required business outcomes. Consider an airline seeking a maintenance system for managing the servicing of its aircraft. The classic SLA will deliver a robust operating environment that meets its performance objectives as a technical system. The OBA delivers a business service so integrated into the airline's operations that its performance objectives can be detailed in terms of the flying hours achieved for the airline's fleet.

A very different IT industry is shaping, one delivering business services, not IT services. A vendor community increasingly layered between suppliers of automated infrastructural and back office business services, and suppliers of people-intensive specialist services that align tightly to the delivery of their clients' competitive core competencies. And in the latter context the development of new procurement processes that can identify and deliver the effective strategic business partnerships necessary for an OBA culture to flourish.