Technology firms: their problem in a nutshell

By Fiona Czerniawska.

The following forms part one of a series of articles that we are publishing based on our on-going research into how clients see consulting firms. To view the second article in this series, please click here.

Digital transformation represents a massive opportunity for technology consulting firms, but why does our research suggest, again and again, that these firms are missing out?

Our new suite of reports, brand perception summaries for individual consulting firms, suggests the answer lies in clients’ heads.

Let’s take IBM as an example. It has a predictably strong reputation for the quality of its technology consulting work: 66% of executives who know the firm by repute (what we call indirect clients) describe quality as high or very high (the average is 49%), and only a very small percentage say anything that is outright negative. Equally, because IBM is so well-known, there’s little difference when we look at actual clients (or what we call direct clients): everyone knows what IBM does, and does well.

What’s interesting is how perceptions shift between these two different types of clients for other firms, especially non-technology ones. Overall, there’s a 19 percentage point increase in the proportion of direct clients who have positive views about the quality of technology work, to a point where 68% think that these firms do good work. That's actually higher than those who think the same of IBM. In other words, non-technology firms may start off being viewed as relatively weak, especially relative to giants such as IBM, but around one in five people change their views, once they’ve worked with them, pushing technology firms down the pecking order.

To understand why that’s the case, we asked senior executives which type of consulting firms they’re mostly likely to use for technology-orientated projects, and why. Technology firms such as IBM lose out when it comes to areas such as stakeholder management, leveraging industry knowledge to identify new business models, and even defining process change – all of which are integral to the type of large-scale digital transformation projects currently driving growth in the market. Crucially, technology firms often lack sufficiently strong relationships outside the IT function to be credible alternatives to strategy firms and the Big Four.

But they’re also losing ground within the IT function: CIOs, the people most likely to think that technology is the solution to every problem, are actually less likely to bring in technology firms than their counterparts in other functions (16% would choose a technology firm, compared to 21% in other functions). CIOs, we suspect, are especially keen to distance themselves from IT practices (and suppliers) of the past: wholesale outsourcing of the IT function, projects that took so long to deliver the hoped-for benefits that the business had moved on by the point of completion, and so on.

For the last decade, one of the big competitive pressures in the consulting industry has been around non-technology consulting firms trying to demonstrate their credentials and capabilities in technology work. At the moment, the situation seems to have reversed: to keep their position in the market, technology firms have to demonstrate they can do more than just technology.

This is the first in a series of articles we’ll be posting over the next couple of weeks, all of which are based on our on-going research into how clients see consulting firms. To view the second article in this series, please click here. If you’d like more information about this research programme, please click here or contact Sarah Burgess.