CXO

Survey shows little change in mix of clients

Our survey shows there has been little change in the clients independent consultants and small firms have served over the past five years. But according to industry experts, there has been a change in what and how clients are buying.


In spite of—or perhaps because of—the rise and fall of dot coms, the majority of independent and small consulting firms have continued to concentrate their efforts on brick-and-mortar companies, according to a recent survey on TechRepublic. Of the 175 respondents, 46 percent reported that 90 percent or more of their clients are brick-and-mortar businesses. The majority of respondents also reported that their competition is staying out of the virtual market, saying less than 30 percent of their competitors are Web-based businesses.

Despite the hype of the last few years, TechRepublic’s survey could be seen as anecdotal evidence that the world of business isn’t moving as quickly as some believe. This situation may provide additional opportunities for IT consultants, said Rob Leavitt, director of member advocacy for the Information Technology Services Marketing Association (ITSMA).

"What that means is that there’s tremendous opportunity out there still," he said. "The majority of companies still have not really moved into serious e-business, but they will."

To provide context for our results, we showed the survey numbers to Leavitt, whose firm provides marketing, branding, and sales strategies for the technology industry, and to David Joubran, president and CEO of Acumen Solutions, a management and technology-consulting firm. The two gave their impressions on how the survey results reflected consulting trends and the market as a whole.

A change in buying habits
Instead of contracts for new technology, Joubran said his firm is receiving requests for projects that upgrade or enhance existing technology to maximize the return on the initial investment. Most of our respondents indicated that they’re serving well-established companies that have likely made some significant investments in technology during the past five years (see Figure A).

Figure A


Both Leavitt and Joubran suggest that the cooler pace of IT spending has lessened the sense of urgency toward IT projects. As a result, potential clients are taking longer to determine consultants’ expertise and ability to deliver. Clients are also moving the point of contact for larger consulting firms up, from managers to the CIO level, lengthening the sales cycle, Leavitt said.

"More people are involved now," said Leavitt, whose firm focuses its research on Fortune 1000 and Fortune 500 companies. "There’s just a lot more scrutiny over any possible engagement."

While more eyes may be on a potential contract with a consultant, our results suggest that many consultants still have an IT manager, CEO, CIO, or CTO as their point of contact (see Figure B).

Figure B


Leavitt claims that clients’ new level of examination stems from the flurry of IT initiatives launched during the past five years that have under-delivered. Many companies feel like they’ve been burned and aren’t willing to make such risky investments.

Consequently, consultants also have had to work harder and longer for sales, Joubran said. His firm targets the communications and financial services industries and serves blue chip companies like Verizon and Nextel, as well as midsize businesses. He said such skepticism has tacked an additional 45 to 90 days on his firm's sales cycle.

No change in clientele
The majority of those surveyed said that 30 percent or fewer of their clients were click-and-mortar companies (See Figures C and D).

Figure C


Figure D


When asked how they would characterize the change in their customer base during the past five years, the majority of respondents said their clients remained largely brick-and-mortar, or that they'd had no significant change. Eighteen percent said they'd seen a gradual shift from brick-and-mortar to Web-based companies (see Figure E).

Figure E


Consultants not concerned with Web-based competition
Figure F seems to illustrate that most respondents aren't worried about their services being replaced by Web-based offerings like application service providers (which had been previously perceived as a threat to the consulting and software value-added reseller industries).

Figure F


Who are the respondents?
We asked our members several questions that would help define their place in the market. The results showed that 70 percent of the respondents worked with a small firm or were independent consultants. The majority of respondents also reported completing two to four projects for their typical clients, with an average length of engagement between one month and one year.

Do you choose your clients, or do they choose you?
Do you purposely take on clients that have been in business for a long time to avoid payment problems or lack of experienced leadership? Have you been burned by fledgling companies who couldn't afford what they needed, or worse, didn't know what they needed? Discuss your experiences below.

 

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