It was a dream run. For years, consultants had the ears of CXOs everywhere, whispering: ERP, CRM, change management, re-engineering . . . Not any more. Evolution will be a challenge for many consultancies, survival will be at stake for a few.
Over the past 10 years the relationships between consultant and client, and consultant and IT vendor, have shifted dramatically. As enterprises' information needs become more sophisticated, packaged software more refined and the skills osmosis from consultant to client takes hold, it is not surprising that the interplay between these three stakeholders in the IT equation should change.
The consulting landscape itself has changed beyond recognition during this period; partly in response to a growing regulatory requirement that the audit role be separated from provision of consulting services, and also in response to a global economy that has slowed demand for consulting services while introducing the Indians with their ability to cut code on time and on budget.
Today just one of the major accounting firms - Deloitte - still has its own consulting arm. PricewaterhouseCoopers consulting has fused with IBM, Andersen has floated off Accenture, and Bearing Point separated from KPMG. Ernst & Young sold its consulting group to Cap Gemini.
At the pointy end, the management stalwarts remain - firms such as McKinsey & Company, Booz Allen and the Boston Consulting Group - but all are feeling the effects of slower demand.
What has changed most, however, is what is being asked of the consultants. The consultant, the analyst, the vendor, the CIO - each holds a unique perspective on the consultant-client relationship and where it is headed.
THE CONSULTANT: Press V for Value
Getting down to specifics - sectors, that is
Gerhard Vorster, the managing partner of Deloitte's consulting business in Australia, says there has been a sea change in what enterprises seek from their information systems and that is affecting what they want from their consultants.
The twin drivers of fear (largely of Y2K) and fashion, which dominated IT implementations in the 90s, have been replaced, he says, by a search for value: a search that is being "exaggerated by clients becoming more savvy and more mature". They are also "much, much more specific in what they want and what they buy". There is also a far shorter cycle to value available with most IT investments having a 12-month rather than a five-year horizon, says Vorster.
So where a consultant in the fearful and fashionable 90s might have scoped what a customer needed, sourced a product, tailored it, installed it and then perhaps helped run it, today there is far more hands-on involvement from the client. Part of that comes from the gradual transfer of technological skills from consultants to enterprises, which Vorster says was deliberate and prudent. (Consultants had to transfer existing skills if they were going to be able to keep their own skills base at the leading edge, being his argument.)
While the calibre of Deloitte skills is not at issue here, the fact is that its volume has plunged. At its peak the organisation employed 1200 staff. Today it is half the size, in part reflecting declining revenues for the firm but also a by-product of an industry-wide consulting sector shakedown. Vorster indicated in a September issue of BRW that he expected revenue to fall by about $55 million to $70 million in 2003-04. It was worse the previous year, 2002-03 saw revenue fall $75 million, or 37 per cent.
Deloitte is now the only big accounting firm with its own consulting business, and although it is precluded by law (the US Sarbanes-Oxley legislation) from performing consulting work for its audit clients, Vorster hopes to benefit from securing a deeper sectoral understanding for his team of consultants from the accounting side of the parent business.
Although the firm intends to compete with the Indian newcomers (and Vorster expects them to simply be the first of several waves of new players with China and The Philippines following in the Indians' wake) by having development centres in Hyderabad and Mumbai, his primary strategy is to "move up the value chain where we can look at client-specific solutions.
"With technology and other management consulting, it becomes a bit easier to make money if you understand the client, and you understand the client's industry. You have to go back to a client event of one - the notion of best practice is no longer a business advantage."
Where Vorster sees the future of client-consultant relationship is in the symbiosis that will come from the consultant offering a uniquely developed information solution, which precisely meets the client's needs and supports unique business processes, while the client provides back to the consultant a much deeper understanding of the industry sector and processes that support it. Vorster also believes that these deep silos of expertise gleaned about one industry can then be segued to a different sector. So for example a business process which delivers benefits in the airline sector might well do the same in the retail sector.
All in all, it's a tall order, and its success or failure will depend on, if not the right stuff, at least the right people - even if "the talent's" skills sound suspiciously familiar.
Vorster says that it will be important for consulting firms to secure and keep people who are able to understand business and interact with business. "Our business has to assign a high priority to finding and keeping a depth of talent; but you don't have to own all the arms and legs that will do the work. And anyway, clients will look for more unbundled service elements," he says.
"You can no longer define a strategic direction for a company unless you understand what the company does. That core we do need to own, so it will be almost as though the clients have in-house management consulting skills. It will be the best applied practices where the value lies in the next three to five years."
And while Deloitte has historically been best known for operating with upper echelon, large enterprises, Vorster recognises that the consulting firm needs to start looking elsewhere for its dollars. "One of our tactical challenges in Australia is the middle market, which is immense and a huge opportunity," he says.
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.