Background
Practitioners and pundits alike are calling this
the deepest drought in the IT services industry in 30 years; consider:
- All the Big-5 have had lay offs as have CSC, AMS, and BA&H.
McKinsey had a partner call
for capital.
- All the Internet systems development firms have
suffered through multiple layoffs (Sapient), mergers (Proxicom,
Scient & iXL), or bankruptcy (MarchFirst)
In the past, our industry escaped recessions because people
needed new projects, even in recessions, to help them cut costs (e.g.,
collection systems and loan adjustment systems have been hot items in periods on
economic recession).
In addition, projects that are really strategic and highly
visible (such as a billing system for a telecom) often escape budget cuts.
The current situation is different in at least two
ways:
- First, all the projects for the dot.coms that have gone under have been cancelled.
- Second, for legacy enterprises, the frenzy to get
through Y2K and to get onto the Internet has subsided, so an awful lot of
consultants were employed on things that are not continuing through the slump.
Consulting to help organizations employ the
latest technology to improve productivity, cut costs, and serve customers
better is still a great industry. The key is staying healthy enough
financially to stay in the game, and positioning to be ahead of the game even in
the downturn and as the tide turns!
Problems in IT services industry (e.g., Viant, Razorfish, Proxicom, Sapient,
iXL, Scient) today:
- Solution Service Offerings have not materialized: Demand creation systems (i.e., systematic
and programmatic ways to sell their services) have not developed. They
didn't need to in the face of what
looked like infinite demand. The sales script was: “Tell us your toughest problem and we’ll
build a system to handle it”.
People buy knowledge/assets/solutions that are
important to them. Up until recently
what was important was knowledge about Internet technology and how to work with
it. This is no longer the agenda. What is important today is knowledge of
important business problems and how to solve them. The sales script now needs to be:
“Your toughest problem is X and we know how best to solve it!”
- Too many skill sets to manage: Every firm tried to develop internal
depth of competence in strategy consulting, creative design, Internet systems
development, project management, account development, client management,
change management, and even experience modeling. There is no way one
firm can build a systematic way to efficiently attract, develop, deploy,
manage, and grow the right number of people across so many different skill
sets. Over the past 50 years, it has been hard enough to build a
long-term sustainable business that manages will with just one or two!.
- Building a long-term sustainable growth business is a lot different than
building a relationship-based consulting practice. Most of the
Internet IT services firms are lead by former consultants from
partnership-based companies (BA&H, BCG, AC, etc.) where it is not common to learn the subtleties associated with building and running a
business, where:
-
Top managers need to stay connected to the front-line across an ever-broader range of activities
- A well developed network of personal relationships is not enough to sustain the business' growth, and
- What you learn in one place needs to come out in all others.
- Organizational loyalty and accountability was often conflicted between geography (where you lived or worked),
industry (for whom you worked), and competence (what you knew how to do well). Everyone pitched in to
help out but not many were inclined to take full charge of resources, clients, projects, and the
responsibility to make everything work out right.
Best approach going forward
-
Define service offerings. Service providers need to be clear about what problem they solve, for whom,
and how. It is best if the problem is important (i.e., someone will pay a lot to solve it) and pervasive
(i.e., a lot of people have it).
There are still important problems to address, but they are in different
areas than we have been used to seeing:
- Biotech, bio-engineering, bioinformatics (where there is a flood of new
instrumentation and data needing to be stored, organized, analyzed, etc.)
- The need for privacy and data security in the health
industry and even in the finance industry, particularly related to implementing
HIPPAA and GLBA privacy standards for “standing data" are just gearing up.
- Demand for billing systems has given way to the need for provisioning and revenue
assurance systems in the telecommunications industry.
- Mortgage industry which is developing new
infrastructure in the face of finding themselves in an era of growth and
prosperity, and
- Medical testing procedures and systems to provide safe
handling of human trials in the face of highly publicized incidents involving
loss of life, closure of testing at major facilities (e.g., Johns Hopkins) when
existing systems and processes were found to be inadequately supported.
Proactively and systematically go out and find everyone
for whom that problem is important and go solve it for them.
Tell them what you understand their problem to be, what
others find hard about solving that problem, what the best have done, what
their options are, and how you can help, if they want.
- Institute account review procedures. Focus top management attention on top
prospects for growth at existing accounts on a regular basis to be sure that
the best resources of the firm are being channeled for growth in that
opportunity.
- Define organizational units around service offerings,
the market they service, and the problem they solve. Assign a top
team of people to drive growth in this specific space, give them the resources
they need to be successful and then reward them well when they are successful!
