Consultants and Consulting

By admin, April 21, 2010 8:06 am

Last week I talked about one bastion of the tech industry, the analyst firms; today, we'll hit another, the big consulting firms.

I qualify the consulting firms as "big" because there is quite a range of consulting companies out there and more room for them in the market. To survive as an analyst firm, a company almost has to be big, or very specialized, in the first place. Of course there is some overlap at those levels between the two groups, but in general, analysts purport to sell information, while consultants purport to sell solutions.

I say "purport" because stories like this recent one are all too common in the consulting industry. The big firms make their money in large part by bringing in recent college graduates and having them crank out PowerPoint decks that tell their clients what they want to hear. As the author found out, this is only rarely aligned with the facts, a state of affairs that exists as a given within the industry.

The IT Skeptic puts this down to the evils of entering into contracts with abstract deliverables, but I don't think it is so simple. Abstract deliverables, from the right deliverer, can be extraordinarily valuable. The best reason to bring in a consultant can be that you don't know what you need and have been unable to clarify it internally; that means you're stuck, and the outside perspective is what is needed to break that jam. Good advice may be abstract, but it's hardly worthless. Frankly, if you are hiring someone for a concrete deliverable, you're not really hiring a consultant, you're outsourcing to a technician. A consultant is someone you consult with, and if you already have concrete deliverables in mind, you're probably overpaying for the privilege.

What this indicates to me is that you need to do your homework before hiring a consulting firm, and spend some time actually interacting with the consultants you are expected to work with. It's also vital to understand their motivations. The big firms have a sort of gravity of their own, and deals with vendors that take the objectivity entirely out of the consulting process. Know what those deals are before you go in.

It also speaks strongly for a different sort of compensatory process, value-based fees. Getting back to motivations, the industry standard hourly billing provides only one: rack up the hours. A value-based agreement ensures that you are paying what the engagement is worth, and more importantly, forces you to sit down and come to an understanding of that value with the consultant prior to engaging… a process that sometimes represents the largest part of value in the project.

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