Depending on where you draw the boundaries, the UK’s management consulting industry was worth anywhere between £6bn and £9bn in 2011. IT directors were among its biggest customers.
In the past, most expenditure has been connected, in some way, with the deployment of big, centralised IT systems.
Two decades ago, the advent of enterprise resource planning (ERP) was a boon for the consulting industry, the likes of which it has rarely, if ever, seen since, driving the use of consultants in everything from scoping and supplier selection to helping organisations manage the changes its introduction brought about.
Though few developments since have been anything like as lucrative, the industry has largely continued in a similar vein.
But buying habits are shifting in two important ways, with profound implications for the IT services and management consulting industries.
Money in short supply
The first is about the technology itself.
The past few years, since the collapse of Lehman Brothers in 2008, have not been easy times for IT consultants. In part that is simply been because the money to spend on IT has been in short supply. That is likely to have happened regardless of what was going on from a technology perspective.
But the growing suspicion is that this period of IT austerity has masked something more significant: the interregnum between two schools of thought where IT is concerned.
The end of big integration projects
In simple terms, this is about the shift away from the installation of big, organisation-wide systems, towards a world in which cloud computing and software-as-a-service (SaaS) dominate and encourage clients to fundamentally reappraise the way they buy and use IT.
That has the potential to spell trouble for IT services companies whose businesses have, for a long time, been predicated on the idea that they could sell large numbers of high-margin junior staff days on big integration projects. The implication is that they are going to need to evolve to the same extent, and at the same speed, that the technology itself is evolving.
IT is becoming more democratic
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But it’s also about something arguably more significant. The growing importance of IT to organisations in recent years has seen it breaking the boundaries of IT departments themselves and moving up the agendas both of other departmental heads and of CEOs.
And the lighter-touch nature of new technologies means that many outside the IT function no longer understand why they cannot make their own decisions where technology is concerned. Indeed the bring-your-own-device (BYOD) movement – in which organisations support employees’ choices about the hardware and software they use to do their work – addresses precisely that issue, recognising the autonomy, not only of departments, but of individuals in making decisions about IT. It is IT by democracy rather than diktat.
That presents a unique challenge for IT services firms which have always worked with IT departments and whose credibility may not yet extend much further. IT and business issues are self-evidently converging, and while it is clear that the consultants to whom people turn will increasingly need to be conversant in both, it is not yet clear who those consultants will be.
IT suppliers become more business focused
On one side of the IT-business divide are the IT services firms – the likes of Accenture, Capgemini and IBM. Their clients do not question their IT skills, but they are pretty sceptical about their business consulting capabilities.
Research conducted by Sourceforconsulting.com among IT and other departmental directors recently suggested that of the IT services firms, only Accenture is so far managing to convince clients that it has a story to tell outside the IT department.
But skills are only part of the story. What is also likely to be required is that these firms demonstrate their flexibility in adopting new models of delivery that are better suited to the ways clients now want to work with them. In that respect, Capgemini tends to be seen by clients as leading the way.
Big four accounting firms move into IT
On the other side of the divide are more traditional management consulting firms, including the advisory practices of the big four accounting firms – PwC, Deloitte, KPMG and Ernst & Young – all of which are becoming increasingly interested in the opportunities that any rewriting of the rules in IT might present.
It is why deals such as KPMG’s recent acquisition of CIO advisory consulting firm Xantus are happening, and are likely to continue doing so. But don’t write off the likes of the big strategy consulting firms – McKinsey, BCG, Booz and Bain – becoming interested too.
The next big battleground
What we don’t know yet is who will win.
Will IT services companies manage to persuade their clients that they can help them with broader business issues, or will business consulting firms take advantage of the opportunities that new technology presents and join the race at the front?
Much probably rests on the extent to which new technology genuinely levels the playing field.
Either way, the winners will be the firms which successfully build a bridge between the two sides. It is likely to be the next big battleground in the consulting industry, and it is one in which IT directors will have a big say.
Edward Haigh (pictured) is director of Sourceforconsulting.com.