Survivability of IT consulting firms

Survivability of IT firms cropped

There are huge opportunities for IT consulting firms, which is reflective of the dynamic nature of the IT industry and the current heat in the market. However, the opportunities are not without risks associated with advising in a fast-paced market. Consulting in a hot sector like IT means that competition is stiff and firms need to keep up to date with and adapt to changing technology trends. The rewards are great indeed for those that can navigate their firm to remain successful as the industry changes. How do firms ride the wave to ensure they stay relevant and grow real value? The answer is not the same for all, but an understanding of how these changes impact the ‘saleability’ of a firm is important.

The rapid changes transforming the sector are giving rise to three particular areas of interest to buyers.

1. Cloud

What’s happening?

Cloud offers a new and attractive delivery model for IT. Companies that adopt cloud-based software or platform delivery minimize the upfront infrastructure and ongoing IT staff costs, and can also improve the scalability issues typically associated with IT. Buying IT as a service can be cost and cash flow efficient, and it offers the flexibility to scale up or down according to requirements.

What does this mean for consulting firms?

Cloud creates a new context for IT delivery, and this brings with it new challenges to common IT issues of integration, data management and scalability. It will be critical for IT consultants to keep updated on new architecture models and best practice changes as technologies mature. As cloud based software, infrastructure and platform vendors take stage in the market, IT consultants will need to either place bets on winning technologies or keep up to date with a wide variety of vendors to be able to advise on the pros and cons of each. Whilst IT has always been a dynamic industry, the industry changing nature of cloud as an IT delivery model requires IT consultants to step up the pace of their research, and to develop or strengthen their strategic partnerships, in order to remain relevant in this space.

2. Cyber security

What’s happening?

IT security has been an issue since the birth of the IT industry. However, the implication of computing, data and channels of business moving online results in new and heightened threats to business operations and data security. Cyber or online security attacks that disrupt operations or result in a loss of data can have huge repercussions on a business, as this can immediately affect a company’s brand and the perception of its customers. As such, cyber security has become a significant issue that all companies now need to manage in line with their online presence.

What does this mean for consulting firms?

Cyber security is a highly specialized topic that requires deep domain knowledge. It’s also fast moving as new threats constantly evolve. Consultants must be confident that they have the skills, knowledge and intelligence to be effective in this challenging environment. In some cases, traditional IT security approaches are still relevant, but new cyber security models will also need to be applied to effectively address the different nature of threats. Keeping updated with new security standards and the latest research will be an important new driver for IT consultancies to remain updated.

3. Data analytics

What’s happening?

As companies become increasingly more dependent on IT, so too does the volumes of data they amass through their use of IT systems. The intuition is that having a lot of data should be useful, however extracting insights from the analysis of this data requires highly specialized expertise. Data is like a new goldmine. Mining it effectively is the new challenge. Consulting firms that can help organizations put the data they have to use are therefore in very high demand.

What does this mean for consulting firms?

Analytics is an area where everyone knows it is useful, but very few know how to do it properly. Consulting firms must be able to find new ways to collect, store, and structure, analyse and report on data stored to get the most out of it. However, not all IT consultancies that have expertise in traditional IT areas of data management and business intelligence are able to address all of the complexity that data analytics typically involves and the predictive insights that can come from it. So IT consultancies need to keep pace, but they must build the skill before they can sell it. Research and thought leadership papers can be a great way to start. Building partnerships with key vendors that specialize in analytics can also be helpful in landing those first few projects.

Even if keeping up with IT industry changes, the fundamentals of selling an IT consulting firm remain unchanged.

As the IT market matures so too does the requirement for consulting firms to have deep domain knowledge and specialized skillsets. Evolving IT areas like those above still require deep expertise in order to stand out from the crowd to be attractive to buyers.

Demonstrating you have securely imbedded your intellectual property (IP) internally, is essential. If your firm’s knowledge, experience, tools and techniques exist solely in the minds of individuals within your firm, those assets may walk out the door!

Finally, consultant loyalty remains key. IT consulting skills change at a rapid pace in line with the industry. If your IT consultant’s skills and knowledge is in demand, so too is your firm’s services, but retaining talent is also a key challenge. Taking measures to ensure you attract, develop and motivate the best quality staff is a necessary investment in time and resource. Consider linking some compensation to profit growth and ensure any knowledge gained through contract professionals is retained with your staff. If you’re entering into an M&A process, we recommend you read our recent blog on effective communication in an M&A deal in order to keep your people onside and engaged.

The IT sector is an exciting sector to work in. No doubt the landscape will look very different again in 5 years time, but the principles of building a consulting firm of value are likely to still be true. Read our 8 Levers of Equity Value to find out more.

2 thoughts on “Survivability of IT consulting firms

  1. Colin – thanks for your comment. You are correct in that keeping skills current and retaining key staff is vital in all consulting firms. However, the pace of change in IT is generally quicker than in other consulting sub sectors. The market is very dynamic and innovative. Thus keeping skills relevant requires more frequent training and those with skills in demand are more likely to be proactively sought out in the market. So retain staff with hot IT skills also becomes a bigger challenge as a result of keeping their skills current. Selling a consulting business is typically a disruptive time for staff, so it is worth considering the best way to retain staff through incentives. Otherwise they may respond to others knocking on their door.

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