Consultant, heal thyself
Brainstorm gathered together some of the best brains in the IT consulting industry to explore the many challenges they face.Consultants are supposed to be good at identifying problems and issues facing their clients. But they have more than a few challenges all of their own.These include dealing with a new world order imposed by regulators following the Enron fallout. The Sarbanes Oxley Act in the US, for instance, bars professional services firms from doing auditing and consulting work for the same client, a move that has seen many firms spin off their consulting businesses or sell them to other specialists.In addition, with IT spending only recovering slowly, consultants in the field are finding the going tougher than before.IT consultants face some local hurdles, including satisfying black economic empowerment targets, hanging on to talent and doing business in the rest of the continent.Brainstorm recently gathered together some of the bright people in the industry to discuss some of the main challenges they face, at a round-table discussion. Participants included John Bell, director at Accenture; Greg Reis, of consulting house BSG; Sven de Kock, principal at AT Kearney, and Andrew Lane, of AT&L Consulting. African innovationFor all of this, consultants seem excited by the opportunities in Africa, though there is some discussion about what constitutes best practice, and the extent to which this remains relevant and important for South African consultants working in other parts of the continent. While the concept of "fit for purpose" has some currency, the team felt strongly that the concept of best practice should not be compromised.According to Lane, there is a big opportunity in Africa. The problem is not best practice as such, but how it is implemented. "The devil is in the way people do the implementation, how you take the knowledge you have and apply it," he says."We need to look first at best practice, and what we can learn from it; then we need to look at how we can play to Africa`s strengths; and, lastly, you need to identify the implementation hurdles."The telecommunications industry has shown how technology can allow late starters to leapfrog older technologies, and this example can be used across other industries, such as banking.De Kock believes the consulting industry needs to look more closely at ways to innovate. "If you read what Gartner is saying on the subject, there is a definite need for greater innovation. We maybe need to marry best practice with innovation, but innovation from an African point of view."Bell worries about the connotation of "the African way" and how this looks to the rest of the world. "Africa is often seen as a basket case, so you don`t want to Africanise too much. Best practice is vital if we want initiatives like Nepad to succeed."Different emerging markets can learn from each other. De Kock cites the example of distribution strategies, which in developing markets can differ quite markedly from developed markets.Lane says the challenge is in change management. "We need to look at best practice and the extent to which we can learn from others in the rest of the world. Then we need to ask how we can play to Africa`s strengths."On more global issues, the team feels the industry has changed dramatically, and not just in the sense of the effects of Enron and other corporate disasters.Certainly the days of putting in large projects are over. According to De Kock, clients these days are still looking for expertise, knowledge and experience. However, they are also looking for value over the long term.Consultants, used to completing a project or implementation, are finding it`s not an easy task to adapt to this new way of thinking, he says. "I`m not sure we as an industry have figured this all out. We like jobs that have a definite start and a finish and don`t want to have to worry about whether we`ve delivered value years later." Look to yourselvesReis says types of interventions are changing. Strategic interventions are now fairly rare, since companies are now more aware of what good strategy is. But he warns that companies too often abdicate business design to third parties. "Gartner is saying more and more that companies need to build internal capacity to do analytical business design. The other side to this is that the consultant`s value chain gets eroded as companies build capacity."Bell says corporate governance has become an issue, locally and abroad. The focus, he says, has moved from advice to execution. "Companies must now look internally for governance, they cannot simply blame consultants for the advice they are given." Competing for talentMovement of talent has also changed the landscape. There was a time when the consulting firms could have their pick of the best people coming out of business schools, and tie them in as "consultants for life". This is no longer the case, with corporates, multinationals, investment banks and others vying for the same talent. Good consultants are also fair game for corporate clients too. "Corporates are building internal consulting capability, and this is both a bad and a good thing," De Kock argues."It`s negative in the sense that we lose good people, but it`s positive in the sense that we have prophets for the consultancy industry within the corporate world."They will squeeze you, of course, because they know exactly how you work. My big question here is how long they will stay inside the corporate world? Do they lose the edge of being in a consulting environment?"But, for now, drawing talent remains tough. De Kock says the key is to attract good people with fresh challenges - not just money.This leads to the big question of whether recent changes in the industry are structural or cyclical. The team feels that it`s a mix of both.Says Bell: "To a certain extent it`s a cyclical thing, and a cycle we have seen before. It`s a bit like the old centralise/ decentralise thing. For a while there was a move to decentralise, now we`re centralising again, except we are calling it shared services, which is more palatable." Answering vexing questionsBell says there will be a swing back to using consultants more. "I see more collaboration between consultants and corporates. As corporates go through the process of recruiting, they may find their existing teams becoming less efficient because they are not in the consulting world."Lane says there should always be work for good external consultants, who can support the internal capability with more targeted work. "It comes back to the question of what strategy is. To me it means answering vexing questions in an analytical way. There will always be an appetite for that kind of work.""Good corporates know the value consultants can add, but also that they don`t have the capacity for everything," adds Reis. "They know they need internal skills."But, says Bell, the industry perhaps needs to do more to identify the value. "Often these things are driven by very personal agendas within an organisation. For instance, an executive`s delivery timeframe may coincide with his or her stock options falling due. This is a very real issue and consultants need to understand it."All agree though that fee models are changing, with more emphasis on contingency type work. "This is also a cyclical thing," says Reis. "There`s definitely a squeeze on margins, and corporates do look for the best deal."Lane says despite the growing appetite for contingent billing, this model is not always appropriate. "It can drive the wrong sort of behaviour by consultants," he says.Bell agrees, saying the industry needs to apply its mind to variations in pricing models. "Contingent billing can`t really work with strategy or organisational design, but it might work with sourcing projects."An important question is whether consultants are helping bridge the chasm between business and IT. The team feels strongly that consultants can help fulfil that role."Both business and IT are to blame for the situation they find themselves in. IT has, in many ways, lived up to its bad reputation; and CIOs must nowadays do more to demonstrate value. At the same time, business can do so much more to involve IT," says Bell."For example, research into mergers and acquisitions has found that the most successful deals were those where the IT aspects were considered up front." Crowd of chartersBell argues that IT is pervasive in everything an enterprise does. "But business must understand how IT enables its strategy."De Kock says the problem has been that IT has always been implemented in silos, rather than being used to support the business at the corporate level. "We find for instance that enterprise resource planning (ERP) should be implemented end-to-end, but ends up being implemented division by division."Black economic empowerment (BEE) looms large for consulting firms. The industry needs to fit in with a number of charters, including, for example, the mining and financial services charters (depending on their clients) but also the ICT charter where implementations are of an IT nature.In addition, the professional services industry is busy putting together its own charter, and a draft for the consulting industry is currently also being written.This puts pressure on an industry that has always prided itself on getting the best people, but it can be an opportunity as well, says Reis. "Compliance with the charters gives us an opportunity to grow our skills base," he says.De Kock says diversifying the consulting work force is a good thing. "By having people who think differently, we can build something for South Africans. We can certainly challenge the traditional paradigm, and that has to be a good thing," he says.The industry is also dealing with the growing "corporatisation" of many entities within it. Whereas most houses grew out of professional services firms governed by laws of partnerships, this is less and less the case, with a number of consulting arms either going corporate themselves or, in an increasing trend, being acquired by IT firms. The purchase of AT Kearney by EDS and of Price-waterhouseCoopers` consulting arm by IBM, are two examples. Locally, the purchase of KPMG`s South African consulting business by listed IT company EOH, is another. Independence dayDe Kock says there can be concerns about independence, and in AT Kearney`s case it has had to fight for this. "We are now seen as a truly independent business within EDS, and we don`t have to go into businesses alongside them. At the same time, having the balance sheet behind us is a plus."Bell says the process has been driven by consolidation and also by the pressures created by Sarbanes Oxley and Securities and Exchange Commission (SEC) regulations. "The big five has become the fat four and, of these, three have separated out their consulting divisions. Only Deloitte still keeps it in-house," he says."I have to say though that the shake-out is not finished yet; there is room for further consolidation."Reis raises the vexing question of alliances that many consulting houses have with vendors. "We see more and more that multinationals are gobbling up the functions they used to farm out to consulting firms they had alliances with. Where does this leave the consultants?" he asks.Bell asks though how consultants within the big vendors can be independent. "Can we be objective in recommending a product to a client? We believe we can. But we do rely on alliances," he says.De Kock says a vendor might question the commitment of a certain consulting partner to its product, and ask the question whether it may not be easier to simply build that implementation capacity within the vendor itself. No easy lifeIt can turn out to be a conflict of interest both ways, says Reis. "A strategic alliance with a software vendor, one has to say, does cross the line," he says.Bell says it`s something that simply has to be managed. "It`s not easy. We can advise the client and come to a conclusion. Ultimately, if it`s a particular product the client wants, it must decide. If it`s merely an outcome, it`s up to us."Will consultants be able to deliver on the challenges they face? Certainly life has not become easier for them over the years. However, as with the clients they advise, they are challenges they cannot avoid.
31 July 2004
Brainstorm gathered together some of the best brains in the IT consulting industry to explore the many challenges they face.
Consultants are supposed to be good at identifying problems and issues facing their clients. But they have more than a few challenges all of their own.
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