The Evolution of IT Services Firms

By Ed Marshall

IT consulting firms help bridge the gap between the customers that have business areas they wish to automate, and the technology companies that enable the desired automation.

A decade ago, most consulting firms fell into one of three categories:

1. Hardware/software resellers, with practices aligned around specific products.
2. Strategic IT consulting, working on long-term engagements often involving ERP implementations.
3. Staff augmentation or “body shops” offering IT resources to departments needing short-term staff or to smaller companies that don’t need full-time IT.

Two trends are driving an evolution of this market, both of which are attributed to cloud computing.

First, the cloud has dramatically simplified technology deployment so that IT consulting firms no longer need to specialize in vendor-specific hardware/software configurations and implementations. Second, many customers are no longer interested in running their own data centers, or even owning their business process technology—it’s not strategic to their business. They want their IT consultants to solve the full range of IT and business issues, not just focus on deployment and configuration. The result of these trends is new hybrid IT consulting firms that are more strategic, have some reselling/sourcing responsibilities and some vendor-specific expertise. And most of all, these new firms are focused on solving customer problems.

Cloud’s Impact on IT Consulting Firms

Client/server technology is not easy to deploy. You need to understand the database and application technology, procure and configure the right hardware, and understand how to make it work inside a customer’s existing IT infrastructure. As an IT professional, if you are proficient at any part of this process, you can likely find customers who need your expertise. IT consultants have traditionally focused on particular technologies to deepen their product knowledge, build closer alliances with the vendor (even official certification), and better serve customers who want detailed applications of a particular technology. But with cloud computing, much of the complexity is eliminated.

You are no longer simply talking to the customer’s IT staff about networks, firewalls, and VPNs. You are talking to the customer about their business challenges, and solving those challenges.

Let’s use NetSuite as an example. As the IT consultant, you care much less about the database technology, the application technology deployment, or server procurement. You need to make sure your customer has a browser, which is a low bar to clear. By clearing the need for traditional technology expertise, there’s a new opportunity for IT consultants who have business process expertise, change management expertise, and still some technical proficiency at NetSuite.

The conversation with your customer has changed. You are no longer simply talking to the customer’s IT staff about networks, firewalls, and VPNs. You are talking to the customer about their business challenges, and solving those challenges. There is still a technology component in your value proposition, but it is small relative to the business impact component. We are seeing the impact of this change in a few different ways. First, we are seeing traditional resellers moving away from product expertise into full-solution expertise to compete with cloud vendors such as NetSuite.

For example, a reseller can no longer be satisfied focusing on a vendor such as Microsoft or Sage to drive their strategy, which resulted in the reseller pushing as much vendor product as possible. The reseller must now focus on solving customer problems. If the customer is looking for quote-to-cash process automation, the conversation can’t be about just accounting software (and the database, the middleware, and the servers—you get the picture).

The conversation has to be about the business process. Resellers are becoming more strategic and customer-focused. Second, we are seeing a new breed of IT consultants. They are not starting with technology and working back into business solutions. They are starting with a business solution and integrating technology into their offering. We have CFOs who are starting consulting practices around outsourced CFO services because they can partner with NetSuite to provide the underlying technology that enables their business processes.

Are these CFOs NetSuite Solution Providers? Yes. Are they database experts? No. They are solution experts and problem solvers. And they are making a real impact on their customers’ business processes. So IT consulting firms can be smaller than they used to be, and they can still have some product specialization since the barrier to entry is so much lower.

Cloud’s Impact on IT Consulting Customers

Cloud computing has also changed customer expectations of the IT footprint needed to run their business. Customers want solutions—not servers, not databases. This is very evident to anyone who has moved their office in recent years. It used to be important for a landlord to show the prospective tenant the viability of “the server room,” and the tenant’s IT professional would need to lay out specifications and do sophisticated planning around this server room.

Now, more companies don’t want a server room. They need connectivity, and expect their IT consultants and vendors to do the rest. For example, if a customer wants a client/server email solution, they likely don’t want a conversation about the server room. They expect the vendor to handle the complications. We see this manifest in the number of traditional IT resellers that now also call themselves managed service providers, or MSPs.

They no longer just sell hours and servers—they sell maintenance contracts and hosting contracts. As soon as you agree to a customer’s request to host their server, you’re no longer just a consultant—you are an MSP. Thus, your business is complicated in an effort to meet customer needs.

Conclusion

The evolution of IT consulting has resulted in some new outcomes. We rarely see IT consulting firms that are just resellers, or consultants billing for just labor. Most firms are supporting multiple lines of revenue, including MSP, and need systems that support multiple lines of revenue so that these IT consultants can provide their customers with a true solution, not just the purchase of technology. We see customers looking to procure solutions involving technology, but these customers don’t want to purchase databases, servers, and backup systems.

They want to pay for solutions in a “consume-as-you-go” paradigm, driven by the vision of today’s cloud vendors such as NetSuite. IT consultants who do not appreciate this delivery model will lose out, particularly as more and more new customers come along with modern expectations of what an IT solution should be. NetSuite will stay on top of these trends in IT consulting, providing you with the solutions you need to succeed, today and well into the future.


Ed Marshall, SVP and General Manager of the Services Vertical at NetSuite.

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