Global It Consulting Market


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Global IT Consulting Landscape

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Global It Consulting Market

  1. 1. OF<br />IT Consulting<br />Changing Landscape<br />Of<br />Taking The Next Step…<br />
  2. 2. Executive Summary<br />Prolonged recession - slow recovery, Capital investment Crunch and EU debt crisis has impacted business of all sizes causing tightening budgets and forced the business leaders to rethink how they can leverage software and technology as a consolidated service with optimum productivity, transparency and accountability. Which will better support their rapidly changing business requirement & corporate objectives. Now The expectation is <br />How IT can Do MorewithIncreased Efficiency with the Existing Resources at aLower Cost!<br />IT Consulting is rapidly maturing and emerging as the most powerful business model for emerging markets. Customized low cost rapid implementation is the key in overcoming the barriers to adaptation – either real or perceived!! <br />Consulting Market Continue To See Rapid Growth, Despite Macroeconomic Volatility<br />IT Consulting will see not only rapid growth but accelerating growth, not in spite of the macroeconomic slowdown, but because of it. IT Infrastructure Optimization will become an inevitable choice to maximize technology ROI and organizational effectiveness…especially when barriers like integration, security and customization – are being addressed. We can expect more rapid growth relative to the traditional software market as companies like IBM, HP, Samsung SDC and TCS, continue to grow much faster than Oracle and SAP. <br />SaaS Market Will Evolve Many Folds Over The Next Five Years<br />The next five years will see an explosion in SaaS. The penetration of SaaS is still tiny compared to its potential. Two major categories of SaaS vendors will clearly emerge: displacers and niche providers. There will be changes in the market landscape – specifically, the distinction between SaaS and Platform-as-a-Service (PaaS)/cloud computing (platform providers) will start graying. Pressure will build, perhaps for the next several years, but then the mass exodus for on-demand technology will happen very, very quickly. <br />Growing Prominence Of Consulting & Advisory Will Change Traditional Business Thinking And Metrics<br />In terms of consulting, the most important word is ‘service,’ which means that customers can vote each month whether or not they’re still happy with their vendor. As a result, consulting & advisory firms companies are very focused on time-to-value, and those that can truly serve their customers are being rewarded handsomely. More often, consulting is a disruptive force in the industry, and has made the business leaders to think differently. ‘Five C’s’ will be the game changer in shaping the business: Contracted Monthly Recurring Revenue (CMRR), Customer Acquisition Cost (CAC), Cash flow, Customer Lifetime Value, and Churn.<br />Recommendations<br /><ul><li>As IT Consulting service provider, first and foremost thing is to increase 2010 market share by demonstrating potential buyers how your advice will assist them not only in mitigating financial and business risks but also in copying with economic uncertainties.
  3. 3. Reduce time spent negotiating with buyers for another (Small) fixed price projects. Instead consider growing your market share by investing in development of differentiating consulting service offerings to win clients, or add new talents to your consultants base in a global market of 73 billion that is forecast to grow 9% in 2011 compared to 6.2% in 2010.
  4. 4. Constantly assess your organizations business performance in particular, as a local provider of consulting services. Learn from 2009 success and failures!</li></li></ul><li>IT Consultancy Overview<br />IT consulting is a field that focuses on advising businesses on how best to use information technology to meet their business objectives. CIOs are continuously seeking to deliver five key business values - cost reduction, better integration, higher integrity, higher service quality and greater agility and aligning IT governance with the enterprise governance. <br />IT Consulting Value Chain<br />IT Strategy<br />PHASE 1<br />Consulting Approach<br />Application Cataloging & Potential Identifications<br />Quick-Wins Applications / Software<br />Phase 1: Defining Sourcing Strategy (Process, Apps., Infra). The outcome of this phase is identification of quick-wins along with detailed Sourcing agenda. Focus of this phase is rationalizing operational costs.<br />Phase 2: The savings derived from Phase 1 are re-invested into transformation initiatives of Phase 2. The initiatives are in the area of Application Portfolio Consolidation, Defining IT Governance roadmap and revisiting IT strategy. The outcome of Phase 2 is long=term IT roadmap and projects identified to align IT portfolio with business requirements. Focus of this phase is deriving business process flexibility.<br />Phase 3: The savings derived from Phase 2 are re-invested in to Phase 3 for further transformation activities like APO, Architecture Engineering, KM, APM, etc. Focus of this phase is Business-IT alignment.<br />Sourcing<br />Operational Cost<br />$<br />PHASE 2<br />Application Portfolio Consolidation<br />IT Governance<br />Consolidation<br />Business Process Flexibility<br />Lean and Business Aligned IT Portfolio<br />Long tern IT Road maps and Directions<br />Governance<br />Consulting Domains<br />PHASE<br />3<br />Knowledge Mgmt strategy and soln.<br />Application Portfolio Optimization<br />$<br />Product Data Management<br />Project Management<br />APO<br />IT Portfolio Mgmt Analysis<br />IT Architecture Engineering<br />IT Consulting<br />IT Architecture<br />IT Assessment & Selection Of Systems<br />IT /Business Alignment<br />Modernization<br />IT Modernization Projects<br />IT Portfolio Mgmt.<br />Process Optimization & Digital Fab<br />Integrative Business Process Management<br />Advisory Services<br />Tangible Output<br />Objective<br />
  5. 5. IT Consultancy Landscape<br />Components of Market<br />Despite the uncertain economic situation, the IT services market is expected to remain strong. IT has been globally, one of the fastest-growing segments of consulting. Revenue pressure on consultancy service providers will continue to be high. In 2009, Many global and regional consulting buyer delayed or froze their investment in projects reduced their number of preferred supplier and increased the number on consulting rate cards.<br />Provider Key business performance indicators such as –Backlog for orders and revenue, Time from Bid to project to delivery, Client attrition, Consultant utilization, Forecast accuracy, Project, Profit and margin, Project Funnel and Project size, Sales force efficiency were impacted. <br />Changing Strategy<br />Post recession, to get the competitive edge consulting firms are strategically repositioning themselves by <br /><ul><li>Bidding for smaller projects
  6. 6. Cutting overhead cost
  7. 7. Rebalancing project tasks across global workforce
  8. 8. Reducing the consultant base with voluntary or forced Leaves</li></ul>Enterprises and individuals<br />Consumers<br />Integrators<br />Regulators<br />IT Consulting <br />Companies facilitating implementations<br />Govt Institutions /Industry Regulators<br />Providers<br />IT Services + Business Consulting<br />SWOT Analysis (Advisory Prospective)<br /><ul><li>Consulting firms are not keeping any stones unturned in updating their knowledge base to keep pace with evolving business & Technology needs to defend their market share.
  9. 9. In 2011 Enterprise cost takeout and business process improvement are in the scope of many consulting projects.
  10. 10. Apart from price pressure from the consulting day rates and frequent changes to business conditions and technology the global consulting service providers are facing challenges from competitive technologies, software enabled business models and business process simulations.
  11. 11. Consulting firms strategically acquire competitors, presenting an opportunity to grow their global scale and revenue in 2011-2012.
  12. 12. Value Driven Approach
  13. 13. Efficient Use of Resources
  14. 14. Business-led, IT enabled approach to engagements
  15. 15. Depth in verticals industries and business process
  16. 16. Breadth of Service & Skills
  17. 17. Relative Immaturity of global delivery capability
  18. 18. Dependence on Suppliers
  19. 19. Over Dependence on customers
  20. 20. Global Association structure
  21. 21. Increasing demand for compliance solutions
  22. 22. Service Level Management</li></ul>W<br />S<br /><ul><li>Change in Economic & Business environment
  23. 23. Green Agenda
  24. 24. Pattern based strategy
  25. 25. Mid Market Penetration
  26. 26. Other high growth sectors
  27. 27. Industry Consolidation Challenges
  28. 28. Rapid Technological Changes
  29. 29. Competitive Pressure
  30. 30. Government Regulations
  31. 31. Global Economic Slowdown</li></ul>T<br />O<br />
  32. 32. Competitive Landscape<br />The IT Consulting Market has an intense competitive landscape given the number of Mega-vendors and the startups that have entered or likely to enter the space . Two Types of competition emerging among the consulting firms<br />Between the Established Mega Vendors & pure play IT Service firms<br />Between different business consulting and Technology consulting <br />The IT Consulting Market will be shaped as much by the demands of the stake holder as by platform vendor action .<br />Consulting Firms has to focus on Four critical Elements of their business to succeed.<br />Build a robust Offering<br />Monetize Effectively<br />Deliver Extensive Value Added Service <br />Drive Ecosystem Growth<br />Success Mantra!<br />Large Customers<br />Typical Customers<br />Non Addressable Customers<br />Newly Addressable Market<br />
  33. 33. Global Top 10 Consulting Firms Revenue & Marker share <br />(USD Million)<br /><ul><li>Worldwide business condition of 2009 have changed the consulting market landscape as more market share was absorbed by the top 10 providers reducing the combined share of all providers by 0.7% or $491 Million.
  34. 34. Six outperformers exceeded the worldwide market average of negative 9% in 2009 in the top 10 list: Deloitte, PWC, Ernst & Young, KPMG, CSC & Fujitsu.
  35. 35. Fujitsu with negative 5.7% and CSC with negative 8.2% outperformed the market average by negative 9%
  36. 36. Overall big four coped relatively well in the global consulting market . Since the financial crisis in 2008 CFO’s are considerably influential to CIO and overall for the business and IT consulting investments of an organization.
  37. 37. Smaller supplier of advisory services were challenged in their aim to achieve a balance in their 2009 revenue across several geography markets on their global business performance.</li></li></ul><li>Regional Analysis: Top 10 Consulting Firms Revenue, Growth & Marker share (USD Million)<br />North America<br /><ul><li>Japan Showed the Highest concentration of market share (68.1%) for top 10 providers among all five regions. The worldwide concentration of top 10 market share was 34.1% in 2009.
  38. 38. No provider in the world and European top 10 lists achieved flat (0.0%) or positive revenue growth in 2009. In contrast , five providers operating in Japanese market grew their consulting service revenue, thereby outperforming the global market peers.
  39. 39. IBM has unique presence: It is listed among the 10 largest consulting service providers in all five geographical regions.
  40. 40. Other provider populates the top 10 lists in multiple regions and domestic providers appear on regional lists, For example Logica appears in Europe’s list Samsung SDS in Asia Pacific and NEC in Japan’s list.
  41. 41. The underweighted average revenue declined for top 10 providers varies significantly and it is as low as 2.3% for Asia and as high as negative 12.4% in Europe.
  42. 42. Asia Pacific lower decline in revenue indicated that smaller marker recovers faster from an economic crisis.</li></ul>Europe<br />Asia Pacific<br />Japan<br />
  43. 43. Sector Overview<br />2010 have seen IT spending in all major industries returning to growth. Consulting and development/integration (D&I) services came in slightly above expectations as organizations that had put investments on hold began investing again in 2010, particularly in the second half of the year.<br />Top 3 Sectors in IT Spending<br /><ul><li>Government Sector
  44. 44. Manufacturing
  45. 45. Banking & Securities</li></li></ul><li>Alliance in the Consultancy Space<br />In a constantly changing competitive landscape a few deterministic attributes which will play major role<br /><ul><li>Scale: IT Consulting service providers have scale in their operations to deliver their advice across several geographical regions and domains.
  46. 46. Scope: Advisors operating initiatives for buyers on a global scale have the ability to offer a broad array of consulting services addressing this initiatives; broad scope in the advise offered is critically important.
  47. 47. Skills: Consultancies need the right mix of skills such as multicultural and multi-domain change management , while at the same time offering a deep business process understanding for a large number of industries.
  48. 48. Stability: A solid balance sheet and financial stability of the business and IT consulting service providers are critical because the buying organizations must mitigate the risk of failing to complete a project initiative.
  49. 49. Strategy: consulting service providers continually evolve their business strategy through reorganizing, “deskilling” of their resources and redefining the service outcome.</li></ul>Operating complexity for organizations has increased the demand for advice. Potential buyers of consulting services often don't have sufficient in-house expertise to address the issue completely. It is therefore nor surprise that some of the consultancy service firms that specialize in addressing complex business conditions were asked to assist their clients in the business operations restructuring etc.<br />In difficult and uncertain times such as 2009, buyers preferred to work with established providers to attain advice they need. Consulting is relatively immune from the economic effects, even in a global contracting market. Consulting and advisory service providers are more resilient if they had an established relationship and could demonstrate their business value –add to clients.<br />Server & Storage Consolidation<br />IT Policies & Procedure<br />Network Design & Implementation<br />Technology Selection & Migration<br />Virtualization<br />Backup Plan & Strategy<br />Cloud Computing<br />
  50. 50. Top Tech. Mergers & Acquisitions (2009-2010)<br />Dell-Perot Systems:<br />$3.9 billion<br />Dell's purchase can be seen as a response to rival HP's $13.9 billion acquisition the previous year of EDS -- another services company founded by Perot.<br />Xerox-Affiliated<br />Computer Services:<br />$6.4 billion<br />Xerox believes ACS will help it penetrate new markets without huge amounts of overlap, saying that only about 20% of the companies‘ customers are common to both businesses.<br />The acquisition, could have both a direct and indirect impact on Cisco's bottom line, because expanded use<br />of videoconferencing may increase network traffic, letting Cisco sell more switches and routers.<br />Cisco-Tandberg: $3.4<br />billion<br />IBM is spending more than $1 billion to expand its analytics software capabilities, with SPSS and its predictive analytics tools that help companies mine historical business data to identify future trends.<br />IBM-SPSS: $1.2<br />billion<br />HP-3Com: $2.7 billion<br />The deal, gives HP a core switch, the H3C 12500, to compete against Cisco's Nexus 7000, as well as significant market presence in China.<br />Cisco- Starent<br />Networks: $2.9 billion<br />The deal boosts the vendor's Ipbased mobile infrastructure for several types of wireless networks, including LTE and<br />WiMAX.<br />
  51. 51. Generic Trends<br />Six Technology trends as key to reshaping the delivery of critical IT consulting<br />Cloud Computing will accelerate from pilots to production, with private clouds leading the way. Over the next 12 months organizations will implement private cloud computing environments for specific production-based applications. <br />Consumerization of IT trends will continue to accelerate within corporate IT environments, as new generations of powerful consumer mobile devices such as smart phones, net books, and tablet devices continue to proliferate, displacing PCs and laptops as technologies of choice among business users. This will result in significant changes to end-user support and customer interaction support requirements within the enterprise as more of these consumer devices are being used to access mission-critical applications beyond corporate e-mail and voice.<br />Social Computing will move beyond marketing and increasingly be used both as a productivity tool within the enterprise and as a way to revolutionize client engagement. Organizations will tap social computing tools for broad-based knowledge management initiatives that drive greater time- and cost-efficient collaboration across their global workforce. In addition, organizations will integrate social computing tools with transactional business applications to bring greater richness and depth to interactions with clients and partners.<br />Smart Computing will gain popularity as a way to automate and simplify IT systems. Using intelligent analytics and other advanced automation tools, organizations will establish “sense-and-respond” systems to automate complex back-end processes that manage devices within the data center and in the distributed environment.<br />Cash <br />Management<br />5. “Fit for Purpose” Appliance Offerings will grow in popularity as the computing platforms of choice for specialized applications. Appliances are turnkey computing devices that bundle all the necessary hardware and software for handling specialized tasks such as database management, security, Web commerce, voice mail, and ERP packaged software. Unisys expects to see appliances emerge for industry-specific applications such as voice messaging, air cargo management, healthcare, and other specialized industry functions.<br />6. Cybersecurity technologies such as biometrics and sophisticated monitoring applications will move to the forefront of the security discussion. Government agencies, financial institutions, and airports – to invest in advanced identity and credentialing and secure supply chain systems.<br />As cyber crime grows more sophisticated and IT infrastructures become more complex, organizations will take a more holistic, integrated approach to security across the enterprise. <br />Turnaround<br />Business <br />Valuation<br />Cost<br />Controlling<br />Potential <br />Valuation<br />Profit<br />Controlling<br />Market <br />Development<br />Management <br />Reporting <br />Solutions<br />Business <br />Models<br />Business <br />Development<br />SAP <br />Consulting<br />Cross Border <br />Consulting<br />
  52. 52. Forecasts<br /><ul><li>Worldwide IT spending is forecast to total $3.6 trillion in 2011, a 5.6 percent increase from $3.4 trillion in 2010, according to the latest outlook by Gartner, Inc. Gartner has slightly raised its outlook for 2011 from its previous forecast of 5.1 percent growth.
  53. 53. Banking and securities, and communications, media and services will experience the greatest growth through 2014, growing at 2009-2014 compound annual growth rates (CAGRs) of 5.2 percent and 4.6 percent, respectively. Manufacturing and natural resources, and wholesale trade will experience the weakest growth through 2014, growing at 2009-2014 CAGRs of 3.0 percent and 3.1 percent, respectively.
  54. 54. Gartner recommends that technology and service providers execute business and marketing plans for 2010 based on a 4.1 percent annual growth rate, but prepare contingencies to mitigate the downside risk of a slow-growth scenario or a "double dip" recession, based on uncertainties in the economic environment.</li></ul>Predictions<br />Forrester Predicts that:<br /><ul><li>$4.8B Green IT Consulting Market By 2013.
  55. 55. companies such as Dell, HP, Sun, and Intel will gain some traction in the market as they offer services around datacenter energy efficiency.
  56. 56. long-run winners will take a company-wide approach. Such approaches are being pioneered by companies like Accenture, Deloitte, IBM, and EDS, according to Forrester.</li></ul>Gartner Predicts that:<br /><ul><li>By 2015, a G20 nation's critical infrastructure will be disrupted and damaged by online sabotage.
  57. 57. By 2015, new revenue generated each year by IT will determine the annual compensation of most new Global 2000 CIOs.
  58. 58. By 2015, information-smart businesses will increase recognized IT spending per head by 60 percent.
  59. 59. By 2015, tools and automation will eliminate 25 percent of labor hours associated with IT services.
  60. 60. By 2015, 20 percent of non-IT Global 500 companies will be cloud service providers.
  61. 61. By 2014, 90 percent of organizations will support corporate applications on personal devices.
  62. 62. By 2013, 80 percent of businesses will support a workforce using tablets.
  63. 63. By 2015, 10 percent of your online "friends" will be nonhuman. </li></li></ul><li>Issues & Challenges<br />Security and Privacy<br />As activity migrates to the Internet and the cloud, and the hyperdigitization trend accelerates, the need to upgrade the security of the experience and the clarification of rights to privacy of the individual/corporate user increases in tandem. <br />Globalization<br />Globalization alters the perspective of all aspects of businesses. Every business must embrace the notion of being global. Similarly, an IT strategy must be global, which means taking advantage of IT to break down physical limitations, and, at the same time, tapping into a global labor pool that brings new energy and innovation at scale.<br />Consumerization<br />Consumer behaviors will have the power to reshape how enterprise IT works; they will bring new and varied expectations for IT, which, at an enterprise IT level, must be recognized and developed.<br />Intelligence Technology<br />Business intelligence, analytics, pattern recognition, and "smart" solutions are the new vocabulary of IT's value; new IT-related initiatives that don't fit within this framework will be increasingly less attractive to enterprises that are not interested in more "IT for IT's sake," but are laser-focused on "IT for the business' sake."<br />Hyperdigitization<br />Hyperdigitization is the accelerating manifestation of the impact of IT. . It is estimated that by 2020, roughly one-quarter of the global gross domestic product (GDP) will be generated by the force of digital activity.<br />Value Chain<br />Service value chains will redefine competition and how IT services are consumed and paid for. A new maxim for the future regarding service provisioning is that "the whole is greater than the sum of the parts." Organizations must become more proficient their ability to examine their providers' partners — and their value chains. <br />Hyperverticalization<br />Deep specialization into subvertical processes will be an imperative for commercial success in the new arena of alternative services delivery. Deep process knowledge and industry IP will be applied to sub verticals. The formula for future success — microverticalized solutions — will indeed lead to market fragmentation. <br />
  64. 64. Thank You<br />Mouli Bhattacharyya Sen<br />