Corporate Clients Want Solid Returns on IT Investments

ROI (return on investment) has become the mantra of the chief information officers (CIOs) at the corporations served by consultancies. Only if a solid return on new dollars invested in computer and telecommunications projects can be forecast will new projects be assigned to consultants. At the same time, IT system managers have become much shrewder bargainers. They demand better prices as well as free extras—and they often get them.

This trend sets the tone for IT consulting projects today. In contrast, during past booms, IT consulting/implementation projects were often bid on an estimated basis that allowed for significant growth of the total fee if the project took longer than originally thought. Today, however, many IT consulting projects are bid on a “fixed cap” basis, whereby a pre-agreed fee is guaranteed to see the project through to successful completion. The relatively new trend of contingency pricing, that is, the final amount paid for a consulting assignment being dependent upon the actual results of the work, has also dampened final profits at many consultancies.

Meanwhile, intense competition from IT consultancies based in India, such as Tata, that have lower operating costs than their peers in Europe and North America, held down bids and increased the buying power of corporate clients.

Recently, the IT industry has gained strong momentum, riding a new wave of IT investment. This is due to several factors, including a) accelerating adoption of online transactions, customer service, communications and e-commerce; b) a rapidly increasing need for better network and data security; c) growth in network and internet traffic; d) a growing interest in cloud computing and the Internet of Things (IoT); e) continuing adoption of mobile devices for business, consumer and industrial uses; and f) a growing focus on Artificial Intelligence (AI).

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