In a comment to my recent blog post Belgium: An example of Cloud changing the SAP HCM consulting market, Steve Hunt, Senior Director, Customer Value Research at SuccessFactors mentioned Consulting-as-a-Service as a consulting delivery model. Of course, consulting is all about delivering services, but as technology and the related consulting market transitions to the Cloud, the way in which services are delivered and consumed will also change.
Steve’s description of Consulting-as-a-Service – which I will abbreviate to CONaaS from hereon – was simply of consultancies delivering small chunks of services over a prolonged period of time, rather than high-volume services into large projects and then ending the engagement once Go Live is reached (with exception of standardized enterprise support contracts). I don’t believe that we will see the end of this type of consulting as it is a necessity for getting new technology and practices implemented into organizations, but we may see services consumed by customers in a different way than we do today. There are some consultancies that deliver regular services and some that already deliver services on a CONaaS basis, so this is not something new. However, we may see this become more of the norm as customers get more used to the on-demand delivery model for technology and require partners that can offer them consulting services on a similar basis.
Ultimately as technology delivery and markets change, and as businesses adapt, so too will the suppliers of these companies. Invariably those that can and are willing to adapt will no doubt survive the transition, and it might mean adopting a business model and strategy that seems much less lucrative. Synonymous with the transition to the Cloud, it will be those companies that are adaptable and willing to take risks that will be the survivors. Trying to hold onto the consulting gravy train will ensure short-term survival, but in the long-term this will only serve to mask the necessity to transform into an organization that has to survive with lower revenue.
Another interesting facet of a CONaaS model is billability/chargeability, either as a subscription or in the form of units. Currently consulting is billed by the hour or day and even fixed-price proposals are based on a number of days. In a CONaaS model it would be more likely that a fixed subscription gives x number of hours to the customer – a sort of retainer, as you like. This would provide value when it comes to working with customers on explaining new features and benefits of a quarterly SaaS release. Another option is that units are based on a business outcome or specific delivery and that will have a fixed cost associated to it. The revenue would most likely vary from unit to unit and would be based on the exact deliverable and/or perceived value of the outcome of the deliverable. Customers want business outcomes and the CONaaS model allows them either to have work on demand or to buy specific outcomes when they want it.
It is worth noting that some consultancies and vendors have tried this in the past… and failed. That may be because of the infancy of Cloud in some areas or just the fact that these organizations have struggled to win enough business in their respective market to prove the business model. It certainly does not constitute a failure with the model itself. In addition, there are also issues with the middle men – or layers – within consulting that cannot proposer with this type of model. In his blog Full time culture and the non-value-adding middle man, Sven Ringling makes some excellent points about this and also about the full-time culture that has developed in consulting. It is definitely worth a read.
As Cloud becomes more prevalent and the consulting markets being to change it is inevitable that new models will arrive. Of course, the usual disclaimers about quality versus price apply and vigilance by customers should not change. A bit of research and reference-checking goes a long way to achieving those business outcomes, albeit indirectly. Whatever happens in the market, there will almost certainly be changes to how consulting services are delivered and it might be the most innovative methods that drive success.
Great blog Luke. I’ve offered retainers to some clients because it can make things flow easier – and no one has ever taken me up on it. The hourly, purchase order model is very entrenched in the industry.
Thanks Steve. The model certainly is, but I’m hoping and expecting it to change with Cloud. Some firms can’t offer that flexibility, but there will be plenty that can.
Insightful thoughts on this. Thanks Luke for sharing.
I believe, acceptance of such models should change with cloud in longer horizon which will definitely help customers but needs to evolve a lot for consulting/service delivery partners who are majorly dependent on fixed/T&M long term contracts for industry business.
Hi Anoop, thanks for your comments and I completely agree. I think it’s a matter of time before things change.
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A nice concept.
As a french man, I would like to warn you, you may not be able to extend this concept to France if you ever think of.
CONaas sounds like a vulgar french word http://www.collinsdictionary.com/dictionary/french-english/connasse
CaaS maybe ?
Ah, language – always stops a term being used globally 🙂 We’ll have to think of something else for France! Thanks for your comments.
As a management consultant , i always like to try CONaas or CAAS model. With a few experience in management consulting, i can see a great need of this model.
i always wants my customer to be happy with my service and ROI from their expect. They should not feel that they are cheated with the amount of money they paid ..
Did you able to develop this service?? or any progress after this thought. let me know if you have anything interesting going on
Thanks for your comments. We offer services along this model and they have been well received. They don’t apply to every model, but they do help with the Cloud model. Certainly for an on-premise implementation it doesn’t apply as fully, but it can still be used.
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Hi Luke, thanks for sharing the blog and I am happy that I found it. We have seen and observed how software as a subscription has advanced over the number of years and today SaaS is a widely known for software that’s on-demand and available for use immediately but it’s ironic that even SaaS companies that promote real time on demand provisioning of software are still providing legacy based services to their clients. These services are project based and provided as implementation/onboarding rather than a continuous on-going value attainment service delivery. We therefore built a platform called ConsulTeams which basically allows B2B SaaS companies and Consultancies (our target clients) to provide continuous service delivery on-demand and to their customers. I would enjoy connecting with you and getting your thoughts on this further and certainly hope we someday demonstrate how we provide a platform that allows companies to offer service as a subscription. Thank you for the evangelism on consulting as a service!
Hi Luke, hi Haresh,
sorry for chasing you through the internet, but I have really some trouble finding out why this (CaaS) hasn’t been a success yet.
I really would like to know if you think it was because of timing, usability or value (maybe the platform itself was only matching consultants to jobs instead of documenting and enhancing information).
Before trying to set up a CaaS Model for our market guess here in Europe (don’t want to call it an idea yet) I am trying to understand the problems and cultural hurdles involved.
I think quite simply that it’s down to economics… as in legacy (pre-Cloud) implementation partners simply cannot change an on-premise business model to deliver this type of model. Likewise, customers also still procure Cloud services much in the same way as they did for legacy services.
I think being able to help customers understand the value in such a model will enable it to be successful, but that will take time and not every customer will be receptive.
Great Article and feedback thread. I run a consulting organization for SAS Institute Inc here in US. We are an embedded consulting organization is a software company – which allows us to consider all the work we do as “in support of our software being deployed and adopted.” A material driver for our customers is the requirement to consume our services in a flexible manner and ensuring a full services offering option exists in a one performance obligation contract. A material driver for us is ARR. Being able to recognize the majority of the services as an annual recurring revenue (ARR) stream. We have been working on a CaaS model for sometime now – especially around our solutions (more than our tools products). We are packaging the various Advisory activities, the various Deployment/Configuration activities, and the various Continuous Monitoring activities into one “Deployment & Adoption Service” over a multi-year period. Then we can flat line the payment model and consider this a subscription service for ARR. If you think about the business of implementing solution software for customers – all three areas are needed and are purchases buy our customers over time – just as transactions verses one continuous service. The Deployment/Configuration/Customization Builds are about 75% of the costs so if you do not come up with a creative way to include the into your subscription model then you will never impact ARR as much as you would like and ultimately hurt your company’s valuation.
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Great blog Luke. I’m currently looking into potential of a similar as a service consulting model. Wondering if you’d come across any work indicating the disruptive threat this approach is causing traditional suppliers in the consultancy market. A lot of us perceive this to be the growing trend but it would seem the big consultancies still have the financial power and market share to continue the accepted norm.
That’s good to hear. I’ve not seen too much unfortunately. It seems like the older model is still used. I’d love to see you make some headway.
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