IT services firms: parasites of the IT industry

Once known as IT services companies, now called “Digital Services Companies” (ESN): the difference is that they’re not the same thing. Changing the name to ensure nothing actually changes, or the art of a cosmetic facelift.

It’s understandable that these companies want to protect the pie they share: in 2023, the top 10 French IT services firms generated €20 billion in revenue, out of a total IT market worth €65 billion. The largest of these, Capgemini, also announced 9,000 new hires for 2023, including 4,500 junior-level positions. My aim in this article is to put these figures into context.

Note: We are referring here to IT services firms operating under time-and-materials contracts. The fixed-price model, which is distinct from this, serves a different purpose and could be the subject of a separate article. Under time-and-materials contracts, IT services firms provide their clients with expertise, whether from salaried employees or independent contractors, drawn from their “talent pool.”

What value do they add?

This intermediary role would be valuable if recruiters and salespeople, the pillars of any IT services firm, understood even a little bit about what their clients do, as well as the “talent” (🤢) they constantly harp on about. Except that recruitment generally has about as much insight as a teenager experiencing their first romantic crush (“Oh, really? You were already an employee here?”), while placing someone with a client is done with the delicacy of wielding a crowbar.

Let’s be honest: there are some excellent salespeople, just as there are excellent recruiters; I can easily attest to that. But you have to have experienced that moment of pure joy when a sales rep, who has suddenly become your best friend, comes up to you with a big smile, holding a Post-it note with the phone number of someone who’s heard about a full-stack Java 8 and RabbitMQ project involving JSON: a project tailor-made for you.

All this to say that few IT services firms possess genuine technical expertise. The reality is that they generally recruit “on a project basis,” and don’t hesitate to terminate the probationary period if the project falls through. Once hired, the poor soul is sent to “their” client and won’t return until once a year, for a meeting with a manager who has never seen them work.

Thus, IT services firms are the necessary gateway to entering a development market that they control. The dream of a young IT services firm employee, when it isn’t to start their own firm, is to be hired as soon as possible by the client they’re working for; this is called being “brought in-house.”

A term that speaks volumes about how service providers, aka “prestas,” are viewed by their clients: at the very top of the food chain are the In-House Employees, who enjoy numerous benefits (“a very good position,” as Aunt Huguette would have said); next come ordinary mortals, the animals, and finally the prestas. “Is that your presta?” I once heard someone say about me…

A system that benefits IT services firms’ clients, at the expense of employees

This leads us to the conclusion that, of course, IT services firms are not solely responsible for this situation. They are experiencing such rapid growth only because large organizations, both private and public, purchase flexibility from them in terms of human resources. The payroll is treated as an expense, with large framework contracts managed by a procurement department tasked with “streamlining” costs, an approach that favors large IT services firms with limited expertise.

Ultimately, this arrangement suits many people, except perhaps those most directly affected, IT services firm employees, who miss out on up to 50% of the value they generate. And the benefits in return remain to be seen: what difference is there between spending three years on assignment at a client’s site and three years on a permanent contract with the same employer?

It’s an open secret: the vast majority of consultants are simply carrying out orders from the client. Legally, this is the very definition of illegal labor leasing, and since it works to the detriment of employees, it constitutes the offense of illegal labor brokering. Armies of lawyers make this seem acceptable, but I will never cease to be astonished that an entire economic sector, that of IT outsourcing, rests on practices that are literally criminal.

Here again, we’ll euphemistically refer to “technical assistance,” which would make perfect sense if the individuals involved possessed specialized expertise. The reality, however, is that thousands of recent college graduates are marketed as experts and sent on assignments to learn the basics of the trade, which also means making inevitable mistakes. Far from criticizing these junior staff members for lacking experience, I deplore the fact that this system forces them to learn on the job, for the convenience of both the employer and the client.

IT services firms: throw them all out?

No: IT services firms with genuine technical or methodological expertise have, in my view, a vital role to play. In-depth knowledge and know-how in specialized fields require an investment of several decades. Working at an IT services firm therefore allows professionals to gain diverse experience across various contexts (startups, scale-ups, SMEs, large corporations) and sectors (energy, finance, retail, etc.), and to devote the necessary time to acquiring this expertise, including through non-billed time.

One question remains: How can an IT services firm grow while maintaining a high level of expertise and the corporate culture that goes with it?

A few IT services firms are innovating by sharing the value they create: rather than fighting an entire economic system, they choose to offer better financial terms to their employees. The alternative for these employees would be to become self-employed. However, banks only recognize permanent contracts, which are supposedly less risky, and are reluctant to lend to the self-employed. When changing the system feels like moving mountains, this social innovation is welcome.

Apart from that, IT services firms with purely commercial objectives are proliferating, simply taking advantage of an absurd system. They all claim to be “different” and tout a thousand virtues while cynically working to perpetuate the system. This strongly reminds me of a sector where the purchase of services has been prohibited by law since April 13, 2016…