Disintermediated: IT Consulting Firms and System Integration

Over the last few years, many System Integrators (SIs) and Information Technology (IT) consulting firms have found themselves in trouble as the number of clients decrease and revenue takes a downward trend. In-house IT departments, who’s budgets are cost-centers, are also being affected and in the same category.     What has changed so dramatically within the last couple of years to have caught these firms unprepared?

IT Consulting Firms and System Integrator focus on helping organizations on how to best use information technology to achieve organizational objectives. Most of these firm’s main revenue stream is to keep the project teams at the client sites and manage high billable utilization targets by designing, deploying, manage, implement, and administer IT systems on behalf of their clients. This includes bringing together a number of component subsystems and ensuring that they function together.

Although cloud-based services have been available for many years, cloud computing is finally becoming mainstream disrupting the traditional staff utilization business?  By harnessing highly scalable services like Infrastructure as a Service, Platform as a Service, Software as a Service and more recently hyper-converged infrastructures, businesses can conduct their activities, faster, easier, with more computing power and a level of customization that would have been unimaginable a decade ago, and at a fraction of the cost.  With far less technical consultant involvement and time as well.

What used to take five weeks to stand-up, now can be built in a few hours via highly customizable scripts which can be used and re-used time and time again.  With such changes taking place in the market, and at such an amazing pace, it is certain that most of these firms were bound to lose business.

Should be said that this is not a new phenomenon.    Technology has disintermediated many industries over the years.  Travel, Music, Retail, Banking, Book Publishing just to mentioned a few.   The process of reducing the use of intermediaries between producers and consumers, has been a solid staple of business revenue for consulting and system integrators.    And now this is happening to the IT Business.

Many IT departments, Systems integrators and IT consulting firms did not have the foresight to reorganize their businesses to accommodate to the changes in the marketplace.   However, many have done so brilliantly, and those are the ones we will focus on in future articles.