As the New Zealand consulting market contracts, IT heads are offering some clues as to why.
Sky City information services director Damian Swaffield says his company is tending to make less use of big consultancies as its in-house expertise has developed.
“We use external consultants in project management and business analysis; otherwise we tend to steer away from the big consultants and use small boutique companies where we can body-shop people in.”
Swaffield says Sky City’s internal skills have expanded in response to rapid change and growth in the business.
“We tend not to want to acquire the risk management that comes with larger organisations because we’ve internalised that. We would just end up paying a cost premium for something we don’t want. We tend to use smaller consultancies. We have 20% of our IS workforce contracted.”
Auckland Regional Council information chief Tony Darby paints a similar picture. He says it’s “very demoralising” for in-house IT staff to see work offered outside which they could handle.
Darby says the ARC isn’t reducing IT spending but is doing those projects it can do in-house.
“We still use companies like Synergy and Sytec to do certain work.” Recent examples are a review of the council’s internet strategy and a network upgrade.
He can also foresee using consultants when the council embarks on a significant rating project, for which it is close to finalising a supplier.
ARC IT team leader Colin Wotherspoon says another explanation for consulting’s decline is that IT is losing its mystery and buyers are becoming more circumspect.
Inland Revenue business development and systems general manager Colin MacDonald says there’s been no change in the way the department spends on consultants.
“Inland Revenue has a wide skill base among its own staff, but where required it augments this with specialist consultant skills. The department’s current technology strategy project, for example, has involved both the services of consultants, and those of internal staff.”
Another large IT shop, the BNZ bank, also reports no change in its use of consultants. But IT head Peter Fletcher thinks the market as a whole is reducing its reliance on them.
“I don’t know if that’s a question of oversupply; I think there’s just less demand.”
According to Swaffield, a former Deloitte employee, consultancies that were attached to the big accounting firms suffered when they were cut adrift.
“That audit function provided a constant income stream and without that the consulting sides of the businesses have lost their stability.”
He believes that’s forcing them to look to the systems integration market traditionally served by IBM, Unisys, and Gen-i.
“I think ERP implementations have also dried up. A lot of the big firms had big ERP competencies.”
As the big consultancies move down, the smaller ones are being squeezed, he says.
“Small players don’t have the scale to compete with someone like IBM/PwC unless they start to merge. They don’t have the marketing capacity. It would make sense if you’re one of the Big Four and you wanted to get into service delivery and want to quickly acquire a systems integration capability to go and buy some one.”
That’s not necessarily good for customers, however.
“Ideally you want to see a range of consultancies. At the high end we’re looking for true partnership and we pay a premium. But then we go down scale to those we just buy bodies from. We like to see players in this space. The risk is that everyone will move to the higher space.”
A senior IT staffer from the pharmacy industry, who does not want to be identified, sees the merger pressure as evolutionary.
“We have to accept that this is the nature of business — as long as there’s not too much of it, because competition is good. If it happens too much it skews the market. I like to see a healthy market.”