The New Tech Boom

"The ERP implementations that were simply treated as technology installations and did not address the need to change the business gave a bad name to our profession," says Stephen Pratt, CEO and managing director of Infosys Consulting. "Unfortunately, some client requests in that direction persist."

Y2K Hangover
It's difficult to understand why those requests linger. Most IT product and services buyers remain disappointed in their investments, and most IT consultants take pains to emphasize that their offerings drive business value.

One-third of the 1,221 global executives who responded to a 2007 Bain & Company survey say their companies rarely achieve expected returns on their IT investments. Yet, 87 percent of the same group also says that IT can create significant competitive advantages. A recent TCS survey ("TCS: One-third of IT Projects Fail," Consulting, March/April 2008) contains nearly identical findings.

"My sense is that every company aspires to position IT such that it is an enabler of business growth and profitability," says Rudy Puryear, Bain partner and global head of the firm's IT practice. "Unfortunately, too many times IT feels more like a barrier than an enabler."

More than a decade after ERP implementations were promoted as strategic investments, it is difficult to find executives who say that the new systems made much difference to their company. "I think the industry in general used to do a fairly good job of faking it," says Rob Milstead, a director in Sapient's consulting practice who also manages the firm's utility practice. "IT consultants often knew just enough to get by. That no longer works given how clients hire their consultants today."

Sapient, like other IT consulting firms, reengineered how it delivers services. "We wrap everything we do around a focus on the client problem we are trying to solve," Milstead explains. "We do a lot of technology work. But if you don't understand the industry and specific problems a company in that industry faces, the technology may or may not hit the target."

Milstead, Foutty, Pratt and others all emphasize the same point—technology consulting is business consulting. "For a long time, technology consulting was discrete," says Bryan Palma, vice president, global information security for EDS. "It was about the technology and the implementation of a product." No more. "Stand-along technology consulting is pretty much dead," Pratt says.

Does the CIO matter?
While a new form of technology consulting has risen from the ashes, many clients remain confused about what services qualify as IT consulting today. "If you sat down with the CEO of a large company and asked him about his IT consultants, he'd probably complain for 15 minutes," says Dean McMann, CEO of McMann & Ransford. "He might not even realize that he's investing in IT consulting to do all of the important things on his list."

McMann, whose firm connects buyers of consulting services and consulting firms to help them develop the solution, has witnessed roughly $1 billion worth of IT consulting transactions take place in the CEO's conference room in the past three years. Not once has he heard questions such as "Are you Microsoft certified?" or "Have you done this 50 times before?" Not once has a CIO been present.

An executive told McMann that his large company recently fired every consultant worldwide to help cut costs in a down business cycle—except for the IT consultants working with operational executives on new products. "He told me he fired consultants from McKinsey, Bain and Deloitte," McMann recalls. "That saved the company $150 million. I asked him how much he was spending on the remaining consultants working on new solutions: $500 million."

The message is clear: A certain type of IT consulting is worth a lot of money. "This work is about making the Fortune 500 better in the marketplace," McMann notes. "It's not about saving them money on accounts receivable any more. I don't see anybody spending money on internal processes, but they would think nothing of spending $30 to $40 million on a four-year project that helps them solve a big problem for their customers. That's because they see how the IT consultants make money for them."

Cool Projects, Open Checkbooks
For example, a large manufacturer that makes $1 welding sticks for oil and gas companies, and their drilling platforms, recently called McMann for help with a valuable problem. To help its customers reduce the costs of welding failures on large oil and gas platforms, the company wants to embed technology into the platforms that automatically monitors the strength of the welds. The company's executives project that their customers will pay $10 million for this capability on a single platform, and there are thousands of these platforms around the world. "I asked him how much he would be willing to spend on IT consultants to help make this solution happen," McMann recalls. "He said, 'I don't care!'"

The IT consulting expertise these sorts of projects require are industry specific and geared to solving the client's customer problems. General Electric Healthcare is using IT consulting to help build "hospitals of the future" for its customers. Hewlett Packard is using IT consultants to help its customers in the automotive sector better manage their supply chains. These solutions prominently involve GE Healthcare and HP products, of course, and they require IT consultants to design and, in some cases, implement the services wedded to those products.

These consultants have deep industry expertise, can speak with authority to the business leaders they work with and also possess a rare ability to translate techno-speak into clear terms and, even more important, performance metrics that their clients' customers care about. They hail from both the large firms and, more often, 100-consultant boutique firms whose founders once worked for the large firms.

"And they're loving it," McMann adds, "because they're buying big boats and doing what they've always wanted to do: using IT to help solve big problems."

Enthusiasm also is evident in Foutty's and Pratt's voices when they discuss certain projects their larger firms are doing for clients and their clients' customers. Pratt mentions a social networking platform that Infosys recently developed for a client whose customers can now discuss the client's high-tech products in much the same way that Amazon.com customers can share book reviews with one another.

Pratt also mentions those tantalizing 24 inches between high-ranking executives and their computer screens that contain the tens of millions of dollars' worth of software applications their companies have purchased in the past decade. "If you ask most executives if they've ever seen an SAP or Seibel screen, they'll say no," he explains. "It's about the interface between executive decision-making and information and helping companies make money from their information … And it requires a deep understanding of decision-making and human behavior and how the company makes money. That's an exciting area right now."

Foutty points to what she describes as the fascinating challenge of drawing insights across industries to help solve different business problems that on first blush look nothing alike. She mentions a new approach her firm helped a pharmaceutical company develop to strengthen the accuracy and speed of decision-making related to the "blockbuster" drug pipeline. It turns out that the approach may also help media companies address similar challenges in their content-development pipelines.

"One of my partners connected the dots and put the [industry] client teams and our clients together," Foutty reports. "And we think this will lead to a great outcome in the media company."

Leadership Concerns
Making these connections and applying IT consulting to help clients bring new offerings to their marketplaces requires what McMann describes as a "unique breed of cat."

He's referring to the type of IT consultant who at one time would examine a new strategy, one enabled by some sort of technology change, and then design a way to make the strategy work in reality. "These were the people who were 'architect-ing' solutions, if you will," McMann notes. The consultants who advised clients on the IT-drive strategy understood what the technology was supposed to do; the architects knew what the technology was going to do in practice, and they understood what changes and challenges the technology would create.

These consultants have always been valuable, but another breed of IT consultant—those who made it work by implementing the systems—became incredibly valuable during the ERP wave of the 1990s. That work was much more focused than the business-technology design work the architects performed and more profitable in terms of sheer scale. "From a billable hours' perspective, making stuff work was addictive," McMann says.

However, the addiction produced side effects that may hamper firms' efforts to get into the CEO's conference room today. The systems integration work produced a generation of IT consultants who have spent the majority of their careers slapping in systems rather than wrestling with business problems.

"When you've been in consulting for fifteen years and have worked on three five-year systems implementation projects, you've never really had to look at a CEO and figure out an answer to a complex problem," McMann says. Many of these consultants are now partners.

"It's difficult to find the star athletes who combine real technology savvy and real business savvy,"  Pratt says. "Those people are incredibly valuable in the market right now, and they're worth every dollar." Pratt also identifies a cultural challenge leaders of large IT consulting practices confront. By treating technology consulting as separate from business consulting in the past, many firms helped foment professional friction between "prima donna MBAs and propeller heads," Pratt says. "That was a giant cultural problem that firms today really need to address and resolve. … Some firms built up super blueblood cultures that can't tolerate people with technical skills. And some technology consulting firms have built up an arrogant stance that 'we do the real work, and the MBAs are blue-sky guys who don't know anything.' Both of those perceptions are wrong. I'm not anti-specialization, I'm pro-diversity."

IT consulting practices, Pratt says, need to ensure that mutual respect exists between techies and MBAs.

Firm leaders also face a growing need, Milstead emphasizes, to cultivate deeper industry expertise earlier in their consultants' careers. For the past three years, Sapient has put younger consultants through intensive industry training before they work on specific projects in that industry. The immersion classes cover the ins and outs of numerous industries including financial services, energy, auto manufacturing and telecommunications. Further, Sapient leaders also launched an annual consultant recognition program called the Innovation Award. The contest honors the best example of innovation "at the intersection of business and technology" that employees submit based on their project team experience.

Old Habits Die Hard
Firm and practice leaders also will need to inspire their clients to expand their understanding of business technology and technology consulting. On a gut level, most clients no longer believe that the next big thing—the killer app that redefines their marketplace—lurks  on the horizon, Foutty says. Yet, many clients keep scanning the horizon because they can't quite let go of the notion, she adds. Service oriented architecture, which allows companies to re-use and re-bundle discrete IT services and applications, is the latest silver-bullet candidate.

Client companies also tend to have difficulty buying technology services. "One of first things we look at when we go into a company is their vendor technology spend," Puryear says. "We typically find that it is highly fragmented across hundreds and hundreds of vendors and that there is no strategy or science to vendor management."

It may be a difficult conversation to begin, but IT consultants who believe IT consulting is business consulting need to correct this lingering misperception that technology can or should be treated as a discrete entity. When a client asked Infosys Consulting to conduct a social networking project, Pratt's team explained that social networking and digital marketing consist of much more than technology.

Their ability to make that case stems in part from how the firm is organized.  "We don't have an SAP practice," Pratt reports. Instead, the firm organizes around business processes, which Pratt says stimulates conversations and collaboration between the firm's technologists, business consultants and hybrids.

"Look at the way companies are organized," Pratt adds. "That's where this really hits the road. Are your finance process guys separate from your SAP guys?" If they are, your practice may not be walking its talk.