Posted , in Business model
Robotics consulting: The price of piling it high will be selling it cheap
In our recent report on the size of the robotics and artificial intelligence consulting market we were somewhere between cautious and positive about the long-term prospects for growth. It’s easy to believe that the market will be huge, based on all the talking that’s going on at the moment. There’s plenty of alarmist media coverage, which has brought robotics to the public’s attention as well as to clients’ investment committees. At the same time, the technology itself is fragmented and there’s a dearth of hard data that would give clients confidence to spend.
Some of the consulting firms I’ve been speaking to recently don’t agree (I have been wrong from time to time). They talk of being asked by clients to provide hundreds of people to work on robotics projects: for them, Christmas has apparently come early. But the more I listen to these stories, the more worried I become (not being wrong, I can live with that). To me the difference between consulting and body-shopping is that the former involves working on a discrete, finite project that’s beyond a client’s typical capabilities. Body-shopping, by contrast, means replacing a client’s full-time employees by carrying out business-as-usual activities for an indeterminate length of time. And what these firms are describing sounds like body-shopping to me.
It shouldn’t be: the practical application of robotics in business, especially in knowledge-based work, is new, so the number of people who can justifiably claim to be world experts in it is vanishingly small. Scarce resources should be expensive resources, but body-shopping is an inherently low-margin business, so what’s going on? Clients are probably making a land-grab for resources–if they can’t, or don’t want to, recruit them directly, getting consulting firms to recruit them on their behalf is the next best thing. They certainly don’t want to find themselves without the necessary skills if the market really takes off. They also don’t know what they need: as I mentioned above, robotics technology is a very fragmented area and it’s not yet clear who the leaders–the SAPs and Oracles of the future–will be. Having an agreement with a consulting firm to provide people, without perhaps being too specific about the actual skills required, gives clients a huge degree of flexibility in a rapidly-evolving area. Consulting firms have been keen to agree with this approach: they’re not known for holding back when clients have money to spend; they, too, don’t know what skills they’ll need, so this gives them a chance to be paid to invest in the capabilities they’ll need going forwards.
But short-term gain could translate into long-term pain. By allowing clients to body-shop robotics services, it’s going to be harder for consulting firms to charge the margins that should be possible, given how early a stage in its development the robotics consulting market is.
It’s also a classic case of that philosophical conundrum, the prisoners’ dilemma: the consulting industry would benefit from collective action here–resisting the siren call of body-shopping–but they’re individually incentivised to make a fast buck.
To find out more about our report on robotics, click here.