Following the news from Source Global Research that the use of tech consultants by tech companies is on the rise, Information Age decided to explore the realities of using a consultant; why it’s important and how to select the right partner.
Why do technology companies work with consultants?
Walid Negm, chief innovation officer at Altran, suggested that the number one reason why tech companies work with consultants is to accelerate the speed of product (or service) design, development and launch.
“There was a time when tech companies relied on consultants as much for their industry knowledge as their functional capabilities, but today, industry expertise is table stakes. Accelerating speed to market and supporting innovation are the overriding imperatives. Consultants are well positioned to help drive change because of their external cross-industry perspective, independence and broad experience developing and deploying leading-edge technologies, such as AI and 5G,” he said.
“A growing trend has been to turn to consultants for assistance developing greener solutions. Addressing climate change is top of mind for many c-suite executives, as this year’s Davos agenda suggests. The rising generation of consumers has set its sights on making the planet a better, more sustainable place.
“Tech companies need help to succeed in this new world order, where social responsibility is as important as shareholder value. With sustainability in mind, tech companies are looking to consultants to pressure-test growth and cost-saving strategies, help with execution and ensure that their tech investments have the right ROI — in terms of both financial and green targets. Consultants also bring valuable experience with stakeholder management.”
The who’s who in digital transformation consulting
There are a number of other reasons why tech companies are increasingly using consultants.
1. To build effective proof of concepts
“There are entirely new product and customer markets being driven by the likes of hybrid electric aircraft, autonomous shuttles, low earth orbit satellites and digital therapies, to name a few innovations impacting tech companies. In the case of digital therapeutics, it is actually software that can prevent the onset of a chronic condition. So today, software is the medical device. Consultants can play a critical role by creating proof of concepts to test software that can evolve from initial R&D to new products (e.g., surgical robotics) than can lead to major breakthroughs,” continued Negm.
2. To increase influence over an ecosystem
The customers of companies, tech or otherwise, are increasingly paying attention to brand values and looking beyond convenience.
“Developing ‘something cool’ is no longer enough to build a sustainable business. Tech companies are tapping consultants to help them create product roadmaps that deliver meaningful consumer engagements across an industry ecosystem. For example, with healthcare, there are conflicting motivations between pharma, life sciences, insurance, hospital and med-tech firms. Working with consultants can help companies think more broadly about how their products and services can improve access to care, reduce costs and strengthen outcomes across the entire ecosystem,” he added.
“Tech firms will be able to focus on their core proposition with consultants bringing broader transformational capabilities. For example, in our case this means fusing technology and process with other disciplines such as behavioural science, UX/UI design and learning and development,” he said.
Hallmark also suggested that the use of tech consultants could help create a rounded perspective.
“Tech firms should look at their solutions through many lenses — not just technology — to ensure they remain competitive. They need to enhance customer experience and develop operating models that deliver a frictionless customer journey.”
He also added that they’re important in helping to avoid mistakes.
“Consulting firms can support high-growth tech organisations by helping them learn from others — for example — scaling non-core operations disproportionately with their core operations, thereby reducing their agility and efficiency,” he said.
John Ainsworth, chief operating officer at Atos Business Transformation Services Division, and a client of Gobeyond Partners said: “At Atos we are used to working with either consultancies, or with our own consultancy practice.
“When you’re entering into large-scale digital transformation programmes, it’s important to work with partners with complementary capabilities who can challenge your thinking by bringing innovation and new skills to the table. The client and the consulting firm have to be fully aligned on scope and objectives, with both sides delivering on their promises, ideally through sharing in the commercial risk.”
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It’s clear that tech consultants have a role to play outside of pure tech advice.
Fiona Czerniawska — director of Source Global Research, analysts for the global professional services sector — explained that “for obvious reasons, the big technology players, like Google, tend to use consultants in specialised, non-technology areas, such as financial management and HR. However, as these companies mature and become more complex, they also start to make greater use of consultants in operational areas and strategy. But, as their corporate customers increasingly look for help in parallel to new technology implementation — around behaviour change and speed of adoption — it’s likely that technology firms will be looking for support in building up non-technology services.”
Management consultancy for tech
“Just like any industry or sector, the tech industry needs to continually innovate and disrupt to survive. Take Apple as an example; Apple started as an asset builder, initially manufacturing PCs, then laptops and latterly expanding into other devices such as mobile phones. However, Apple also had the insight to complement their manufacturing businesses by stretching into technology creation through software and digital services and are also now actively building a digital ecosystem through their App Store — so they have created a platform business to insulate against disruption in any one of their core business focus areas. The same is true of Amazon in the way they have grown for being a pure online retailer to adding technology services through AWS and digital ecosystems through its marketplace and IoT capabilities.
“Management consultancy businesses help tech clients to take a different perspective to shape future strategy and direction and to enable disruption as a competitive advantage and diversification into alternative or complementary business areas.”
When the client-consultant relationship is functioning at its best, the consultant gives the client an Information, Expertise, Insight and Execution capability that is just as relevant to a tech industry client as it is to clients from other sectors.
Information: The data and analyses that take the client’s world, industry, and market position and make sense of it.
Expertise: An experienced operator’s perspective on a problem and the different ways that it can be solved.
Insight: The rigorous, analytical application of expertise to come up with insights that will help the company succeed.
Execution: The roadmap to choosing and implementing the changes to be made.
“Tech firms need to balance delivery of their strategic objectives with being highly operationally agile and responsive to market evolution” — Hallmark
Be wary of tech consultants
It’s evident there are many benefits to using tech consultants, but there are several things that businesses should be wary of when using contractors or consultants, according to Andrew Holway — digital consultancy and training specialist.
“Technical knowledge is primarily tacit,” he said.
“Tacit knowledge is very difficult to transfer to another person via verbal or written means. Getting value out of technical consultants is therefore difficult unless they are very good teachers with a good grasp of knowledge theory. This is rarely the case. Or at least teaching skills are rarely checked out when companies engage with consultants.
“Ownership is also extremely important for the efficient development and operation of IT. Systems that have been delivered or even touched by non-internal resources can quickly start to stink. Systems that are specified or developed by external parties will suffer “software rot” much faster. “Not invented here” culture is extremely hard to get around.”
There are issues
One of the big issues around the consultant model is that consultants are incentivised to develop ‘sticky’ relationships with their clients.
“In order to operate profitably, consultancy shops have to ensure that their employees are billed out for the maximum amount of time. When business is slow, consultants will be inclined to push more complex, bloated solutions which ensure a revenue stream. I have personally witnessed some shocking abuse of trust by technical consultants — specifically within large multinationals,” continued Holway.
“Finally, technical teams can take quite a long time to trust each other’s skills and experience. This process of building trust within a team can be modelled with “Transactive Memory Systems”. Advice given or work undertaken by untrusted resources, such as consultants, is often unusable by a technical team simply because there is an implicit, almost unconscious mistrust of the source. This can cause strange managerial side effects – especially when working with more agile, self-organising teams.”