Deciding whether to do a project internally vs. using external resources ("make vs. buy") will always be a challenge for organizations undertaking ambitious IT endeavors. The motivations for taking the latter varies from case to case, but a formal approach to evaluating, selecting and managing external consultants is always the best way to increasing the chances of realizing the desired payback.
The ever changing nature and growing complexity of technology, the constant evolution of business models and paradigm shifts, and the pressure to compete globally, often makes deploying and combining all the necessary knowledge, techniques, methods and skill sets needed to conduct large-scale technology implementations (e.g. WMS, ERP, Business Intelligence) a daunting, if not an unfeasible task.
The term "consulting" in the IT industry has a very broad connotation, and it is important to say that, for the substance of this article, to discuss the value added by consultants and the important aspects of selecting and managing consulting partners, we are considering this general meaning. Consulting is defined in the Merriam-Webster dictionary as "providing professional or expert advice." This can range from management consulting, corporate business strategy/vision, business processes redesign, operations improvement, change management, systems design, implementation and coaching.
In addition to the level and scope of consulting activity, the way to look at a consultant's role and how to best capitalize on such resource is also affected by the type of industry, application area, size and maturity of company, as well as organizational, political and competitive scenarios, priorities, etc.
Undeniable need or strategic value-added — quantifying the benefits of external consultancy.
In many cases, when a clear business need or an organizational gap is present, justifying the cost of external consultancy is practically a non-issue. Sometimes it doesn't make sense to invest in developing the required competencies internally, only to address the necessities of a specific isolated project. Time constraint pressures can be the overpowering motivators to other companies, since consultants are usually able to shorten project time and smooth out the learning curve. Elsewhere, lack of internal expertise in technologies, specific industry, or in high-level strategic issues are indisputable reasons to use outside resources. This has been intensified by the downsizing trend of organizational structures that had depleted them of talented people, as well as the labor shortage, specially grave in the IT employment market. Also, in environments that are heavily political, an external unbiased authority represented by a consultant can be the only catalyst to resolve political disputes.
For most of tactical tasks for which consultants are in demand, such as covering a gap in a staff technical team, or providing the methodology for a complex project, showing the benefits and weighting them against the costs is typically a straightforward exercise. Sometimes, hard numbers can even be anticipated, allowing the use of standard methods for investment appraisal in a typical financial justification. Which CFO wouldn't approve the 20% cost of consultants in a million-dollar WMS project that would have a return on investment in less than one year?
The ironic side of this is that generally, the more strategic benefits with greater impact in the long run that "good" consultants bring to the table are much harder to estimate. Those "intangible" values provided by consultants are seen, for example, when they play the role of change agents, using their cross-industry experience to disseminate best practices, instigating new insights, bringing multiple perspectives to a topic, will result in robust conclusions based on a more thorough understanding of the issues involved. Providing new benchmark standards with real-life experiences will lead to practical discussions that suggest alternatives to fine-tune or reengineer processes based on technology. These alternatives may revolutionize the company's way of thinking of its business, breaking paradigms at the individual, team and corporate level.
Another form of evaluating a consultant's value to a project is through a risk assessment approach. What is the cost of making mistakes? Downtime? Good decisions vs. bad decisions? What is the cost of lost opportunity?. If the estimated benefit of the project is $50,000 in incremental revenues per month, thus it costs the organization $50,000 each month the project is delayed.
What selection criteria should an organization consider when choosing a Consulting partner?
As said before, the consultants' profile and skills assessment are determined by project scope and complexity, company characteristics, industry and application area. Still, all of the selection criteria can be to some extent adapted and applied in most cases. Understanding the project needs and priorities that must be addressed is a necessary step prior to defining the consultant's competencies and skill sets. Following are some of the main criteria that should be considered in a selection process:
- Technical Skills - typical required technical skills include a solid understanding of process and project management issues, as well as appropriate knowledge of the actual tools used in the development process. Business and workflow-modeling skills are critical for requirements analysis and should be complemented with expertise of the modeling tools used. Only mastering prototyping tools and techniques is not enough. The consultants must be able to use them effectively in interactive sessions and to verify the prototype against business scenarios created during requirements modeling sessions. Even the simplest application requires testing, which demands knowledge of test case creation and verification, as well as experience with the testing technology. Finally, implementation techniques, including training and documentation, will help ensure success.
- Application and Technical Infrastructure Expertise - In-depth knowledge of the tools, development environment, platforms, and network interfaces are obviously required for application and development consultants. Consultants playing a higher level role on applications projects should profoundly understand how the application integrates with the corporate systems architecture, the overall technological scenario, future trends and directions, and how it relates to current and future business models to provide enabling technology visioning.
- Industry Expertise - It is also imperative that consultants understand the client's existing business strategy and processes, and their functional requirements, as well as the best practice for the company's industry. Therefore, organizations should assess consultants according to their industry capabilities. In some ideal cases, consulting firms with multi-industry experience can add a tremendous value applying ideas from one industry to the problems of another.
- Proven Methods and Techniques - Choose a consulting partner that can bring a well tested methodology with a track record of successful projects under similar circumstances as yours. Prefer those consultants that are flexible and can adapt their methodology to your specific needs and avoid excessively ingenious proprietary methodologies or concepts not yet clearly demonstrated.
- Multi-vendor Experience and Product Independence - Considering the multitude of product choices, the fast pace and competitiveness of the IT market where vendors come and go, products disappear and technological standards win and lose everyday, you want to be sure to have unbiased advice on all the options available.
It is very common to find organizations excessively emphasizing technical skills in their process to select IT consultants. I've seen consultants' technical evaluation matrixes with hundreds of technical requirements for relatively simple projects. Be aware, because sometimes this skills minutia adds little value but significant overhead to the process. What is worse, many times the disproportionate focus on functional technical requirements act to the detriment of other important soft skills, such as:
- Communications and listening skills, collaborative team building and leadership.
- Coaching and mentoring skills critical on helping company's resource quickly ascend the learning curve (indispensable to knowledge transfer success).
- Dealing with political climate, conflict management and mixed motivations.
- Identifying and working with different forms of resistance.
- Change management. Information technology has become so intrinsic to business that some of these large IT projects have the power to affect substantially organizational structures, management systems, job definitions and responsibilities, beliefs and behaviors, performance metrics and employee skill sets. The skills to deal with all psychological issues resultant of this are highly desired and hard to find these days.
Doing it right — how to capitalize the most on consultant's resource?
There are plenty of nightmare tales in the industry about consulting and consulting providers. Certainly there are numerous aspects of consulting that can go wrong, making it a disadvantageous proposition or even a disastrous one to a company. Since for this article I decided to set an appreciative tone and focus only on what can go well with consulting, we will leave for a later opportunity the discussion on the disadvantages and pitfalls of consulting. Following are some tactics to help you get the most out of external consultants on your IT projects.
- Keep Ownership of the Project. It is important that the enterprise and the IS group take ownership. Don't let consultants fill all the key roles on the core project team. The project plan should be the company's plan, not the consultants' plan.
- Use Combined Project Teams. Creating combined project teams with in-house people and external consultants sharing responsibilities and complementing roles is one of the best ways to ensure alignment with business requirements, smooth know-how transfer, and keeping control of project execution. Compare the consultant's methods and tools portfolio to the organization's in-house competency base on overall requirements and try to find the best match.
- Aim for Knowledge Transfer. Consulting is all about buying intellectual capital, hence, consultants must be able to provide knowledge in all phases of project planning, execution and management. Make knowledge transfer a crucial part of the "contract" with the consulting organization. Define and agree on metrics to verify if this is attained. It probably is a strong sign that knowledge gains were unsatisfactory when at the project finish, the organization still feels unsafe to be alone when the consultants leave.
- Define project scope and set clear expectations. A clear understanding of project scope, objectives, priorities, timing, deliverables expectations and consultants role on its execution is a fundamental premise to any project success. You can only make consultants accountable in an effective manner for what you're buying from them with a good project plan. This doesn't mean that the consultants can't have inputs to the plan. Actually in several cases they are being paid to do so, but still the plan has to be yours.
- Check References and Experiences (at Individual Level). The formal RFP, and proposal process, do not necessarily lead to the best match with a user's needs. This method rarely assesses individuals, and cannot be used to match the consulting team to a user's culture. It is then advised to assess the individual background of each consultant being assigned and tying those individual names to the contract when possible. Look for a proof record of solid performance within similar organizations, similar size and complexity projects.
- Assure executive support and corporate buy-in. Without senior management backing and clear understanding by the entire corporation (or at least all affected parties) of project benefits, trade-ins and objectives, as well as explanation of reasons and how consultants will contribute to the project, the consultant presence can be viewed with skepticism and as threatening. Internal marketing of project with the appropriate delegation of consultant's role can't be neglected.
- Cultivate and Manage the Partnership Agreement. Look for consulting partners with a reputation of true commitment to results and client values. But be aware of the partnership trap. Most consulting providers talk about trust and partnerships (as defined by having mutual economic consequences), when in reality the relationship is based in a service agreement were both parties are expecting to make a profit out of each other. The best is to define and enforce measurable service level agreements where specific services are associated with performance standards. Carefully manage the service level agreements throughout the relationship existence and back them up by precise (not vague) contractual terms and conditions.
- Maintain Rich Communication. Good communication flow about the project and consultants' activities is probably the most important success factor. Making sure that everyone in the organization that is affected or that is a potential contributor is properly informed, along with sharing responsibilities and legitimate ownership.
Getting the most out of a relationship with a consulting party is a complex task. One of the most common mistakes customers make is to underestimate this complexity. Selecting a consulting provider with an incomplete technical or soft-skills profile, miscommunication or misconceived expectations, or ambiguities surrounding roles and responsibilities, may often lead to dissatisfaction and failure. However, following the critical success factors described above can help organizations enjoy the fair amount of value from their consulting investments.