Consulting's dirty little secret

Consulting's dirty little secret

Summary: Enterprise software implementation consultants often benefit financially when their clients' projects fail. Anyone buying software implementation services should be aware of this fact.

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TOPICS: CXO, IT Employment
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Enterprise software implementation consultants often benefit financially when their clients' projects fail. Anyone buying software implementation services should be aware of this fact.

Successful projects have a predetermined end date, marking the project's conclusion and signaling the end of consultant billing. When failing projects run longer than planned, consultant fees often run substantially larger than budgeted. Much of this over-budget amount drops to consultant's bottom line.

To protect yourself, negotiate services agreements offering incentives for success rather than failure. For example, include an early completion bonus in the contract, but insist on stiff penalties if the project runs late or over-budget. I asked Vinnie Mirchandani, an expert on negotiating contracts with consultants, for more advice:

Align consultants (who are frequently system integrators) with project success metrics. Measure them against things that make or break a project...well trained users, well tested processes, well scaled architectures, If they are involved in end user training, test the users they trained and have them do remedial training till all users pass. System integrators are big on paper deliverables. Those plus $ 2 may buy you a cup of coffee at Starbucks -- maybe.

On the other hand, if the delays are your fault, be prepared to pay when the consultant fixes your mess. And let's not kid ourselves, client-created failures are a dime a dozen. That said, follow the sage words of Larry Dignan, ZDNet’s Executive Editor:

Be tough, but don’t screw your vendor.

Note to consultants: I realize this applies only to other consultants and not to you, but if the shoe fits...well, you know what to do.

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On the subject of consultant excess, the image below is courtesy of the Getting Drunk in First Class blog, which describes the "crazy-ass stories that constitute a consultant’s experience." The picture shows a consultant's dinner bill, presumably paid for by the client. Yeah, life is tough in first class.

ConsultingÂ’s dirty little secret

Topics: CXO, IT Employment

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25 comments
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  • An angry apathetic writer who doesn't look at himself.

    In EVERY consulting project that I've ever done where it went past the expected due date, the fault has always been with the customer. I want to go in, get the job done, so I can then move on to the next client. More often than not, when I'm onsite, the delays are the result of some individual not providing necessary information for me to connect, not being available, running off to meetings, etc.

    I can't tell you how many billable hours I've made just sitting there waiting for one of the admins or managers who say, "I'll be right back." and don't come back for 2 hours.

    You may think its all about the billable hours, but it isn't. Most of us are consultants because we enjoy implementation projects and experiencing different environments. Keeping us there longer past the expected due date is actually more detrimental to me than it is to the client, because for every hour that I am there, I am not at another client's office, and thus that client has an opportunity at that moment to look elsewhere for a more available consultant.

    Benefitting from consulting services requires a commitment from both the consultant as well as the client. Neither of us benefit from an over-extended project.

    Next time you write one of these articles, write about what you need to do on your end to get the best service possible.

    Thank you.
    yyuko@...
    • Sorry I touched a nerve

      When writing this, of course I was aware some consultants would feel I'm accusing them unfairly. However, the piece very clearly describes that clients are frequently the cause of failures.

      Nonetheless, I don't accept that all consultants are lily-white. The fact remains that this conflict of interest is real. Remember, I write project failures all the time, and this conflict is a component of many of those failures. For a recent example, see this post:

      http://blogs.zdnet.com/projectfailures/?p=436

      I described the issue in less dramatic terms, but there is some relevance, if you read between the lines.
      mkrigsman@...
    • I've worn both shoes and I can tell you that blame can be spread around

      "In EVERY consulting project that I've ever done where it went past the expected due date, the fault has always been with the customer."

      I've been an IT worker dealing with consultants and I've been an IT consultant. I've worn both shoes and I can tell you that I've had consultant firms drag things on indefinitely and deliberately bring in inexperienced people until the CIO complains. On the other hand I've seen what you have experienced where the customer is at fault. I think each case is unique.
      georgeou
  • Not always fair blaming the consultant

    More times than not it will be the customer causing the over-runs. Those mistakes fall into several broad categories:

    Not getting staff buy-in: Companies tend to have a "we're the decider" mentality and neglect a program to co-op staff to get on board with the new program early. Train the trainer and free software give-aways are a good ways to get the technical thought leaders on your side.

    Scope creep: Normal in almost all projects but it's a killer for projects with poor requirements gathering. Can we get this or that added...runs a tab up in a hurry.

    Failure to consider all costs: Particularly on MSFT projects. The cost of CAL's, connectors, new backup software really adds to the project price tag.

    Using contractors to bury costs: Contractors are off the books for most execs, so it's easier to bury a bad quarter in a project than in-house where there's no place to hide.
    Chad_z
    • I totally agree

      Chad, It's certainly true that external consultants are easy scapegoats, and this happens all the time. Most clients don't look closely at themselves, because of course it's much easier to blame "them". One mark of a great consultant is how he or she manages the issue you've raised.
      mkrigsman@...
  • Better method, do a little homework.

    Any consultant worth his/her salt should be able to provide you with a list of previous (or current) clients. Ask for that list and then take the time to really talk to those clients about past performance and satisfaction.
    No_Ax_to_Grind
  • RE: Consulting's dirty little secret

    There are lots of great consultants out there who work hard to satisfy their clients within the constraints alloted to them. Tha being said, there are also lots of folks who "bank on bologna" so to speak. Charging $100 per person for meals when a $15 meal would have sufficed.

    As long as the contract allows for something, I guess the client can only decide to go elsewhere from that point forward. So the rule is to negotiate your contracts and perhaps to create templates for contracts which are acceptable for your company.

    Then you can solicit bids and use your templates as guides. For example, perhaps your firm will agree to pay for meals for certain projects, but only up to a limited amount per person per meal. That's a fair thing to ask.

    Or perhaps your firm can insist on coach or agree to only pay the cost of a coach fair for any flight, and let the consultant arrange their own flight, knowing that they will only be reimbursed for a coach fair unless they can prove that there were no coach seats available. Or perhaps set a maximum fee amount for travel reimbursement for flight or car rental. Why should the consultant rent a Jag when a Taurus would do just as well and for less?

    Just some ideas. It does come down to better negotiation at some point, at least for part of it.

    If the consultant doesn't agree to such limitations, then they don't want your business. Period.
    srobtjones@...
    • Thanks for the reality check

      For some reason, clients do accept these extravagances, often without sufficient critical thinking. Thank you for a dose of reality.
      mkrigsman@...
      • You seem to have hit a few nerves

        find it amusing that you have had to define "failure". Any project whether it be a per hour or fixed fee is loaded for the consultant as long as no penalties are in place.
        Add to that the fact that the consultants are long gone when its time to "pick up the pieces".
        I admit to being on the purchasing end for the last couple of decades. I've seen far too many cases where the consulting firm is likened to cockroaches. Once one shows up you end up with many..... All billing by the hour.
        One incident that comes to mind was a conversion to SAP. The company I was with even paid to train the consultants!
        "Never underestimate the power of human stupidity
        Harrim
  • RE: Consulting's dirty little secret

    A wise man, probably a consultant, once said: If you can't provide the solution, there is a lot of money to be mad in prolonging the pain. Call any of the big firms and ask them how many accounts they can actually reference.
    educationtalk
    • Vendor selection

      A common theme in some of these posts relates to carefully choosing your consultants. Yup, that's surely the best place to start.
      mkrigsman@...
  • There is excess out there, but its not the norm

    I have worked with seveeral outside consultants on inhouse projects, all of them failed because of feature creep, cost associated with feature creep and politics. I was never in charge of the projects and in our case, any failure was seen as just another reason to cancel it... so we wasted money.

    On the other hand, i have consulted for a few companies, either doing websites or windows domains/email. Both types of projects suffered from feature creep and client communication break downs.

    Atleast three websites i have done have taken a year because the client just disappeared. I had another one where they told me they tested with vista/IE7, assured me it would work, then after everything was wiped out, it didnt work, then said they didnt actually test it.

    So i agree with the other guy.. alot of billable hours are wasted on stuff that the client could of easily avoided.

    Now i will say one thing, if i screw up and it results in delays, the client either ends up with free hours or discounted rates. I will make them happy, but in the past 10 years, that has only happened once.
    Been_Done_Before
  • Incorrect Insight

    I have been a consultant for 20+ years, done 100s of
    projects for as many customers at all levels - from
    developer to Vice President. First, this viewpoint is
    about as 80s as you can get. Second, it's just lacks
    merit. There are so many misconstrued angles, I am
    not going to bother covering them all. No consulting
    firm benefits when their clients' projects fail. That's
    just not a sustainable notion from a business
    perspective. The key to business success is client
    success. This is from the top down - from
    management to the consultants who do the work. I
    don't think i need to draw those self-evident
    connections.

    Sure, there are instances where inappropriate
    expenses have gotten billed to clients but it's
    definitely not the norm. I certainly would not make
    such an incorrect hypothesis based on it.

    Most consultants will agree that making project
    success mutual is just good blocking and tackling.
    And, by far, the more difficult issues that lead to
    project issues are all those non-technical ones, such
    as change management, client support, etc (that
    research is well borne out).

    And I am not sure how those additional fees just drop
    to the bottom line. These are costs associated with
    delivering those additional fees, too.

    I will stop there.

    Cydney
    cydberry
    • It's not an incorrect insight at all

      Cyd,

      Thanks for the comment; given your experience it's a valuable contribution to this discussion.

      How can you dispute that failed projects are not financially beneficial to the implementation consultants on a project? I've seen this scenario over and over -- project has trouble, consultant now has a conflict of interest. If the consultant helps complete the project quickly and efficiently the customer benefits. However, if the projects extends out longer than planned, the consultant continues milking the cow. This conflict does exist. Perhaps writing this blog has made me jaded, but I see these negative behaviors all the time.

      Of course, the real question is how the consultant and client together manage this tension. Honest consultants put aside their own concerns in favor of the client's interests, and do things you described.

      Regarding dollars dropping to the bottom line, by the time the project reaches a failure stage, many of the consultants start-up costs have already been absorbed and amortized. This means these "failure benefits" are more profitable than the hours billed earlier in the project. Again, it creates financial incentive for failure, and that's inherently a bad thing.

      I invite your criticism of my arguments -- please poke holes wherever you see them.

      Michael
      mkrigsman@...
      • There is no financial incentive for failure

        I can very easily dispute it. Yes, of course, on a pure T&M project, if the project
        goes over the budget, then the consulting company will get additional fees. It
        could be argued that some startup costs are more recouped -- and I am not sure
        what you are refering to other than maybe sales costs and maybe some downtime
        costs related to 2080 hours but there are some assumptions there that there are
        no other projects for the staff, etc., and then you have to discount opportunity
        costs for other projects, customer acquisition costs, etc. However, by far, the
        biggest expense on a per hour basis is the loaded cost of that person, the max
        amount to the bottom line is the GM + all the other costs still incurred --
        telephone, office expense, etc.

        In my entire career, I have never heard anyone talk about any benefits of failed
        projects. It just makes no sense. My point is that it only takes so many
        "beneficially failed projects" for a consulting company to even be in business. No
        project success, no clients, no revenue, no business. And there is more to that
        additional $$ than just revenue. Yes, some projects do fail. And no one wins.

        Most of what I have seen in the last 10 years is that when the project fails, the
        consultant ends up financially worse off -- this is due to fixed fee, project
        structure, SoWs etc.

        Cydney
        cydberry
        • OK, let's redefine "failed"

          Instead of saying failed projects, let's call them "severely late projects." I've also seen hundreds of projects, and I've seen consultants make hay while the sun shines, so to speak.

          Anyway, I respect your points, but just beg to differ.
          mkrigsman@...
  • RE: Consulting's dirty little secret

    >When failing projects run longer than planned, consultant fees often run substantially larger than budgeted.

    This also just in: The sky is blue. Grass is green. The sun rises in the east and sets in the west.
    Vesicant
    • That made me laugh, but...

      If it's so true and obvious, then how come I'm being skewered by the comments on this post?
      mkrigsman@...
  • I think a lot of the issues...

    result in improper delineation of responsibilities between the consultant and the client. Especially implementation of the consultant's ideas.

    I do a lot of Quickbooks consulting but I don't do the data input required to bring the job to fruition. That is the responsibility of the client. And if I don't make this clear up front, so the client provides the man power, the job can drag on forever and costs skyrocket.
    bjbrock
  • RE: Consulting's dirty little secret

    I agree 100%. As a marketing contractor working mainly for software vendors I have witnessed many delayed projects. The reason each and every time has been because of the inhouse consultants who seem to be working to there own private agenda.

    I find that a number of consultants are extremly arrogant and simply to proud to admit when they are unable to understand. The other problem is they suffer from the "Not Designed/Constructed Here@ syndrom.
    chris.symonds@...