...by Daniel Szego
"On a long enough timeline we will all become Satoshi Nakamoto.."
Daniel Szego

Sunday, December 27, 2015

Extending technology portfolio of an IT consulting company

Working with small or medium IT consulting companies, it is always a question how exactly the technological service portfolio look like. What should be the major and what are the side-technologies that are covered. The situation is especially interesting as the whole IT world is changing each year, new technologies are emerging and others are getting old fashioned. 

The question that I try to analyse how is possible to make a decision about extending the current technological portfolio with a new one. For that question we investigate the market situation with the help of four different dimensions:

a. Cost of a technology: Every technology has got a cost. On the one hand, it depends on the complexity of the technology itself. The more complex it is, the more difficult to build up the necessary knowledge for that or more expensive to get the necessarily qualified expert for the given field. On the other hand, some technology are changing pretty fast, that means that simply keeping up with the everyday changes is itself a huge effort. 

b. Risk of a technology: The second big dimension is the risk of a given technology. It depends among the other on the technological life cycle. As an example if the technology is at the beginning phase in research and development, or it is practically used only by early adopters than the risk factor is pretty huge. On the other hand, general market situation should be taken into a consideration as well, like factors about competition and competitors or factors like general entry or exit strategy of the market.

c. Benefit of a technology: Certainly, the most important question, is a technology good for anything, does it provide value directly or indirectly for an end-user, is it possible to sell at all, or is it perhaps only a fashion trend or technological bubble.  

d. Combination of technologies: Last but not least, a new technology should not be considered only alone, it is usually an extension of the existing portfolio. As a consequence, it is an important question if there are any possible synergy between the new choice and the existing portfolio, either from a pure technological or from a rather market oriented point of view. 

The four big dimensions are summarized on the following picture.

Figure 1. Dimensions of a technology.

Based on the dimension there is a possibility to analyse certain technological choices or typical situations.

1. Successful portfolio extension: A typical characteristic of a successfully new technology can be seen on Figure 2. It must be good integrated with exiting technological knowledge,introducing the new technology should be easy and it should bring strong benefits. As an example, let we consider a company who mainly deals with windows server operation, choosing Skype4Business to extend the portfolio can be such a good extension: It can be good integrated both with the existing technological knowledge and with the typical customers as well, in this sense there are a lot of synergy effect on the market and the introducing cost is low as well. As it is a standard Microsoft product, the general risk factor is not too high; how much csutomer benefit does it exactly bring is certainly an open question.

Figure 2. Successful portfolio extension

2. Wrong portfolio extension: On figure 3 there is a typical example of a wrong portfolio extension. let we assume for instance that we have an SAP consulting company, that wants to offer Skype4Business for the customers. Well, firstly SAP is a totally different technological world, in this sense there will not be too many synergy effect, neither in existing knowledge nor on the market. It is again a question how much benefit Skype4Business offers for a customer.

Figure 3. Wrong portfolio extension

3. New strategical service: Figure 4 demonstrates a typical extension situation for introducing a brand new technology in the portfolio. It has got a huge cost and risk factor, the possibility to integrate with the existing portfolio is not so big, however hopefully it brings a lot of benefit as well. As an example, considering a company that mainly deals with .NET custom development, introducing Dynamics into the services portfolio can be such a direction.

Figure 4. New strategical service

4. Extending existing portfolio: Last but not least minor extension of the portfolio is a general case use-case as well. As an example consider a company that mainly deals with SharePoint, taking Office 365 into the technological portfolio is a trivial choice. The synergy effect is basically huge, the know how must be more or less exist, so setting up the new technology is pretty much straightforward. Such minor extensions are usually not result of a detailed analysis, rather a result of an indirect evolutionary process. 

Figure 5. Extending existing service