The IT Consulting Dilemma Facing Small and Medium-Sized Businesses

By | May 17, 2005

Although businesses that earn revenue of less than $100M yearly could most benefit from independent, knowledgeable advice regarding information technology decisions, rarely, if ever, is this market targeted by IT consulting firms.

It is because not only do smaller businesses lack the deep pockets to afford the exorbitant fees charged by consulting companies, but also they more closely scrutinize the value of engaging in such relationships. The current consulting landscape is not conducive to clients who are either concerned with the total cost of an engagement or its efficacy. Instead, consulting companies continue to acquire plenty of large corporate clients even though they are charging upwards of $230/hr while working under a business model that focuses on billable hours rather than added value. Although value is a factor of importance for maintaining their client base, maximizing billable hours is always the number one priority.

Another contributing factor to this dilemma is that small and medium-sized business owners can have difficulty locating reasonably-priced, trusted providers of IT services that target their type of organization. Rather, these owners have neither the requisite knowledge of where to go to find expertise, the experience in IT to recognize opportunities and/or problems, nor do they have an idea of which is the best course of action for addressing the opportunities and/or problems within their company that they do realize. IT is not, nor will it ever be, the core competency of most small to medium-sized business owners.

Lastly, businesses must always be wary of implementing technology for the sake of technology. Meaning, if there is no specific benefit to be realized for implementing any technology, don’t. Some IT consulting firms, just for the sake of acquiring another client, will recommend businesses do just that. How can business owners be sure their best interests are being held?

Smaller businesses cannot afford wasted time finding and then being involved with high-priced, low-value, irrelevant and risky consulting relationships, nor should they. There is a better way. Instead, businesses should only engage in working consulting agreements with consulting firms that are willing to provide a ‘guarantee’ on their services. Although service organizations cannot provide a 100% “money-back” type of arrangement, a professional services ‘guarantee’ can come in a variety of forms.

First, ensure that the firm focuses on results instead of up-front fees. This can be determined by noting how much of their total compensation is determined by hourly billing rates. Those firms that are primarily, if not totally, compensated on an hourly basis fit directly into the category mentioned above – the category of maximizing hours and maximizing the need for the consultants themselves and putting farther down the list performance and or productivity. Rather, find firms that are creative in their contractual arrangements. This can be done fairly easily by identifying and tightly coupling metrics that directly correspond to the consulting engagement with the total amount paid for services. Also, this methodology allows for tracking of those metrics before, during and for a specified period after the engagement. This allows client businesses to evaluate the value of having the consultants in. Because there is a true measure of their worth and total compensation is directly tied to that measure, businesses can feel much more comfortable and can much more easily afford to take the risk of using outside help.

Second, only work with companies that offer a pain-free way of engaging. The curious nature of hiring consultants is that you’re often hiring them to do work in an area in which you’re not an expert. If you’re not an expert, how do you know what needs to be done and who the best people are to be brought in? Locate and utilize the services of only those consulting firms who are willing to analyze your business and discuss your needs without being on the clock. This is the typical consulting firm’s loss-leader.

Lastly, find consultants who are organization-focused. Without an analysis of the organization as a whole, work done by outside entities are very likely to become “silo’d “ and considerably less valuable to the client’s overall business. For example, providing a new system that is not considered from a holistic business perspective may do exactly what it was intended to do, but the negative repercussions of such a system on the rest of business (continuity, learning curve, relation to other systems, etc.) might significantly decrease the ROI or even render the project with a negative valuation.

Being a small or mid-size business principle is extremely exciting and fulfilling work. If you’re interested in growing, sometimes you’ll need outside help. In the past, though, that outside help was only available to big companies with deep pockets. Now, however, a consulting niche has developed where the expertise your company requires is available and available at reduced risk. The new wave of consulting firms are willing to work with your business to be successful and share in that success.

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