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Covid-19: impact on the IT consulting market and outlook

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The Covid-19 crisis has had a massive impact on the IT market. Some parts of this sector have benefited (think of everything that revolves around remote working), but others have also suffered enormously. This is the case of IT consultancy. According to a Whoz study published in June 2020, 13% of projects had been abandoned, and 21% had been put “on hold”. Jean-Philippe Couturier, the CEO of Whoz, discusses in this podcast the results of this research and gives us his vision of the IT consulting market for the coming months and the year 2021.

Statistics: the impact of COVID on the IT professions

  • 13% of IT projects have been abandoned
  • 21% of IT projects frozen (June 2020)
  • -23%: the drop in purchases of IT consulting services in 2020

The state of the IT consulting market in September 2020

Jean-Philippe Couturier describes a market that is emptier than usual, leading to a ferocious battle between consulting firms (ESN and SSII) to place their consultants. The IT consulting market follows the overall growth by a factor of 2 or 3 but with a six-month time lag (due in particular to structural reasons such as fixed-price projects). Six months after the start of the crisis (March 2020 – September 2020), we logically find ourselves reaching the lower end of the trend.
Fortunately, the future is a little brighter for reasons that Jean-Philippe explains very clearly in this podcast.


IT consulting market outlook for 2020 and 2021


The crisis has affected IT freelancers in particular, who were the first to suffer from a 23% reduction in the purchase of intellectual services. But Jean-Philippe Couturier also believes that freelancers will be the first to benefit from a recovery that he hopes to see starting in June 2021.

The recovery in September 2020 is still timid (see the forecasts we made in May 2020, which have been confirmed). But the signals are still less damaging than expected. The extent of the recession has been revised downwards, and a new vaccine becomes possible within 6 to 9 months. Jean-Philippe Couturier also believes in a spectacular rebound in consumer spending (a “consumer bulimia”) once the vaccine is on the market. The savings rate is historically high, with 1059 billion Euros sleeping on French people’s accounts (source: Banque de France). Using these savings to purchase will mechanically lead to a healthy recovery (currently estimated at 7.4% for 2021). Businesses’ digitalisation projects will be positively impacted. For if the crisis has taught us one thing, it is that we live in a world that will be increasingly digital. The digitisation of companies is, therefore, a necessary step. I spoke here of “mass extinction of 1.0 businesses”. This prophecy applies to all businesses that have not yet taken the digital turn. The pool of IT projects to be carried out is, therefore considerable.


There are fewer long-term projects and more projects in agility mode, with new competition from freelance platforms that should do well in 2021 when the recovery takes hold.

Jean-Philippe Couturier, CEO Whoz



Sectors that are suffering, and those in need of IT advice


Tourism, automobile, aeronautics, transport, non-food retail (see our analysis here) are sectors which have suffered much from the crisis. Some (aeronautics, automobile) were big consumers of IT advice and have drastically reduced the budget. There have also been unilateral refocusing of IT consultancy contracts. ING, for example, forcibly reduced working hours (from 5 days/week to 4.5 days) and rates were cut by 20%.

Despite everything, Jean-Philippe Couturier notes that, at the height of the crisis, customers and IT consultancy providers also pulled together. Payment terms for freelancers, for example, have been shortened by some large companies so as not to accentuate the financial difficulties already present.

The transition to remote working (which is likely to last several months before being definitively adopted by companies) is creating an appetite for expertise, particularly in the field of cybersecurity. Let’s not forget either that the new ways of working are accompanied by an overhaul of business processes and new requirements in terms of remote storage and processing (see our article on the impact of COVID in the media).


IT consulting on the eve of a business model change?


The COVID crisis has pushed the IT consulting market into retrenchment. Never before have so many IT consultants found themselves on inter-contract and freelancers without a mission. IT consultancy assignments have become shorter, competition has become fiercer, and prices have become higher. Also, the possibility of remote working has been introduced. Whereas customers demanded an on-site presence before the crisis, remote working is now the norm. This is leading to de facto increased competition. There is no longer any need for a local presence to be able to offer an IT consultant: the geographical scope of the competition has widened. This puts pressure on prices, of course, but also on invoicing. Whereas invoicing by blocks of one day was the rule (“on a time and materials basis”), it is now possible to split the invoicing of IT services:

we’re going to go for quarter days, half days, and so on the one hand, it’s a way of dividing up the staff. These [IT services] companies are, in my opinion, significant players in the digital transformation of their customers, but they are struggling to transform themselves.

With consultants who work remotely and who are likely to serve several clients in a day, how would it still be possible to charge daily rates? Time sheeting, which is always based on trust, could well be a practice of the past if control tools were to be imposed. We are witnessing the beginning of the flexibilisation of consultancy work, which could also be “used” in the long term.


The IT job market: how to stay in the race


Uncertainty and pressure are, therefore, increasingly being felt in the IT market. With the crisis, the projects to be completed will be chosen with more hindsight, with execution costs under the microscope. Hyper-specialists will still be in demand, as well as generalists who master many fields.

There will always be a need for specialists and generalists […] I believe there is a need for so-called horizontal and vertical skills. We’ll have generalists who master a lot of everything, and we’ll have specialists who will be hyper-specialists, who will master a lot […] something specific. I believe that to make specialists work; we need generalists. […]

To stay in the race, it will be necessary to train, learn and practice new technologies continually. The rate of knowledge obsolescence will never be as high as it is in today’s IT market, where the pace of innovation is high, and the supply of intellectual services far outstrips demand. Customers now have a choice, and they will be quick to choose the best.


 

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