Which industry are tech giants going to disrupt next? Maybe it’s consulting?

Globally, a number of technology giants such as Amazon and Alibaba are getting into the consulting space. They are not only providing advisory services on the implementation of their hardware and software capabilities, they are also starting to become the advisers on digital strategy and digital transformation. What is driving their thinking? Is consulting the next industry the tech giants are going to disrupt?

An interesting recent trend of digital transformation is that a number of technology giants are getting into strategy and management consulting. Some recent developments include:

  • Amazon is significantly expanding its professional services arm. As of early January 2020, Amazon Web Services (AWS) has over 1400 job openings on its job posting website (https://www.amazon.jobs/en/teams/professional-services.).
  • China’s Alibaba is pushing its Alibaba Operating Systems concept to help expedite its corporate customers’ digital transformation. CEO Zhang Yong stated that Alibaba’s Operating Systems will serve brands and companies in 11 different areas such as branding, product development, and sales and marketing. It will deepen ties between both Alibaba and merchants selling on its platforms, as well as the merchants and their customers. Alibaba will provide dedicated resources to help its customers design, develop, and implement the digital transformation.
  • PingAn, a financial services company, is now building PingAn Technology Digital Consulting (https://tech.pingan.com/en/), whose explicit goal is to help corporate customers transform their digital operations. The digital consulting services cover end to end capabilities, from strategic planning to process optimization to systems integration and implementation.

Granted, technology companies have always been deploying professional services capabilities to help customers design and deploy technology products. Microsoft, Oracle, CISCO, etc. have all been doing this for years. What’s new here is that the tech giants such as Amazon, Alibaba, and PingAn are now building advisory capabilities to get into strategic planning, product innovation, operating model redesign, and change management. For example, Amazon’s job description for a people & product operating model consultant (https://www.linkedin.com/jobs/view/sr-people-product-operating-model-consultant-at-amazon-web-services-aws-1354372474/) reads “build clients’ future-state operating model – organization’s blueprint for change – to ensure that enterprise capabilities, key processes, ways of working, and workforce are refactored to align with the desired business outcomes that are driving the adoption of AWS. They then work with the executives to drive a cloud-enabled approach to organizational change management to ensure the transition is successful and sustained over the long-term.”

What could be driving these companies to get into a competitive industry segment that already has millions of consultants and systems integrators?

 

My hypotheses of the reasons why:

  • To stimulate business demand?

As I told many of my clients in the past, Technology doesn’t matter to them right now. There are more technologies available than they know what to do. Technology only matters when there are enough people who can generate the right business demand and ask the right questions to identify opportunities to apply the technology. These “technology demand generators” are difficult to find. Without these business demand generators, technology is just a hammer looking for nails. The technology providers such as Amazon and Alibaba may have realized this and are now actively building up their armies of demand generators to help companies leverage their technology.

 

  • Frustration with the current landscape of digital transformation advisory space?

I used to draw a 2×2-matrix map where the different types of advisory firms sit. The vertical axis is the business relevance and the horizontal axis is the technology capability depth. There are many advisory firms that are business consultants – they are strategically relevant to CXOs on business topics but lack the depth of technology capabilities. There are also a lot of firms who are technology consultants who know how to implement the technology but struggle to make the technology relevant for the business CXOs. It’s a rare combination to be both – being able to be both business relevant and technically capable. So maybe the tech giants are trying to address the white space of being relevant on both business and technology and fill the void?

 

  • Role model for the rest of the industry?

Tech companies sometimes would get into the hardware business to showcase the potential of both the hardware and software. Google did it with its Google phones and Microsoft did it with Surface laptops and tablets. So maybe the tech giants here are trying to do the same thing with the advisory space to showcase the art of possible for digital transformation and create playbooks that can be replicated to other companies.

 

  • New growth market?

US companies spent $68.5B on consulting in 2018, according to Statista (https://www.statista.com/statistics/793147/consulting-market-size-united-states/). So could it be that the tech giants see another growth market that they want to attack?

 

 

While it is difficult to build and run a professional services practice, the tech giants do bring a number of advantages:

  • Proprietary data advantages

The data advantage brought by the tech giants would be extremely attractive to its consulting customers. We are talking not only about tech giants’ insights of customer profiles and behaviors but also industry benchmarks on technology adoption behaviors, e.g. computing performance numbers and feature adoption rates. Furthermore, tech giants can readily share the vast amount of lessons learned captured in their own journeys. The data advantage by the tech giants is not something that can be easily replicated.

 

  • Pre-built technical capability to accelerate the transformation

This is probably a no-brainer: tech giants’ investment in pre-built technical capabilities can quickly jumpstart their customers’ digital transformation. Furthermore, the pay-as-you-go pricing model allows their customers the flexibility to truly test and learn without incurring significant capital overhead. In an empirical research done by University of Toronto’s Jin Wang and Kristina McElheranhey, “Economies Before Scale: Survival and Performance of Young Plants in the Age of Cloud Computing“, the authors already observed that by adopting cloud computing, newer manufacturing plants have enjoyed significantly higher survival and growth.

 

  • Ability to Influence

There is an old Chinese saying “The person on the spot is baffled, the onlooker sees clear (idiom). The onlooker sees more of the game.” With the name recognition of the tech giants and the experiences that those tech giants have undergone, their advisors might carry more influence weight and can push their customers to think and act more out of box.

 

What do you think? Is consulting going to be disrupted by the tech giants? Should the consultants be worried?

 

 

Copyright © 2022 Parker Shi. All rights reserved.

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