One of the more demanding requirements for an “industry analyst” is to prognosticate market undulations. Crystal balling is important to service providers as well as software firm as I discovered in early 2001 when I created Professional Services Strategies at META Group in early 2001. In the previous year, the market for IT related services had completely cratered and in short order, I had signed up all of the usual suspects (Accenture, Deloitte, IBM, SAP Consulting, Oracle Consulting, et al) as well as a number of lesser-knowns as clients. While all were generally interested in my insight regarding competitive analysis, marketing drivers, and best practices for service delivery, what they really really really wanted to know was…where is the business? This simple burning question quite naturally led to subset queries such as:
1. when will things turn around?
2. what services will turn around first?
3. what new services might spark client interest?
4. will rate structures hold up?
5. how is offshore affecting onshore consulting rates?
I had one major client with an internal business analyst who would “make the rounds” with all the prominent analyst firms (IDC, Forrester, AMR, Gartner, and META Group) as well as a few other once every six months. Her task was to gather intelligence for budgeting and sales forecasting and our bi-annual meetings lasted from two to four hours. Her questions were unusually sophisticated and I came to highly value these meetings for their substance and mutual enlightenment.
From our first conversation in late 2001 to our last conversation in mid 2005, she told me that I was running counter to my competition, many of whom tended to regularly tell her, in so many words, that “the market will turn the corner in six months”. The problem, she told me, was that none of them could say just why.
Until late 2003, I simply advised that there would be no movement or improvement in the consulting services market for the foreseeable future. My argument was that neither of the two most important business drivers was at all evident: a) a positive economic climate or b) new and disruptive technology. In the 1990’s, we had seen a perfect and positive storm of both as well as the decision accelerator known as Y2K. From 2001 through 2003, we watched the slow smoldering of a post dot-com universe amid a sprawling trash heap of firms that did a disastrous and rushed job of implementing large-scale ERP. CRM was incorrectly touted as the new wave and NetWeaver was prematurely presented as disruptive technology. In fact from the onset of Y2K to date, we have had no new wave of business applications nor any truly disruptive technology. (“The cloud” is a repurposing of assets, primarily Internet, not a new technology per se). At any rate, this was an extremely boring phase for information technology and most especially for related consulting services.
Finally, in late 2003, I presented an upbeat quarterly trends teleconference with my partner, Stan Lepeak. The teleconference was very well attended, a response fueled in part by the title: “In 2004, the Sun is Coming Up (for those who know where to find it)”. While economic indicators had shown only slight improvement and no new technology drivers had appeared, Stan and I had begun to detect serious upticks in some consulting areas, most especially those having to do with low-end functional outsourcing (e.g. HR) and low-end technical outsourcing (infrastructure and ADM). While much of our evidence was anecdotal and too little of it based upon rigorous primary research, we amended our market outlook from “cloudy” to “partly cloudy” and by mid-2004 our prognostication has been borne out. No particular driver was attributed to this change either by META Group or any of its competitors. At the time, I chalked it up to “pent up demand”, a mass reaction to three or more years of “sucking it up”, “belt tightening”, and the like.
The downturn in SAP consulting since 2008 has been nowhere near as severe as the 2000-2003 rut. For the most part, 2009 was the worst year ever so 2010 seemed better than its sluggish reality. All the same, I am detecting some changes in conversations and observations to such point that I will now declare that “the SAP consulting market will turn the corner in the next six months (~ late spring or early autumn 2011)”. My evidence is thin but does include very sunny-side up quarterly results for SAP, a somewhat improved economic environment, and that strongest of drivers after two plus years of struggle…pent up demand.
I am not expecting vast and ambitious projects. I expect instead to see a slight flood of “sweat the asset” initiatives, including hefty doses of business intelligence, business process optimization, instance consolidation, legacy retirement, and improved supports of end users to increase deployment competency. The latter of these may be the result of rose-colored glasses but over the past year I have definitely detected a market wave of realization that end users are the most neglected aspect in the SAP installed base as well as an understanding that well-supported users (heretofore referred to as “business process drivers”) can yield considerable business benefit.
This rosy prognostication flies in the face of those provided by Forrester, Gartner, et al, most of who see little to no growth (a holding pattern). Admittedly, they are addressing the tech market (software and hardware purchases) which is driven by IT clientele more than the services market which is more driven by business clientele. My prediction is based on the pent up demand of business people, the emerging SAP clientele.
There still isn’t anyone talking to these people. SAP continues to address the techie world almost exclusively, as if their software is like something provided by Apple or Microsoft that just “plugs in”. In their most recent quarterly call, SAP once again spoke almost entirely about the 37% of their revenues that is derived from software while ignoring the 63% that is service and support related.
The business people represent a market of necessity as analytics and business intelligence represent an ever-growing percentage of SAP software sales. The demands of the business market (business analysts, business process owners, end users, et al) may finally be addressed by SAP’s consulting partners if not SAP itself. Whether ASUG will follow this trend remains to be seen.