Software as a Service and IT Consulting Firms

IT Consulting firms in the history of their existence have shown their value to the Enterprise in several ways. In the early days their value was two folds -

1) A Solution to the IT staffing needs of an Enterprise to handle Peaks and valleys in their staffing requirements based on the projects. (companies like EDS excelled at this and were really the delivery arms for the CIO's)

2) A Consulting based approach that added value to the client organzations by helping them making informed strategic decisions (Capgemini , Accenture (NASDAQ: ACN) are good examples of companies that did great here)

Over the last decade with the advent of offshore Consulting firms , The labor arbitrage angle was the big focus area and getting the distributed development model working was the big value add of these firms. The growth of companies like Wipro and Infosys are excellent examples here.

At this point of time all the above are a given for an major IT Consulting firm , but the next phase in the evolution of IT Consulting faces a threat that challanges the very existence of IT Consuting firms in their current forms.

I am talking about -- Software as a Service firms (eg: Salesforce.com)

The Bread and butter for IT Consulting has been implementing complex software withing the Enterprise Context. With the advent of Saas firms , the need for an IT Consulting Firm is eliminated . The value of SaaS to an enterprise is cutting on the complexity of maintaining inhouse software and it is in direct conflict with the Business model for a consulting firm. Yes , their is some need for IT Consulting but it is very minimal.

So , what will happen to the IT Consulting firms ---> In my best guess they will evolve into ITBPO firms . (BPO + ITO). ITBPO firms takes the outsourcing concept to the next level. ITBPO takes the Software aspect out of the relationship and focusses on the business function.
There will be convergence in the business model for traditional outsourcing firms like ADP and Traditional IT Consulting firms like Wipro , CGEY , etc. A Similar convergence is happening in the media industry with players like Viacom , News Corp trying to be tech savvy and players like yahoo , google and MSFT trying to be media savvy.