I cannot recall how many times I heard this phrase over the last decade. Being a Sales Executive for lenovo, and working side by side with IBM in getting and managing projects that involved integration of technology and services on a world scale, this phrase was heard throughout the negotiations I took part on time and time again, on and off the record.
And for a good reason. IBM has been an industry standard for a century. They represent for the system integration market a standard in many different levels, from resource quality to knowledge base, going through success rate, on time delivery, and a customer portfolio that includes ALL the major players in every industry.
Does this mean that IBM does not have its downsides? No, and a great many deal of them, but they are overlooked when examined in the light of the positive gains that come out by hiring them, and IT executives in the market prefer to open up their budgets in exchange for the peace of mind that only the IBM seal can bring.
Is this article about IBM then? Actually…. yes,.. and no. What is said about IBM can be said for each industry leader that involves some level of consultancy services. From IT to strategy, operations, sales or marketing, hiring the “seal” in exchange for peace of mind is more common than not, and it is directly correlated to how many variables are under control by the client: the less variables under control, the less peace of mind related to the project. The less peace of mind, the more need for the seal.
As explained in Harvard Business Review by Clayton Christensen, when talking about business consultancy, for almost a century the industry leaders have been operating under the “solution shop” business model, which is structured to diagnose and solve problems with undefined scope, producing ad-hoc recommendations and charging high prices in the process.
On the flipside, clients many times have a hard time assessing the efficacy of the hired solution, First at pre project, due to time constraints and pressures from within the client’s own organization to come up with a solution, and second, at post project level, due to many factors like implementation quality, knowledge on the subject and the time frame required for many projects to wield results (therefore creating opacity on the actual contents of the solution). Under this kind of situation, is very likely that project owners turn to the “seal” looking to minimize the uncertainty.
There are, however, some changes in the horizon, and they have been there for some time now. Going back to IBM, it sold its PC division in 2006 and its x86 server line 8 years later to Lenovo and shifted its business from a hardware based model to a more IT software solution company / system integration role. In fact, since 2000, more than 50% of the company´s acquisitions were software related, 35% were solution oriented and only 3% were related to hardware. This strategy change was a result, among other things, of diminishing returns in the industry, a steep decrease of computer hardware costs, and an increase of component quality standard over the last decades, which made way to a number of new players in the pc and server industry, and led to an era of low cost hardware for the corporate market.
IBM correctly anticipated the situation, surfing the disruption and leading it to its current position in the market. After the transition was over, and at great expense, It became a leaner and stronger company, oriented for IT consultancy and technology integration.
What happened in the IT Industry with IBM was disruption 101: New technologies changed the landscape of a once profitable business, and forced old players to adapt to the new reality while new players joined the fight.
This same situation is starting to be seen in the Business Consulting Industry according to Christensen, where democratization of access to information and computing power have been major disruption forces in the last decade. The more access to data the companies have, the more they can work inhouse with data provided by 3rd parties at a fraction of the cost of what used to be a job for big consultancy firms, which shifts the ownership of projects from external to internal. According to Tom Rodenhauser, managing director of advisory services at Kennedy Consulting Research & Advisory, at traditional strategy consulting firms the share of work that is classic strategy is now about 20% -down from 60% to 70% some 30 years ago-.
This is creating a huge change in the way companies can and must deal with upcoming problems and opportunities. The available technology, that allows an almost seamless integration of efforts from people around the world, and current social trends, that favor autonomy, mastery and purpose over what previous generations considered sacred (a secure position in a company for the length of their professional life) are giving birth to changes that companies will have to adapt to, in order to take advantage of the new reality that it is forming in the horizon: The fact that there is talent and knowledge available for every situation a company faces, and that it can be obtained fastly and at a fraction of the traditional consulting cost.
This presents a world of opportunities for those who dare to take advantage of them, and a few challenges that go along them.
On the opportunity side, because of the very low overhead and flexibility this change brings, there is a possibility for any organization to democratize the access to the best human resources there are in the form of an expert. This gives managers the tools they need to do what every one of them is hired to in the first place: To meet infinite demands with limited resources. In a word, empowers them.
I understand that this empowerment comes with a price, which is the need of ownership. With knowledge comes responsibility, and therefore managers need to learn to use the expert “tool” as any other resource the company puts in their hands. Using again IBMs example, back in the day were the hardware business was a major part of its strategy, a computer would sell the to the equivalent of millions of dollars at today’s prices. It was a very expensive asset for any company, and its use was restricted to specific projects that justified its cost. Therefore, the approval process involved in its purchase and usage was bureaucratic and went up very high in every organization. 50 years later, the computer has become a commodity for the corporate world: Its usage is the bricks and mortar for their workforce labor to solve daily problems, and how companies approach its purchasing process has evolved to reflect the new scenario.
We will be seeing similar movements in the following years regarding how companies and its managers approach expertise and know-how requirements. Following similar patterns of what happened with computers, on-demand access to experts and knowledge is likely to democratize , becoming more and more mainstream in its usage, and in accordance, the process which once demanded bureaucratic approvals because of its price and nature, will reflect the new reality.