An impossible equation formed in the IT sector – "staff-hours are bought for a 40 000 euro job at the cost of 200 000 euros”

Cloud1 asked its customers what they expect from their IT partner. Based on the answers, consultants are increasingly required to develop the business-oriented skills of the customer's organization, staff, and top management. I argue that the current prevailing way of selling does not responsibly meet this need.

Expectations towards IT partners are changing rapidly. The need for change is backed by the democratization of technology advanced with the cloud: today, it is rarely possible to achieve genuine competitive advantage with technology. Especially in cloud environments, technologies, applications, and data development tools are available to all organizations. What has always been crucial is how technology is used in a business-oriented and cost-effective manner. For example, news about unexpected cloud costs is one visible symptom of methods of doing things where the IT partner's understanding of the customer has been at least deficient.

Actors in the field are now required to develop a new kind of expertise in customers organizational structures, personnel, and top management. This was emphasized when Cloud1 conducted customer listening and asked what they expect from their IT partner.

Enables of Transformation

The messages we have received from our customers reinforce our view of the need for the IT industry and its companies to change from a technology-driven supplier to an enabler of organizational competence, culture, and data transformation.  Ultimately, technology only plays a small part in this. Genuine business benefits and results almost always come from everything but technology choices.

The interviews for the customer listening were conducted by Tarja Lähdemäki of Valoa Digital. Ten Cloud1 customers participated, totaling 21 individuals. Lähdemäki stresses that the goal is to strengthen dialogue so that results are discussed together between the customer and service provider. Based on the customer listening, cooperation will be developed.

The Alliance of Customer Value and Technology

The next growth phase of the IT sector must be based on cost-effectiveness and enabling the return on investment of customer business. More discussion is needed about expertise, organizational transformation, less about technology. Too often, we see solutions where ultimately only the IT consultant benefits from the customer's enthusiasm and desire to expand, for example, data development in different business functions of the organization. 

The customer needs are met by making decisions too quickly, on the wrong basis, and corners are cut in critical phases of planning to show quick results. What starts with enthusiasm and success creates a risk for structural errors, the correction of which will again require the hiring of additional staff-hours. The hourly rate meter keeps ticking.

The Customer's Interest is at the Heart of Responsibility

This is no secret or new thing, but change has also been slow on the buyer's side. This is particularly evident in public sector tendering. Still, headcount, hourly rates, and CVs are bought and sold, leading to odd situations. Staff-hours are bought for 200 000 euros when the same job could be offered for a fixed price of 40 000 euros. This staff leasing business model leads to an impossible equation.

No fact supports that the IT sector can continue with the old way of doing things. Hourly rates have not kept up with the industry's wage and cost development. At the same time, costs are rising, but the amount of money available to customers is decreasing. I argue that our industry's new growth is based on making the consultant's work unnecessary.

We must increasingly strive to work for the benefit of the customer. It's about transferring expertise and enabling the results of technology investments. However, this requires the ability to understand the customer's business and development needs in a new way. The best results are only produced when the organization is enabled with the capabilities and a functioning culture to manage technology, data, and the business-oriented development work they enable. These are the capabilities that cannot be outsourced.

It would undoubtedly be easier from the industry's point of view to just continue the old way: to offer as always before, to push the hourly rate to the limits of profitability or below, to send a team to the customer, and to start the taxi meter billing from every starting hour.

It would be easy, but can it still be called responsible business?

When we talk about corporate responsibility, we should also talk about whether we are genuinely responsible in our customer relationships, whether we always offer the best and only that which genuinely adds value to the customer?