Some IT shops looking for niches to weather slump
October 31, 2008 Jackie Noblett
The pullback on technology spending has some firms preparing for headwinds by shifting resources away from general project management and into specialty services.
A handful of area IT consulting firms saw reductions in Massachusetts IT consulting staff in 2008, according to Boston Business Journal research. Of the five firms that did see reductions, only one, Collaborative Consulting LLC in Burlington, was in the top 10 in terms of head count.
Collaborative Consulting’s area IT consulting staff fell to 167 from 178 last year. Company officials could not be reached for comment. Springfield IT consulting firm Court Square Group cut its consultants in half to 14, but executives say the cuts were a part of a strategic shift away from traditional, low-margin IT services into specialized areas like life sciences data management and network security consulting.
“Some of it is, for a lack of a better term, a commodity. You compete strictly on price,” said Cori Rolland, vice president of marketing and project management. “We took the very important parts of IT and took our expertise in life sciences and focused on those areas.”
Analysts are expecting sluggish growth in IT services. Cambridge research firm Forrester Research Inc. said in September the slowdown will not be as dramatic as previously expected, with about 6 percent growth in 2008 and 2009. But growing demand for service-oriented architecture and business efficiency projects will boost the growth in spending to 8.6 percent in 2010.
The slowdown in traditional IT consulting services has Wakefield consulting firm Edgewater Technology Inc. (Nasdaq: EDGW) making some staffing changes.
The company lost 19 percent of its local consultants, dropping to 89 from 110 last year.
In its second quarter conference call, Edgewater Chairman, President and CEO Shirley Singleton said the company had seen “some measured pullback in spending on our classic tech space” as companies took more projects internally.
The company has seen an uptick, however, in projects like integrating social media and Web 2.0 applications, business intelligence, and collaboration software.
“The demand for these new areas are shifting rapidly and we are endeavoring to re-purpose our (available) staff to fulfill those needs to match that pipeline,” Singleton said.
Boston-based iCorps Technologies Inc. cited a tight IT professional labor market for its four-person reduction in staff.
“The instability of the economy is keeping people from pursuing other jobs. I have multiple open positions,” said Michael Hadley, iCorps president and CEO. “This summer we lost a lot of opportunities because we didn’t have the right people. But we pride ourselves on our consultants and want to hire the best.”
Some firms have used the environment to beef up its manpower and go after new segments of the technology consulting market. Waltham firm mindSHIFT Technologies Inc. upped its local consulting staff 39 percent to 32 people through an acquisition. The company expects to be somewhat insulated from the spending reductions in IT services, as it focuses on businesses that have few IT staff.
“The fundamental premise of the company is that small businesses want one-stop shopping for IT services,” said Paul Chisholm, mindSHIFT chairman and CEO. “We feel like it is an underserved niche by the big guys.”
But even Chisholm expects to feel the effects of a recession. “There’s no question that our growth will be slower. But it’s a little too early to see what will happen.”