Belgium: An example of Cloud changing the SAP HCM consulting market

I live in Belgium, but rarely work there. However, I have many friends in the consulting space and have been following the market closely over the last 3 years. We’re beginning to see a slowdown in the market; rates are dropping by half, the market is crowded with SIs and is saturated with contractors, and many of the big projects have all been completed. And now Cloud has gained a growing foothold within Belgium and many consultancies cannot compete with pocket size implementation rates that competition is bringing to the market.

So, is this a trend that we can expect to see in other markets in the future?

I believe it is. I believe that Belgium is an example of how the SAP HCM consulting space is going to change in other markets. The biggest factors are the shorter projects with lower costs. There is a need to bill consultants, but with SuccessFactors it will be a matter of 1 FTE – or less – on a project. The days of 20+ FTEs on a project for 150+ days will soon be over.

There is going to be a contraction in the consulting market. With less business to go around, it is inevitable that there will be SIs going under. I don’t think we’re going to see many large casualties – the likes of Accenture and Deloitte have other successful and profitable lines of business – but there are some that will simply be unable to be profitable in the Cloud. One tactic I have already seen by some SIs is using junior consultants on SuccessFactors projects to ensure profitability. However, as a long-term plan that is a flawed strategy. The value of Cloud is not in the technology, but rather in what it offers to the business. Do juniors really understand how to offer this value when they are still learning the technology?

And that leads to another fundamental mistake some SIs are making: they are treating SuccessFactors like just another niche technology, as if it was Nakisa or OpenText. By sidelining it, being reactive, and using juniors then SIs are making a recipe for their downfall. While on-premise is where the money is, the future is all about the Cloud. Not being able to proactively build a business, create relationships with the vendor and their sales executives, and not being able to provide true value will make it very hard for SIs to transition.

Having seen what is happening in Belgium and understanding the revenues that SIs need to make, I find it hard to see how many of the SIs are going to survive as Cloud becomes bigger and bigger in the SAP HCM market. With diminishing project revenues and stagnant costs, is there going to be consolidation of the markets? I can only see it going that way.

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13 thoughts on “Belgium: An example of Cloud changing the SAP HCM consulting market

  1. This is not a Belgium only phenomenon. You talk about Junior consultants, what I am seeing is that SIs in Cloud are hiring offshore consultants for 1/5th the cost of North American consultants and getting them to do the monkey XML configuration work.

    Market is not looking for cloud SIs and for consultants. So the question is, where is the money to be made? Big Data?

    • Thanks for your insights and adding to the discussion. Money will be made from proprietary areas such as consulting, integration, advisory, and more technological things like HANA and management of Big Data/analytics. However, I also believe that for SAP HCM there will no longer be money to be made as it is now. There will be less revenue and fewer consultancies – the survivors will reap the rewards.

  2. Hi Luke,
    The point you make about FTEs on SuccessFactors implementations is a very important one that I see SIs struggling with. They are still staffing SuccessFactors implementations the traditional SAP way. Unfortunately that is a myopic theory of survival in this dynamic market. A point worth observing is that organizations where the top echelons have a keen eye on the market and understand the nuanced shift will be the ultimate survivors even if currently they may seem to be scurrying like their contemporaries. It is very encouraging to see that thought leaders like you have a keen pulse of the market.

    Cheers,
    Jyoti

    • I understand your argument in the general HCM marketplace but I am interested in knowing your opinion as it relates specifically to Time Management/Time Evaluation.

      • Time Management/Evaluation in the Cloud is largely handled by 3rd party products from outside of the SAP HCM product range. As a result Time Management focus is still on-premise. However, as SAP and other Cloud vendors build out this functionality it may move to the Cloud, although I expect for SAP HCM for it to be available as part of Employee Central and therefore not available to on-premise customers.

    • Thanks Jyoti. I understand what you are saying about senior leadership understanding the market and those with a key understanding of the shifts and who also have a real drive for the future will invest in a strategy that clearly includes the Cloud as a focus.

  3. Good Article as usual .I think the way forward especially with SAP is the Integration of Core ERP with SF and the rapid deployment of this solution .I guess it is just time before the Non Payroll & Time modules move completely to SF. The only players remaining will be those who are able to deploy this integration within a short time frame unlike traditional SAP projects.

    • Thanks Harris. I do believe that those modules – and even Payroll – will eventually be available in the Cloud. I don’t think customers will be forced to move to the Cloud, but better options will incentivize them.

      I think your last comment is right, but I also believe it will be those that are most agile in adapting to the new business model. That will require speedier implementations and speedier integrations and the quickest will survive.

  4. Its happening right now for HCM and SRM, Being a consultant for 8 years with on and off on projects, had made a drastic move to Successfactors, unfortunately the market is very tough. All the NA SAP FT employees have been moved to successfactors, and crap breed are on projects which are still implementing SAP HCM @ tremendous cost. Regarding time management, SAP employees are in process of transitioning since it is not going to be supported from 2014.

    Imagine all SAP NA FTE on Bench learning Successfactors and implementing it, one consultant working on 2 or 3 implementation projects in the span of the project which would be @ max 6 months. Would there be a need for contractors ever ? had not seen any jobs in a few months.

    This would also help in the Consulting Fraud, reduce the inflow fake candidates who have come to SAP Consulting world.
    http://scn.sap.com/community/career-center/blog/2012/04/09/sap-consulting-fraud–disturbing-example

    The problem is that some of the companies mentioned in this blog are sap partner for successfactors. Why doesn’t the client do a third party check for all the implementation partners. For instance State of California http://www.businessinsider.com/another-high-profile-sap-failure-state-of-california-2009-2

    Success and failure of a project is not a problem with software, the consultants who have implemented it.

    Also if you look at the other public sector implementation listed here.
    http://scn.sap.com/community/erp/hcm/blog/2013/06/05/truth-about-the-sap-hcm-customer-connection-program#comments

    Why does the client make these decision, and as it is in the process of implementation, why don’t get out of the contract and implement successfactors is another million dollar ?.

    • Thanks for your perspective Rajesh. I agree with your sentiments and I see this being part of the new reality. There just isn’t the utilization with the Cloud that existed with on-premise. And this cost reduction will lure many customers to venture into the Cloud – as we are already seeing in some markets. It will be a matter of when – not if – this will happen.

      Thanks for posting those blog links because they are good for customers to read.

  5. Hi Luke, I believe a major growth opportunity in this space is to develop consultants that both truly understand the details of the technology and have expertise in broader talent management process design and deployment. Our customers want experts who can integrate OD/HR consulting with HR technology configuration. This is a challenge for a lot of consulting companies who tend to take an approach of either:
    a) HR technology shops: configure the technology as fast as possible to maximize profit per fixed-price project – to quote Bowie, this is a “wham bam thank you mam approach”
    b) HR consultants: do extensive process design and culture change work that takes months (or years) before getting the technology up and running. this is more of the “analysis paralysis approach”.

    Our customers need consultants who can blend both to end up somewhere in the middle. Just as we have “software as a service” we need more “consulting as a service” where focus is placed on providing steady ongoing support over years instead of trying to frontload consulting engagements with as many billable hours as we can possibly fit in this year. From what I can tell, the consulting companies that do this well are in extremely high demand in our customer base.

    • Hi Steve,

      Thanks for weighing in with your comments. Even though SuccessFactors is fairly new to the SAP HCM world still, you seem to have a good grasp of the types of SI. I certainly see large a emphasis on the technical aspects, even for non-technical practices like Talent Management.

      I definitely think your “Consulting-as-as-Service” suggestion works out better for customers, but I don’t see the bigger SIs doing this. There are many smaller consultancies doing this (note: not SIs), especially in the management consulting area. I think this change will be forced on many because the value of SaaS will be lost if technical folks try to implement SuccessFactors technology.

      Best regards,

      Luke

  6. Pingback: The Consulting-as-a-Service model (CONaaS) | Luke Marson

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