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Plague year

Plague year

Big Consultancy has been humbled by international and local events. But don’t count it out yet

No change swept through the IT industry quite so unexpectedly, and so swiftly, as the erosion of Big Consultancy. At the beginning of 2002 Big Consultancy stood rock solid, one of the three or four great pillars of the IT industry. By the end of last year it had all the appearance of a creature queuing up for registration on the endangered species list.

Much of the Big Consultancy we remember at the cusp of the millennium has simply disappeared or changed its title to something that sounds like the name of a fashionable pub. One that might not be around for too long.

These changes accelerated this year as Big Consultancy sought to distance itself from the plague year of 2002. It was the year that the Enron fiasco swept over New Zealand without losing much force from its US epicentre.

Many believe that, in Wellington alone during the past 18 months, 1200 people who might have responded to the job title of IT consultant are no longer consultants in the sense that they were at the beginning of last year.

Trouble rarely travels alone. While the Enron tidal wave lost some of its force somewhere across the Pacific, two other forces conspired to put a multiplier on the outcome here. First, the dot-com bust had inspired a whole lot of expats – especially those on the London market -- to see New Zealand once again as a green and pleasant land. Then there was the Labour-led coalition, which by nature is in the business of permanent staff. Enron and the dot-com shakeout softened up the consultancy target, and Labour’s strong if rarely appreciated doctrinal underpinning did the rest -- and is still doing it.

Government departments can now get the permanent staff they have always wanted. No longer do they have to so much with contractors and consultants, despite the fact that they meet the entrepreneurial profile the government has in mind to ensure we do not drop off the end of the OECD listings.

It is the come-uppance time for Big Consultancy after those years when it could stalk its easy prey through a wilderness of Lambton Quay’s mirrored glass walls.

Looking back, it is easy to see that government departments, in general, used Big Consultancy as a kind of ass-covering insurance policy. The consultants, in turn, treated them as a cash cow. During the 1980s and 1990s, CIOs could feel secure in their jobs if they had an ivy league consultancy somewhere on site. With Arthur Andersen/Deloittes/KPMG/E&Y/PWC on the job, how could anything go wrong? Privately, directors of major consultancies admit that one era has ended and another one has started. One Big Consultancy director believes that on several occasions the state should have exacted penalties, and done so publicly, from consultants unable to meet their commitments. Such penalties, pour encourager les autres, might have had a sobering effect on the over-optimism that characterised a slew of public projects.

Yet again, without unassailably defined requirements users were on slippery ground when it came to enforcing penalties.

Users such as New Zealand Post CIO Nigel Prince, who has operated on both sides of the fence, is emphatic that problems could be traced back to the outset of the engagement: the original agreement

Don’t expect the sponsor/proprietor of New Zealand’s most heavily funded IT venture, Landonline, Land Information CEO Russ Ballard, to join the list of consultancy critics. The ones who worked at LINZ were, without qualification, “great”, he notes. “They all went the extra mile and did so without sending in an extra bill.”

He talks fondly of some enthusiastic consultants routinely working 80 hours a week. But Ballard leaves the interviewer to infer that government users might do well by equipping themselves with a more codified and less abstract understanding of what consultants can do and cannot do.

For example, consultants are inherently conservative, which means that they will go for the overkill (not his word) if they scent a problem. Their wish to distance themselves from the scent of failure is such that instead of recommending changes they will sometimes recommend that a project be “smashed” by withdrawal of funds.

CIOs need to realise that if they accept advice from a consultant they are also accepting responsibility for it. “The accountability is yours, not the consultant’s.” It is important for CIOs to be able to be able to understand and filter consultants’ advice – especially “strong recommendations” that may be disguised bids to stay on the job.

Ballard notes that the dividing line between the contractor and the consultant is this that the contractor delivers a product, while the consultant sells advice.

The KM threat

When Labour was in opposition, consultants were an easy mark. In August 1996, MP Annette King, now Minister of Health, delivered a blistering attack on IT consultants. The then Minister of Social Welfare, mild-mannered chartered accountant Peter Gresham, was moved to tell Parliament that King’s “never-ending attack on Social Welfare’s use of contractors and consultants displays either a naïve understanding of modern business acumen or reflects a hidden agenda to reinflate numbers in the public service...”

And so it was that as 2002 unwound, King and others saw their opportunity to deliver on something they had never tried to hide and were in fact rather proud of -- getting rid of consultants and contractors and replacing them with permanent staff.

The stars were in alignment:

- The dot-com crisis was prompting expats to wing their way back.

- There were to be no more mega projects of the type that had attracted consultants like bees to a honeypot.

- The Enron scandal had soured Big Consultancy in the public mind.

- KM was getting a foothold, especially in Health.

In fact, for several years Labour had been preparing for life after Big Consultancy. One of its instruments in returning to the permanent staff era was Knowledge Management, whose high priest, Ed Swanstrom, was invited to the 2001 Govis conference by -- wait for it -- the Ministry of Health.

The eloquent Swanstrom couldn’t wait to savage Big Consultancy and did so by aiming at its weakest point – its charging methods, which he appeared to equate with a game of pick-a-number.

All this found its way home, especially to the key employing departments in health, education, and welfare. It didn’t help, either, that consultancies had a problem getting their heads around knowledge management. They failed to see the threat that KM was starting to generate.

Big Consultancy went along with the notion that KM was a temporary fad designed to bring the less bright staff up to speed.

KM holds that everyday staff members, the strugglers, can never learn to walk the high mountain tops if every time there is some change in the wind the consultancies arrive and tell them to get out the way.

Care and use

New Zealand Post CIO Nigel Prince is a walking handbook for the care and use of consultants.

Rule No.1. Know your requirements. Set them down. Then define your exit strategy.

Rule No.2. Make sure you follow Rule No.1 first.

Acquisition of consultants in New Zealand, Prince believes, has been blighted by the acquirers, the users, embarking upon a quite unnecessarily risky path by formulating ill defined requirements.

Prince points out that consultancy is knowledge transfer. “You are bringing in consultancy people alongside your own people. You must ask yourself one question: ‘Why are we engaging consultants?’ Mostly it is because they are bringing in value-added skills. You are buying the knowledge of another organisation to fill the vacuum in the knowledge that you do not have. You are buying an organisational knowledge base. You are buying rapid upskilling.”

It is this aspect that distinguishes consultancy acquisition from using contractors for term assignments or in project management generally. “The critical part is that the consultant is holistic. You are not resourcing for a peak requirement, for a finite period. You are looking for a long-term commitment -- and that commitment is knowledge transfer.

Prince is visibly, if patiently, intolerant of stories of consultants being engaged because of their credentials -- and how, after a brief period those individuals have been transferred to other jobs. “You are talking about the swapping out problem. You must ensure at the outset that there are no swap-outs. Or, if there are, that someone of parallel capability is put back in.”

Prince believes there must be a beginning, a middle, and an end to a consultancy arrangement. The end game, the exit strategy, is what stops the consultants “perpetuating their own employment” after the transfer of knowledge.

Prince says special attention must be applied to a consultant’s CV. “You must look at CVs very carefully and ask yourself whether these people have been on assignments similar to the one you are setting out.”

Once the CVs have been verified, the CIO is in much the same position as a board game master, “mixing and matching skillsets” against their own requirements.

Prince has the advantage of someone who is now a gamekeeper but was once a poacher. For much of the 1980s he was a management consultant with Ernst & Young. Then he went to Telecom and for several years was in a variety of financial assignments until he became director of accounting for Telecom in Wellington, a role that saw him overseeing the complex national billing scheme.

Eventually he crossed the great divide and became IS manager for the services group. Along the way there was responsibility in depth for business markets and call centres.

Three years ago Prince joined New Zealand Post as commercial manager, a position that saw him oversee Post’s own consultancy work for the South African postal authority.

Prince emphasises that, right at the outset, any business needs to sort out the affiliations of the consultancy firms it is considering hiring. “Eyes must be open. Is there such a thing as true independence, anywhere?”

Similarly the salesman-in-disguise problem that has afflicted so many users for so long must be recognised and dealt with. Nothing must be taken on face value. “Find out the identity of the people (the consultancy will deploy) and then confirm those identities. Never confuse sales talk with execution. You have to have be aware.”

Prince discounts suggestions that consultants are routinely over-priced. “This is a fairly mature market that we are in and it is price-sensitive.” What needs to be scrutinised, Prince believes, is the value employers receive against the risk. Then the employers need to look at the consultants’ share of that risk.

Prince has the unfurrowed brow of someone who knows he is comfortably on top of his game. Others could be similarly untroubled, he implies, if they “set and crystallise their expectations” early in the piece.

Key differences

Few have had quite so much hands-on experience over quite so many years in the realm of outsourcing/contracting and consultants as Philip Crosby, BNZ Investment and Insurance systems manager.

Asked to distinguish between consultants and contractor, Crosby says the key difference is that a contractor creates something tangible, whereas a consultant creates something intangible. “I use a consultant to assist with decision-making processes, whereas a contractor is normally someone to fill a shortfall in resource. If I were reviewing the architecture of our platform I would use a contractor to conduct the review and produce a management report. I might then use contract programmers to undertake remedial work.”

Crosby says he uses contractors when there is either a shortfall of resource or it is not justifiable to acquire that resource skill on a fulltime basis. Areas where contractor skills are needed should be identified early and their use planned so that their application becomes successful. “Always engage contractors alongside permanent staff for knowledge transfer. It works two ways.”

Consultants, on the other hand, should be used when an independent view is required. If an independent view is not required, internal resources are sufficient. Consultants should also be used when you want to validate existing theory.

“Consultants normally have a wider view and experience compared with the internal resource, which can often be blinkered.”

Interestingly, Crosby does not insist that consultants should be agnostic in their views. “Everyone normally has favourites as a result of their own experiences.”

Crosby agrees that some consultancy rates can be extremely high, but cost needs to be considered along with the overall project. The objective is to arrive at a better solution faster.

Glory days to dog days

Consultancy got a huge boost in the late 1980s as institutional employers found themselves grappling with new legislation that made it hard to fire staff without issuing monstrous handouts.

It was then, many believe, that there came into being a de facto view of consultants as part-timers who would do the job without hanging around at great expense after it the work was completed.

Many believe it was then, also, that contractors and consultants were often regarded as one and the same thing, with consultants as the carriage trade version of the twain. Whatever the small print said, they were both regarded as body shop repositories, reservoirs of peak demand labour. Above all, they could be got rid of.

The problem was exacerbated in the IT sector of course, because of the high pay structure which was seen as leading to correspondingly high pay outs.

Many consultants see the present swing of the pendulum as creating a fresh opportunity. As departmental users get a taste of life without them, they believe, their absence will make the departmental heart grow fonder.

Many of those in New Zealand owned consultancies believe they are victims of far-off events in foreign lands. Among the elements on the minds of the locals:

- Government departments are furiously replacing contractors and consultants with permanent staff. This has the twin effects of fattening the public-sector roll while putting a lot of self-employed (or small company-employed), ie entrepreneurs, on the street.

- Government is crying out for competent project managers but is at the same time driving down their value (ie their price)

- There is an increased demand for project management training and project management methodologies, partly driven by the paradox that organisations want to be at the cutting edge but only if someone else has been there first.

- ERP replacement solutions will be in demand over the next couple of years.

- In the shorter term there will be a significant move of personnel out of Wellington, and in many cases out of IT, particularly people who have been around long enough to be in a position to retire or seek a different job or lifestyle.

- There is a trend towards doing everything in bite-sized chunks. This is not in itself a bad thing but it is risky if there are no longer the people with experience of large, complex projects/planning/programmes of work, etc.

- There will be a dumbing down of a lot of requirements. Everything will continue to be done on a shoestring, and often with people who may be technically capable but without the larger vision, business experience and understanding of processes necessary to drive benefits.

- Requirements are being focused on outputs rather than outcomes.

- There will be an upswing in people trying to drive volumes through their e-commerce solutions. That will create more roles for business-savvy people to achieve the business benefits that IT was put in place for.

- A pending demand for information management/integrated document management is unlikely to meet the in house capability to install it.

- A number of big state projects are imminent and can no longer be deferred.

Local consultants say that in the past there has quite often been a great deal of long-term employment of consultants and contractors at high rates in situations that could have been handled by internal staff. They also say there has been an unwillingness to pay salary levels required to obtain the requisite skills.

The current environment has created a situation where people are now hired to fill positions requiring skills that are highly paid in the free market but are lower at state salary levels. This introduces the possibility that some people in state jobs might not be the most capable and will blunder.

This conjures up the traditional bureaucratic spectre in which mediocrity hires more mediocrity because it does not wish to hire competition.

Consultants believe there will be tears before bedtime as the government drives consultants and contractors from its temple. Sooner rather than later, they say, government departments will find themselves with in-house staff who cannot do the job they were hired to do. If that happens, they will have to be let go, somehow.

Sidebar:

Russ Ballard’s 15 golden rules for the acquisition, care and discharge of consultants

1. Define your expectation. How can the consultant know what to expect, if you do not?

2. Do not take away from consultants their right to innovate.

3. Always acquire a consultant by a tender and by competitive bids.

4. Thoroughly evaluate your preferred tenderer.

5. Reference and personally evaluate all sources and sites. Never miss this step.

6. Establish a clear plan, complete with intermediate milestones which must be reported against.

7. Any departure from the pre-arranged plan must be signed off.

8. Projects must have a defined end product. Therefore build in incentives and penalties, especially in regard to an early completion and a delayed one.

9. Never take a consultancy on an open basis. If you do, then you provide it with an incentive to keep working for you forever.

10. Cement-in effective monitoring. You will be in trouble if you cannot track the consultancy time-frame.

11. Verify CVs. Call up and make sure you ask the right questions and get the right responses. Bland responses mean a negative -- you are being told that an organisation has “failed with this individual”. All neutral replies should arouse your suspicion

12. There is no great difference in managing permanent staff, contractors or consultants

13. Never take testimonials on face value. Always talk to the candidate.

14. Remember that if a consultant gives you advice and you decide to take it, you are the one who assumes accountability.

15. Never forget that consultants are by definition conservative. It is you, the client, who takes the risk.

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