Who will win the race as preferred digital transformation partner: management consultants, agencies or IT service providers?
The significant need of companies for external advice in defining and implementing comprehensive digital transformation strategies has opened up major growth opportunities for consultants – strategy consultants that are able to define digital business strategies, design consultants that can create an appealing digital customer experience, and technology consultants that can implement (and potentially run) the necessary technology environments.
In a race to win the position of preferred digital transformation partner and offer services in all three domains – strategy, design and technology – players from different backgrounds are currently massively overhauling their competitive strategies. Actually the provider landscape is changing at an incredible pace. Over the past year, we have seen competition between management consultants, digital agencies and IT service providers heat up significantly. Each of them enters the digital transformation market from a different perspective and with different strengths and weaknesses.
In our new Market Insight Report on Digital Transformation PAC summarizes the most important recent developments in the provider landscape, based on the more in-depth analyses and profiles of key players that PAC has been publishing over the past few months.
Management consultants: strengthening their innovation and implementation capabilities
The strength of management consultants clearly lies in their strong intimacy with decision makers at the top management level – who are the necessary drivers and sponsors of comprehensive digital transformation projects. Management consultants have a recognized legitimacy and expertise on strategic, organizational and transformational projects.
We currently see that most of the large, global consulting firms are forming dedicated digital strategy units or (co-)innovation labs. Some of them are even investing in implementation capabilities and are recruiting in areas like service design, product development, or solution architecture as the examples of BCG Digital Ventures, Deloitte Digital, McKinsey Digital or Strategy&’s Digital Services show.
While all the above-mentioned digital consulting units are still small in scale compared to the digital practices of the large IT service providers, such as Accenture, Capgemini, IBM, Infosys or TCS, it becomes clear that the large consulting firms are playing an increasing role in actually realizing digital technology solutions – moving into the domain of IT companies and digital agencies.
Digital agencies: strengthening their technology expertise
At the same time, the digital agencies are building up their strategy consulting as well as their technology expertise beyond marketing and advertising. The digital agencies are increasingly targeting CIOs and other information and technology functions within large companies, positioning themselves directly against large IT services firms. Looking at the four large global agency networks Publicis, WPP, Omnicom an Interpublic, all of them have boosted their digital technology capabilities over the past few months through acquisitions and consolidated their digital expertise in new organizational structures. In particular, they are strongly investing in big data and analytics offerings and capabilities.
IT service providers: consolidating their digital expertise in dedicated business units
IT service providers have a deep understanding of the technology aspects of choosing, implementing, integrating and eventually running complex digital solutions. They have strong expertise in security as well as backend and legacy integration, e.g. to incorporate big data solutions, cloud architectures or backend systems. Backend integration is clearly an area where IT services firms can prove their strengths against digital agencies and management consultants.
We are currently seeing all the large IT service providers develop their innovative and creative capabilities as well as their digital strategy expertise either through M&A activities and/or the recruitment of e.g. customer experience, digital marketing or design professionals. Additionally, over the past 1-2 years, most of them have consolidated their capabilities related to digital transformation under specialized digital business units as the examples of Accenture, IBM, Capgemini or TCS show.
The route ahead: adjust to the emerging phases of digital transformation
For digital technology and service providers, it will be critical for future success to fine-tune their positioning, go-to-market and service offering to the three phases of digital transformation that we describe in our new Market Insight Report on Digital Transformation. Customers – even from the same industry – might be at very different stages of digital transformation and therefore need to be addressed in a differentiated way.
While in the phase of digital frontend transformation, access to decision makers in marketing and sales as well as expertise in frontend design are key, backend integration expertise becomes increasingly important again when customers move towards digitally integrated enterprises. Emerging digital ecosystems on the other hand need trusted third parties that are able to align divergent interests of various stakeholders, coordinate innovation networks and build the necessary technology platforms.