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13.6 Managing an IT consulting project

Objectives and deliverables will have been discussed during the process of tendering for the consultancy work. However, before the consultant starts work in earnest, the client and the consulting team should set aside time to meet and clarify the objectives further. Investment of personal time will be amply repaid later in the project. Objectives often contain conflicts, for instance between cost and flexibility or between the demands of different users. Many ill-defined objectives have resulted from an attempt to hide these conflicts rather than facing up to them at the outset. If the objectives change as the assignment proceeds, then go back to reclarify and replan.

Plan to have an explicit time buffer between the completion of the consultancy work and the first critical deliverable such as a “go-live” date. All projects need contingency time for unexpected events but client and consultant often feel embarrassed about this “padding” and implicitly conspire to hide the safety time by accepting overestimated times on every single task in the project. Neither the client nor the consultant can manage safety time that is hidden within the tasks, and it is in the wrong place: it should be at the end of the project. Overestimating on each task gives a false illusion of safety to those whose duty it is to deliver the task – an illusion that is often rudely shattered when a critical bug is found the day before the go-live deadline. Risky projects need a longer time buffer, typically up to a third of the overall time available. This way of working requires a different approach by all concerned: more honesty in estimating task times, constant monitoring of the project buffer and immediate action if the safety time begins to be eaten away at a faster rate than the project is progressing.7

There should be one person who acts as the client for the project and, if it is a significant project, a top-level manager should act as a sponsor. For large multifaceted projects, the sponsor will need to assemble and chair a steering committee with the brief of ensuring that all stakeholder needs are met.

Clients should think hard about whether they have the time to manage the consultants. It is possible to employ someone – another consultant perhaps – who is not connected with the main consulting contractor to manage the consultants.

Client and consultant should also plan for the time of the specialized people within both organizations who will need to work together. If the consultants cannot deliver a key specialist such as a database designer at the right time, then the whole project will be delayed. On the other hand, if the consultants cannot gain access to the people they need to talk to, such as specialists, senior managers or end-users in the client organization, then they will have a legitimate reason for late delivery.

Client and consultant should work together to develop a stakeholder analysis and keep it up to date. Think of everyone who could be affected by the project and map them according to the degree to which they are affected. Manage all these relationships according to their importance and review the status and importance of the relationship with each stakeholder periodically as the project progresses.

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For long projects, set intermediate objectives or milestones. Monitor any drift that occurs in these milestones but do not simply sacrifice quality to achieve an arbitrary milestone. A milestone is a guide to controlling a complex project; it is not a weapon for beating a consultant who is a day behind schedule.

Every project needs its own information system. This can be as complex as a networked project management system or an intranet site and it can be as simple as an agreement for client and consultant to meet for lunch once a month. Remember that “days to do” on any part of a project is a more useful figure to monitor than “days done”.

Keep control of scope. Either the consultant or the client may suggest additional work and this may be justified but it is usually better to treat additional work as a separate project. “Scope creep” has been the death of many an IT project that eventually collapses under its own weight and has to be scrapped or radically truncated.

13.7 IT consulting to small businesses

The personal computer and the Internet offer unprecedented technology power to small companies but many small-company managers have neither the expertise nor the time to exploit this power. This leaves them vulnerable to unscrupulous or ineffective vendors of information technology. Small companies have a great need of IT consulting assistance but they may not have the cash flow to pay for it. One answer may be to obtain some form of government grant to support business or technology development. The alternative is for the consultant to find a way of working that is very time-effective.

Consultants who have worked with larger companies should not assume that it is much simpler to carry out an assignment with a small one (see also Chapter 24). Many business issues are common to large and small companies, but some are peculiar to the small ones. Small businesses employ fewer specialists than large ones and typically have little slack resource of any kind. In order to compensate for the lack of economy of scale, they often need to respond faster than their larger competitors. The loss of one order can change business priorities in an instant. Owner–directors may have aspirations and personal agendas that are quite different from those of managers and directors of larger companies.

However, the need to link technology to business needs is just as important for the small company as it is for the large one. Appropriate technology may take the form of one or two specialized high-technology applications or a wider application of standard packages. Company-wide application of complex technology is not an option for most small businesses, and with fewer employees to coordinate there is less need for it.

Consultants to small companies will need to help their clients think through the same IT questions as their larger brethren: why? what? which? how? The analysis will need to be done in a very time-effective manner, perhaps in several short stages over an extended period of time rather than by the consultant

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working full time and producing a comprehensive report. Many directors of small companies seem to value a long-term relationship with a trusted and experienced outsider whom they can call upon for advice or support from time to time. This mode of working can be difficult for the consultant with a busy schedule but sharing the problems and the excitement of small-company management can also be very rewarding.

13.8 Future perspectives

If we are to understand the development of the IT consulting profession and to make some predictions about its future, then we need to get back to basics. Beneath all the turbulent development of information technology, some trends have remained surprisingly constant. The underlying hardware technologies have continued to follow Moore’s Law: “Processing power doubles every 18 months while cost holds constant.” The explosive growth of the Internet has proven the truth of Metcalf’s Law, a less well-known “law” of technology, which states that “the value of a network is proportional to the square of the number of users”.

Technology, however, cannot develop solely in the laboratory: it must be applied, and the application must add enough economic value to finance further development. Michael Porter8 has identified five stages in the application of technology. The first stage is the automation of discrete transactions, such as order entry. The second stage is the automation of whole business functions, such as human resource management or accounting. Many businesses today are in the third stage, which is the use of IT to integrate multiple business activities by using customer relationship management, supply chain management and enterprise resource planning systems. Porter discerns the beginnings of a fourth stage in which the suppliers, channels and customers of an entire industry are integrated from end to end. Finally, he foresees a fifth stage in which the whole integrated value system is optimized in real time. This would mean for example that product designs would continually adapt to the inputs from suppliers, factories and customers.

In short, the underlying growth of technology shows no signs of slackening and there is no lack of ideas to apply the technology. The experts in application of technology are the consultants, so it is natural that information technology itself and the IT consulting profession have grown symbiotically. There is every indication that this growth will continue.

1E. M. Goldratt: The haystack syndrome: Sifting information out of the data ocean (Great Barrington, MA, North River Press, 1991).

2J. Barthelemy: “The hidden costs of IT outsourcing”, in Sloan Management Review, Spring 2001, pp. 60–69.

3M. C. Lacity, L. P. Willcocks and D. P. Feeny: “IT outsourcing: Maximise flexibility and control”, in Harvard Business Review, May–June 1995, pp. 84–93.

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4C. K. Prahalad and M. S. Krishnan: “The new meaning of quality in the information age”, in Harvard Business Review, Sep.–Oct. 1999, pp. 109–118.

5F. F. Reichheld and W. E. Sasser: “Zero defections: Quality comes to services”, in Harvard Business Review, Sep.–Oct. 1990, pp. 105–114.

6“The reality of virtual consulting”, in Consultants News, Jan. 1999, p. 4.

7For a more detailed discussion of this topic see R. C. Newbold: Project management in the fast lane: Applying the theory of constraints (CRC Press–St. Lucie Press, 1998).

8M. E. Porter: “Strategy and the Internet”, in Harvard Business Review, Mar. 2001, pp. 62–78. On current trends, see also J. Hagel and J. S. Brown: “Your next IT strategy”, in Harvard Business Review, Oct. 2001, pp. 105–113.

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All consulting projects and assignments involve the use of financial and accounting data, and all management consultants, whatever their particular field of specialization, inevitably find themselves concerned with financial issues and practices. There are two reasons for this. The first is quite simply that finance and accounting provide the working language of business, and it is virtually impossible to analyse the operations or results of any complex organization except in financial terms. The second reason is that there are close and complex linkages between finance and all other functional areas. Decisions made in any area of line operations (such as an increase in the social benefits provided to workers) will have an impact on the organization’s overall financial position, and may call for a revision in existing financial plans and budgets. Equally, a decision that appears to be entirely financial in nature, such as a reduction in short-term bank borrowing, may impose a real constraint on other operating areas. Virtually all consulting assignments uncover such linkages.

The present chapter focuses on the special problems of consulting in the analysis of capital investment projects, rather than the use of financial information in general. Even here, however, the impact of financial decisions and policies on other areas of activity cannot be overlooked, and such issues will be examined as they arise in the course of the chapter.

It is pertinent to ask whether the management consultant is the person best qualified to assist clients in this complex area. After all, there are other professionals who work in the financial area: bankers and accountants. Are they not the obvious source of such advice? Both groups are specialists, however, whose competence covers only a part of the financial area.

Managers who need advice on financial matters will frequently turn first to a firm of independent accountants, and in many cases this will be the firm that audits the company’s financial statements. Most accounting firms regularly provide such assistance, and are a valuable source of advice on the design of budgeting and reporting systems, and on taxation. The accounting company that has an ongoing relationship with the client has the advantage of a close working

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knowledge of many aspects of operations, and will have a shorter “learning curve” than other consultants.

There are, however, some serious limitations in the use of accountants as general management consultants. There is a fundamental difference between advising (where the client is the management of the company) and auditing (where the accountant’s responsibility is to the shareholders, creditors and general public). The potential conflict of interest is clear. An accountant who has advised the company on key financial decisions should not be placed in the position of having to produce a critical evaluation of the results of those decisions in the audit report. Some countries, indeed, legislate to keep audit and advisory work separate, although the combination continues to be accepted in English-speaking countries.

Apart from the question of probity, there is also an issue of competence. A distinction must be made here between the major public accounting firms and the smaller firms and sole practitioners. The larger companies have developed “management services” divisions, organizationally separate from the audit function and equipped with a wide range of consulting skills. The small firms and independent accountants, however, are often far from being “full-range” financial specialists, and the specialist training of a conventional accountant may make it difficult for him or her to recognize the limitations in established accrual accounting and to think in cash-flow terms, to plan on the basis of probabilities and alternative scenarios, or to accept some of the more recent developments in costing and budgeting.

The company’s commercial bank is an alternative source of financial advice. In the field of liquidity management and credit control, the advice of the local bank manager may be very useful, particularly as it will be supported by specialized knowledge about the financial situation and general credit rating of actual and potential customers. But again, it must be recognized that the training and experience of commercial bankers are biased; they may be highly skilled in credit assessment, but are likely to know little about company valuation or the workings of the securities markets.

Merchant bankers (investment bankers in United States terminology, or banques d’affaires in France) are much more actively involved in consulting. The traditional role of merchant banks has been to act as agents and intermediaries in the issue of securities, advising on the terms of the issue and providing underwriting services. In recent years, their role has expanded to include a wider range of advisory services, although it remains a specialized one. They are actively involved in merger and acquisition activities, and are increasingly in competition with the commercial banks in risk management and other treasury operations, but they are not much involved in day-to-day corporate financial operations such as credit and liquidity management.

The constraints and specializations of these various types of organization provide an opportunity to the general consultant who can take a wider viewpoint spanning the full range of financial decisions. Preparing for such a role involves a major investment of time, but the consultant willing to make such an investment will be in a position to offer a unique service to the client.

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