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Cloud vendors: Officially declare war on consulting

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Cloud vendors

Counseling is getting harder and harder to do, that’s a fact! From the layoffs of several major consulting giants to the reduction of client budgets, we can see the clues, but this is not the fundamental reason. Cloud vendors sneak attacks on consultations may be the biggest reason.

When the cloud computing giant learns enough methodologies from consulting agencies, it will go to grab business.

From its inception to the present, Huawei has learned methodologies and tools from more than 20 world-class consulting companies. Through citation, optimization, and upgrades, it has formed the best benchmark for theoretical methods + practical applications, and exported this set of methods to global companies.

Alibaba Cloud, Baidu Smart Cloud, etc. have successively integrated hundreds of the world’s most well-known consulting companies and IT solution providers to help physical enterprises from technology upgrades to scenario changes, using ecological capabilities to promote digital transformation.

Today’s cloud services are moving from platform to front-end, from basic to comprehensive integration, from self-use to industry empowerment, and can provide integrated solutions from consulting, customized solutions, deployment planning to cloud strategy, DevOps optimization, operational support, etc. The solution directly helps enterprises improve their ability to utilize the cloud and accelerate digital transformation.

Whether it is collaborative management or the integration of originally separated and siled data, whether it is channels, business, customers, operations, finance and data, when all departments need to put themselves on the cloud, cloud computing vendors are no longer just A platform, an ecology.

Using ecology to solve problems is much faster and more efficient than consulting companies relying on methodologies and tools, PPT reports, and on-site services, and the results are more visible. It is reasonable to sneak attack on consulting companies.

Smashing the consulting pot, Yunqi

Alibaba Cloud, Huawei Cloud, Tencent Cloud, and Baidu Smart Cloud are the largest “four clouds” in China, accounting for approximately 80% of the entire cloud infrastructure market; in addition, JD.com, Lenovo, Byte, Meituan, etc. are also entering cloud computing market.

Almost everything these days requires cloud services. SaaS companies need cloud services from giants; ordinary users will also inadvertently use cloud services from giants; more enterprises and institutions also need cloud services for business transformation and structural adjustment.

This is not only an industry feast of cloud services, but also a strength competition of cloud services.

However, each company has different genes and different understandings of the cloud. There is also this formula circulating in the market:

Alibaba Cloud = scenario-based capabilities + technology + ecology;

Huawei Cloud = IT hardware strength + scenario + technology + ecology;

Tencent Cloud = content matrix power + ecology + technology;

Baidu Smart Cloud = AI power + scenario + ecology.

Baidu was the first to go all-in AI, and Baidu Intelligent Cloud also has a high priority in obtaining support within the group. When Baidu Intelligent Cloud expands its business, it has always been an attitude of AI + everything.

Huawei Cloud has Huawei’s hardware genes and has hardware advantages with the support of ICT technology. Alibaba Cloud was the first domestic cloud computing company to wake up. It currently has the strongest comprehensive strength and faces the most competition from competitors. Tencent Cloud has Tencent’s rich content and ecological advantages. Tencent has invested in more than 10,000 companies, and they can all become your suppliers or your customers.

But what they have in common is that everyone is packaging more consulting services in winning bids ranging from millions to tens of millions.

The first force in the Four Clouds formula is the basic force of each company and the core driving force for cooperation in thousands of industries. Consulting companies, which are highly homogeneous, lose another round because of their experience and ability to talk but not fight.

Whether it is McKinsey in the United States, Roland Bain in Germany, Accenture in Ireland, or even large and small consulting companies in China, they are all being attacked by cloud vendors.

As the next step of digitalization becomes more and more complex, customers expect service providers to simplify complex things, and their expectations for cloud service providers are also increasing. They also expect a company that can integrate various scattered technical problems and provide A comprehensive solutions partner.

Then, the plot of cooperating with you to set up technologies and solutions first, mastering the know-how, and then using your size advantage to integrate you and surpass you will naturally continue to unfold.

Although the consulting work in cloud computing is not very profitable compared with the main business, on the one hand, mosquito legs are also meat. If the methodology I learned from the consulting agency is not reused in another place, I will always feel that I am losing money; On the one hand, taking root in customers’ knowledge through consultation is also a first step to prevent yourself from being abandoned.

After all, if a customer chooses this company, there is a high probability that they will not choose another one.

Of course, it would be a bit biased to say that cloud computing “steals” the methodology of consulting companies. In fact, what cloud computing companies “steal” is the difficult-to-implement part of the consulting firm’s methodology.

Therefore, in the process of digital transformation, cloud computing giants play the role of “comprehensive integrators” who integrate scattered problems into system solutions; on the other hand, they may also play the role of disruptors in some “small but beautiful” industries. .

Consulting services are being packaged by cloud computing giants. Cloud vendors have integrated various top consulting services in the world, but they have backhandedly ruined McKinsey Strategy, Accenture IT, IBM transformation and upgrading, etc.

Cure all diseases, clouds surge

The main business revenue of cloud computing giants is relatively high. The revenue reported by Siduo Cloud in the first quarter is often over 10 billion yuan. However, due to the price reduction trend driven by Alibaba Cloud in the first half of the year, the gross profit and net profit are actually not very high.

On the contrary, in a small and beautiful industry like consulting, as long as there are top consulting experts like McKinsey leading a team, it is possible to achieve results, and the gross profit may be higher than that of ordinary hardware and software. And with the backing of giants, it is easier to find target customers among thousands of potential customers.

The involution of the industrial chain has been analyzed by many observers. However, few people mention the external pressure from the industrial chain. “External pressure” means layering down from the core and trunk to the outside and edges, layer by layer, across boundaries.

For example, central state-owned enterprises have extended their business to the upstream and downstream of the industrial chain, traditional private enterprises have entered the Internet field (such as Shugen Internet), Internet companies have become involved in SaaS and cloud computing businesses, and SaaS and cloud computing giants have also begun to provide consulting services. . This series of changes stems from the fact that listed companies now generally need to equip consultants, otherwise it will be difficult to sell products smoothly.

When all enterprises enter the deep water zone in terms of digitalization, transformation and upgrading, etc., they usually turn to consulting agencies to do these things: How to continue to grow? How to organize change? How to expand your business? How to reduce costs and increase efficiency? How do I learn about competition? How to research the market? How to optimize audit, tax, strategy?

In these local battlefields for consultation, cloud computing giants have already squeezed in. You know, some companies that make financial software have directly positioned themselves as a cloud computing company.

So, after the cloud computing giant squeezes business into consulting firms, what else can consulting firms do?

Maybe, the consulting company will be “reduced” to doing self-media business.

When engaging in consultation, it is better to speak in slang on the Internet than to speak in vernacular that everyone can understand.

The high threshold for consultation lies in the fact that for a long time, complex tools and highly condensed charts and maps have been required to demonstrate knowledge. However, after delivering it to customers, some customers need more plain language. The previous consultation had a high threshold for cognition. At this point it becomes a hindrance.

Remove the barriers and go straight to digitization by drawing comics, right? Self-media can do this, but professional consulting organizations can basically only output industry judgments with in-depth professional reports, or provide guidance in the form of professional consultants. This is not only the threshold of consultation, but also the inherent service form formed by consultation for a long time.

But after cloud computing companies enter the consulting field, traditional consulting is also changing.

The master of all things, Yunxing

The four clouds are similar on one side and killing each other on the other. The four clouds are competing to become the cloud base for thousands of enterprises, serving both central state-owned enterprises and thousands of small and medium-sized enterprises, and can do all marketing, sales, services, supply, and finance.

Everyone’s gross profit margin is decreasing, which is very cruel. It is also cruel that the already shrinking market is being robbed by giants across borders. The combination of the two often leads to a cruel quadratic – a double decline in gross profit and revenue scale.

As a large manufacturer, after further subdividing the scenarios, the fragmented scenarios correspond to countless SKUs. The giant’s huge product system can cross-combine countless solutions in different scenarios, thus forming a moat that is difficult for other manufacturers to break through . —Competitors may not have complete product lines, or offer the same combination, which will increase docking costs.

To put it bluntly, it has been happening in the industry to fragment the market that can be standardized. Once I enter each site and every scene, it will be difficult for others to connect.

Fragmentation is the moat for some giants.

But as mentioned earlier, digitalization is becoming increasingly complex and customers are looking for simpler solutions. The more user-friendly the delivery is, the less the need for “packaged” consulting services will be.

The extremes of things must reverse each other, and one will ebb and flow. Consulting, while being “stolen” by the giants, continues to play the role of industry experts in areas that the giants cannot reach or where they do not have advantages.

Some professionals have estimated that if a consulting agency has an annual turnover of about 100 million yuan, it is equivalent to directly serving project funds of about 200 billion yuan, and the total turnover of the service target companies involved in that year is about About 650 billion yuan. This data may not be accurate. Consultations will basically exceed one-thousandth of the project amount. A consultation payment of about 100 million can correspond to at least a project or company’s total revenue of about 100 billion.

When some professionals are proud that every 100 million yuan of consulting payment corresponds to a higher amount of project funds, internal consulting practitioners should see a kind of “sadness” or shackles – others are only willing to spend one thousandth of the project amount. Go and pay for the intellectual services of the project.

Of course, there are not no customers who are willing to spend more, such as companies that are leading the market and technology and want to go further. Giants, especially cloud computing giants that are deeply integrated with digitalization, often follow three steps when purchasing consulting services:

The first step is to consult with the company’s senior veterans to share their consulting experience.

The second step is to ask for advice humbly and then send the veteran from the consulting company out the door.

The third step is to think about it. As a giant with so many clients, do you want to try consulting services?

Of course, an industry that is not cross-bordered by outsiders and never fights internally may not necessarily be a good industry. More types of competition will also lead to more types of services for customers. The services are varied and there is always one that satisfies the customer.

Consulting giants such as McKinsey all have their own styles. In Yiou’s view, there are actually several typical consulting models.

Japanese model: process-oriented, I will send someone to guide you, and by doing so you can improve efficiency and ensure quality. As for why? Not telling you.

Korean model: After learning from Japan and the United States, we advocate taking responsibility for the results, and coming over to guide us will ensure that there will be results this time. But there are few original theories of its own.

The American model: emphasizes methods, emphasizes theoretical innovation, is responsible for standardization, and will definitely be guided by a set of standards. It may tell you why, but this kind of why can only draw inferences from one case to another, not to other cases.

Chinese model: It is still competing among various genres.

In short, consulting is about solving the most difficult business problems – both macro issues and fine-tuning details.

The current development stages of China’s enterprises are uneven. Some companies are already on par with or even ahead of the world’s first-class companies. Some companies are still wondering whether they are suitable for the Chinese market. Some companies lack technology, and some companies lack the market.

Businesses come in different sizes, but many of the problems are the same, just with different levels of complexity. Simple problems can be solved with standardized products; complex and difficult problems require customized solutions.

The latter is generally the main battlefield for consultation. The former is the main battlefield in SaaS and other industries.

But now, cloud computing companies may be able to do it all . Use the platform + ecological model to empower most small and medium-sized enterprises, use customization + consulting to serve large and medium-sized enterprises in need, use simple and crude computing power to release the beauty of finely crafted algorithms, and use refined service projects to refine and reuse thousands of Methodology for all walks of life.

When cloud computing companies do consulting, either “the wool comes from the pig” (in the purchased product portfolio, the actual marginal cost of the big head is the lowest), or “the wool comes from the dog, and the pig pays” (after packaging, the original cost of dozens of The consulting fee of 10,000 yuan is integrated into the target price of several million or more, which may lead to the introduction of a fourth party to pay the bill).

This is also a fun part. For customers, you think you are paying for A, but in fact they are counting on B to make money.

Where is the road, Yunfan

With the army of cloud vendors overwhelming the city, how should consulting companies respond?

Two paths: Accenture model or McKinsey model?

The Accenture model is to do everything from strategic consulting, management consulting, digital consulting, technical consulting, and operation outsourcing. Once the revenue is achieved, when facing the cloud computing giant, it will no longer be small and beautiful, but big and comprehensive. The price is that the per capita revenue is much lower than McKinsey, but the total revenue is very high (global revenue in Q3 of fiscal year 2023 is US$16.6 billion).

The McKinsey model is to believe in the value of intellectual services. It does not focus on quantity, promotes high-end talents, and provides top-notch services to form a brand premium. The unit price of projects and per capita revenue are both very high, but McKinsey’s total revenue (2022 Fiscal year total revenue of $12.5 billion) cannot keep up with Accenture.

Or the third way is to rely on the giants.

At the same time, cloud computing companies package “free” consulting services in winning projects that often cost millions or tens of millions. In fact, it is difficult for non-industry people to judge how much of it is actually consulting. While China’s consulting industry is still struggling to get million-dollar orders, millions is almost the least among cloud computing companies’ winning bids.

Is there still room for “fighting” here? How will industry trends evolve?

Use simple words to explain complex events clearly, from sorting out the current situation to truly gaining insight into and predicting the industry. As a third-party organization, the real value of a consulting company has never been to be attached to a giant as a certain department and enjoy the shadow of the giant; it is to be able to stand on the shoulders of the giant, be the first to blow new winds in the industry, and be at a higher level. Issue independent and valuable judgments from perspective.

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