Moving to the Cloud – What Changes with Consulting?
With rapid adoption and migration to the Cloud, comes changes to how we run and manage our businesses.
In this post, we look at changes for Cloud Vendors, and Reseller Partners as it relates to Consulting and Implementation Engagements. The key comparative areas being:
**EDIT** As quite rightly pointed out by one particular reader, I should clarify that the points mentioned below refer more so to Multi-Tenant SaaS applications than general Cloud:
| Area | The Traditional On-Premise Model | What Changes with Cloud? |
|---|---|---|
| Fees | Projects are based on a one-time Time & Materials basis typically with unpredictable costs of implementation. |
Projects can be delivered on a Fixed Fee basis – thereby significantly lowering and providing predictable services fees. Project Fees can also be billed on a recurring basis to cater for ongoing customer engagement and frequent innovation cycles. |
| Duration | Projects can last for years. | Cloud projects are measured in weeks, not months or years, providing a faster time-to-value. |
| Location | Onsite Consulting with associated additional expenses. | With no onsite hardware with installed software, an effective virtual approach can be taken to streamline project costs and bottlenecks. |
| Software Tailoring | Extensive application customisation and associated ongoing maintenance costs. | Focus on best practice, packaged Configuration versus customisation. |
| Requirements | Start with customer requirements and define a one-off solution. | Start with customer requirements and always leverage best practices for reusability |
| Resource Allocation | Large Implementation teams varied and unpredictable experience levels – all billing the client | Focused team with functional depth and experience |
| Utilisation | Consultants are incented to bill hours (and keep utilisation high) | Consultants focused on implementing efficiently with high quality and customer satisfaction, and multi-task on multiple-projects. |
The Cloud Subscription Renewal Model changes the game as far as Customer success is concerned. A customer centric approach is critical towards winning in the Cloud.
“68% of companies are more likely to have a marginal project or outright failure than a success due to the way they approach business requirements analysis”
This places further emphasis on ensuring best-in-class solution delivery in order to maximise Cloud customer retention.
Ultimately, the impact and knock-on effect of project implementation failure can be seen as one of the key reasons a company may choose not to renew their Cloud subscription.
Kunal Pandya is a Senior Director at SAP, responsible for the Global Cloud Solution Center, enabling and evangelising Cloud to SAP’s Partner Ecosystem.
Hello Joao,
Thanks for giving me the opportunity to go a little deeper and provide some clarifications:
You do not agree that the consulting landscape changes with the Cloud?
Having worked within Cloud organisations and with consulting companies who have transitioned from on-premise to Cloud, I have to disagree with you. There are significant changes (good and bad - depending on perspective).
I agree - but clearly this is not the only difference, and other than the changes to consulting, there are plenty of business model, product strategy, sales, support and financial changes also. I plan to address some of these topics in future posts.
The customer will not give up all of their processes. In fact this highlights one of the potential disadvantages of a multi-tenant SaaS application. There is no per-client customisation within the multi-tenant framework, only configuration (data level). We move from a platform where virtually anything can be customised, to one where configuration options can be limited, meaning the customer has to accept best practice, or a variation of best practice.
Successful Cloud software vendors will provide their customers with amplified extensibility and configuration options to ensure business processes are not being dictated by software limitations.
True - however there is a loose association. The point is a multi-tenant SaaS app can force customers down the best practice path, as opposed to having the option to leverage. If we consider Line-of-Business apps such as HCM, this may be welcomed as many customers are choosing to simplify and consolidate complex global processes, and deliver value in the shortest time possible. Why? In order align with and strongly support their organisation's business and strategic execution initiatives. This is one of the key drivers of the market towards Cloud apps: Time to Value and Execution.
In my experience, implementation efficiency is a critical KPI relating to profitability for a Cloud vendor or consulting partner. Many Cloud vendors fix their services fees, providing a level of predictability. Whilst this is not impossible within the on-premise landscape, the fixed configuration approach certainly makes it easier within the Cloud.
In no way have I implied on-premise consultants would be "badly organised thieves".
Traditionally, utilisation has been another KPI for on-premise consulting - this is a fact, including within SAP.
Based on the Cloud model of potentially fixed fees, this no longer becomes the biggest concern. In fact, within this model, consultants are directed to manage multiple implementations at various stages of the cycle.
"Consultants focused on implementing efficiently with high quality and customer satisfaction, and multi-task on multiple-projects."
To explain the rationale behind this statement, we need to understand the renewal model of the cloud. I am not stating that on-premise consultants are not customer-centric, I am stating that within the Cloud - typically within the SaaS model, customer retention is possibly the number one critical factor for any Cloud vendor/partner. Profitability, and survival can depend upon it.
Customer-centricity should not only apply at consulting/delivery level, but from product strategy to sales to delivery, support and account management - throughout the entire organisation.
Why is this important? Because if the customer is not satisfied with their implementation, level of service, support, functionality or promises made during the sales cycle, they will not renew their subscription - and they can take their data and walk away, without owning any depreciating licence cost on their capex budget. Nothing hurts a Cloud vendor or reseller partner more than customer churn.
In my view, a Cloud Vendor/Partner who demonstrates a customer-centric culture is more likely to be successful, profitable and most importantly have a higher Customer NPS. Win for the vendor, win for the customer.
I have to admit, unfortunately I am disappointed with this particular comment. Your intelligence in no way has been questioned, nor is this piece intended as marketing.
What I would be very interested to hear, are your views based on your experience with Cloud Consulting engagements - what remains the same, whether you have experienced any changes? I look forward to a productive discussion without the unfortunate berating and unnecessary negativity.
Thanks again for engaging.
Hello Joao,
This piece in particular was neither intended to include benefits or downsides. It is intended to open the discussion to the reader to determine what this means for them, based on their perspective. One respected reader pointed out that these points could be perceived as downsides for large profitable consulting SIs, another mentioned it could be seen as a transformative opportunity to embrace a new market. Both valid points - where the blog was not only accepted at face value but was responded to in the right spirit.
You make valid comments with regards to framing the post up-front and ISVs - although the point I was making has been missed. With regards to apples/oranges - a comparison between say an HCM on-premise implementation and a Cloud HCM implementation is very valid - the comparative table stands firm. In actual fact, I make no mention of SAP ECC, SuccessFactors, Oracle/PeopleSoft, Workday etc.
Ultimately, it is illogical to consider a piece as 'marketing' due to the absence of downsides - when the post didn't warrant it. Therefore, I'm sorry Joao, whilst I acknowledge your views, I believe you are mistaken.
However, prior to ceasing this discussion and to ensure we remain on topic, I would still love to hear your (or anyone's) views on the below - let's focus on SaaS Apps: 🙂
Hi Kunal,
Good summary. Also, I did enjoy more reading your discussions.
Since cloud is in its inception for business world, there are different perspectives. Good for all.
The column-1 in your table looks a good start but different vendors/customers will have additions, and of course different versions to column-3. As we know today, most of the home work and buying decisions are made even before a vendors/partner start their first presentation.
I understand you have to respect the blog length, but please connect (web link) your future related posts.
- Abbasi
Very good points well made Abbasi. You are correct, this is a start and will of-course need to evolve.
Thanks for sharing your thoughts. I thought it was quite a smart summary of the major differentiators as we see them today.
I was reflecting on your point about utilization: You write (rightly) that today vendors implementing cloud (or at least SuccessFactors) solutions are more focused on efficient implementations whereas the legacy way of working was more about keeping individual billability high. I wonder whether this is not something that will "normalize" a bit when large consultancies start to seriously engage around cloud implementations? Currently the dominant players in the market for implementing cloud based solutions are still often small or mid-sized consultancies with a high degree of extremely professional resources who are self-driven and maximize both their companies share of wallet and their clients benefit at the same time. I am not implying that large consultancies are bad... but I do suspect that utilization or billability will remain an important metric also going forward, within the consulting business.
Looking forward to your (or anyone's) thoughts on this.
Inna Wahlberg - an interesting view here. As someone who is actively engaged with Cloud customers, is this what you have experienced?
I would certainly agree on the premise that there are always workarounds, and there will always be good and really bad workarounds (or hacks) as well.
I am in general not as pessimistic as some observers. I think there is a great deal of benefit in trying to understand the "standard" and what value it could bring, rather than attempting at great cost to reinvent the wheel. Granted, a standard will never suit anyone, but the conversations around readiness would be best held upstream prior to going for the solution implementation in order to avoid disappointment, or worse yet... compromise (where famously all parties leave the room dissatisfied with the solution)...
And by the way, following from the fact that I'm working in another continent, 5000 Km from my customer who has an On-Premise SAP......
With no onsite hardware with installed software, an effective virtual approach can be taken to streamline project costs and bottlenecks
This is completely wrong. The fact that the servers are in the cloud or on the customer premise have absolutely NO bearing on the location of the consultants. Cloud providers still have to talk to the customer, "On-Premise Consultant" have a thing called the internet and VPNs (look them up).
Have you actually done a Cloud (or On-Premise) implementation project? Doesn't seem so.
Joao,
It pains me to say, you have resorted to insulting the intelligence of the readers and myself. It is now difficult to tolerate your provocative, uncourteous responses.
Your anti-cloud sentiments are clear, and you have the right to support your stance, however I'm disappointed your responses were not delivered in a more professional manner - maybe I would have more freely accepted some very good remarks you have made - that could go a long way to changing my view. Instead, you antagonised and took an overly aggressive, confrontational stance including profanity - for which there is no excuse, and clearly needs to be improved upon.
The topic of Cloud can be very confusing for many, and I have previously personally experienced backlash from those who either do not understand it, or are so set in traditional ways that they flatly reject it and see it as a threat - with any significant shift this can be expected. Unfortunately, I didn't expect that within SCN, and if you have personally felt targeted, insulted, or a nerve has been touched - I can only apologise as that was not the intention.
With over 5000 views in two weeks, the vast majority of feedback has been positive. No one has to listen to me, the market shift towards the Cloud, and the stated rationale behind it speaks for itself. Although, my role is to ensure and support SAP's ecosystem journey to the cloud with SAP - and supports it's transformation. I openly acknowledge, that not everyone will make the journey.
Is every point I have made correct? That is debatable.
Can each point be dissected and be disproven? Sure, that is what makes this topic great.
Is the principle of the overall message correct? Absolutely yes - without a doubt.
The last thing I wanted was to stop responding to a contributor/commentator but unfortunately, I will have to do so from here on in, unless we see more conformity to the SCN rules of engagement. Let's all play fair 🙂
In addition, I don't want to take this thread off-topic - so these confrontational interactions end here and now.
Regards,
Kunal.
(BTW - yes, I know what the Internet is, I know what VPNs are, and yes I have delivered both Cloud and On-Premise projects).
**EDIT** Unfortunately, transparency has diminished as all but one of the responses that this particular comment referred to has been deleted.
Safe to say the topic invites for passionate responses 🙂
I think there are quite many here who still get their living from good old on premise. There are definitely benefits (and challenges) to both solutions. And there are good and bad consultants in both worlds too...
An article like this should most definitely generalize and provoke a bit to get the point across, and that is what we see here. In the companies I have worked for in the past there was certainly an incentive towards high billability, which was considered industry norm. As I mentioned I expect metric of billability / utilization will remain important in the future too, even if the way of working is a bit different now.
Hi Kunal,
nice summary of the most obvious differences between SaaS implementations and on Prem.
I'd like to add another that I fear is going to cause some problems in the future (and has already in some cases) 🙁 Especially as this does impact strongly the consulting model.
Vendor control of delivery partners.
In a SaaS model the vendor has absolute control on who they permit or not to implement their solutions. The vendor needs to be approached to give access to the tools that are needed by the implementation partners. If they don't like the partner, the partner hasn't paid their fees, the partner is charging for services using a model the vendor does not approve of, or ANY reason, they don't give access.
Now the customer's voice is important, no-one wants to lose a sale! But, it's really the vendor's choice who they give that magic key to the system. If you're not on the list, don't even bother lining up at the door. As such there is an unprecedented level of control that vendors have over their implementation partners. One result I have seen (which is good(ish) for customers) is a huge reduction in the daily rate for implementation specialists, another has been monopolistic behaviour where smaller partners have been locked out of competing with larger firms due to not being able to meet the vendor requirements for, for example, number of consulting staff.
Where you work becoming more important that the individual skills you develop.
Whereas in the onPremise world, the skills of the individual are very important, and contracts with named resources often appear, in the SaaS world, this is less so. Due to the requirements to be part of an accredited partner, individuals are in a much more difficult position to offer their skills in a contracting type arrangement, as such the firms that are getting the implementations are much more able to resource as they see fit. This is especially true as (as mentioned in table) fixed price deals are more common, having a particular consultant on the job cannot be justified if it is just as easy to put more lower paid/less skilled people in place. The direct result, being the "expert" in a given area is less rewarding for the consultants. There is less worry about providing people for on-the-job training as long as the job gets done. Consulting firms have a far lower risk of their people leaving them to go contracting than in the on Premise world.
Smart customers may still look for individuals with a known performance record and industry experience, but it is with the companies that those individuals work that the deals are done, not the individuals.
I think here I would have to challenge the comparison
as in my experience due to the maturity of the on Prem market there is currently a move for companies to go directly for named resources that have great experience and offer great value for money over larger teams. Small teams of highly skilled resources accomplishing what in days gone by would indeed have been much larger varied teams. Because of the maturity of the market and people having connections it is possible for this to happen. In the SAP market in Australia for example you'd have to be a social pariah not to be within at most 2 LinkedIn connections from every other SAP consultant in the country.
However, on the SaaS side, due to the requirement to engage a partner, and not having the choice to pick a particular consultant/contractor, Your ability as a customer to influence the team that the partner you chose is using is less, you might get a functional team with depth, you might not! Especially as the process for doing the implementation is also dictated by the vendor, the depth of skills/experience of the partner team you end up with can also be variable.
Whilst it is true that due to there being less "distractions" in SaaS the team should be more focused this again is purely down to which team you get in the luck of the draw. Whereas in the more customer controlled on Prem model that I'm seeing (the huge big5 type consulting projects are few and far between these days) it's much less luck and much more a situation that can be influenced by the customer.
Some SuccessFactors specific rumours 🙂
I've heard that there may well be a clarification on the ability of certified consultants to work independently of the partner that they were trained with, and retain access to all training and updates (will probably be a fee associated with this, I'd imagine) - so a contracting market like we currently see for onPremise may yet arise and customers will be able to benefit. I'll like this to happen, but it's certainly not there yet (AFAIK).
Cheers,
Chris