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Is it time for the Big Four referees to educate the public sector on the benefits of rules changes?

In TBR’s newest blog series, What Do You Think?, we’re sharing questions our subject-matter experts have been asking each other lately, as well as posing the question to our readers. If you’d like to discuss this edition’s topic further, contact Geoff Woollacott at [email protected].

Adoption accelerated as innovation stalled

Last year’s pandemic-induced changes across the technology space and society overall led TBR to consider how the pandemic accelerated existing technology adoption trends. From an emerging technology perspective, we increasingly believe private sector adoption will remain stalled until public sector actors with scale and influence rethink operating practices and enact and enforce regulatory governance. Several years ago, our “wallet versus will” special report argued that the public sector used to lead in technology adoption when funding was the decisive factor but lagged in technology adoption when consensus on common business rules proved elusive. Add in a pandemic, and we’re questioning whether private sector innovation has hit a roadblock that will be resolved only when there is greater public-private partnership and, more importantly, an ability for our political leaders to come to some consensus. Consider the following:

  • Our latest research around blockchain suggests a current period of disillusionment. Reaching the scale technologically feasible to generate business returns requires better automation and regulatory agility or the networks won’t achieve scale through broader ecosystem participation.
  • Globally, poor international cooperation related to the sharing of information and the movement of people between countries contributed to the spread of COVID-19. Imagine a blockchain-enabled universal product code (UPC) on a smartphone functioning as an international system of record regarding vaccination history.  

Early in the pandemic, supply chain disruptions made headlines and every consumer felt the impacts. Blockchain-enabled smart supply chains, tied into ports and international transactions, could have smoothed out some of these disruptions if the distributed ledger technology had been broadly embraced by countries and their import/export hubs. The Republic of Venice once ruled commerce, reaching the pinnacle of its power from 1425 to 1500. It’s no coincidence that general ledger accounting was invented in Italy during that same period.

Moving from city-states to countries, nations fundamentally seek to protect their citizens through sovereign laws, with many regulations revolving around property, currencies and finances. Cryptocurrency purportedly separates currency from nations. In one potential scenario, China’s newly launched digital yuan topples the U.S. dollar as the de facto international currency trading standard, greatly reducing the impact of economic sanctions from the U.S. foreign policy tool set. Venice’s grip on the Mediterranean loosened for many reasons and while blockchain wasn’t among them — needing another 500 years to be invented — the parallels to the U.S. can be unsettling.

Private sector initiative proved emerging tech-enabled practices are essential; now comes public sector education

Out of necessity, the private sector accelerated emerging technology-enabled use cases to address the pandemic’s impact. This highlighted gaps in how the public sector operates and responds to significant changes in the commercial space. For newly enhanced technological tools to deliver tangible business and social benefit after these proofs of concept, government must accommodate new ways of working while still providing expected regulatory benefits to its citizens against moral hazards. Not surprisingly, advisory firms with the tax and audit knowledge essentially acted as referees within the free-market systems that frantically developed the workarounds to sustain business operations in 2020, exposing the ways in which the public sector decreases, rather than increases, the efficiency and viability of emerging technology-enabled operations.  

So, what do you think? Is it time for the Big Four referees to educate the public sector on the benefits of rules changes?

With post-pandemic world in sight, 6 IT services, digital transformation and consulting trends emerge

1Q21 belongs to the India-centric IT services vendors

India-centric vendors demand considerable attention at the start of 2021 for three trends cutting across their sales motions, talent strategies, and avenues to new partnerships and intellectual property. 

Winning deals the old way

In a return to the old-school tactic of rebadging client employees, India-centric vendors have begun winning larger outsourcing deals, in part because the pendulum has swung back to clients demanding “run-the-business” IT services, which naturally favors outsourcing by low-cost offshore IT services vendors. Using an old-school approach to buy their way into mega-sized contacts or secure renewals may heighten competitive pressures for IT services vendors that lack the same scale in offshore locations or willingness to absorb headcount to open doors for long-tail managed services opportunities. Across the outsourcing space, TBR sees a broad trend of vendor consolidation in contracts up for renewal, further pressuring all competitors to expand contract sizes in any way possible.

The most challenged, but also the vendor group with the biggest opportunity, will be the Big Four. Over the past five-plus years, all four firms, to varying degrees, have expanded their application services capabilities delivered through low-cost locations to better appeal to new buyers. Although firms like Deloitte have experienced some initial success, reaching critical mass will require partnering more strategically with the India-centric vendors, unless the Big Four want to adjust their pricing for more mainstream, almost commoditized IT services.

Developing talent onshore  

With attrition diminished by COVID-19, India-centric vendors will continue to push to expand onshore U.S. talent, including in ruralshore locations. By focusing on recent university graduates, the India-centric vendors can access relatively cheap talent, spend less on visas, and market locally based talent as part of their sales pitch. In addition, all IT services vendors could face a tech talent threat from cloud and software majors. While companies such as Google (Nasdaq: GOOGL) and Microsoft (Nasdaq: MSFT) have mostly gone after upper-mid-level and senior-level services talent, strategies could change as those software and cloud vendors expand their services capabilities (for more detail on technology vendors’ expansions in the services realm, see TBR’s September 2020 Digital Transformation: Cross-vendor Analysis). 

Turning to open source

Lastly, India-centric vendors, especially those lacking software-specific talent and IP, have begun promoting their value to Microsoft and other cloud and software giants by investing in and developing more talent through open-source consortiums. In contrast to traditional R&D efforts, open-source consortiums can provide less costly and time-consuming avenues to developing IP and possibly unlock new business opportunities through consortium partners. TBR also believes increased participation in open-source consortiums could potentially have long-term impacts on services vendors themselves, including development of software mindsets and associated practices. 

Even with slower growth, management consultancies should come through 2020 positioned to help clients weather disrupted digital transformations

Even with slower growth, management consultancies should come through 2020 positioned to help clients weather disrupted digital transformations

Management consulting market summary

Outlook

Regardless of whether the pandemic lingers, re-emerges in the second half of 2020 or significantly subsides, TBR expects consultancies will benefit from opportunities created by the chaos of COVID-19, such as uneven responses from government authorities around economic fallout, pandemic protocols and continued uncertainty throughout 2020. Vendors with greater scale, more established technology-centric brands, and deeper partnerships with cloud and software providers will weather the crisis and alleviate pressures on front-end management consulting by price-conscious clients that demand flexible payment terms. TBR expects management consulting revenue growth for the benchmarked vendors to decelerate to 3.5% year-to-year in 2020 but to continue to outperform revenue growth for the benchmarked IT services vendors.

Disruptors

Every part of the global economy, including the IT services and management consulting markets, are experiencing serious disruptions from the global COVID-19 outbreak. Countrywide lockdowns and changes in travel and personal interaction to limit the spread of the virus, have forced changes in human resource management for vendors and their clients, some short term and some likely permanent. Macroeconomic uncertainty due to the pandemic is pushing clients to re-evaluate their spending and shift their priorities from high-touch, large-scale strategic transformational discussions to tactical run-the-business and price-competitive managed services opportunities.

Overview

Benchmarked vendors in the management consulting segment increased revenue 7% year-to-year in 2019, a growth trend that continued to surpass that of benchmarked IT services vendors in TBR’s IT Services Vendor Benchmark, which expanded 1.9% year-to-year in 2019. The Big Four vendor group remained the largest revenue contributor at 55.8% of benchmarked revenue in 2019; however, strategy-led vendors increased their market share by 10 basis points year-to-year to 28%. Big Four and strategy-led firms are expanding their intellectual property assets and managed services capabilities to position as business advisers with holistic service capabilities.

The Management Consulting Benchmark provides key service line, regional, vertical and operational data and analysis for 13 leading management consulting firms. The research program also includes a deep dive into 11 vendors’ business strategies as well as SWOT analysis.

Vendors pursue tactical run-the-business engagements to help clients react to COVID-19 and relaunch business operations

Management consulting market summary

Outlook

Regardless of whether the pandemic lingers, re-emerges in the second half of 2020 or significantly subsides, TBR expects consultancies will benefit from opportunities created by the chaos of COVID-19, such as uneven responses from government authorities around economic fallout, pandemic protocols and continued uncertainty throughout 2020. Vendors with greater scale, more established technology-centric brands, and deeper partnerships with cloud and software providers will weather the crisis and alleviate pressures on front-end management consulting by price-conscious clients that demand flexible payment terms. TBR expects management consulting revenue growth for the benchmarked vendors to decelerate to 3.5% year-to-year in 2020 but to continue to outperform revenue growth for the benchmarked IT services vendors.

Disruptors

Every part of the global economy, including the IT services and management consulting markets, are experiencing serious disruptions from the global COVID-19 outbreak. Countrywide lockdowns and changes in travel and personal interaction to limit the spread of the virus, have forced changes in human resource management for vendors and their clients, some short term and some likely permanent. Macroeconomic uncertainty due to the pandemic is pushing clients to re-evaluate their spending and shift their priorities from high-touch, large-scale strategic transformational discussions to tactical run-the-business and price-competitive managed services opportunities.

Overview

Benchmarked vendors in the management consulting segment increased revenue 7% year-to-year in 2019, a growth trend that continued to surpass that of benchmarked IT services vendors in TBR’s IT Services Vendor Benchmark, which expanded 1.9% year-to-year in 2019. The Big Four vendor group remained the largest revenue contributor at 55.8% of benchmarked revenue in 2019; however, strategy-led vendors increased their market share by 10 basis points year-to-year to 28%. Big Four and strategy-led firms are expanding their intellectual property assets and managed services capabilities to position as business advisers with holistic service capabilities.

The Management Consulting Benchmark provides key service line, regional, vertical and operational data and analysis for 13 leading management consulting firms. The research program also includes a deep dive into 11 vendors’ business strategies as well as SWOT analysis.

Bringing the best: Talent and technology in management consulting

Insights from TBR’s Professional Services team

Join Senior Analysts Elitsa Bakalova and Patrick Heffernan and Research Analyst Kelly Lesiczka as they discuss the infusion of technology into every aspect of management consulting. In addition to detailing changed business models among the Big Four and Strategy-centric firms, the team will review how asset- and IT-centric consulting vendors have increasingly brought their technology-trained talent to bear across the management consulting space.

Don’t miss:

  • Which IT services vendors and consultancies have best transformed their talent to handle the new management consulting world
  • How emerging technologies, particularly artificial intelligence, will change the business models of management consultancies
  • Why companies like Capgemini, IBM and Accenture will be the ones to watch through 2019

 

TBR webinars are held typically on Wednesdays at 1 p.m. ET and include a 15-minute Q&A session following the main presentation. Previous webinars can be viewed anytime on TBR’s Webinar Portal.

For additional information or to arrange a briefing with our analysts, please contact TBR at [email protected].