Seeding the Next Generation of Consultancies

There's been a lot written recently about how artificial intelligence, machine learning and automation are going to displace millions of workers. However, these powerful new technologies already have spawned a surge in demand for a new wave of highly skilled consultants to help organizations capitalize on the added business opportunities resulting from the latest innovations.

Although the potential business benefits that can be derived from AI, ML and automation are obvious, attaining these benefits requires highly specialized skills that most organizations currently lack.

Salesforce sees the demand for this unique set of consulting skills rising and has launched a new US$50 million SI (system integrator) Trailblazer Fund and SI Trailblazer Alliance Initiative to fill the void.

"Growing customer demand for Salesforce has created a critical need for more Salesforce-trained consulting partners as part of the thriving 'Salesforce Economy,'" said Tyler Prince, Salesforce's EVP of worldwide alliances and go-to-market innovation.

"Consulting firms play a pivotal role in the Salesforce ecosystem," noted the new fund's administrator, John Somorjai, Salesforce's EVP of corporate development and Salesforce ventures.

Meeting Demand

Their comments reminded me of the market forces that propelled International Network Services (INS) -- a network consulting company I was a part of in the 1990s -- to tremendous success. Cisco Systems at that time was riding a wave created by the rapidly growing demand for their routers among major service providers and enterprises seeking to build out new Internet Protocol networks.

Cisco's executives recognized that the biggest impediment to continued growth was lack of sufficient manpower to properly plan, design, implement and manage their latest networking products. In response to this potential speed bump, Cisco not only made a strategic investment in INS, but also used our successful network consulting methodologies as a model for other firms entering the market.

Fast-forward to 2006, when Salesforce found itself in a similar position, as demand for its Software as a Service solutions started to gain traction. Although there were a handful of consulting companies helping customers implement Salesforce's solutions -- such as Bluewolf -- Salesforce made a seed investment in Appirio, a new consulting company.

The Scalability Challenge

Jim Goetz, an INS alum who had become one of the most successful venture capitalists at Sequoia Capital, also backed Appirio. Investing in a professional services company at that time was very unusual, because most VCs didn't see the consulting model as scalable, and they were concerned that the primary intellectual capital and assets (i.e., people) easily could walk out the door.

What set consultancies like INS and Appirio apart, and attracted the attention and funding of VCs, was the promise of a more repeatable, and therefore scalable, business model that would combine traditional professional services with a widening array of software-powered solutions.

That formula not only led to the acquisition and successful exits of those firms (INS by Lucent and Appirio by Wipro), but also made companies like Bluewolf and Cloud Sherpas targets for acquisition by IBM and Accenture respectively.

Smart Bets

Based on these experiences, the investment community is making more bets on consultancies. For instance, 2nd Watch earlier this year received $19 million in funding to scale its consulting business, which is focused on AWS, Azure and other cloud infrastructure service requirements.

While the good news is that many of the first generation cloud-native consultancies found success and an exit via acquisition, the new challenge is to find the next generation of consultancies that can help corporate clients adopt a new round of AI, ML, automation and Internet of Things technologies and applications.

With its new SI Fund, Salesforce is joining a growing number of VCs to help the next generation of specialized consultancies fill the void -- and help their mutual customers capitalize on the latest technological innovations and market opportunities.

Jeff Kaplan has been an ECT News Network columnist since 2009. His focus is on cloud computing, SaaS, IT management, managed services and the Internet of Things. He is managing director of THINKstrategies. Email Jeff.