Zigging IT Consulting when Everyone Else is Zagging
Date: Wednesday , September 05, 2012
Think of IT consulting as an industry and several stereotypes come to mind – numbers game, high attrition, low loyalty, cut-throat price competition, short tenures and short company life spans for mid-level companies. That was the idea I had about the industry before I came to know about Solugenix. I was working at a management consulting firm in Chicago, IL in late 80’s and early 90’s and came to know of this company, based in Chicago, that was doing IT consulting since 1969. Wait a minute - 1969? That was the first intriguing piece of data that caught my attention - one amongst many more to come. Was there even an IT industry back then? Lyndon Johnson was in the White House and Indira Gandhi was barely settling down in her first term as the Prime Minister. Even if there was an IT Industry because computers were being used by businesses, would it not take some time before someone can make money consulting? Apparently there was a need for consulting and the founder of Solugenix, Russell Shields found a way to provide services to serve those needs.
I know it is easy for a CEO of a company to wax eloquent about how great his company is. However, I am not trying to impress the readership of siliconindia to get business – you are not the type who buys the type of services we provide anyway. Because siliconindia’s readership contains enough members who are, or will be IT entrepreneurs, I could not turn down the offer to share the incredible lessons I learned over the last 20 years I have been with the company.
Based on my experience, our clients’ direct feedback and our own results, I strongly believe there is a right way and a wrong way to run an IT Consulting organization. Hopefully if more organizations adopt these approaches, we can reduce the wastage (of talent and capital) and the heartburn that seem to permeate the industry. Here are the lessons in no particular order:
• Successful IT engagements are the raison d'ętre of IT organizations – everything else follows that success. You need to have a clear definition of what that success means, and you need to communicate it to all your team members. For us, success is defined as (a) project success (budget, schedule and functionality), (b) organizational enrichment (capture or enhancement of knowledge, and possibly IP), and (c) client satisfaction (as defined by a single measure – will the client be reference-able after we are done?). Have a fuzzy definition of success, and you will have fuzzy execution and fuzzy alignment. Also, financial measures of success do not make sense unless you have operational measures of success for your engagements. Operational success is a prerequisite to financial success. By all means you should have financial success metrics like EBITDA, Gross Profit, and more, but only after nailing down your operational success metrics.
• IT Consulting business should be run like a Professional Services Firm – not like a temp services firm. Examples of Professional Services Firms are CPA / CA firms, Law Firms, and such organizations. An example of Temp services firms are those that hire out temporary nurses or accounting clerks. I am not saying one is superior to the other but you need to know what returns each type can realistically produce. Our learning was that your choice in this regard affects everything – including your financial metrics. There is a (low) plateau to the financial returns you can get, if you run a temp agency. You cannot fake it either – that is, you cannot run a temp agency and have slick marketing messages that say you are a professional service firm. Your employees and your clients see through it from a mile away. I have never seen that work. Does the distinction seem arbitrary? It is not. We can give a few examples to show the stark difference: a professional services firm develops professionals that form long term relationships with professionals at client organizations and grow that relationship over time using strong value addition. These professionals are rewarded directly by the nature and size of those relationships – think CPA firm (that is, a well-run one). A professional services firm does not depend on a sales force. A temp agency uses its billable resources as faceless interchangeable parts and needs a sales force (non-billable) to nurture relationships. A deeper treatment of this distinction is in the various writings of David Maister, a British management consultant and author.
• Successful IT engagements depend on mature software engineering processes. Mature processes depend on stable teams. Stable teams depend on stable organizations. Stable organizations need a different ownership and governance structure. You cannot build IP (technical, organizational) on floating population. Loyalty of the employee, which mirrors the loyalty of the employer, has a direct impact on the bottom line by preserving organizational knowledge, client relationships and significantly increasing the IT engagement success rate. Measure it and you can see the correlation as clear as night and day. Why should you care? What proof do I have? Here is just a few metrics from Solugenix: Longest standing IT consulting firm in the U.S. – possibly the world; profitable for 43 consecutive years; total market cap of all the various spinoffs so far greater than $8 billion; average tenure of employees at least twice U.S. average any given year – sometimes significantly more; nine employees so far completed 30 years of service. Above everything else, knowing that the profession we love (Information Technology) can be pursued without the rat race, low-margins and high-churn – that is priceless. Yes, it can be done.