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Perspectives

Steve Bloom

Transforming your business model

When the IT landscape changed, consulting firm Pragmatek learned to rebrand and refocus

By John P. Palen
Wednesday, March 25, 2015

In the post-recession shakeout, services like information technology have witnessed increasing commoditization. Corporate leaders accepted box solutions and the global help desks to control costs, reasoning that they paid an internal IT staff to make recommendations and manage it.

In this environment, previously successful IT consulting firms like Pragmatek in Bloomington watched revenue plummet. Pragmatek had corporate-savvy, experienced consultants who were paid well and sold their expertise to internal IT departments to the tune of $20 million in 2009. In 2010, Pragmatek’s revenue sunk to $5 million. It had to change something fast.

CEO Steve Bloom is an IBM veteran who joined Pragmatek’s sales team in 1991. He had always bridged the gap between C-level expectations and consultant capabilities. But Pragmatek’s sales approach continued to emphasize adding bodies and implementing products.

“At the time of the recession, only 10 percent of our revenue was management consulting and the rest was IT staff augmentation. But our experience was shopped against much younger IT techs with no significant business management expertise,” Bloom says. That’s when the lightbulb went off.

Shifting gears from selling SAP (Systems Applications and Products) software to selling business strategy wasn’t a big leap. The firm already had the expertise to know how IT should align with business processes. It needed to rebrand, change its sales process, and shift its consulting focus to services that were in demand and couldn’t be handled by a newbie IT tech.

“We used to approach clients saying we could implement software. Now we had to ask about what they were doing with their supply chains, their business analytics, and other management issues,” Bloom explains.

Developing a new methodology called “Business Process and Technology Alignment,” Pragmatek shifted to 90 percent, high-value management consulting. It targeted CEOs and COOs instead of IT managers. It rebranded its image, website, and marketing messages, banking on attracting a more sophisticated buyer.

It’s working. In the past few years, Pragmatek has attracted midsize to large clients like Deluxe, testing and sensor maker MTS Systems Corp., and cleaning innovator Tennant. Consultants are providing strategies to drive business results and reduce costs by improving business processes — and that includes the company’s choice of technology. “We have better relationships with major software companies because we can get them an audience at the top of the company,” Bloom adds.

By empowering a CEO to align all aspects of the business, including IT, Pragmatek transformed its business model. Last year, the company brought in $7 million in revenue with just 25 employees.

“We were a commodity and we had to change,” says Jodi Martin, senior account executive. “Now sales are on the rise and margins are better than ever because we help clients drive the bus instead of changing spark plugs.”

A company’s competitive sweet spot can change for a variety of reasons. Responding quickly and strategically to a more profitable market position will attract new customers and the right talent.

Bio

John P. Palen is CEO of Allied Executives and works with CEOs, business owners, and executive leaders on leadership development and business performance improvement through peer groups, coaching, and educational workshops.

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