Status quo: medium-sized IT management consultancies and the digital transformation

Management consulting is one of the industries that is highly dependent on digitalization benefits. Admittedly, management consulting is to be seen as one of the sectors that sets up, directs and is involved in implementing a large number of projects for the digitization of companies from a wide variety of industries (Werth et al. 2016). But what potential does the consulting industry itself have?

IT management consultancies & digital transformation

Consulting is a service that provides added value for the customer through specialist knowledge in one or more areas. The concept of consulting is the often used Angliscism of advice and consequently the synonym for “consultant” can often be found again (Hoffmann 1991).
Management consulting, on the other hand, is a branch of consulting that specializes in supporting companies with regard to organizational and process optimization (Hoffmann 1991). According to the Federal Association of German Business Consultants, this sub-area generated around 44% of the 25.2 billion euros of sales in 2014 nationwide (Jörg Murmann 2015).
The above definition shows that a management consultancy supports a customer in solving a complex issue (Hoffmann 1991). The question arises: How does it come about that a customer hires a management consultancy?

Complexity as a trigger for management consultancies

The counseling situation  it results from the fact that, due to the complexity of the problem or the situation, the customer is not able to solve it adequately on his own and with his own resources. For this reason, he turns to external experts who should first give him an overview, later point out possible decision-making paths and then support him in choosing the solution strategy (Hoffmann 1991).
The complexity of a situation can grow beyond the possibilities of the customer, for example if the business environment changes rapidly or if there are changes within the company due to restructuring of the organization. The advisory service is intended to reduce the amount of information and, at the same time, the complexity of the problem in order to enable the customer to act again (Kubr 2002). This results in two main tasks for management consultancies: Provision of knowledge and development of solutions for business decision-making problems (Schrädler 1996).

Success factor: knowledge transfer

The knowledge transfer in combination with the development of solution approaches for the customer results from the interplay of knowledge, experience and information (Schrädler 1996). Kampe says that the leverage structure has to be reconciled depending on the scope of the project and its complexity. By this he means that the relationship between the advisors of junior and senior consultants is crucial for optimal advice (Kampe 2011). The transfer of knowledge within the consulting company is stored and supplemented in so-called knowledge management systems. In order to constantly supplement the knowledge, there is also close cooperation with science, for example in the form of workshops or further training (Alavi and Leidner 1999).
For the success of the consulting service, according to Kubr, the independence of the consultant is a decisive factor for success. In this context, independence is often associated with objectivity to the existing project. Kubr assesses the consultant’s objective and neutral view of internal company events as particularly necessary in order to identify the actual problem with the customer (Kubr 2002). The independence of the consultant is also intended to counteract the “operational blindness” of the customer. Operational blindness in an organization has its origins in routine in everyday work. A blind employee assesses his work as good, although this is not the case and does not feel the need for change, as a result of which the effectiveness in everyday work suffers. Operational blindness can increase if management has recognized it but does nothing to prevent it (Hohlbaum and Olesch 2004).

Expertise and new ideas

Due to their external perspective, consultants have a certain distance from the customer’s internal processes and previous procedures, which allows them to get an objective impression of the situation. This results from an impartial attitude on the part of the advisor  towards the various stakeholders of the customer, which makes it easier to work on solving the problem of the stuck structures (Schrädler 1996).
It can be assumed that the counselor has certain skills and resources that are currently not available to the person seeking advice. According to Kramer, the consultant’s degree is of secondary importance, nonetheless, the majority of the approximately 86,000 consultants in Germany have a natural or engineering background, mostly in combination with business management knowledge. In addition to the high professional requirements for consultants, a distinctive personality profile is also very important to the consulting firms. This includes, for example, a confident manner, communication skills (preferably in several languages), open-mindedness, resilience and analytical thinking (Kramer 2006). It should be noted, however, that it is obviously sufficient for the customer if a consultant pretends to be a consultant or if he is employed by a consultancy firm. There are many certifications and textbooks on the subject of “consulting”, but no standardized vocational training in the actual sense (Dr. Michael Zirkler 2005).

IT management consultancy

According to the Association of German Management Consultants, IT consulting accounts for 21% of the turnover of € 25 billion in 2014 mentioned at the beginning of the chapter (Jörg Murmann 2015). The aforementioned characteristics of consulting also apply to IT consulting.
The aim of the IT consultancy is to strengthen the competitiveness of the supervising company through various project assignments. The areas of responsibility range from internet and cloud services, such as e-commerce or in-house learning and information platforms, to the analysis and implementation of software and system solutions that include, for example, IT security (Kramer 2006).
According to Scheer, there is a trend towards increasing personal contributions on the part of customers, especially in IT projects. As a result, on the one hand, large consulting firms have to adjust to a high degree of flexibility with regard to the deployment of employees or consider the possibility of using freelancers in a targeted manner. On the other hand, the customer’s need for increased self-control brings enormous potential for small consulting firms or start-ups, which can act much more efficiently and flexibly with flatter hierarchies and virtual forms of organization.

Business consulting in growth

Overall, Scheer expects major changes on the advisory market over the next 5 years (Scheer 2016). Due to the special characteristics of IT consulting, it represents enormous potential for medium-sized consulting and is in  another article  shown. The study on this is currently being prepared and around the middle  June 2017 on this blog. If you want to stay informed, you can Newsletter subscribe to. The text is an excerpt from a study that I am currently doing with a student.
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