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March 6, 2009

The Magic Formula and the death of software consulting

When I was working in ERP the entire market was huge. Everyone wanted it, and the people who could provide niche services were few and far between.

We had the magic formula working for us. Scarcity and value. There were few people capable of doing the work, and there was no doubt at the time of the value provided.

Today that's all over...

Software programmers, ERP systems and consultants are abundant. The lure of success drew in everyone and their pets, and today SAP consulting (say) can be done by a very large number of consultancies.

Not only that but the value equation is changing. ERP projects, in fact many IT projects, had a habit of running over time and budget - and of producing questionable value for clients. (The dangerous combination of inventive people, flexible platforms and the promise of a tweak more functionality.)

Another factor is the rapidly evolving market of SaaS style software coupled with an increasing number of online suites really draw into question the value proposition of large scale IT projects.

Powerful and self serving IT departments aside for a minute, we can see that the magic formula is breaking.

The area is no longer scarce. There are many platforms and enterprise level productivity suites today - and the skills to work on them is abundant.

In fact they are so abundant you can get them by the bucketful at cut price rates from India, Pakistan and the Phillipines.

Moreover the value of these projects looks a lot better when you start to factor in the many low cost alternatives available online today.

There is no doubt in my mind that software consulting as a lucrative area of revenues for consultants is on the wane. Any long term player in that space will tell you it is getting a lot more competitive. 

And this is a trend that is only going to accelerate.

The scarce and valuable thing to offer today is a proven track record in implementing rapid business change. Services over software, and helping companies to find innovative ways of economically leveraging new technologies.

In fact, if you want to make any sort of significant yield on your efforts as a consultant what you offer must be both scarce, or perceived as scarce, and of significant value. 

Thats the magic formula. Worth another couple of posts I think.