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Wednesday, May 18, 2005

Consulting : Sign Of Things To Come??

Capgemini NA is said to be embarking on a major turnaround program making it most likely to look more like a specialist niche firm. They are probably moving away from the frame of big service provider to a specialist service provider. Consulting line of business appears to be a tough terrain for Capgemini in North America. Strategy to fix: - Close offices, tweak the senior –junior ratio to stretch further, rationalize expense – all these characterize the new approach. Chopping down the range of services substantially, (already sold off its healthcare vertical to Accenture recently), Capgemini is said to be planning to be more nimble and provide the comfort of a small specialist player to end customers. Huge challenges lay ahead – tapping the rich knowledgebase that any consulting company ay boast of and the challenge of lack of synergy in consulting with far less no. of service offerings. This in turn runs the risk of losing key people and in general could create huge concerns for customers. Focussed attention and relationship could find favour with selected clients. In general - this is a reflection of the state of the industry -Offshore firms,highly cash rich as they are shall muscle in and begin to make targeted acquisitions – last twelve months has seen more acquisitions announced by offshore vendors and going by public statements more should follow. Though am not sure whether any offshore firm would look favourably at consulting firms with fat cheques and high cost structure.Perhaps it is easier to do lateral recruitent in significant nubers. Ironically, in a way - high cost outfits like Capgemini may not have many options left.

I recently wrote Services + Consulting: Good Match Or No Match? - In IT Professional Services,the key distinction to make is are we a consulting firm or a technology shop( This is tricky - as IT is becoming inseparable from business).This reflects on the business model. In a consulting model, the firm employs experts, not flashy freshers, skilled professionals that know the tricks of the trade and the best practices. The legacies and cost structure will be higher due to the larger payouts for the experts. The client realization should also be higher - but with generic sales force selling both consulting and professional services, carrying aggregated targets – sometimes it can create pressure on the system. Also in the western firms quoted here- there’s a double whammy effect – first differential is cost structure between consultant and technical expert – with technical expertise becoming cheaper – largely due to offshoring the difference widens quite considerably and hurts – So it would not be counted too bad to argue that best managed offshore firms with enlightened management would invest heavily in building consulting capabilities and potentially compete effectively and move on pulverize the blue blooded consulting firms – this is a real possibility – but the offshoring firms need to approach this far more seriously and make concerted investments to realize this – along with economical offshoring technical pool – this is the deadly combination that western firms need to watch out – western firms – you have not seen much of this type of competition thus far – this is indeed a formidable one!! Consolidation is not only happening in the software product arket - service firms are also beginning to be forced to act along similar lines!

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Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld
"All views expressed are my personal views are not related in any way to my employer"