It’s a bad time to be a consulting company. First, the Internet bubble burst,
driving several notable consulting firms out of business and giving consulting a
black eye with all the clients left in the lurch. Many projects went unfinished,
and clients swore that they’d never bet their future on another consulting
Then the Anderson/Enron fiasco hit. All of a sudden it was no
longer safe to consort with the big boys if you were purchasing both auditing
and consulting services. Even though large accounting firms are working
feverishly to dismantle or dissect their consulting practices, the damage has
been done. So where does a company in need of consulting services turn?
A time to look inside The resources needed
I think it’s a good time
for companies to look inward. One of the most common gripes in any IT
organization is that the company views their services as a cost center and not
as a profit center.
The internal IT organization is considered more
tactical than strategic. Companies reinforce that notion every day by sending
out large chunks of system design, software development, and strategic planning
services to outside firms at the behest of division presidents or influential
The result? Internal IT organizations are left
with the grunt work of installing PCs, manning the help desk, or developing
applications while the strategic work goes to vendors who first have to learn
the business and then figure out how to apply their technology to the business
problems. Doesn’t this seem backwards to you? It does to me.
Make IT the consulting company
The best way to turn
this model on its head is to start operating your company’s IT function as if it
were a consulting company. In the past, internal IT departments have been the
“free” functions provided by the company. Unfortunately, the perceived value of
something that’s free is zero. So internal customers have both an unrealistic
expectation of the delivery time and the cost of the services they receive. What
better way to reset this expectation than to run the IT business as an internal
consulting company from which all services are purchased?
This would also
change how the IT department manages employees. Staff performance would be
measured by billable hours and meeting deadlines, with more consideration given
to training and preparation for upcoming projects that the new internal
“customers” are requesting.
Treating the IT department as a consulting
company would also give IT some real advantages over external competitors (i.e.,
other consulting companies selling to the company’s departments).
IT wouldn’t have any marketing costs because they don’t need an expensive sales
force or glossy marketing literature. Second, the IT staff has knowledge of the
existing business processes since key members already participate in critical
corporate strategy sessions. These two advantages alone could allow the CIO to
offer better services at a lower cost than an outside consulting firm.
Given the market conditions,
this is a great time to attempt this approach. A big plus is the availability of
the workforce to make it happen. There are hundreds of top-notch consulting
professionals that have been laid off, and they’re looking for more secure jobs
with more stable companies.
Providing out-of-work consultants with a
familiar consulting type of environment will make these new hires immediately
There are no good reasons why an internal IT department
can’t staff projects on their own by hiring on the available expertise, instead
of paying top dollar to bring them in as consultants. It makes good sense to
begin building a top-notch internal staff now with an eye toward providing paid
consulting services to internal clients.Changing
the customer mind-set
The most challenging aspect of the internal
consulting approach is convincing internal customers to pay for services, and
expertise, that they’re used to getting “for free.”
customers through the transition by billing internal customers for strategic
planning, project management, software development, system maintenance, or user
support at the employee’s proposed hourly billing rate but not collecting any
fees from the departments for the first six to nine months. Departments could
begin getting regular monthly invoices for overhead costs (including PCs,
software licensing, and a percentage of communications use, such as Internet
connectivity, phone service, long distance, etc.).
Over time, IT leaders
will be able to demonstrate the economic impact that IT has had on the
organization and clearly compare that value to potential outside consulting
services. After IT has established an economic value, collecting on the invoices
will be much less controversial.
To make it work, you’ll need two key
agreements in place. First, you need the full support of the CEO and CFO to
convert the internal IT function from a cost center to a profit
Second, you’ll need an edict from the CEO requiring all IT
purchasing to be done through the new IT consulting organization. This needs to
include not only hardware and software products but also, most importantly, the
software consulting, software development, and strategic planning
There’s no question that there will be significant resistance
from the heads of departments used to purchasing and managing their own IT
services. And you’ll have to make an internal commitment to make customer
satisfaction the number-one priority—regardless of the cost.
find in the long term is that providing a customer-focused, industry-specific
services organization will be much more cost-effective than allowing business
units to buy their own services. The payoff, financially and for the IT
department, will be big.