Second-tier consultants up the pace for 'fat four'

Second-tier consultants up the pace for 'fat four'

The days of the "fat four" consulting services dominating the IT landscape have long gone with the emergence of 'second tier' consulting organizations moving in to fill the gap.

There are still services giants that are a staple part of the blue chip set including PricewaterhouseCoopers which was acquired by IBM, Deloitte Consulting once part of Deloitte Touche Tohmatsu, Accenture which spun off from Arthur Andersen, Capgemeni (formerly part of Ernst & Young) and BearingPoint (formerly KPMG).

However, the Enron scandal and other accounting irregularities that led to the separation of accounting firms from their IT consulting units in 2002, opened the door for smaller, more agile, specialist firms to make a play for the lucrative services dollar.

The impact in Australia over the past 18 months has been significant with mid-sized IT specialists such as Phoenix IT&T Consulting and Cubic Consulting securing a host of deals.

Interestingly, many of these new second-tier consultancies are staffed by former employees of the "fat four".

The tough economic climate has also been a boon for these firms with the head of Phoenix IT&T, Andrew Henderson claiming its services are typically "30 to 60 percent lower than our first-tier competitors".

The IT industry, he said, has been smarting from exorbitant engagement fees charged by the large consulting houses and credibility also under question, because projects were often "sold" by senior management but delivered by their more junior employees.

"Despite the void in the market, companies were coy about spending up big on projects and were looking for lower-cost alternatives capable of delivery quality," Henderson said.

David Johnson, chief executive of Cubic Consulting (division of Foundation Technology Services), said the big players are only getting bigger in the search to provide end-to-end solutions, but the next tier of the market is far more dynamic.

"Companies are going for smaller providers because they want an independent group to act as a barometer and they want a greater level of focus from suppliers; there has been a big shift in the market from two years ago," he said.

"Some of the big consultancies are a shadow of what they were 18 months ago."

Johnson, who specialises in change management issues, said IT projects are still tough which is why any technology shift that has a broad impact on end users requires plenty of planning.

"If you want user adoption and a smooth transition [the groundwork] must be embedded in early planning and strategy," Johnson said.

In such a demanding environment, the competencies of an IT pro are changing and having the right knowhow is critical.

Competencies of an IT pro

IT managers need three different sets of skills - technical, functional and managerial, says Australian Graduate School of Management (AGSM) postdoctoral fellow Anthony Vlasic.

“With the proliferation of e-business, IT is both the link between the business model and the critical driver of success. How large, IT-based investments are managed is of critical importance to organizational efficiency and effectiveness," he said.

“Information technology is increasingly at the core of many business functions, operations, products and services. Today organizations worldwide spend more than 50 percent of new investment funds on IT and related communications."

Vlasic is a keynote speaker at the forthcoming Computerworld IT Leader’s Forum at Sydney's Star City Hotel, Darling Harbour, on July 27.

His presentation, titled The Essential Business Competencies of Information Management Managers, will highlight the business expertise IT managers need, and how to get them, to deliver successful IT-based investments. -- Siobhan McBride

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