For every consultant who spotted the cloud opportunity and raced to embrace it, there will be another who is still not quite fully convinced.
Clients have spent hundreds of thousands – or even millions – on their on-premise solutions, they are comfortable with their data centres and have established long-term relationships with their maintenance engineers. They’re not ready to give all that up in one go. And, as long they resist a wholesale move to cloud, there’s a role for IT consultants and specialists to offer support for these traditional models.
But the pace of change is quickening; clients have tuned in to piecemeal migration and with software vendor innovation being cloud-focused, the largest traditional consulting firms have seen the writing on the wall, turning to mergers and acquisitions (M&A) as the only credible way of rapidly building their cloud capability.
Shaun Fröhlich is UK managing partner of Incredibleresults, and works with leadership teams to accelerate value growth.
“We are all on a spectrum,” he says. “Many believe the world is changing because of the cloud and it is spurring them on to cash in their chips on their existing business, but there is an almost equal number that remain neutral and see it as an evolution, not reason to trigger a capital event.”
Despite the cloud offering faster, less disruptive deployment and easier global enablement – while cyber-security concerns have increasingly been addressed – migration to the cloud isn’t yet wholesale for most organizations.
Easing levels of resistance
CRM, web applications, business intelligence, database management, HR, data storage, enterprise resource planning (ERP), finance and accounting will all lift at a different pace, and the order in which these different functions are brought into the cloud will differ greatly between enterprises.
PwC’s Aran Samra works in global corporate development. He points to industries such as defense, or certain government institutions, where one may discover greater resistance.
“Perhaps here you may see less adoption of the cloud. Other times it is sector-agnostic – it can just come down to the chief technology or chief executive officer.”
Synechron managing director Tony Clark recalls a banking client doing proof of concept (POC) work with Google and Amazon, transforming risk models that once took days to run now taking minutes to execute at a mere fraction of the cost.
“I think the cloud provision competition is increasingly going to be from big tech,” he says. “When the banks start telling me that they are doing proof of concepts with Google or Amazon, that’s a new thing.”
It’s little surprise then that the regulators are getting involved. Pamela Dyson, chief information officer of the US’s Securities and Exchange Commission is driving the SEC itself towards cloud solutions, while the UK’s Financial Conduct Authority (FCA) released guidance last year giving as close to a stamp of approval as it ever would to the use of cloud storage.
Is it all or nothing?
A popular route for many businesses seems to be the hybrid model – a system were the cloud does all the heavy lifting, mitigates risk for certain core business functions, perhaps the back-office, while on-premise is retained where a particular infrastructure is required. For example, having data held on-premise but the analytics in the cloud.
Synechron’s Clark sees a whole new model developing with huge potential for gaining scale, streamlining efficiencies and – ultimately – cutting costs.
“In the past you would buy software, load it onto your server and data center and buy a whole set of licenses for your bank, which could take months. Meanwhile the bank next door would go buy their license for their set-up and so forth.”
“Now you see banks clubbing together to set up shared utilities and trading platforms as a cloud service with almost instant commissioning times, massive scalability and utilization-based costing.”
M&A: the only way forward
Big consulting firms are in a race to build capacity through a buying spree of specialist cloud implementation businesses in preference to change from within. Internal change takes too long; the revenue and delivery model is different, new technologies and skills are required and a respray just isn’t practical or authentic.
Accenture has been at the forefront of this trend, building its Cloud First Applications division – and Salesforce appears to be a prime target. The consulting firm has also picked up UK-based consultancy Tquila, participated in a $42 million funding round in partnership with the CRM leader Vlocity and acquired Cloud Sherpas.
Matt Cooksley, chief operating officer at makepositive, sees significant M&A between consulting firm giants and agile cloud-orientated newcomers continuing, accompanied by a wave of enterprise skillsets convergence taking place as traditional IT consulting firms move into systems integrations and creative digital design.
The direction of travel is clear and while clients are approaching their cloud journey in stages and a substantial market for on-premise remains, denial is futile. The large consulting firms realize they have to adapt fast and the fastest, lowest-risk way to achieve this is through M&A.
This blog is a condensed version of a more in-depth article. Click here for more information on building cloud credibility through M&A.
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