Why do most IT Services Agencies Fails Miserably ?

Many clients complain about their vendors and blame their IT services partners for not being able to achieve the results they first expected to. Having run Pear System for about 10 years now, I have seen many promoters who had to seek new vendors midway through the project when they contacted us. 

According to the statistics provided byPMI Global Project Management Survey 2017  only 15% of the projects delivered as planned. Looking at the scale of the failures, the clients are also making a move away from outsourcing and are setting up their inhouse teams as they manage some funding or steady stream of revenue. 

Hi I am Jaspal and in this blog I am going to talk about the possible causes for astronomical failure rates in the IT service industry and suggested solutions to outperform others. 

Approaching a project 

Most IT agencies prioritise grabbing a project over any other factors. Lack of proper research and rushing into making a proposal can be self-inflicting. To beat the competition companies often chose to under quote the estimated costs involved. Such projects suffer cost overruns and tarnish the reputation of the company and promoters.

Agencies are also accused of often neglecting the current projects while focusing more on chasing new prospects. Due to this lack of focus, communication between the vendor agency and the client suffers which spirals into inadequate or unclear requirements and vision understanding on the project. And such projects do not find a closure even long after the first time allocation. 

Solutions

• Be honest while promising: Agencies should do proper research before quoting any time and budget estimates. 

• Be honest about your capability: Agencies should not look for anything more than what they can bite. Saying NO is also appreciated sometimes. 

• Communication is the key: Agencies should clearly communicate about the intended goal and what does the project actually want to achieve. 

Poor IT Project  Management 

Just hiring a skilled team does not ensure a perfect execution. A project has numerous variables, any of which if went unnoticed can set the whole project back by months and resources. 

Agencies can easily underestimate the project complexity. This causes scope creep and stressful situations in the development process. This problem then mushrooms into inefficient resource allocation which further leads to overworked members, burnout and missed deadlines. 

Another factor that activates the fault lines is the over reliance or underplaying the risks associated with legacy systems. Outdated technologies and inadequate tools adversely impact productivity. 

Agencies should also strive to set up a system in place to track and manage the client’s demands of changes in features and function while not compromising on communications between team and client at any stage. 

Solution

• Use the Tools: Adequately utilising the project management tools for the resource allocation and regularly reassessment of workload of the team and adjusting staff accordingly. 

• Avoid micromanagement: A defined approval process for swift implementation of tasks. 

• Communication: Actively nudging the clients to provide feedback and asking inputs during key decision making exercises.

• Upskilling the team on the go : Allow and support skill upgradation of the team members in the process. Allocation of budget  for training is advisable. 

Inadequate Differentiation 

It is a hypercompetitive space. Every agency  out there is trying their luck to sell the same prospects the same services as other players. Only the agencies that stand out from the crowd remain relevant to taste any measurable amount of success. 

Clients find it difficult to pin down on a single option when all sellers offer similar services for similar packages. That's the major reason for clients to ultimately resort to reference from a trusted source for a high ticket project.

Solution

• What is your strength? : Agencies should strive to avoid the homogenisation of the services and look out for their Unique Selling Proposition as soon as possible. Eg. Innovative approach, Personalised service, superior data driven analysis.

• Sacrificing small budget projects for large projects is not a wise move in the beginning. 

• Customer satisfaction: Work to exceed the expectation of the client so that it helps in fostering long term relationships.

Ineffective Marketing and sales 

Setting up unrealistic sales targets while mimicking others' marketing strategies will achieve nothing but exasperation. Generic Marketing messages only add to the noise and don’t bring any business. 

Agencies without a fixed marketing budget and plan often struggle to even meet their ends, let alone flourishing. Agencies do not spend time studying their possible prospects before launching their ad campaigns or email marketing campaigns. 

Small agencies depend too much on the intuition of founders. More often than not,  founders are not willing to take risks on a valuable chance or sceptical of taking key decisions. 

Solution

• Outbound Marketing : Your sales team should be aware and trained according to the target buyers’ personas. 

• Content Marketing: Create valuable content (e.g.,publishing blogs, case studies, white papers, webinars) that showcases your expertise and attracts qualified leads.

• Creative Marketing Ideas:  Experimentationshould be encouraged. Agency should set aside some dedicated budget for the same. 

Economic Downturns and Technological Disruption 

IT services is a very dynamic market. It is very sensitive to microeconomic factors. You may see a deluge of enquiries one month and just the next month on break of some unsuitable news you may see the old client also backing off. 

And then there are also technological advancements with every passing day. Any new technology or tool may render your months worth of hard work absolutely worthless. WIth onset of AI on the landscape we have seen many startups vanish in no time.  

Agencies also have to deal with cyber security threats like Ransomwares and D-DOS attacks almost all the time which takes away precious time and energy. 

Solution

• Agility: The IT sector has been quick to adjust to black swan events as we have seen in dot com crisis and Covid-19 pandemic. Agencies are advised to quickly navigate through the changing market conditions and provide services related to emerging markets and technologies.

• Invest in continuous learning: Ensure the team gets all the resources to remain up to date with the latest technologies. 

• Cybersecurity:  Agencies should keep updating systems and should not compromise on cyber security. Make sure to double check all the libraries and softwares used.

By understanding these common pitfalls and focusing on building a sustainable business model, IT services startups can increase their chances of success in this competitive and dynamic market.

Thank you for taking the time to read this article. Hope you took something valuable from this.