Will the consolidation of IT consultancy muddy the waters for IT decision makers?

The reduction of independent IT advisory resources, as a consequence of industry consolidation, means CIOs will have to rethink where they buy their consultancy...

The reduction of independent IT advisory resources, as a consequence of industry consolidation, means CIOs will have to rethink where they buy their consultancy services before embarking on major projects.

Having a one-stop-shop for end to end IT consultancy services can have its advantages in terms of reducing cost and complexity, but where a service provider has multiple arms, it also means the loss of truly independent advice.

Recent acquisitions including Information Services Group's (ISG) take over of IT benchmarking firm Compass and KPMG's purchase of IT sourcing consultancy Equaterra are recent examples of the consolidation in the IT consultancy sector.

The acquisition of IT benchmarking company Compass, by ISG, means the UK loses an independent IT benchmarking resource because it has been swallowed up by a group that already offers services such as IT sourcing consultancy. According to one industry source ISG sees itself as a company with a portfolio of businesses that provide advisory services using fact based analysis as the foundation.

If a company that carries out IT benchmarking or sourcing advice has services to on-sell such as outsourcing and consultancy there is a fear that customers may not get completely independent advice.

These fears have been expressed by FTSE 100 companies, says a source. "Customers need to know that when they get results from a benchmarking supplier that they are not driven by someone else's agenda."

Clive Longbottom, analyst at Quocirca, says that any business buying benchmarking need to be sure they know which supplier owns the benchmark and what other services they have to sell on.

KPMG also added a string to its bow when it took control of sourcing consultancy Equaterra. This acquisition could be part of a trend that sees the standalone corporates that offer pure sourcing consultancy disappear. The disappearance of an independent sourcing consultancy could also accelerate the rise of the sole-traders, as decision makers seek truly independent advice.

Mark Lewis, partner and head of outsourcing at law firm Berwin Leighton Paisner, says there are the big consultancies with sourcing capabilities competing with thousands of independent consultants or small companies specialising in sourcing.

Independent sourcing consultants, who work alone or hire support when required, can handle large deals and provide an alternative which is totally independent of any company offering the IT services.

Peter Brudenall, partner at UK law firm Lawrence Graham, says ideally a business would not want advice from a consultancy that could have another revenue stream form a project.

He says the consolidation will make customers look wider for services and may as a result increase opportunities for smaller consultancies. "It might encourage businesses to shop around and there are many good consultancies out there especially in niche areas."

Longbottom says that KPMG will inevitably integrate the Equaterra service into its own but he questions whether small suppliers can really fill the gap left. "Will small consultancies have the depth, breadth and reach to do proper comparisons?"

Consolidation in the IT consultancy sector will enable investment in services and could open the door to new players that fill gaps left behind after mergers and acquisitions. But it also means CIOs have to re-educate themselves on where services are available. Conflicts of interest may now exist where they didn't before.

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