High-Value It Consulting: 12 Keys to a Thriving Practice [1 ed.] 9780072226256, 0072226250

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“These best practices provide the road map that is key to running a world-class consulting practice.” —David Smart, VP, System and Technology Services, The CIT Group, Inc. “Practical, actionable, and full of insight. If you are starting your own consultancy, looking to advance in your career as a consultant, or looking to take your consultancy to the next level, you will find the hands-on information you need in this book.” —John Wyzalek, Principal, White Paper Group “This book provides an invaluable road map for enterprises that find themselves crossing over into the consulting arena, but that lack formal consulting experience to draw upon.” —Charles Dow, Vice-President, SLMSoft “A digestable summary of the consulting industry and powerful key factors to consider in building, managing, and measuring a successful practice.” —James Fehrenbach, HR Director “This is a comprehensive and thoughtful approach to helping IT consultants get a solid perspective on how to establish or improve their consulting practice.” —John Davies, Independent IT Consultant “This book provides the information a technical practitioner needs to know in order to succeed in a consulting organization. It also nails the business of consulting.” —Nancy Stonelake, System Architect, Sprint “This book should be required reading for experienced practice managers in order to help avoid the gaps in processes that creep into existing operations.” —Paul Saunders, Vice President Consulting Services, QUEUE Systems, Inc. “This is a how-to guide to building a successful consulting organization with key anecdotes as well as useful management and measurement philosophies geared specifically toward the consulting environment.” —Tanvir Mangat, Senior Consulting Executive

“From pre-engagement to post-engagement activities, this book provides key metrics, practical approaches, and real-world examples for successfully running an IT consulting practice and ensuring client satisfaction.” —Silvy Picciano, FLMI/M, ACS, Industry Executive “A comprehensive guide for any IT consultant looking to effectively build, manage, or grow their practice.” —Andrew Chow, MBA, Director of Technology, ninedots “An excellent reference for IT consultancies to remind them of the true value consultants provide to the market—something that is critical with the economic climate we endure today.” —Steve Engel, Business Integration Consulting Lead, EDS “Consulting work can be frustrating because of the challenges involved in managing client expectations. This book provides solid material to understand the intricacies of the consulting process and ways to successfully deliver consulting projects. A must-read book for consulting practitioners and business users.” —Bharat Shah, Principal, McCann Computer Systems, Ltd. “This is a very useful guide for consultants to provide them with a comprehensive and practical understanding of what consulting is all about.” —Adel Melek, Partner, Deloitte & Touche

High-Value IT Consulting: 12 Keys to a Thriving Practice

About the Authors Sanjiv Purba is an information technology executive with over 15 years of industry and consulting experience. He has worked for the “Big 5” consultancies, boutique consulting firms, and has run a successful independent contracting business. Some of his clients include IBM, Deloitte Consulting, ISM, Goldman Sachs, Perrier, CIT, Microsoft, Sun Life, and the Royal Bank. He has built successful consulting practices at a variety of firms including Deloitte Consulting and Blast Radius. He has written over 10 books and hundreds of articles for such publications as The Globe and Mail and the Toronto Star and is a frequent lecturer at universities and colleges. Bob Delaney, MBA, has more than 25 years of experience as a consultant and manager in marketing, communications, and information technology. He manages a web development consulting practice and teaches Internet Marketing at Ryerson University. Bob is a Microsoft Desktop Systems MVP.

About the Technical Reviewer Marian Cook is a futurist, strategist, entrepreneur, and professional speaker. She is the founder and president of Ageos Enterprises, a business and technology consulting firm headquartered in Chicago with an office in Denver. She has received the Influential Woman in Business Award presented by The National Association of Women Business Owners, and is a member of the Advisory Board for Loyola University’s Center for Information Management and Technology.

High-Value IT Consulting: 12 Keys to a Thriving Practice

Sanjiv Purba and Bob Delaney

McGraw-Hill/Osborne New York / Chicago / San Francisco / Lisbon / London / Madrid / Mexico City Milan / New Delhi / San Juan / Seoul / Singapore / Sydney / Toronto

McGraw-Hill/Osborne 2600 Tenth Street Berkeley, California 94710 U.S.A. To arrange bulk purchase discounts for sales promotions, premiums, or fund-raisers, please contact McGraw-Hill/Osborne at the above address. For information on translations or book distributors outside the U.S.A., please see the International Contact Information page immediately following the index of this book.

High-Value IT Consulting: 12 Keys to a Thriving Practice Copyright © 2003 by The McGraw-Hill Companies. All rights reserved. Printed in the United States of America. Except as permitted under the Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of publisher, with the exception that the program listings may be entered, stored, and executed in a computer system, but they may not be reproduced for publication. Legal disclaimer: This book is not intended to provide legal advice and should not be used for this purpose. Please consult a practicing lawyer when dealing with legal matters. 1234567890 DOC DOC 019876543 ISBN 0-07-222625-0 Publisher Brandon A. Nordin

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This book was composed with Corel VENTURA™ Publisher. Information has been obtained by McGraw-Hill/Osborne from sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, McGraw-Hill/Osborne, or others, McGraw-Hill/Osborne does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions or the results obtained from the use of such information.

To my wife Kulwinder, my children Naveen, Neil, and Nikhita, and my mother Inderjit. —Sanjiv Purba To Frank C. Walden of British Columbia: friend, mentor, inspiration, and all-time favourite employer. —Bob Delaney

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Contents at a Glance Part I IT Consulting Best Practices Chapter 1 Chapter 2

Evaluate the Current Health of Your Consulting Practice . . . . . . . . . . . . . . . . . . . . . . .

3

Road Map for Building a High-Performance IT Consulting Practice . . . . . . . . . . . . . . . . . . . .

25

Part II Selling Client Businesses and Engagements Chapter 3

Implementing a Marketing Strategy . . . . . . . .

49

Chapter 4

Account Development Strategy . . . . . . . . . . . .

69

Chapter 5

The Client Account Pipeline and the Decision-Making Process . . . . . . . . . . . . . .

99

Chapter 6

The Client Decision-Making Process . . . . . . . 117

Part III Delivering Client Engagements Successfully Chapter 7

Pre-Engagement Activities . . . . . . . . . . . . . . . . 141

Chapter 8

Starting an Engagement . . . . . . . . . . . . . . . . . . . 167

Chapter 9

Maintaining Engagement Controls . . . . . . . . . 187

Chapter 10 Running an Engagement . . . . . . . . . . . . . . . . . . . 209 Chapter 11

Testing, Deploying, and Closing an Engagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241

Chapter 12 Working Multiple Engagements for a Client . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263 Chapter 13 Risk Mitigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 279 Chapter 14 Legal Considerations in IT Consulting . . . . . 297 Chapter 15 Quality Considerations . . . . . . . . . . . . . . . . . . . 311 Chapter 16 Celebration, Communication, and Other Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323 ix

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Part IV Running an IT Consulting Group or Practice Chapter 17 The Evolving Practice . . . . . . . . . . . . . . . . . . . . . 339 Chapter 18 Financial Management: The Bottom Line . . . 351 Chapter 19 Day-to-Day Management of an IT Consulting Business . . . . . . . . . . . . . . . . . . . . 379 Chapter 20 Using Information Technology in IT Consulting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399 Chapter 21 Human Resources and Career Management . . . . . . . . . . . . . . . . . . . . . . . 417 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433

Contents Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Downloadable Online Forms . . . . . . . . . . . . . . . . . . . . . . . . . . .

xvii xix xxi

Part I IT Consulting Best Practices Chapter 1

Chapter 2

Evaluate the Current Health of Your Consulting Practice . . . . . . . . . . . . . . . . . . . . . . .

3

Defining the 12 Key Metrics for a Successful Consulting Practice . . . . . . . . . . . . . . . . . . . . . . . . Evaluate How Your Practice Is Doing . . . . . . . . . . . Establish a Benchmark for Your Practice . . . . . . . . Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . .

6 21 23 24

Road Map for Building a High-Performance IT Consulting Practice . . . . . . . . . . . . . . . . . . . .

25

Describing an IT Consulting Practice . . . . . . . . . . . Defining the IT Consulting Practice Lifecycle . . . . Defining IT Consulting Roles . . . . . . . . . . . . . . . . . 12 Key Metrics and the Practice Lifecycle . . . . . . . . Leadership, Value, and Intellectual Property . . . . . Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . .

25 28 40 43 44 45

Part II Selling Client Businesses and Engagements Chapter 3

Implementing a Marketing Strategy . . . . . . . .

49

Service Lines and Paradigms . . . . . . . . . . . . . . . . . . Getting Started . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Niche and the Culture . . . . . . . . . . . . . . . . . . . . Research and Development and New Projects . . . . The Role of Marketing . . . . . . . . . . . . . . . . . . . . . . . People with a Common Need . . . . . . . . . . . . . . . . . The Marketing Plan . . . . . . . . . . . . . . . . . . . . . . . . . The Marketing “Kit” . . . . . . . . . . . . . . . . . . . . . . . . . Writing and Talking Tips . . . . . . . . . . . . . . . . . . . . .

49 50 51 52 54 55 56 59 61 xi

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Chapter 4

Chapter 5

The Channels to the Client’s Mind . . . . . . . . . . . . . Project Planning with a Human Face . . . . . . . . . . . Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . .

64 66 68

Account Development Strategy . . . . . . . . . . . .

69

Yes, I Do Account Development . . . . . . . . . . . . . . . The Structure of Account Development . . . . . . . . . Crossing the Validation Bridge . . . . . . . . . . . . . . . . Discover the Client’s Needs . . . . . . . . . . . . . . . . . . . Propose a Solution . . . . . . . . . . . . . . . . . . . . . . . . . . Resolve Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Engagement Terms . . . . . . . . . . . . . . . . . . . . . . The Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Account Development Tools . . . . . . . . . . . . . . . . . . Pricing Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Samples and Reference Sites . . . . . . . . . . . . . . . . . . . Response Templates . . . . . . . . . . . . . . . . . . . . . . . . . RFP Responses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Integration with Product Sales . . . . . . . . . . . . . . . . The Account Development Plan and Resource Kit . . . . . . . . . . . . . . . . . . . . . . . . . . Budgeting for Account Development . . . . . . . . . . . Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . .

69 70 73 73 75 76 77 78 78 79 82 83 84 89

The Client Account Pipeline and the Decision-Making Process . . . . . . . . . . . . . . . . . .

90 91 96 99

Business Development’s Common Elements . . . . . 99 The Account Pipeline . . . . . . . . . . . . . . . . . . . . . . . . 99 In and Out of the Pipeline . . . . . . . . . . . . . . . . . . . . 108 Case Study: The Windy City Opportunity . . . . . . . 113 Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . 114 Chapter 6

The Client Decision-Making Process . . . . . . . 117 Organizational Behavior . . . . . . . . . . . . . . . . . . . . . The Art of Finding Decision-Makers . . . . . . . . . . . Is the Client Worth the Effort and Risk? . . . . . . . . . Contract Management . . . . . . . . . . . . . . . . . . . . . . .

118 124 128 133

Contents

Getting the Deal Done . . . . . . . . . . . . . . . . . . . . . . . 134 Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . 136

Part III Delivering Client Engagements Successfully Chapter 7

Pre-Engagement Activities . . . . . . . . . . . . . . . . 141 Impact of Pre-Engagement Activities . . . . . . . . . . . 141 Checklist for Pre-Engagement Activities . . . . . . . . 145 Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . 166

Chapter 8

Starting an Engagement . . . . . . . . . . . . . . . . . . . 167 The Engagement Lifecycle . . . . . . . . . . . . . . . . . . . . Impact of Engagement Activities on Key Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . What You Should Have from the Previous Phases . . . . . . . . . . . . . . . . . . . . . . . . Sample Templates . . . . . . . . . . . . . . . . . . . . . . . . . . . Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 9

167 169 170 181 185

Maintaining Engagement Controls . . . . . . . . . 187 The Thin Wedge of Profitability . . . . . . . . . . . . . . . 187 Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . 208

Chapter 10 Running an Engagement . . . . . . . . . . . . . . . . . . . 209 The Quest for a Standard Methodology . . . . . . . . . Impact of Running an Engagement on the 12 Key Metrics . . . . . . . . . . . . . . . . . . . . . . . . . Major Phases and Deliverables for Running an Engagement . . . . . . . . . . . . . . . . . . . Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 11

209 213 214 239

Testing, Deploying, and Closing an Engagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241 Impacts on the 12 Key Metrics . . . . . . . . . . . . . . . . Testing Phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deployment Phase . . . . . . . . . . . . . . . . . . . . . . . . . . Post-Engagement Activities . . . . . . . . . . . . . . . . . . . Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . .

242 245 256 259 261

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Chapter 12 Working Multiple Engagements for a Client . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263 Extending the Engagement Office . . . . . . . . . . . . . . Challenges of Multiple Engagements . . . . . . . . . . . Selling Multiple Engagements . . . . . . . . . . . . . . . . . Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . .

263 270 275 277

Chapter 13 Risk Mitigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 279 Three-Point Risk Assessment for Engagements . . . Practice-Based Risk Assessment . . . . . . . . . . . . . . . Examples of Risk Assessment . . . . . . . . . . . . . . . . . Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . .

279 292 294 295

Chapter 14 Legal Considerations in IT Consulting . . . . . 297 Legal Documents Are Part of IT Consulting . . . . . Form and Style of Agreements . . . . . . . . . . . . . . . . Defaults and Disputes . . . . . . . . . . . . . . . . . . . . . . . . Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional Resources . . . . . . . . . . . . . . . . . . . . . . . . Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . .

298 300 307 308 308 309

Chapter 15 Quality Considerations . . . . . . . . . . . . . . . . . . . 311 Why Quality? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 Quality Assurance Strategy . . . . . . . . . . . . . . . . . . . 314 Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . 322 Chapter 16 Celebration, Communication, and Other Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323 Never Crowded at the Top . . . . . . . . . . . . . . . . . . . . Celebrating Success . . . . . . . . . . . . . . . . . . . . . . . . . . Client Satisfaction . . . . . . . . . . . . . . . . . . . . . . . . . . . Team Satisfaction and Loyalty . . . . . . . . . . . . . . . . . Keeping the Practice Competitive . . . . . . . . . . . . . . Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . .

323 324 328 330 331 335

Contents

Part IV Running an IT Consulting Group or Practice Chapter 17 The Evolving Practice . . . . . . . . . . . . . . . . . . . . . 339 What Are Your Business Vision and Goals? . . . . . . Assessment: Tactical and Strategic Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . Building a Corporate Road Map . . . . . . . . . . . . . . . Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . .

340 343 347 350

Chapter 18 Financial Management: The Bottom Line . . . 351 Impact of Financial Management Activities . . . . . . Keeping a Running Score with Financials . . . . . . . . Dealing with Suppliers . . . . . . . . . . . . . . . . . . . . . . . The Bank: What to Do, What to Expect . . . . . . . . . Insurance in IT Consulting . . . . . . . . . . . . . . . . . . . Taxation for IT Consultants . . . . . . . . . . . . . . . . . . . Revenue Recognition . . . . . . . . . . . . . . . . . . . . . . . . Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . .

351 353 364 367 368 374 377 377

Chapter 19 Day-to-Day Management of an IT Consulting Business . . . . . . . . . . . . . . . . . . . . 379 Priorities and Discipline . . . . . . . . . . . . . . . . . . . . . . Organizational Structure and Documentation . . . Expense Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . .

380 384 388 395 396 397

Chapter 20 Using Information Technology in IT Consulting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399 Keeping Technology Focused on Your Business . . . The Business Essentials . . . . . . . . . . . . . . . . . . . . . . . Software and Office Tools . . . . . . . . . . . . . . . . . . . . . E-mail and the Internet . . . . . . . . . . . . . . . . . . . . . . Mobile Tools for the Professional Staff . . . . . . . . . .

399 400 406 409 411

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Home Office Support . . . . . . . . . . . . . . . . . . . . . . . . 413 Putting It All Together . . . . . . . . . . . . . . . . . . . . . . . 414 Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . 415 Chapter 21 Human Resources and Career Management . . . . . . . . . . . . . . . . . . . . . . . 417 HR Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . Consultant Review Cycles . . . . . . . . . . . . . . . . . . . . Career Management . . . . . . . . . . . . . . . . . . . . . . . . . Closing Perspective . . . . . . . . . . . . . . . . . . . . . . . . . .

417 425 430 431

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

433

Acknowledgments I would like to acknowledge the support or encouragement received from the following individuals: Paulette Peirol of The Globe and Mail; Mike Flynn of Kingsbridge; and Kan Wadera, Franca Del Bel Belluz, and Alex Lynch at Microsoft. And at Blast Radius: Gautam Lohia, EVP; Natalie Michael, VP; Brett Turner, SVP/GM; Lee Feldman, Chief Creative Officer; Gurval Caer, President and CEO; Steve Harmer, EVP; and Michael Dingle, EVP.

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Introduction It seems that the idea of becoming a consultant appeals to just about every IT practitioner at one time or another in their careers. Some eventually take the leap by joining an existing consulting organization, others start their own business, and some simply continue to ponder the possibilities. Many practitioners that become consultants end up repeating mistakes other consultants have made in the past, which ends up costing them money, leaves a trail of dissatisfied clients, burns out talented employees, and causes many to abandon the consulting profession altogether. Others continue in the profession without a clear end-game in mind. It doesn’t have to be like this.

Purpose of this Book It doesn’t matter if you’re a new consultant, a seasoned pro, or if you fall somewhere in between. This book provides a realistic and true picture of what it takes to be successful in the consulting business—whether you’re joining an established consulting organization or starting a new one. Tools for measuring the health of an IT consulting organization are not readily available in the industry. This book examines the three pillars that form the infrastructure of every consulting organization, namely: people, clients, and profitability. At any given time, one or more of these pillars can be at odds with another. For example, training practitioners on a new technology may reduce profitability in the short term, but it may be the right thing to do for the client in the long term. This book defines 12 key metrics that make it possible to measure the impact of everyday decisions on the three-pillar infrastructure and the ultimate vision of a consulting practice. Of particular importance to the intended audience of this book is how these 12 key metrics can be impacted in the different parts of a standard practice lifecycle to improve the overall health of the consulting organization. These 12 keys can thus be used as a dashboard to assess the health of the current organization, and then in an overall strategy to improve the organization’s value in measurable stages.

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Intended Audience This book is written for consultants, managers of consulting organizations, and prospective consultants. It is intended to help practitioners grow their professional careers in consulting organizations of any size, as well as providing techniques for improving the health of the practice. Clients who are hiring consultants or those who are considering the use of consultants in the future will also benefit from reading this book. By understanding the consulting business, clients can more effectively leverage the value that consultants can bring to their organization.

Organization of the Book The book is organized according to a practice lifecycle that includes the following phases: practice operations; marketing and sales; pre-engagement activities; engagement lifecycle; post-engagement activities; and risk mitigation and quality assurance.

Part I: IT Consulting Best Practices In this section we examine the three-pillar framework and the 12 key metrics for evaluating and influencing the health of a consulting organization. Chapters 1 and 2 show a practitioner or the managers of a consulting organization how to build a report card or dashboard to measure how they are currently doing with respect to these 12 key metrics. Chapter 1 Evaluate the Current Health of Your Consulting Practice Chapter 2 Roadmap for Building a High-Performance IT Consulting Practice

Part II: Selling Client Businesses and Engagements Part II focuses on sales, marketing, account strategy, and client decision making. This is the lifeblood of any consulting organization and all too often, consultants neglect this area of their business. Chapters 3 through 6 examine practical approaches for optimizing these processes. Chapter 3 Implement a Marketing Strategy Chapter 4 Account Development Strategy

Introduction

Chapter 5 Chapter 6

The Client Account Pipeline and Decision-Making Process The Client Decision-Making Process

Part III: Delivering Client Engagements Successfully Part III examines techniques for effective delivery of engagements, establishing and growing client relationships, and closing out engagements to facilitate farming of additional business development opportunities. Chapter 7 Pre-Engagement Activities Chapter 8 Starting an Engagement Chapter 9 Maintaining Engagement Controls Chapter 10 Running an Engagement Chapter 11 Testing, Deploying, and Closing an Engagement Chapter 12 Working Multiple Engagements for a Client Chapter 13 Risk Mitigation Chapter 14 Legal Considerations in IT Consulting Chapter 15 Quality Considerations Chapter 16 Celebration, Communication, and Other Considerations

Part IV: Running an IT Consulting Group or Practice Part IV examines back-office functions that are critical for supporting practitioners. This includes executive leadership, support applications, tools, and human resources. Chapter 17 The Evolving Practice Chapter 18 Financial Management: The Bottom Line Chapter 19 Day-to-Day Management of an IT Consulting Business Chapter 20 Using Information Technology in IT Consulting Chapter 21 Human Resources and Career Management

The Downloadable Online Forms Throughout the book you’ll find examples of forms, the bulk of which have been used by the authors with great success on consulting engagements for Fortune 100 companies. All of the forms discussed and illustrated here are available for download in Microsoft Word format from the McGraw-Hill/Osborne web site. Visit www.osborne.com, click the “free code” link on the upper left-hand corner of the page, then scroll through the list of titles to find this book’s link.

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The forms are divided into the following categories:


Practice operations




Marketing and sales




Pre-engagement activities




Engagement lifecycle




Post-engagement activities




Risk mitigation and quality assurance

Part I IT Consulting Best Practices

1

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Evaluate the Current Health of Your Consulting Practice

1 Evaluate the Current Health of Your Consulting Practice

A

n information technology (IT) consulting organization can survive only if it is profitable. The bottom line has some flexibility in terms of timeframe and measurement methods—especially for organizations that have complex mission statements (e.g., to increase product sales in key markets). However, consistently achieving financial sustainability requires balancing a dozen key metrics that sometimes contradict or compete with each other. Understanding and working with these key metrics is vital for the success of any IT consulting organization. Getting any of them wrong can be devastating to the organization. Running an IT consulting practice is like running any other business, with the usual business inputs and outputs. The company has customers, generally referred to as clients. Employees are often referred to as consultants. There are also the usual back-end functions like accounts receivable, accounts payable, payroll, and other human resource functions. The consulting organization must establish a market presence, invest in its people, and learn to compete effectively. The key difference is in the product that the consulting organization sellsand this drives out all the significant details. IT consulting organizations, for the most part, are in the business of selling services. Some products or frameworks may occasionally become part of the transaction, but usually these play a smaller role in the sale. Selling services is different than selling products, even software products. This difference is reflected in the type of infrastructure, employees, and interactions that are needed to satisfy a client purchasing the services. When service hours become an organization’s primary product, all sorts of interesting things happen. Service hours cannot be

3

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High-Value IT Consulting: 12 Keys to a Thriving Practice

stored until they are sold. An hour of someone’s time that is not sold is gone forever. There is no way to recover that hour. There are, however, methods to offset the impact of this lost revenue (e.g., through value-added selling, investments in intellectual property, or providing sales support), but these bring their own competitive challenges. For example, raising your rates may enable a competitor to win the business. Having consultants work longer days will impact morale. Hiring additional employees will affect fixed costs and put additional strain on the infrastructure. IT consulting organizations face many other challenges that can impact their survival and profitability, including the following:


Skills obsolescence With a focus on profitability, many organizations are not able to invest in developing new skills for their employees. A database administrator (DBA) being billed full time as a DBA may never get an opportunity to develop skills in other areas.




Competitive market reality The barriers to entry in the IT consulting industry are relatively low. A consulting business can get started with just a single paying client and a service. This creates a lot of competitors, some of which do not have an expensive infrastructure to maintain and are willing to undercut or provide services for free. Coupled with the normal business cycles of the economy, this competition can cut into consulting revenue streams at anytime.




Technology evolution Within a single decade, we’ve seen the rise of different technologies and techniques that changed the way business is conducteduntil another revolution emerged. Mainframes, client/server, pen-based computing, re-engineering, object-oriented computing, components, network computing, the Internet, data warehousing, ERP, CRM, self-managed teams, change management, and web services are just some examples of hot areas that have emerged in the last decade. Even nontechnical revolutions, such as re-engineering, have a profound impact on IT consulting organizations by eventually changing the way technology is deployed to meet the evolving demands of the business. Consulting companies are always being forced to upgrade and become experts in the latest hot area before anyone else.

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Fixed costs and overhead The revenue streams of most consulting organizations are not constant. There are ups and downs based on market conditions. Clients usually do not award projects back to back. The delay between project engagements is nonbillable for all the employees dedicated to the client. However, fixed costs and overhead, such as rent, equipment, telecommunications, and salaries, still need to be paid.




Rate pressures Consulting fees are always under pressure to go up, or down. Either direction has an impact on selling opportunities and the revenue stream. Employee demands for improved benefits and higher compensation in good times applies the upward rate pressure. A tight labor market, high demand skill sets (can be old or new technologies), and retention bonuses are other upward drivers. Too much supply or a client’s unwillingness to invest in consulting services apply downward rate pressure.




Resource planning Staffing the organization to the right level is problematic. Large projects can end suddenly, releasing many workers from a billable engagement.

Any of these challenges can destroy a company’s well-being overnight. So how can a consulting organization protect itself? The answer is to prioritize and ruthlessly focus all activities and investments in a way to reduce the risk. At the most basic level, every consulting organization must care about clients, employees, and profitability. Let’s leave aside the complex dependencies and how these are measured until the next section. A three-pillar support framework for IT consulting organizations, as shown in Figure 1-1, can be constructed using these focus areas:


Clients Clients are unquestionably the most important element in a consulting organization’s success. A client must value the services that they are purchasing at the price they are paying. This results in customer satisfaction, which then leads to customer loyalty. Customer loyalty allows for a predictable consulting revenue stream because engagement opportunities are increased.




Employee fitness Employees, who are also called practitioners, resources, or consultants, are the primary product of the consulting organization. As such, their number, morale, commitment, and skill level are vital to the organization’s success.

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High-Value IT Consulting: 12 Keys to a Thriving Practice

Figure 1.1




Three-pillar support framework for consulting organizations

Profitability The bottom line is a combination of many factors, including charge-out fees, employee utilization, fixed costs, and margins. Profitability over time sustains the IT consulting organization.

Defining the 12 Key Metrics for a Successful Consulting Practice While the three-pillar support framework for IT consulting practices identifies the focus areas for the organization, it does not provide an easy way to measure the health of an organization. It also does not provide guidance or direction of where investments should be focused to produce better business results; this requires an additional, lower-level breakdown of the framework into a set of essential key metrics, as shown in Figure 1-2.


Client satisfaction Indicates how satisfied a client is with the service they have received for the price they paid.




Utilization Ratio of the hours charged to clients (e.g., billable) versus the total hours available for billing.




Resources The number, quality, and morale of employees available for billable client work.




Average billing rate The average billing rate contractually agreed to by clients in a specific time period. This is weightadjusted by the level and number of resources that were billed during the period.

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Figure 1.2

12 key metrics for IT consulting practices




Accounts receivable The amount of fees that are to be collected from clients and the time they have been owed to the practice.




Costs Consists of all the types of costs, including fixed and variable, required to run a consulting organization. Fixed costs include office rent, utilities, cleaning, and telecommunications. Variable costs include entertainment, transportation, and certain types of supplies.




Discounts Average discounts applied to the standard chargeable rate sheet within a measurable unit of time. Discounts have a significant impact on the bottom line.




Pipeline A list of potential client engagement opportunities along with their probability of closing and other relevant pursuit data.




Backlog The amount of work that has already been sold and is waiting for completion. Every consulting organization should try to build a backlog that will keep the group busy during downtime or nonbillable hours.




Sales hit ratio This is expressed as a ratio of the engagement opportunities that are sold compared to the ones that were sought.

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High-Value IT Consulting: 12 Keys to a Thriving Practice




Leverage Number of junior (less expensive) resources on engagements versus senior (more expensive) resources.




Risk/exposure Description or indication of the risks/exposures that can greatly impact the practice. For example, what should be done in response to a new regulation, which could affect an existing engagement’s success, that the government is enforcing.

The keys are described in more detail in the following sections, with a table identifying the corresponding key drivers, challenges faced in improving this metric, how the metric can be measured, and an essential rule to derive the most value from the metric.

Client Satisfaction Client satisfaction is a key element for building a successful consulting practice. Satisfied clients continue to provide billable consulting opportunities. They can also provide a personal reference for other departments of the company that are considering using your consulting organization. Satisfied clients can also refer you to other colleagues and successful friends who may be looking for the type of services you offer. Client satisfaction is impacted by every interaction that a consulting organization has with the client organization. Although the relationship may arguably be influenced before any meetings have occurred (e.g., your reputation can precede you), once your firm is awarded business, the relationship often starts from a level playing field. Every interaction from then on should be engineered to grow this relationship. Clients want to be the focus of any consulting organization that they are considering for retention. This means that consulting organizations must be ready to demonstrate their knowledge and buy in to the corporate identity, culture, and strategy. Many consulting organizations end up failing miserably by attempting to make the client change their culture. Consulting organizations should also consider adopting guidelines under which clients themselves can be fired as an account. Although undesirable, this is sometimes necessary when it becomes clear that your organization cannot satisfy the client’s needs or do so profitably. This can happen for any number of reasons, including chemistry between people, industry misalignment, and value misalignment. It’s best to let a client go so they can find a consulting organization that is

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better suited to service them. This, however, should be done as a last resort. And only one of the senior members of a consulting practice should be empowered to make this call. The summary table containing the key drivers, challenges, measurement, and essential rule for this metric is as follows: Key Drivers

Client interactions, quality of deliverables, and professionalism.

Challenges

Putting your clients first without being taken advantage of yourself.

Measurement

Project team can send a satisfaction survey to a client at regular times during the engagement. A third party can be hired to administer surveys. Project managers can provide unofficial satisfaction surveys at regular intervals on a project. (Engagement managers, senior executives, or dedicated quality assurance groups can also do this.)

Essential Rule

Always put your clients firsteven before your own interests.

Utilization Utilization is often expressed in the form of a percentage measuring the number of hours a consultant works on certain predefined activities. Most consulting organizations are interested in billable (or externally chargeable) utilization. This is the percentage of time that an employee is billable with respect to the total number of hours that are available for billing. Utilization can be measured at the individual level and across the practice. Being on the “beach” or the “bench” are industry terms referring to when a consultant is not working on a billable engagement and is considered overhead. This is also known as downtime and is ultimately dreaded by managers and consultants alike unless that time can be used to provide value to the consultant and the organization. Downtime can be used for training, sales support, and building intellectual capital. In the ideal situation, downtime can be an effective use of time. Billable utilization is key to profitability. Beyond a certain threshold, every increase in billable utilization adds directly to the bottom line. Some of the factors that can impact utilization include: Chargeable hours worked by employees




Billable utilization on client work.




Nonbillable utilization Hours worked by an employee that may add value to the business, but which are not paid for by a client. Employees on the bench can usually enter their hours

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worked in this category. This measure has a key impact on the organization’s profitability. Employees who have a high nonbillable utilization may be motivated and valuable; however, when they are nonbillable, they are considered an overhead to the organization. Even a few employees in this category can have a staggering impact on the bottom line.


Training Ongoing training is a vital investment for every consulting organization. Many organizations have a minimum number of training hours allocated for every employee and the practice as a whole.




Business development The sale of consulting services often requires the involvement of consultants. This time can be categorized as pursuit or business development activities.

The summary table containing the key drivers, challenges, measurement, and essential rule for this metric is as follows: Key Drivers

Sold billable engagements, number of resources having the skills to fulfill on an engagement.

Challenges

Finding the optimal mix of utilization, profit margins, and morale. Accurate forecasting of utilization is difficult because of unforeseen events. Getting internal practitioners to submit their time consistently during high project pressures.

Measurement

Should be assessed weekly. Timesheets must be completed and submitted by workers by a certain time of the week—say, Sunday night—so utilization statistics can be calculated early in the following week.

Essential Rule

Maximize utilization for all resources whenever possible—without risking the other keys.

Resources Resources are the only significant product that most consulting organizations can offer their clients. There are three dimensions of interest in this area: the number of resources, employee morale (influenced by such things as career path development), and turnover (employees permanently leaving the consulting organization). How many employees a consulting practice employs directly affects its earned revenues. The key caveat here is that the resources must be

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profitably chargeable. Resources that are not billing their time to chargeable clients are considered overhead. Employee morale is affected by many factors, some of which conflict with each other, making it difficult to balance the overall impact. One thing is clearlow morale hurts the bottom line of any organization. If unhappy, employees will leave the organization or, at a minimum, their productivity and quality of work will diminish. This can create a snowball effect, lowering the morale of their colleagues and making it difficult to bring in new work. A number of theories surround the impact of employee turnover. Some believe that it is better to continue moving lower performers out of a practice and replace them with stronger ones. Others think that the threat of removal will make the team perform at their best. Continually hiring above the median point then strengthens the team. While this approach has several problems, one thing is certainvoluntary turnover of strong employees is not good for the business or the bottom line. The summary table containing the key drivers, challenges, measurement, and essential rule for this metric is as follows: Key Drivers

Career management, ability to impact the organization, and ability to be billable.

Challenges

Determining the right level of resources to maximize revenue for the practice. Determining the balance of training required to maintain demand for a company’s services while protecting its bottom line. Training is expensive because of the lost opportunity cost, cost of the course, and travel/lodging expenses.

Measurement

Regular surveys for practitioners.

Essential Rule

Replacing employees is more expensive than keeping them happy in the first place.

Average Billing Rate In addition to utilization, the average billing rate is another lever that determines a consulting organization’s revenue and profitability. This is generally a measure of the sum of all fees charged to clients divided by the sum of all the consulting hours during the same time period. An average billing rate is derived from a standard rate sheet that every consulting organization should have and revise regularly. This is

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their price list. Spending, investment, and revenue decisions all hinge on this list. A sample rate sheet could be as follows (where X may be $200 an hour and Y may be $250 an hour): Level

Domestic

International

Analyst

X

Y

Consultant

X + 50%*X

Y + 50%*Y

Senior Consultant

2X

2Y

Manager

3X

3Y

Senior Manager

4X

4Y

Partner/Director

5X

5Y

The summary table containing the key drivers, challenges, measurement, and essential rule for this metric is as follows: Key Drivers

Opportunities in the marketplace and the number of resources that are on the bench.

Challenges

Continue to increase your average billing rate without increasing the size of your bench.

Measurement

Weekly or monthly report with trends over a period of time. Total of all fees charged divided by the number of billable hours in that period.

Essential Rule

Do not increase billable rate at the expense of billable utilization without considering overall profitability picture.

Accounts Receivable Doing a job well and satisfying a client is a crucial part of the business. Collecting fees in a timely manner is also a vital aspect of the business. The cost of running a business does not go away while trying to collect the receivables owed. In fact, there is an interest penalty against your effective rates so long as there is a delay in the actual collection of fees. The following approaches could help improve collecting payment.


Collect fees before starting service.




Tie fees to interim deliverables or make final deadline/budget.

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Tie fees to agreed-upon performance.




Collect fees according to a predefined schedule, say, 25 percent upfront, 25 percent at the midpoint of the engagement, and 50 percent when the project launches.




Be prepared to pull your workers off the engagement, after legal due diligence is completed to ensure that it is legally and ethically permissible to do so.

It is not unusual to have a senior-level executive deliver an invoice and hand collect the check on a regular basis. Invoices should contain clear instructions to pay the full amount on receipt or within a short period—say, 10 days or so. Since consulting fees tend to be high, it is often difficult to present a large interim bill to a client before a sizable deliverable has been completed. However, delaying the bill just compounds the problem. It is important to demonstrate your value upfront so the client feels good about paying your fees at any time during the engagement lifecycle. The summary table containing the key drivers, challenges, measurement, and essential rule for this metric is as follows: Key Drivers

The cash-flow requirements of your business. The risk you are willing to tolerate.

Challenges

Presenting a large bill to a client before enough work has been done to demonstrate value. Collecting money through legal channels is expensive and time-consuming. Determine the client’s stability and ability to pay.

Measurement

Use an aging report that shows receivables at regular time periods (say 30, 60, over 90 days).

Essential Rule

Stay on top of your receivables. Set expectation when closing the business. If you are letting a client delay payment, send an official note through legal channels that sets expectations.

Costs It’s imperative to keep costs to a sustainable level despite bumps in the marketplace or in other parts of your business. Costs can be divided into two broad categories: fixed and variable. Fixed costs are relatively predictable from month to month. Fixed costs are sometimes referred to as overhead. Some examples of fixed costs are office rent and supplies, benefits, salaries, and certain operational functions like accounting.

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Variable costs offer a greater opportunity of control and are often tied to revenue generation. These can include business-related expenses, transportation, parking, bonuses, entertainment, celebrations, training, lodging, reading materials, advertising, and other everyday expenses. If variable costs increase, you should try to generate more revenue. While keeping overhead to a minimum is a desired goal, this could have a negative effect on the staff and lower their morale. Controlling costs can never be done in a vacuum. In many instances, organizations that cut back on costs do so at the expense of their employees. For example, the following techniques have been used to control business-related expenses in various organizations; the related impact is described in the second column: Strategy

Impact on the Organization

Limit on celebrations

Employees feel unappreciated. Morale goes down.

Taking public transit instead of taxis

Lowers employee morale. Employees spend more time traveling, thus losing billable time or personal time.

Elimination of entertainment expenses

Reduces time spent with clients or for team-building.

Elimination of business/first-class air travel

Consultant morale can suffer, especially if colleagues from other organizations can fly Business Class.

Limits on lodging expenses

Employees begin to avoid business travel. And when forced to travel, they do not operate at peak efficiency.

Allocation on photocopying expenses to client expense accounts

Consultants can be irritated having to remember additional sets of codes— especially when they go to a photocopy machine during a busy day and find that they have the wrong code.

The summary table containing the key drivers, challenges, measurement, and essential rule for this metric is as follows: Key drivers

The type of business you want to operate—whether it’s consultant friendly, client friendly, or worldclass. How much you want to empower your employees.

Challenges

Keeping your fixed costs at a minimum without impacting the other keys. Tying variable costs to revenue generation.

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Measurement

Use an accounting package to break expenditure down into predefined buckets in order to analyze the largest financial impacts on the business.

Essential rule

Find a balance for fixed costs that supports the other keys, but which lets your business absorb unexpected events.

Discounts Discounts are sometimes offered on top of a consulting organization’s standard rates. Some argue that you should never offer a discount to a client because of the precedent it may establish; once a client receives a discount they might continue to expect one on all future business. Another argument, along an entirely different tact, is that a discount is a good way to demonstrate your willingness to partner with a client. Others are willing to offer a discount off their standard rates to win business. Some organizations support a tiered form of discounting that empowers specific resources to offer discounts during pricing negotiations. For example, some organizations allow business development managers or project managers to offer a discount at their own discretion within a specific and narrow range. Discounts above this range are further tiered requiring progressively higher levels of management or executive approvals. Discounts can also be offered on volume and time business. They can also be offered to a client as an incentive to buy your services sooner. A colleague wanted to buy a particular model of a car that he saw advertised on television. He walked into a car dealership with his mind made up to buy the car and making his intentions clear to the salespeople. He enthusiastically took a test drive, looked through the marketing materials, and selected the options he wanted on the car. The last thing he wanted was a discountany discount would do. He told the salesperson clearly that he wanted a discount as a sign of good faith and interest in him as a customer. The salesperson’s manager got involved and declared that a discount would not be offered on that model because it was a popular one and did not need to be discounted to increase sales. My colleague did not hear that the dealership did not discount anythingever. Rather, he heard that he was not worth a discount, based on a subjective analysis and the model’s popularity. The customer walked out and on the way home bought a different model car from a competitor. Upon reaching home, he received a call from

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the sales manager who still wanted to dealbut it was too late. A deal was lost—perhaps on principle, perhaps to avoid setting a prece dentbased on a $250 discount on a $25,000 car. The summary table containing the key drivers, challenges, measurement, and essential rule for this metric is as follows: Key Drivers

Client expectations. Profitability! Strategic intent (discount to get into a new area and build a referenceable client).

Challenges

Offering a discount provides a new price expectation for a customer. Ensuring that the customer accepts the discount as a onetime event. Letting a customer understand that a discount is your attempt to form a true partnership with them.

Measurement

Calculate weekly or monthly based on the expected average billing rate and the actual average billing rate.

Essential Rule

Be sure to send the correct message and set the desired expectations when discussing discounts with clients. If you need to reduce the total dollars, reduce the work, too. For example, if you are proposing doing A, B, and C for $30,000 and the client has only $20,000, then offer to do only A and B.

Pipeline The pipeline is a list of opportunities currently being pursued by the organization. This list is usually categorized by client, by client within industry, or by the type of opportunity (e.g., data warehouse, CRM). Each listing has information that is important to understanding and pursuing the opportunity, including: client name, client opportunity, client contact, contact information, opportunity description, total opportunity amount, amount of current pursuit, probability of close, pursuit team, and a description of relevant activity against the opportunity. It is important to assign an accurate value to the “probability of close” indicator. If the view is too pessimistic, the pursuit team might not pay enough attention to the opportunity. If it is too optimistic, the pursuit team might feel complacent about the opportunity. Some organizations assign a numeric probability in increments of 10 or 20 percent points. For example, 0 percent probability can be a placeholder; 10 percent may indicate a new referral; 20 percent may indicate an unqualified opportunity; 30 percent may indicate a qualified opportunity; 40 percent may indicate that the client has requested a proposal; 50 percent may indicate that initial meetings have successfully occurred; 60 percent may indicate that a proposal has been successfully

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delivered and well received by the client; 70 percent may indicate that the firm has been selected as a finalist; 80 percent may indicate that a client has provided a verbal “yes”; 90 percent may indicate that a team has started to bill their time on the project; and 100 percent may indicate that a contact has been signed and that an engagement has started. Such an item should then be moved to an active projects list. A healthy consulting organization needs a comprehensive pipeline that is large enough to maintain profitability. There should be a healthy mix of opportunities between the different probabilities. If all are in 90 percent closed status, fully staffing the opportunities might be difficult. If they are all in the 10 to 30 percent closed status, it may be too long before they can provide revenue for the firm. Consultants generally enjoy delivering projects more than pursuing sales. Once they are on a billable engagement, it is not unusual for the consultant to focus entirely on the client and not consider where the next piece of business will come from. Somebody in the organization has to do this or the revenue streams will dry up. While having a dedicated sales team is an expensive proposition, the team can seek out good revenue opportunities. However, selling consulting services usually requires a consultant’s participation; they are the product that is being “leased”or “sold”and the client generally wants to see them before closing the deal. In addition to a dedicated sales staff, senior members of a consulting organization are generally involved in sales activities. The summary table containing the key drivers, challenges, measurement, and essential rule for this metric is as follows: Key Drivers

Length of time required to find and close identified opportunities.

Challenges

Determining how to classify opportunities that are almost closed.

Measurement

Review the pipeline weekly with the sales team. Review the pipeline more often when billable utilization is under stress for the organization.

Essential Rule

Provide clear criteria for listing opportunities and the probability of closing.

Backlog While the pipeline is an important instrument for finding and closing new engagement opportunities, it cannot predict the actual revenue streams available to the consulting organization. At best, the pipeline

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provides a probable range of revenue based on past experience. Backlog, which refers to sold and booked business that cannot be executed immediately because resources are presumably working on other billable engagements, can be used to compensate for this uncertainty. Just like any product-based business, inventory turnover is the key to profitability. The more times the inventory is rotated in a given year, in general, the better the bottom line. In terms of a services company, this involves maximizing the number of billable hours possible for the consultants. Downtime between engagements is problematic because the resource is uncomfortable with the time off and cannot make full use of training. The backlog provides work for resources during downtime, thus maximizing their billable time. Having a backlog of work is a healthy sign for a business. It allows the organization to budget better, train its employees in a timely manner, recruit effectively, and provide choice opportunities to its resources. Every consulting organization should establish an ongoing backlog to protect their business. It may be necessary to provide incentives to clients so that they agree to support your backlog instead of going to another vendor who can immediately assist them. There are many ways to do this. For example, you can provide long-term incentives such as volume discounting on all your services. Clients also tend to establish relationships with specific consultants and are often prepared to wait for them. This should be the goal for every consultantto have a client wait for them because of the relationship they have created with them. A backlog should never be used to compensate for an insufficient resource pool from a consulting firm’s perspective. Work that’s vital to the client’s organization should be done immediately. Backlog needs to be carefully planned so that it makes business sense to offset the beginning of the work, and not because you don’t have resources to staff an opportunity. The summary table containing the key drivers, challenges, measurement, and essential rule for this metric is as follows: Key Drivers

Strength of the relationship with the client. Revenue required to support business operations for a specific period of time.

Challenges

Building a backlog without losing the confidence of clients who may look elsewhere for their work to be done.

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Measurement

Measure weekly along with the pipeline.

Essential Rule

Build a substantial backlog to cushion the consulting revenue streams without losing business or reputation.

Sales Hit Ratio The effort and expense required to close a sale is a large component of the overall costs incurred by a consulting organization. The sales hit ratio measures the number of opportunities that are chased versus those actually sold. It is really a measure of the efficiency of the sales process. Finding opportunities and strategies for reducing this ratio adds to the bottom line of your organization and provides more control over the revenue streams. It is useful to compute several different types of sales hit ratios for different scenarios. For example, winning a request for proposal (RFP) that many different vendors responded to is significantly more competitive than responding to a solo request from an existing client. Consider evaluating the efficiency of responding to RFPs, request for information (RFI), referrals, extensions to existing engagements, co-pursuits with other vendors or partners, and the ability of cold calls to generate new business. RFPs are usually not worth the effort unless you have an inside track. The summary table containing the key drivers, challenges, measurement, and essential rule for this metric is as follows: Key Drivers

Type of opportunity being pursued.

Challenges

Determining a sales ratio that is a suitable goal for your industry and space in the current market conditions.

Measurement

Assess as part of the pipeline review process.

Essential Rule

Improve your sales ratio over time.

Leverage Not every hour you bill to a client provides the same profit or margin to your business. In general, star employees and senior employees are paid more and have better benefit packages than newer and junior recruits. The ratio of more expensive resources to less expensive resources is called leverage. The higher this ratio, within safety limits, the higher an organization’s profit.

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The summary table containing the key drivers, challenges, measurement, and essential rule for this metric is as follows: Key Drivers

Experience of the consulting team.

Challenges

Avoid the perception of bait and switch with clients. This occurs when a client sees an excellent consulting sales team during the sales cycle, only to find them replaced by junior resources when the project starts. Building working teams that operate well together.

Measurement

Calculate the average ratio of senior versus nonsenior resources across all your projects.

Essential Rule

Implement a formal mentoring program to ensure that junior resources are developed efficiently.

Risk/Exposure Consulting organizations are continually challenged by many risks and exposures that are often connected. One risk may expose another one and so on. The following table shows some of the risks and their impact on most organizations. Risk/Exposure

Impact on the Organization

Key resource(s) leaving organization

Project may fail.

Large project ending unexpectedly

Many resources may end up on the bench.

Insufficient staffing for project needs

Puts strong pressure on existing resources to pick up the slack, thus impacting quality and moral.

Poor employee morale

Employee performance may be affected. Retention may be a problem and employees may end up working for competitors.

Insufficient funding

Puts pressure on existing resources to pick up the slack.

The summary table containing the key drivers, challenges, measurement, and essential rule for this metric is as follows: Key Drivers

Amount of profit devoted to risk insurance.

Challenges

Modifying your risk mitigation strategy to suit the evolving risks facing the organization.

Measurement

Measuring risk/exposure in numerical terms is dependent on the situation. In some cases, measuring this variable may involve executing a mitigation strategy and measuring how well the plan is going.

Essential Rule

Regularly build a mitigation strategy for every risk facing the organization.

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Evaluate How Your Practice Is Doing Each of the 12 keys should be further divided into specific descriptive categories. These categories can then be assigned a target value to help you measure the performance of your practice. This enables you to fix the weaker areas of your consulting practice. The following section shows one potential set of acceptable values for each key attribute. These can be customized to the unique standard of any organization. The acceptable values can be numeric or part of a set. Key Attribute

Acceptable Values

Client satisfaction

Very satisfied Satisfied Neither satisfied nor dissatisfied Dissatisfied Very dissatisfied

Utilization

Billable 0−100% range Sales 0−20% range

Resources

Resource numbers: # of resources: % change: Morale factor: Excellent Good Satisfactory Low Skill level: % training

Average billing rate

Hourly rate

Accounts receivable

Under 30 days Less than 60 days Less than 90 days Less than 120 days Greater than 120 days

Costs

25−100% range

Discounts

0−50% range

Pipeline

$ value

Backlog

$ value by month for 6 months

Sales hit ratio

X:Y

Leverage

X:Y

Risk/Exposure

Overall color status for practice Red Yellow Green

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The following table provides a sample distribution that you might consider as a target for your consulting organization. The notes column provides the rationale for the specified value where applicable. Target Distribution Notes

Key Attribute

Acceptable Values

Client satisfaction

Very satisfied Satisfied Neither satisfied nor dissatisfied Dissatisfied Very dissatisfied

Utilization

Billable 0−100% range 70% Sales 0−20% range 10%

Resources

Resource numbers: # of resources: % change: Morale factor: Excellent Good Satisfactory Low Skill level: % training

Average billing rate

Hourly rate

10% 70% 10% 10%

The top two categories should be well represented. Some clients will never provide a positive review either because of unrealistic expectations or some other motivation. Based on a 40-hour workweek.

80 5 10% 50% 20% 20% 10% $265

Accounts receivable Under 30 days Less than 60 days Less than 90 days Less than 120 days Greater than 120 days

30% 40% 20% 8% 2%

Costs

25−100% range

40%

Discounts

0−50% range

10%

Pipeline

$ value

$10,000,000

Backlog

$ value by month for 6 months

$2,000,000

Sales hit ratio

X:Y

10:1

Leverage

X:Y

15:1

Risk/Exposure

Overall color status for practice Red Yellow Green

Pipeline

Some clients have a policy of slowing their payments in order to maintain their cash flow. If you try to change this too dramatically it may disrupt the relationship.

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Establish a Benchmark for Your Practice The following table can be used to establish a target distribution for your specific business. You can use the values in the preceding table or establish a different target distribution for your organization. The last column is used to record your current values in each category. Do that now. Meet with the senior members of your team to agree on this information. This table can be used to track the effectiveness of your program in the future. Key Attribute

Acceptable Values

Client satisfaction

Very satisfied Satisfied Neither satisfied nor dissatisfied Dissatisfied Very dissatisfied

Utilization

Billable 0−100% range Sales 0−20% range

Resources

Resource numbers: # of resources: % change: Morale factor: Excellent Good Satisfactory Low Skill level: % training

Average billing rate

Hourly rate

Accounts receivable

Under 30 days Less than 60 days Less than 90 days Less than 120 days Greater than 120 days

Costs

25−100% range

Discounts

0−50% range

Pipeline

$ value

Backlog

$ value by month for 6 months

Sales hit ratio

X:Y

Leverage

X:Y

Target Distribution

Current Status

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High-Value IT Consulting: 12 Keys to a Thriving Practice

Key Attribute

Acceptable Values

Risk/Exposure

Overall color status for practice Red Yellow Green

Target Distribution

Current Status

Closing Perspective Most IT consulting practices are consumed by many streams of activity that, if left attended, could lead to significant wasted effort and risk to the organization. This chapter defined a three-pillar framework that can be used to validate the value of every activity or investment of a consulting organization. If the action does not positively impact the client, employee fitness, or profitability in some way, then it is usually not a priority. This chapter also identified 12 key metrics for evaluating the health of an IT consulting organization. An organization should first identify the targets they want to achieve for each of the 12 key metrics and then regularly measure their progress against these. A monthly timetable is a good place to start. The three-pillar framework and the 12 key metrics are the basis for building a successful IT consulting practice. The remainder of this book describes how to positively impact the 12 key metrics for your consulting organization.

2 Road Map for Building a High-Performance IT Consulting Practice

C

hapter 1 identified three key focus areas for every consulting organization, namely: clients, employee fitness, and profitability. These were described as a three-pillar framework because a loss of any one pillar makes the whole structure unstable. Every decision or investment in the consulting organization should have a positive impact on one of these pillars, otherwise the firm’s management should question why they are even being considered. Chapter 1 also introduced 12 key metrics to assess the health of the IT consulting practice. We now have a focus for the consulting organization and a way to measure how it is doing. This chapter defines a practice lifecycle for the consulting organization and builds a road map for improving the practice’s overall performance through these 12 key metrics. It then shows how the phases of the practice lifecycle impact the different key metrics.

Describing an IT Consulting Practice What is an IT consulting practice? As shown in Figure 2-1, at a high level, a consulting practice consists of a collection of practitioner resources that provide services to a set of clients. The clients provide revenue to the consulting organization and, just as importantly, can be asked to provide a personal reference to help the consulting organization win additional business with the same client, the same client organization, or with other organizations. Of course, the process is more complicated than this high-level description. For example, clients may accept your work, but go out of business before paying your fees. We 25

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High-Value IT Consulting: 12 Keys to a Thriving Practice

will examine mitigation strategies for events like this. There may also be relationships with other consulting organizations, subsidiaries, and service providers. The typical IT consulting organization needs to service several different clients in order to survive. There is no optimal number of clients, however there are some guidelines to consider when building a sales strategy. Too few clients will put a consulting organization’s revenue at risk if even one client is lost. Servicing too many clients at any given time may stretch resources and processes so thin that customer satisfaction will erode, thus threatening the well-being of the practice. Having too many clients also means that a significant and meaningful relationship between the executive teams of the consulting organization and the client cannot be built because there is not enough bandwidth. This was a key contributor to the failure of many consulting firms that serviced dot-com companies. Dot-com companies bought services from just about anyone without having any executive-level relationships to close the business. When the dot-com companies folded and the phone stopped ringing, the consulting companies had no relationships to mine for additional business. Of course, some of the dot-com companies never should have been accepted as clients in the first place because they had no visible cash flow to pay for services and no demonstrated history of paying large receivables. A reasonable number of separate client entities or relationships are required to provide the consulting organization with enough diversification to withstand the loss of a client or two, and possibly a downturn in one or two industries. One way to hedge against this is to divide a consulting practice into multiple subpractices, which can be managed as separate business entities. Each one supports a separate set of services and processes, but still map to a central consulting vision. These subpractices can also map into different parts of the client organization. What results, if managed properly, is a rich and diverse many-many set of buying-selling relationships between a client and an IT consulting organization. Figure 2-1 offers a simplified view of the client-consulting practice relationship, but it can be extended quite easily. For example, clients themselves can have multiple clients or customers. Some of these relationships may also be IT consulting based. Similarly, the IT consulting organization can itself be a purchaser of IT consulting services.

Road Map for Building a High-Performance IT Consulting Practice

Figure 2.1

Key internal and external relationships

The picture can get even more complex. IT consulting practices are not necessarily limited to being service-only organizations. Some may, in fact, have large divisions that sell hardware, software, and networking products. The IT consulting organization is then another division that supports the main product sales business. Table 2-1 shows some of the major types of consulting organizations that may be encountered in the marketplace. Table 2.1 Examples of IT Consulting Organizations Type of Consulting Organization

Description

Big 4 or Big 5 Management Consulting Firms

These are global consultancies that have resource pools in the thousands or tens of thousands. These firms provide a full range of IT and business services to clients, and they are highly sought after by clients because of their global reach and experience with megaprojects. A megaproject is one with hundreds to thousands of resources and a budget in the tens of millions of dollars. These organizations typically have the highest fees of any of the other IT consulting firms.

Large System Integrators (SIs)

These are also very large organizations that are typically involved in implementing complex systems for enterprise clients. Their specialty is system integration of heterogeneous technology solutions. SIs essentially assume the high risk of this activity. These organizations can also employ thousands of technical employees.

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High-Value IT Consulting: 12 Keys to a Thriving Practice

Table 2.1 Examples of IT Consulting Organizations (continued) Type of Consulting Organization

Description

Original Equipment Manufacturers (OEMs)

Some OEMs support internal consulting practices that complement their core business of selling product. While the consulting group may be mandated to be profitable, most of these divisions exist only to support the sale of equipment and product. The consulting group typically numbers in the tens to hundreds of practitioners.

ERP, CRM, Supplier Enablement Consultants

These types of organizations evolved in the 1990s with the emergence of software applications that automated end-to-end processes for businesses. Consulting organizations were created within the software companies to support the implementation of the software products. The prime purpose of these groups was, and continues to be, to support product sales and provide training to other organizations that want to use, sell, or implement the core software products.

Boutique Consulting Firms

These are by far the most prevalent type of IT consulting organizations. There are many types of boutique firms that can specialize in terms of technology, solutions, strategy, and industry groupsor some limited combination. These firms typically employ from a few dozen to a few hundred employees. Due to their smaller structure, these organizations are often the most flexible in terms of rate sheet. They are also highly selective in the types of engagements they will accept.

Generalist Consulting Firms

These are similar in size and strategy to boutique consulting firms, but these organizations are typically more flexible in the types of engagements they accept.

Defining the IT Consulting Practice Lifecycle Before we examine approaches for increasing the performance of a consulting organization through the 12 key metrics, consider how IT consulting organizations generally function. Figure 2-2 shows the basic phases or functions that are included in what we call the IT consulting practice lifecycleor practice lifecycle for short. Good performance in all of these phases is required to improve the performance of the consulting organization. Most IT consultants enjoy and prefer the practice lifecycle phases in the following order: (1) Engagement lifecycle; (2) Post- and pre-engagement activities; (3) Marketing and sales; (4) Risk mitigation and quality

Road Map for Building a High-Performance IT Consulting Practice

Figure 2.2

IT practice lifecycle

assurance; and (5) Practice operations. This is not unexpected when you consider the types of personalities within the IT industry. The engagement lifecycle allows IT practitioners to work with technology and/or people, which most most like to do. Post-engagement activities allow practitioners to reflect on the work they have completed and to relive fond memories of shared experiences with their clients. Of lesser interest to some IT practitioners are the sales and marketing phase and the practice operations phase. Sales includes pursuing leads/opportunities and selling services; marketing involves establishing a public reputation for your organization’s brand. Neither requires the deep technology skills that many IT professionals like to develop and use on a daily basis. The practice operations phase also does not require high-level technology skills. This phase involves running a business on a day-to-day basisnot a primary motivator for many IT practitioners. Risk mitigation and quality assurance are often perceived as redundant or repetitive activities. “Why repeat a process, when you can do something new?” is not an unusual sentiment of IT practitioners. Despite the personal likes and dislikes of IT practitioners, each phase in the IT practice lifecycle is critical to the successful performance of the consulting organization. None of these phases can be ignored or skipped. This is problematic because most of the employees in the consulting organization, by definition, are not interested in at least half the activities needed for a successful practice. The phases in the IT practice lifecycle are examined in this section, beginning with the two phases that are generally the least liked or appreciated by IT practitioners.

Practice Operations To many people, running an IT consulting practice is about offering services to clients in order to provide value or solve business problems. Too often it gets missed that operating a consulting practice is like

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running any other business, involving an extensive number of back-end processes to ensure that the business survives and prospers. Activities in the practice operations phase are generally considered to be cost centers or expense items in the organization. The costs for supporting this infrastructure must be absorbed in the fees that practitioners charge clients. This is one reason that larger consulting organizations must charge higher fees for their services than their smaller counterparts; the larger infrastructure that provides additional safety, security and value comes at a higher fixed cost, which must be recouped from clients. Some of the essential practice operations that are required to operate a consulting business are discussed in this section.

Human Resources In addition to hiring the best and brightest practitioners, the human resources (HR) department must take care of other duties. These include career planning, compensation, training, legal considerations, maternity leaves, sabbaticals, performance awards, performance improvements, benefits, and occasionally dismissals. This department is also partly responsible for mitigating the negative impact from some of these actions.

Financial Financial operations are, of course, critical to the existence of the consulting organization. Out of this, there are three key areas that need to be serviced in a timely and efficient manner, as follows: Accounts Receivable Collecting bills is one of the last things a consultant wants to do. After all, it is commonly believed that if IT consulting work is done well, the money will follow. Right? Well, not entirely. For example, the client could go out of business. Or, their cash flow could get severely disrupted. The client may also decide to optimize their revenue by withholding payment and negotiating for better terms. It is vitally important to stay on top of receivables and provide a consistent message to all clients. The legalities involved in collecting receivables in arrears can get complicated, so it is better to be proactive and get your money upfront. In fact, don’t even “hire” or “accept” a prospective client before getting receivables references on them. It is important to establish a clear expectation with the client at the beginning of the business relationship. Every invoice should be

Road Map for Building a High-Performance IT Consulting Practice

generated regularly and spell out the terms of payment very clearly. It may also be useful to include a clear statement on the invoice to indicate that an interest amount (e.g., 15 percent per annum, appropriately prorated) will be charged on outstanding receivables beyond the date specified in the terms and conditions, with a statement such as: “To avoid a late payment charge, please pay before DATE.”For customer service reasons, you might not want to actually charge this penalty, but it provides another tool to encourage a client to pay overdue fees. Accounts Payable Some consulting organizations are sloppy with their own accounts payable (while at the same time complaining about their own clients who pay late). Be careful here. Some prospective vendors may hear about your late payment policy and not provide the best service to you. Clients who also hear the rumors may think that your organization is in financial trouble and choose not to engage you on risky or complex projects. In other cases, vendors may also apply interest charges to your accounts payable and may force the legal system to make you pay the penalties. A general rule of thumb in dealing with your payables is to treat them in the same manner as you would want other organizations to treat your receivablesfairly and accurately. Remember, an organization that is a vendor or supplier today can become a client tomorrow. You do not want them to delay paying their bills when given the opportunity. Payroll, Expenses, and Bonuses Most consulting organizations have biweekly or bimonthly payroll. They should also establish clear expense policies and reimburse practitioners promptly. Bonuses are an excellent performance and retention motivator and should also be executed in an efficient and timely manner. Some organizations have attempted to use bonuses as motivation tools, but make them difficult to actually attain. This can cause dramatic trust problems later on. Bonuses should be attainable and clearly defined.

Premises and Infrastructure This is a broad category that includes all items related to the physical infrastructure of the IT consulting practice. This includes office space, parking provision, security, furniture, kitchen supplies, and office

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High-Value IT Consulting: 12 Keys to a Thriving Practice

supplies. The IT infrastructure is also covered by this category. This includes help desk, technical support, networks, firewalls, software licenses, and computers. All the IT systems required to support the operations of the consulting organization (e.g., payroll) are also included in this section.

Risk Mitigation and Quality Assurance A colleague of mine approached me one morning and diverted our work-related conversation to a personal incident that had caused him a lot of grief over the weekend. He was looking to buy a car. He explained how he visited a showroom and found a car he liked, but looking into the backseat saw mud stains on the leather upholstery; this poor quality turned him off. He wondered if this lack of attention to something so simple was representative of what he would find elsewhere in the car. He also wondered about the service quality after he committed himself financially. Above all, he was insulted that the car dealership had such low disregard for his time. He didn’t even bother to turn on the car. Risk mitigation and quality assurance are two important aspects of running an IT consulting business. Risk mitigation attempts to identify and mitigate problems before they impact the business. Quality assurance involves following an internally documented process that establishes how an organization will conduct its business, engage with partners, and operate its business in all respects. Do not be surprised if a prospective client asks you for your risk mitigation and quality assurance strategy before signing an engagement contract with you. Many clients are starting to view how consulting organizations handle these areas as a good way to weed out the average firms from the best ones. Everyone in a consulting organization can get very busy: finding work, looking for new business opportunities, and doing new things. Managing risk and quality is usually an afterthought, left to an overworked project manager. It is not surprising to find five different quality programs on five different engagements.

Managing Risk Managing risk is everyone’s responsibility in the consulting practice, whose specific risks are continually changing. Project engagements also have their own sets of risks. The basic process for managing risk is to identify all, or as many, of the potential risks well before they occur and then define a mitigation strategy for each of them. The key point

Road Map for Building a High-Performance IT Consulting Practice

then is to execute on the mitigation strategies and monitor the risks on a regular basis. This requires flexibility, dedication, and the strong will to do so consistently. The following list shows some of the information that should be recorded for identified risks. In general, the information should be as specific as possible.


Potential Risk A description of the risk facing the organization or the project team.




Probability A number between 0 and 100 that represents the perceived likelihood of the risk occurring.




Impact A clear statement of the impact of the potential risk and who will be affected as a result. A breakdown of the cost, work stoppages, and other difficulties should also be included here if they are known.




Mitigation Strategy A description of how the risk can be avoided or its negative impact reduced.




Owner Identifies the individual who owns the risk and the related mitigation strategy.




Date Recorded identified.




Resolution Required By must be resolved.




Activities/Comments Describes the activities being followed to mitigate the risk. This can also include some general comments that relate to the risk.




Current Status Identifies the current status of the risk. Some entries might be: open, closed, in process.

Identifies the date that the risk was first Identifies the date by which the risk

Despite every attempt to the contrary, a risk mitigation strategy will not always capture or reduce every risk. Some of the other suggestions in this book will help an IT consulting organization prepare for and deal with the unexpected.

Managing Quality Clients are interested in quality processes as a way to reduce their risks, have confidence in what is being produced, and to justify their incurred costs. Varying degrees of quality can be applied to deliverables in IT

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consulting organizations. Formal processes such as the ISO9001/9002 designations are employed by some organizations as proof that quality is their major concern. Other organizations choose to build their own quality processes internally. The important aspects of managing quality are to have a documented process, to execute on that process, and to continuously collect and use client feedback. Figure 2-3 shows a sample client survey that can be used to collect client feedback and adjust processes to improve the overall engagement quality. Quality assurance is going to be a recurring theme throughout this book. On the Web

Figure 2.3

Interim client survey

Road Map for Building a High-Performance IT Consulting Practice

Marketing and Sales Whether the order of the phase is “sales or marketing” or “marketing and sales,” both are closely intertwined and critical to an IT consulting organization’s survivalregardless of which one actually starts first. It is not unusual for a consulting organization to be built around a single piece of business won from a single client, albeit a large one. The challenge for the consulting firm becomes winning the second, third, and subsequent engagements that provide steady revenue streams to fuel the existence and future growth of the organization. Marketing and sales are both important topics that must be a part of every IT consulting firm’s culture and are one of the major phases of the practice lifecycle. Long-term success for an organization is not possible without strong marketing and sales approaches. This section introduces these topics; subsequent chapters examine these topics in more detail.

Marketing Strategy In IT consulting organizations, marketing activities are intended to promote an organization’s brand and bring awareness to the services it offers. Marketing is an important tool for letting the world know what your organization is capable of doing. This helps with closing additional business opportunities, recruiting strong resources, raising capital, and building far-reaching network relationships. A marketing strategy provides you with an opportunity to craft and hone your message, to present your value proposition to clients, and to define what you are going to do for them. Consulting organizations often create a “service line” for each of these value propositions. A solid marketing strategy will dramatically shorten the sales cycle through stronger brand positioning and increased lead generation. Plenty of free or inexpensive marketing channels are available to IT consulting organizations. Some of these include having practitioners write a column for IT newsletters, business newsletters, magazines, and mainstream newspapers. Offering a small stipend (say, $150) to practitioners generally brings out a few good and motivated writers from the organization. Most IT publications are always searching for new experiences and technical advice to share with their qualified readership. In exchange, they offer you a chance to print a byline containing the author’s name, position title, and the company name. These ideas and byline are shared with potentially thousands of qualified technical readers.

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Press releases should be sent to newspapers to announce important initiatives and alliances your consulting organization is involved in. The business section of most newspapers, which is read daily by many of your potential clients, is a good place to announce key hires into your firm. Another method for generating free publicity is on the speaking circuit. Events like Comdex, Object-Oriented Programming, Systems, Languages, and Applications (OOPSLA), and Internet World are an excellent opportunity for your practitioners to help build a prominent reputation for your firm. Participation in IT societies and institutions, as well as involvement in charitable events and corporate boards, are other good avenues for building public awareness of your organizational capabilities. No marketing program is complete without a strong Internet presence. This includes a branded, sticky corporate web site, as well as a strong presence on industry, public, and job-related web sites. The firm should also try to get a premium position in the dominant search-engine lists (e.g., Yahoo, Google, and Netscape). In another example of a consultancy becoming a client to someone else, some firms choose to augment their marketing programs with resources from an external marketing firm. These firms can be retained or hired on an as-needed basis to provide support, build marketing collateral, staff photos, resumes, and press releases. These firms are invaluable in creating a consistent external image. The impact of most long-term marketing programs is difficult to measure in the short term. Unlike a sales program, which can be funded largely by commissions, marketing programs are an overhead that must be supported from the general corporate profit pool. It is difficult to tie performance to cost directly. But the benefits cannot be overstated. IT consulting organizations that are successful in establishing a strong brand identity find that clients come to them with qualified opportunities, thus substantially cutting down the duration and costs of the sales cycle. Generally, most IT consulting firms do not do a good job marketing themselves.

Sales Strategy IT consulting organizations need to define and build a go-to-market sales strategy that coincides with the marketing program. A short, effective sales cycle is a reasonable objective for a sales strategy because it provides more predictability to the rest of the consulting organization. A sales strategy includes having a price list, service line descriptions, an

Road Map for Building a High-Performance IT Consulting Practice

engagement contract, and some powerful samples of past engagement deliverables. Various sundry giveaway items like personalized pens, binders, and cups also go a long way in a sales program if used properly. IT consulting organizations must embed a sales culture throughout their practitioner ranks. Every practitioner in an IT consulting organization who works on an external engagement is in a position to sell or influence sales to clients. However, many practitioners shy away from sales activities because of a lack of experience, not wanting to appear pushy, or feeling that sales is not for them. In reality, every profession has a sales component. This could be selling an idea, concept, service, or product. For example, this is true of physicians, lawyers, engineers, pharmacists, teachers, accountants, and actors. IT consulting firms should also consider supporting a dedicated sales organization that works with the practitioners to maintain regular flow of new business. The bulk of the cost of this organization can be supported through commission incentives and relatively modest fixed costs. Practitioners can be encouraged to participate in the sales program by including career goals and incentives in their personal development plans. The sales organization must have the flexibility and ability to adapt rapidly to evolving market conditions in a positive manner. This can be done by modifying utilization targets, billing rates, service line definitions, and practitioner skill levels. Some of your competitors are supporting this level of flexibility in their pursuit of new business opportunities. It is necessary to create a sales plan that leverages several different sales channels that offer strong depth, breadth, high visibility, and mission-critical engagements. Some of the numerous sales channels that are available to consulting organizations include the following:


Existing clients




Other divisions within the same client




Referrals from clients




Partnerships and alliances with other firms




Cold calls to new prospects

Engagement Lifecycle Client engagements are the only meaningful sources of revenue in both the present and the future of the IT consulting practice. Following the events of the engagement sale, resources, processes, and best

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practices need to be mobilized in order to deliver an engagement on time, on budget, and to a client’s satisfaction. Most consulting organizations are also in the business of trying to consistently exceed client expectations so the bar is continually being raised. To exceed expectations on a regular basis requires focus and determination. The engagement lifecycle includes a set of activities that support delivery to clients, as shown in Figure 2-4. This is a high-level view that will be further described in Part III of this book, along with the associated techniques, deliverables, and roles and responsibilities required to execute on engagements efficiently. Most organizations should build or adopt a standard client engagement lifecycle, framework, or methodology that can be consistently applied to all the different types of projects they pursue. There should also be the ability to revise or add to the framework or methodology as lessons are learned. Keep in mind that clients may have their own methodologies or frameworks. Most IT consulting organizations are expected to adopt the client’s standards, and not the other way around. This section provides a high-level description of the basic phases of the client engagement framework:

Phase: Plan This phase consists of all the activities pertaining to planning of the upcoming engagement. This can include a close examination of the project plan, client sponsorship, and contractual agreements.

Phase: Requirements This phase consists of all the activities pertaining to understanding the business requirements of the client’s need. Change management, training, and resourcing requirements are also identified in this stage. Security and performance constraints are identified at this stage. This phase is a good opportunity to engage the interest and loyalty of the project team by guiding them through key decisions. A client who has

Figure 2.4

Executing client engagements

Road Map for Building a High-Performance IT Consulting Practice

made a decision at this stage is more likely to buy in throughout the engagement.

Phase: Architecture/Design This phase involves building an integrated architecture (technical, data, and application) and a detailed design for a system based on the business requirements. Design should indicate components that are used, custom work, and reusability opportunities.

Phase: Build The application is assembled or constructed using a variety of techniques, including an iterative or waterfall approach. The difference between these two approaches will be discussed in Chapters 10 and 11. Unit testing should also be a part of this phase. This phase is typically the longest in most IT consulting engagements, in addition to having the greatest involvement of practitioners in terms of numbers and time commitment.

Phase: Test Testing is a formalized process and a good opportunity to solidify client buy-in. Several types of testing are done, including: system, functional, integration, stress, performance, regression, and acceptance. Systems that have a presence on the Internet may require additional levels of security and usability testing. One especially useful technique is to hire an organization to conduct a friendly hack of your site to identify security problems. IT consulting organizations should ensure that there is extensive user involvement in this phase.

Phase: Implement This phase involves full implementation of a system to one or more sites. Training, disaster recovery, and shutdown of a previous site are all part of this phase. This phase is crucial for IT consulting organizations because the results here will dictate future opportunities with the client as well as the quality of the reference that the client is offering to provide.

Post-Engagement Activities These activities are used to close engagements, collect any outstanding fees, and gather client feedback. This includes evaluating the ongoing performance of the implemented system and also gathering feedback

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on the team’s performance through formal or informal surveys from the client sponsor of the engagement. This phase generally consists of a set of activities that culminate in a face-to-face meeting with a client sponsor and other client designates to review the project, key findings, and lessons learned, and to discuss the next steps. A written report is usually left behind as a client reference at this stage. This is a crucial time for the consulting practice because winning additional work from the client at this time can significantly strengthen the relationship. It is also relatively easier to sell to a happy buyer than to go through an entire sales process for a new prospect.

Defining IT Consulting Roles Practitioners who assume many different types of IT consulting roles carry out all the phases of the practice lifecycle. These roles vary by technology, industry, and engagement phase. It is possible to identify some common elements for all IT consultants who are generally expected to be experts in a particular area. This must also be coupled with some combination of softer skills. Consultants can be generalists or specialists. Generalists typically have a broad knowledge base, but do not get too involved in any particular area. Specialists are very narrow, but deep, in their focus and are knowledgeable about a specific area. Most consulting practices require a mix of both. The bottom line or primary objective for consultants is to produce quality results for client organizations based on personal knowledge, experience, and professional attributes in response to a business need. IT consulting organizations support internal and external roles. Both of these groups are vital to the success of the organization. Internal roles include administration, HR specialists, accounting support, premises crews, and office management. Administration includes executive assistants, reception, and project controllers. Premises crews are office managers and mailroom support, and perhaps contracted cleaning crews and interior decorators. Other roles in the organization include technical- infrastructure administrators and help-desk support. External roles are more diverse and numerous than internal ones. This is naturally the case, since this group generates the revenue to support the internal roles. Part of the challenge in defining roles in consulting organizations is due to the changing nature of the IT industry. A CICS developer today may need to be replaced by an HTML developer and then an XML developer tomorrow. For this reason,

Road Map for Building a High-Performance IT Consulting Practice

consulting organizations try to separate the title of a position from its specific duties at any given point in time. Positions are defined by years of experience, responsibility, expectations, ability, education, and salary grids. Many consulting organizations have a set of generic titles that match current and future roles. Table 2-2 shows a set of title hierarchies for an organization. Three different examples are provided in the table. The table begins with a role description because the actual name of the role can vary from organization to organization. The “Years in Level” column identifies a standard amount of time a practitioner is expected to spend in that position. This is a guideline only and can vary substantially between organizations.

Table 2.2 Position Hierarchy Position Description Years in Level

Title Hierarchy 1

Title Hierarchy 2

Title Hierarchy 3

This is an entry-level position in most organizations. Primary responsibilities include providing assistance to more experienced resources.

.5

Analyst

Not Applicable Junior Developer

This position involves more independent activities than the previous one. Researching and writing reports is common in this role.

.5

Senior Analyst

Junior Consultant

Developer

This role is the basic workhorse of consulting practices. These resources are often very general and talented and can assume a variety of technical roles on engagements. Most experienced practitioners join IT consulting organizations at this level.

2

Consultant

Consultant

Intermediate/ Senior Developer

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High-Value IT Consulting: 12 Keys to a Thriving Practice

Table 2.2 Position Hierarchy (continued) Position Description Years in Level

Title Hierarchy 1

Title Hierarchy 2

Title Hierarchy 3

This role is also a basic workhorse for most consulting organizations. With the additional years of experience, these resources begin to assume more management responsibilities over the consulting group.

2

Senior Consultant

Senior Consultant

Architect, Designer

This is a seasoned role that can assume significant engagement responsibilities. This role requires a deep knowledge of technology and industry experience.

4

Manager

Manager levels (1 to 5)

Senior Architect, Senior Designer

This role assumes large engagement responsibility, as well as responsibility for sales. Practitioners who reach this level are typically being groomed for an executive level.

4

Principle

Director

Project Manager

Partner

Vice President

Director

No Limit This is the ultimate career goal for most practitioners in IT consulting organizations. This is the black belt of the consulting profession. This role assumes ultimate responsibility for a portfolio of engagements and is also responsible for sales and generating leads. This group also provides most of the practice’s vision and direction.

Road Map for Building a High-Performance IT Consulting Practice

Since IT consulting organizations tend to attract strong and ambitious talent, a lot of people try to fly through the earlier levels in a much shorter time period. It is not unusual for a practitioner to compress their stay in the earlier positions to a fraction of the recommended duration. However, the experience generally averages out with a longer stay at a higher position before reaching the executive levels.

12 Key Metrics and the Practice Lifecycle All the phases and resources in the practice lifecycle contribute to the overall health and future prospects of the consulting organization. As mentioned previously, the 12 key metrics provide an executive dashboard to measure this health at any point. By using a process of measuring and improving the 12 key metrics, you can improve the performance and value of the consulting organization. Figure 2-5 shows the relationship between the 12 key metrics and the practice

Figure 2.5

12 key metrics and the practice lifestyle

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lifecycle phases. As the key in the figure shows, some phases can have a big influence on the key metrics, while others have an indirect or minimal impact. Looking at Figure 2-5, it is clear that there are many different touch points for affecting the value of any single key metric. This explains the complexity of running an IT consulting organization and the cause of endless management debates. There is no single correct answer, and some incorrect answers are not readily apparent. The remaining chapters of this book describe approaches and techniques for improving the value of the metrics.

Leadership, Value, and Intellectual Property The final piece of the puzzle for running a high-performance consulting practice involves leadership, value, and intellectual property. Filling in the details of Figure 2-1 requires leadership. For example, what services are to be offered to clients? Who are the right clients for the organization and why? What are the policies and procedures of the consulting organization? What type of intellectual property should the organization build? How much should they invest? What are the risks? Effective leadership will not only answer these and other questions, but also do so in a manner that the value of the organization will continue to build over time. This is important for the following reasons: 1. Your competition is doing it. 2. Your clients deserve ongoing value. 3. You may want to sell the business or some portion of it. 4. You may want to raise capital for expansion based on past performance and equity. Your competitors are always trying to improve their processes and find better/more efficient ways of doing things. Clients are also always trying to find ways to do the same work you’re doing with their internal resources, and thus at a lower cost. This pressure comes from various sources inside the organization, including executives who do not want to be beholden to outside consultants for too long. It is imperative that you continually demonstrate how your consulting organization adds value or you will soon become obsolete. This

Road Map for Building a High-Performance IT Consulting Practice

is what leadership is about, and it does not have to come from the senior executives of a consulting firm. Every practitioner is empowered to provide leadership in identifying future value and opportunities for creating Intellectual Property (IP). Opportunities to do this will be discussed throughout this book.

Closing Perspective This chapter defined a practice lifecycle that identifies the key phases and activities that are part of an IT consulting firm’s business. The 12 key metrics that were defined in Chapter 1 measure the overall health of the organization and are impacted in each of these phases. Subsequent chapters of this book examine strategies and techniques for improving the performance of the consulting organization through these 12 key metrics.

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Part II Selling Client Businesses and Engagements

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3 Implementing a Marketing Strategy

B

uilding a comprehensive and concise marketing message and strategy is a necessary and beneficial step for all consulting organizations. A well-thought-out marketing strategy not only promotes an organization’s services and talent, many times even before a client meeting takes place, but it also creates a marketplace “buzz” about the company. The time and effort it takes to create a marketing strategy is well spent since a company’s reputation and brand are directly enhanced and influenced by the message conveyed. A good marketing strategy also builds and sustains the relationship between the consultancy and client, especially if a project or engagement hits rough waters. Finally, effective marketing not only attracts clients, but also lures the best and brightest employees.

Service Lines and Paradigms Unlike most of the “technical work” IT consultants do, marketing activities are not always as easy to quantify. But marketing does have a structure and a methodology,and if you apply this paradigm,you tend to succeed. What’s a paradigm? Aside from being one of those retro-80s, new-age words that crop up in firm names of every type, a paradigm is an example of something that serves as a model. In computer programming, a paradigm would be a software “class.” In the manufacture of hard goods, a paradigm would be a standard-setting product design or model. New things in consulting exist at the margin. Consultants are professional people who apply existing knowledge in a common-sense way that couldn’t otherwise occur within the client organization. As tangible products cluster within product groups or lines, so too do intangible consulting projects cluster within project classes or service 49

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lines. The concepts of product lines and service lines are more similar than different. One big difference is that when you sell a product to a customer, you get the customer’s money, the customer gets your product, and you no longer have it. And when you perform an engagement for a client, you get the client’s money, and the client gets the benefit of your knowledge—but you still have that knowledge. Product and service lines show similarities whenever a class of service, or a class of project is so well-defined that only its lack of actual physical properties—shape, color, weight, dimensions, and so on— make it distinct from a tangible, visible product. Examples could be standard tax return filings for accountants, insurance policies for brokers, and standard configuration of specific software products for IT consultants. Just as a midsize to large company organizes its people and manufacturing processes around its product lines, which usually represent the most direct connection to the buyer, a consulting firm organizes its professional people and support resources and technology around its service lines. This enables the staff who are best qualified and experienced in a certain project class to replicate the benefits of that professional work quickly and cost-effectively for the client. This is often called “specialization.” For example, a consulting firm might profitably and successfully employ different individuals who develop only on specific database software: “That’s George, he’s one of our SQL Server specialists.” A small company or startup firm may make its first market impact doing something unique, unorthodox, or new, or doing commodity work until it defines its own “niche” in its market. After getting its initial clients, a young or small firm survives and grows by learning and doing successfully and constantly what it does best. That can be the type of project that got it going, or the type of project to which it gravitated because of skills, market need, or profitability. Organizing your firm along service lines is both logical and profitable, and thus should occur naturally.

Getting Started Defining service lines is often easy when you’re a step or two removed from the firm. A prospective client seeking a referral for a project may receive a business card from a client and be told, “Go see this firm. They specialize in data-driven applications delivered over the Web for the hospitality industry.”

Implementing a Marketing Strategy

Nice. In a single sentence, the client just “encapsulated” the essence of that professional firm and defined its main service line. Do you want to be “pigeon-holed” in this way? Of course you do! The economies of scale and the flat learning curve of doing the same class of project ensures predictability and quality for the client and ongoing business and profitability for the consulting organization. Consulting firms who study other consulting firms and the act of consulting often find that the most profitable consultants and firms are those that discovered a niche, developed a service line, and dominated that niche. Not surprisingly, the very same strategy works in the tangible-products business. The definition of who and what you or your firm is, and what your service lines are, lies partly in planning and mostly in history. Your past terms of engagement and your client billing dockets detail in hard, cold numbers what your firm’s service lines have been, and what type of projects your firmand its staffspecialize in. A database or spreadsheet of your accounting experience and information can tell you, with statistical certainty, what type of firm you’ve evolved into. For example, a few graduates of a network certification program set themselves up as a consultancy several years ago, and some of their early work lay in Novell NetWare configuration. One of the consultants beta-tested Windows NT, 2000, and Internet Information Services. Soon, based on word-of-mouth referrals, this consultant became swamped with work, and persuaded his colleagues to get their certification on Windows NT and 2000. Gradually the firm shifted into conversion, configuration, sales, and service of Windows NT and 2000 hardware and software for manufacturing businesses located within a day’s drive from their office. They didn’t fully realize their own niche until they decided to advertise, and the ad agency asked them to work with their accountant to extract and summarize their billing data and physically plot their client locations on a map before drafting a formal marketing plan. Experientially, they discovered that a “market” is a group of people with a common need. They oriented their business to address that common need with their expertise and skills.

The Niche and the Culture The niche is also a function of the corporate culture. For example, it’s unrealistic for a ten-person civil engineering consulting firm to specialize in designing, building, and managing projects on the scale and

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scope of construction of the Chunnel between France and England. A large firm with significant overhead will seek out projects with a high value-added component because those projects have to generate a higher fee in order to organize specialized people and their support staff to address it. Smaller firms tend to start, grow, and prosper by finding a project niche that larger firms deem too risky, too innovative, too new, or not interesting or profitable enough. A connection between the corporate culture and its service lines exists, no matter the size of the firm, the personality of its employees, or the type of client. It would be illogical for a client to recommend a consulting firm that helped them connect multiple databases within a distributed environment over a wide area network to a company that needs help creating a sales support web service. Even if the consultancy’s staff had the necessary skills, the first reaction would be to politely say to the prospective client, “We don’t do that type of thing here.”

Research and Development and New Projects Somebody thought up the first project ever done by the firm, or the first type of project that got the firm going. That was a good thing in the firm’s “salad days.”And it’s a discipline that needs to keep happening even as the demand for the staff ’s skills grows and the firm develops a market presence among clients. No manufacturing business can survive by selling the same thing year after year. They need a blend of updates on the products they sell, as well as new products they never sold before. Think of the consumer electronics business. The sound system we buy today is nothing like what we bought ten years ago, but it’s still a sound system. And a company generating a decent profit from its product lines siphons some of that revenue stream away from profit and sinks it into new product development, because the life cycle of electronics products is distressingly short. Service businesses do the same thing. The bread-and-butter work keeps you going, even as you get better at it, and keeps both your bread and your butter fresh. But service lines do die and shrivel up. Look at the business of auditing, which for decades was the bread-and-butter of big accounting firms. The advent of the personal computer and the fruits of the labor of many software developers automated a great deal of the auditing work formerly done by overworked and underpaid

Implementing a Marketing Strategy

students articling while studying for their accounting designation. Auditing became a price-sensitive commodity, and in many cases, its profit margins shrank to almost nothing. Many accounting firms couldn’t visualize their business without a rock-solid auditing foundation, and as a result failed or were acquired. Others developed new projects or services that enabled clients to spend the money they were now saving on largely automated audits on accountants performing different tasks and helping these clients in a new way. Whether your firm is reactive or proactive, the end result is the same. You’ll be doing research and development into new types or classes of service that you can bundle into client projects. Being proactive is better. Dig into survey data about the future. Invest nonbillable hours talking to decision-makers among current clients or reasonable prospects about their business problems. Define trends in a service or project you and your firm can solve with the skills you have now, or those you can reasonably acquire by meeting frequently with strategic alliance partners and reading the trade press. Figure 3-1 is a classic Product Life Cycle (PLC) chart applied to the business of projects and services. Over time, a bright consultant or firm introduces a new type of project or service line. They start to make serious money, attract new clients, and other firms realize a good thing when they see it. So the client’s new project is quickly copied and replicated by others, whoin order to attract attentiondo what vendors everywhere tend to do: offer the same benefit at a lower price. The original firm matches the lower price, and sacrifices profit to retain clients while recouping its investment during the period when they may have been the only or dominant supplier in a niche or had unique skills and capabilities that others took time to find or replicate.

Figure 3.1

The classic marketing Product Life Cycle for a consulting project

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For example, a small web-design firm had, as its objective, to be acquired by a larger consulting firm. The five principals figured that being first out of the gate in offering high-end web services using the tools in Visual Studio.Net would yield early profits, as well as make their firm an attractive acquisition target. The principals all ran the beta software, converted some client projects at their own expense, and built their capability well before the actual release of the “gold code.” Soon after, they hit the speaking circuit in the two industries from which they drew about two-thirds of their clients to talk about the new capabilities they could offer. It worked. Not only did they need to hire two new programmers to handle the unexpectedly large influx of new project work from existing clients, but also they had more new clients than they expected asking for them by name. They were able to bid up their project rates enough to recoup their “sunk cost” in unbillable time during the beta period, and were courted by three large consulting firms, eventually selling the company to one of them.

The Role of Marketing The consultant’s toolbox usually lies within a box inside his or her mind. Indeed, even the so-called tangible tools, like software development or modeling tools, are themselves intangible products. But the consultant’s market is similarly intangible. That market lies in a dark gray zone called the mind of the client decision-maker. A consultant has to show decision-makers that the money in their bank accounts is worth less to them than the end result of what a consultant or a firm can do for them. This is marketing: Getting clients you may not know to think and talk about what you or your firm can do for them. But what is this term “marketing”? Its many uncommonly nebulous permutations are often misinterpretations of the discipline. And marketing is a discipline just as surely as the practice of any other professional skill. When applied to professional services, marketing is a series of planned activities an organization does to prepare existing and prospective clients to do business with you. Does that mean marketing is about advertising and personal selling? In part, but that’s only the tip of the iceberg. There’s much more below the surface. Figure 3-2 encapsulates the discipline of marketing into a “black box” called “Marketing Activities” to illustrate how marketing activities prepare clients to do business with you. Consider marketing as a layer, or an “interface,” between you and your potential (or current) clients.

Implementing a Marketing Strategy

Figure 3.2

Marketing is a set of activities that takes place between you and the client “universe” that help clients prepare to do business with you.

People with a Common Need The first—and most essential—need for a marketing plan is a market. Defining one is as critical as defining your service lines or formulating your firm’s mission. A market for the IT consultant is a group of organizations with a common need. And, like many IT objects, a market has properties and methods. For example, insurance companies are intensive users of relational database software and must cope with new regulatory or environmental changes as they occur. Generally, what marketing properties and methods one organization in a market manifests, the others do, too, although they will be separate but related instances of the same class, to put a marketing event in object-oriented terminology. Putting definitions or boundaries around the market is probably the hardestbut the most vitalstep in writing a market plan. A marketing plan’s value lies as much in telling you what you can’t or shouldn’t do as in telling you what is possible, profitable, and sensible. A careful and accurate estimate of your market keeps you from making mistakes. But it’s an estimate. Much like psychology, where what is troubling a patient must be inferred from what the patient says and compared with trends, histories, and profiles, market sizes, values, and buyer behavior must be estimated quantitatively and qualitatively. Market research is a discipline that can consume the bulk of a university undergraduate degree. In many cases, a workable first-order estimate can be done with some diligent research, telephoning, and spreadsheet number crunching.

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If your firm’s reach is beyond local geography, you’ll likely work with a research firm or with an advertising agency, to put some reliable numbers into the properties you’ve defined for your market. A Market’s Properties

A Market’s Methods

Size: The number of projects per year potentially available to all firms providing service in a specific geographic region.

Buying Behavior: The ritualized but more-or-less predictable trends and patterns by which a client defines a mandate for a project’s benefits, seeks out and chooses a supplier.

Location: In general, it means everywhere your firm can reach with its normal resources to profitably service a client. Value: The gross estimated value of the projects within a specific span of time, usually a year. Client-Acquisition Cost: Usually a percentage of the average gross value of a project spent on acquiring a new client.

In the end, you’re looking for clients whose decision-makers have a common need for the type of work you do and the benefits it affords.

The Marketing Plan Most MBA programs teach a pretty good marketing courseand it’s usually a compulsory coursebut few teach students how to write an effective marketing plan. A professional services firm of any size and in any industry needs to keep its marketing plan as up-to-date as its statement of qualifications, its brochures, and its professional development training.

Marketing Analysis Overview Your market analysis is the “who, what, when, where, why, and how” document that describes as best you can the clients you serve. 1. Market Description a. The environment: On what events, decisions, or things does the market depend? For example, the demand for new computer operating systems is a direct function of the number of new computers sold each year, plus a declining

Implementing a Marketing Strategy

b. c. d. e. f.

percentage of older systems on the market that are upgraded. These environmental factors exist more or less outside the market’s ability to control. Market size: How many estimated clients? Annual project volume? Market value: Annual estimated gross revenues from this market or segment. Location: Breakdown by geographic area, relative to your firm’s ability to service it. Growth: Is the market expanding, shrinking, or stable? If changing, how fast and in what areas? What services and projects is the market consuming now?

2. Market Share a. Major firms in the market. b. Percentage of the estimated market (or its estimated value) held by the firms that are significant competitors to yours. c. Are some types of projects in the market growing faster than others? If so, which ones? Similar analysis for types or classes of projects whose number, value, or proportion may be shrinking in that market. 3. Competition a. Names and profiles of the major firms competing in any market. b. Unique core competencies and attributes of each competitor. c. A SWOT (Strength-Weakness-Opportunity-Threat) analysis on each major player in the market, generally relative to your firm. 4. Buyer behavior a. The rituals and patterns by which clients seek and engage consultants. Governments and large corporations often have formal bidding rules, for example, and policies that require tenders for certain classes of work, or for projects greater than a set threshold figure. b. Decision-making patterns: What role or type of person makes decisions? What roles, people, organizations, entities, or others influence the decision, and how? How long does it typically take to get a decision?

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c. Client-acquisition costs: What is the market’s normal “hit rate” in terms of the number of successes compared to the number of attempted proposals? What absolute cost, or percentage of the gross revenues from the market, is required to acquire clients and remain a serious competitor? 5. Strategy a. A qualitative assessment of the “position” that a new product or a new firm must occupy within the client’s decision-making process. b. The “wedge” projects or issues that are likely to cause a client to either undertake a new project initiative, or to switch consultants when doing a class of work again. c. A quantitative description of emerging issues, trends, and needs that must eventually be filled by firms competing for that class of project within that specific market segment. d. What blend of project, location, price, and promotions will constitute a sustainable competitive advantage (however temporarily) to enter a market, or to expand a firm’s relative share of that market? e. What resources of mandate, people, money, and time are needed to achieve a specific goal within the market being studied? f. What organizational changes (new staff, new or different locations, different structure, upgraded or new skills) are needed to make the firm’s marketing strategy work? Like any other discipline, writing a marketing plan is an art and a science that requires practice. For example, experience quickly teaches you that the law of diminishing returns begins once you’ve counted up about 80 percent of the market, thus lending validity to the 80-20 rule often alluded to by managers and executives. It is a good rule-ofthumb. As well, experience will teach you to count only the firms you are capable of serving. In effect, focus—not trying to be all things to all clients—is a discipline you learn either through planning or through error. Planning and thinking are quicker, easier, and cheaper than trial-and-error. For example, a market in another country may be completely measurable and demonstrably profitable, but of no value to your firm unless you plan to set up shop there or send people on location.

Implementing a Marketing Strategy

The Marketing “Message” A marketing message is a single thought, something like an organization’s mission statement, which can be encapsulated almost into a slogan. When you’ve finished the analysis overview discussed earlier, the “art” in marketing communications is to be able to synthesize it down into a fundamental message that differentiates you from other firms offering similar services, and simultaneously touches a sensitive need within your clients’ minds. If accomplishing this were easy, then advertising and public relations firms wouldn’t exist, and neither would copywriters, marketing strategists, and the annual parade of advertising and marketing courses, conferences, books, periodicals, and speeches. Even if marketing is one of your strengths, it’s worthwhile to have an outside perspective.

The Marketing “Kit” In truth (and if you’re in a larger firm, you can verify this in your own accounting records), about 80 percent of your work comes in from existing or past clients, while about 20 percent of your work comes from new clients. So who are your prospects? You likely already know about four out of five of them. In a small firm, or for an independent consultant just starting out, you’re not able to use the 80-20 rule yet, as the “80” part doesn’t exist. This is why it seems to be four times as hard to get something started as it does to work for a firm that is already established. In fact, it doesn’t just seem to be four times harder—it truly is. Every client prospect is a cold call. Turning the market into prospects, and the prospects into clients, is the start of opening up the marketing “black box” defined earlier in this chapter. So who are your prospects, how do you reach them, and what do you need from them? See Figure 3-3 for how you can connect with prospective clients. If your first marketing tool is the marketing plan itself, the second is the prospect list. Fortunately, both documents tend to come together at the same time you do your research. Unfortunately, creating quality documents doesn’t come so easily. Much of the information is unstructured, and assembling it all is long, hard, and tedious. Are there any shortcuts? In a word, no.

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Figure 3.3

Using your network to reach business prospects and achieve specific new business development goals

Your third marketing tool is referrals. Decision-makers are far, far more likely to see you if someone else has validated you independently. Referrals can come from anyonesuppliers, colleagues, bankers, accountants, lawyers, other consultants in different fields, personal friends, investors, and just about anyone you come in contact with. Once you’ve been referred to someone, and that decision-maker has agreed to see you, you can implement an account development strategy, which will be discussed in the next chapter. Professional sources, the fourth tool in your marketing kit, have always, continue to be, and will always separate the average consultant from the consistently successful one. Professional sources, include writing, speaking, and exhibiting opportunities, showcase your skills, your firm’s capabilities, what you have done and achieved for your clientsall in front of potential decision-makers who can hear you speak or read something you wrote, on their terms instead of yours. Some examples of how you can increase the visibility of you and your firm are:


Write for trade journals, technical publications, newspapers, magazines, or other media where your words will be seen, read, and absorbed by decision-makers.

Implementing a Marketing Strategy




Speak before groups where there is a high probability that potential decision-makers will see and hear you in an authoritative role. Look for opportunities to present before seminars, conferences, meetings, and other forums.




Join service clubs, professional organizations, trade associations, and other groups where your initiatives, ideas, and skills can be seen and observed by people able to make decisions about retaining you to do work for them.




Showcase your firm, yourself, your skills, and your results at workshops, exhibits, trade shows, and other places where you have an opportunity to talk to decision-makers informally.




Collect business cards, names, leads, information, and other data you need to build your prospect list, and to refine prospects into people with whom you have a growing professional relationship.

Writing and Talking Tips People who set aside professional and personal time to write and talk to their peers, clients, and prospects usually end up with more work than they know what to do with. You learn more when you explain what you do to other people than you do by actually doing it.

How-To’s of Writing and Talking Opportunities Having something published assumes that you can communicate effectively and clearly in writing. If writing clear, concise, and informative articles comes easily to you, the rest of the task is merely lining up opportunities to do so. If you don’t have stellar writing skills, you will need to partner with someone who does or ask for help from your firm’s PR or communications staff. The trade and business press is a logical outlet for consultants. The editor is often also the staff. This individual can reside in a cubicle in a larger office, and be solely responsible for the monthly publication of a particular trade or business magazine. This means there is a good probability of a symbiotic relationship between a consultant with good writing skills and interesting ideas, and an editor with a need for copy. Most business and trade periodicals publish their editorial plan

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as much as a year in advance, and getting a copy of the editorial plan usually entails just making a phone call. If the editorial plan includes a topic in your area of expertise, draft an outline and propose writing the article. You might not get paid for your work (and if you do, it’s normally not much), but if the article is accepted, well written, and completed within the deadline, you will most likely get published. The ego boost notwithstanding, getting published positions you as an expert, especially if the publication reaches a substantial selection of decision-makers in your marketplace. The same is true for arranging interviews or guest appearances within the broadcast media. Once a print or broadcast journalist discovers that you are a concise and well-spoken/written interview, you are likely to be quoted and asked for articles regularly. When looking for speaking opportunities before business audiences such as rotary clubs, boards of trade, chambers of commerce, and so on, the process is similar to pitching and writing an article: Look up who’s in charge, establish contact, present your case and why your topic is interesting, and ask for a speaking opportunity. One often thinks of trade shows as an opportunity to exhibit. But they, and professional conferences, are also an opportunity to speak as an authority. Better yet, speakers don’t have to rent the podium, and often get a free lunch (though not too often a speaking fee, but that can depend on the event). Annual conferences begin their planning a year or more in advance, and are often done by a committee. Getting plugged into the planning committee gives you a chance to make your case for being a speaker before a plenary audience (i.e., everybody) or within a workshop or breakout session.

Suggestions for Effective Writing and Speaking A good deal of preparation and organization is needed before you deliver an effective and concise speech or write a comprehensive, logical, and persuasive article. Some steps to ensure you deliver a successful presentation or get published are


Keep it simple. Translate jargon and technical talk into plain English. Your readers and/or listeners want to understand what you say. Making the complex simple is the hallmark of the real pro.




Have someone else read or hear what you write, before you publish or present it.

Implementing a Marketing Strategy




Rehearse often. It’s very difficult to make it look easy. Experts rewrite, polish, and practice all the time.




Understand your audience’s needs. What kind of people are they? What background do they have? Are they interested in the management impact of what you do or the technical details? In almost all cases, it will be the former.




Don’t wear out your welcome. Keep speeches to between ten and twelve minutes. Anything you cannot say in ten minutes, you will never say in twenty.




Keep your visual aids, charts, and graphs to a minimum, unless it is a technical paper. Don’t use overheads as a crutch. Let visuals do only what words cannot. You are there to validate yourself, not your information. Be an interesting person, not a colorful overhead.

Advertising and PR If writing a brochure or creating an ad were as simple as many educated technical people think it is, everybody would do it, and the ad agencies and public relations firms would not exist. We are experts at what we do, and a few technical people are good at communicating it as well. Face it: Most technical and professional people are not where they are because they are natural, gifted communicators. Advertising and PR people depend on the skills of IT people to keep their software, networks, and web sites working. Do not be afraid to depend on (or even pay) ad and PR professionals for their communications skills and savvy. Advertising’s strength lies in its ability to absolutely and completely control the content and layout, and to present it as frequently as your budget and judgment deem necessary. Advertising is about control. However, the reader, listener, or viewer also knows this, and so “discounts” the absolute value of the message that you strove to get just rightand are paying dearly to place in front of your market. Good public relations is a large part of the discipline by which you get your technical articles, exhibits, and speeches before your market via the medium of the trade journal, newspaper, and so on. Many times what you do and what you know is newsworthy in and of itself. Without giving away everything you know, you probably have a list of ten or twelve tips you can give potential clients to help them save

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themselves a lot of grief and headache in your area of expertise. In addition to these “tips” being a topical and provocative speech, they are also legitimate news to the editor of the industry’s trade journal. Summarize it in a news release that’s no more than two pages, make it easy to read, and send it! With publicity, you do not really control the content, as the writer or editor makes the content, length, style, and format fit the medium (and that’s 100 percent the editor’s call). You also do not control the frequency or the timing, as technical or professional articles often appear weeks or months after being submitted. However, the reader, listener, or viewer also knows this, and so “enhances” the absolute value of that message that you worked hard to get just rightand are trusting the editor to place in front of your market. Brochures, web sites, and similar promotion pieces you can carry or refer to are more flexible and adaptable. They also hold less perceived credibility with the client, who many times knows that the information in your brochure, pamphlet, handout, or web site is most likely self-serving. That’s neither good nor bad, just a fact. In the extreme, consider the essential purpose of the ultimate throwaway brochure, the political pamphlet. The candidate wants you to look at his or her face, remember their name and the party, and if you get anything else from the piece, that’s terrific. When you distribute a lot of pamphlets, there is also a statistical certainty that someone who’s inclined to vote for your party (or against another candidate) will contact you or vote for you, on the strength of knowing or hearing about you. In other words, do not take your brochures and news releases too seriously. However, if you take pains to consistently place your material before prospects with a good probability of doing business with you, someone will inevitably pick it up, look at it, and think, “That’s exactly what I need,” and call you. It does happen. That’s why people do direct mail and why, if your list has been carefully researched and targeted, it may yield an invitation or two per hundred letters, assuming you have a great brochure and you follow up the mailing with a call in a few days.

The Channels to the Client’s Mind Marketing does not happen at a newspaper, an ad agency, a trade show, or even in a client’s office. It happens in the minds of the consultant

Implementing a Marketing Strategy

and the client. Everything that’s done in marketing is intended to get the essence of a message from where it originates (your mind) to where it can be used (the client’s mind). To do this, we need to work backward, starting from the client’s mind and working to our own. The client is free to accept or reject a marketing message or overture, and we cannot force our ideas onto the client. That means that, as marketers, we need to identify and start at “openings” into the client’s mind. If, for example, we were marketing to teenagers, one such opening might be an affinity for music, color, and motion. So we would combine our essential message with a trendy musical beat and give it some eye-candy with compelling graphics. It sounds easy enough. But what is the trade-off? This is the content. We need to know exactly what single nugget of information provides the essence to enable the teenager to make up his or her mind and create a desire, and wrap it in music, color, and motion to position it in front of the market’s decision-makers. Let’s call this critical nugget of information a “wedge issue.” IT consultants do the same thing. In one hotly competitive market segment, a fear of falling behind competitors might impel decision-makers to retain a firm to upgrade its systems and software. In another conservative and stable market segment, a fear of system failure might drive decision-makers to undertake a review of security procedures and backup systems. Beginning with the client’s (or the market segment’s) “wedge”issues, consultants construct a sequence of contact points and media called a market channel from the client back to them. For example, a client might be forced to address the fear of a system failure based upon awareness of the consequences and comfort with a solution. You’d build comfort with your solution through a combination of advertising, writing and speaking, reinforced with personal client calls. You might work on awareness of the consequences of that system failure by being a speaker at their industry’s annual conference, and writing about it in their trade publication. Many of the people you would direct this message at might be decision-makers you are familiar with, or who are familiar with you. In basic terms, our market channels tend to be internal (about 80 percent of the new business is from existing or past clients), external (about 20 percent of new business is from new clients), and through peers, who span both groups. Figure 3-4 illustrates the general marketing channels between your mind and that of the client’s decision-makers.

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Figure 3.4

Working through the different marketing layers between you and the mind of a client decision-maker

As Figure 3-4 shows, a professional marketer will tend to abstract and simplify a pathway of critical events or of “routes” into the client’s mind. This process helps keep the expensive process of marketing tightly focused on what we know to be a direct series of cause-andeffect stimuli from the client’s mind into yours. Keeping the client’s mental route paramount in your plans prevents you from becoming me-focused. Drifting from what the client wants to see, read, and hear into what you want to write and talk about is a sure way of wasting money and landing few, if any, clients.

Project Planning with a Human Face Most IT professionals who can manage a project have learned how to plan it. Marketing activities are a project, and they need to be planned. The firm’s prosperity rests on the outcome of correctly executing the plan. Working with IT professionals and technical people leads the authors to repeat the following salient point: Don’t just plan the work. Work the plan.

Implementing a Marketing Strategy

Marketing is very much a people-related discipline. Though many people who gravitate to IT-related occupations specifically do not have to interact with clients, those who achieve “star” status within their firm succeed in marrying their technical expertise with people skills and clients come to them naturally. It’s hard work making marketing look easy. But good marketing is so obvious, so self-evident, that it seems anybody can do it.

Case Study: The Happenstance Market Patrick worked for a midsize firm of system integrators, specializing in office automation for small- to medium-sized businesses. He was helping a colleague in another industry with data analysis in support of litigation action in which his colleague was involved. In working with his colleague, he was explaining the system to the colleague’s lawyer, and suggested to the lawyer that he e-mail some of his charts and data. The lawyer explained that he had an e-mail address, but never used it. Indeed, though the office had a domain name, it was used only for e-mail, and few computers within the prosperous law firm’s offices were connected. Patrick offered to configure the law firm’s computers and set up a basic web site for the firm. Though they made some money on the law firm’s network and web site, Patrick studied what the lawyers were not doing or not doing well enough, and presented them with a report on their alternatives. The firm’s senior partner was impressed, implemented the report, and invited Patrick to speak at a legal seminar in the region a few months later. Using the law firm’s new capabilities as a reference site, Patrick showcased what could be done in a law office to a group of some 125 lawyers, who kept him an extra 90 minutes with questions. Within six months, Patrick’s firm had done more than two dozen similar projects within different law offices, and had hired another staff member as a direct result. Patrick wrote in several legal and regional business magazines about the work his firm had done. His firm invested in a monthly ad in the regional legal journal. Within 18 months, web site maintenance and system and software upgrades from legal firms became one of the firm’s top service lines and helped drive gross revenues for Patrick’s firm up 25 percent in an economy that had seen many of their competitors scale back and lay off staff.

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Closing Perspective In this chapter we learned that marketing is neither magic nor a task to be shunned as “unprofessional,” but rather is a coherent discipline consisting of a series of structured tasks that lead to clients hearing of you, what you do and what firm you work for. Marketing is more about getting the work than about doing the work. In the sense that some professional work is based on probability and sampling, so too is marketing. If a professional person consistently applies the principles of marketing, that individual may not be able to say at the outset what new clients will need service, but will be able to say with confidence that contact with decision-makers will take place, and those decision-makers will be looking to have a problem solved with the skills the consultant brings to the table. In this chapter, a market is defined as people with a common need, and a framework for planning, measuring, and approaching the market’s decision-makers was described. This market plan is a document essential to executing any coherent marketing activity, as one must plan the work, and then work the planin that order. Finally, the discipline of marketing is practiced by getting a message from your head into a decision-maker’s head through the use of media, such as articles, speeches, exhibitions, advertising, and promotion. A consultant who understands his or her media and who speaks to client decision-makers through these channels stands a high probability of gaining both the profile and stature to either cause potential clients to seek them out, or have a client return a call, because in their mind the consultant has been “validated” through marketing activity.

4 Account Development Strategy

A

consultant the author once knew had a problem with approaching clients to ask for work. “I’m not a salesman,”he said. “I do what I do, and I do it well. Don’t ask me to put on any phony, hyperkinetic stream of patter to try and get someone to sign on the bottom line. I don’t like it, I don’t do it well,I’m not into it,and I don’t want to learn it.It’s that simple.” We need to address the issue of a four-letter word that is a problem for many consultants, managerial, and technical people: sell. Few, if any, consultants view their job as “selling” in the classical sense of an exchange of money for products. Yet money does change hands, and the transaction does have some parallels. In both cases, the client perceives the value of cash in the organization’s bank account as being lower than the outcome of what a product can do (in the case of classical selling),or what the outcome of a consultant’s professional skills can achieve. So is consulting selling? Many professional and technical people—and their managers— have a problem with the word sell. In many cases, one of the things that draws technical and professional people to consulting is the perception that consultants—and in most cases the people who employ them—do not “sell” in the traditional sense.

Yes, I Do Account Development Knowledge workers don’t get to do any work for a client until someone admits to a problem, decides the organization wants a solution, and talks with you about what we can do and how we can implement it. In the end, both we and the client have to win in order for consulting work to be useful to either of us. This isn’t “stuff ” that you get at the lowest cost. Consulting is about results, and an ongoing relationship with the client. Marketing activities bring inquiries into a consulting 69

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firm and build awareness of the firm, what it does, and who it employs. The stage is set for account development, a specific and repeatable series of steps to maximize the probability that the time you spend discussing new business with a qualified prospect will translate into profitable projects and client relationships. Rather than change many people’s minds about selling, we will accept the premise that you have chosen your career path for the quality of the work, and not the quantity of sales. Let us define and use a term more appropriate to consulting: account development. The difference is much deeper than semantics. Account development in consulting is fundamentally different than selling tangible products. In selling tangible products, the process ends when the customer’s cash is exchanged for the vendor’s product. Other than service and warranty considerations, there is little left after the buyer’s funds have changed hands. Consulting truly is different. In consulting, the process begins only after the client has accepted the value of what the consultant can do with his or her professional skills. In consulting, the ideal result for both parties is a “relationship” that lasts at least for the duration of the project or engagement, and may endure either between client and consultant, or between the client organization and the consulting firm, for years or decades afterward. Unlike more traditional product selling, in which you start a planned process without always (indeed, seldom) knowing which specific individual you will deal with, in account development, you start the process where marketing comes to a logical end: setting up a meeting to discuss the client’s needs. And if you have followed a structured discipline and planned a series of activities to meet this decision-maker face-to-face, then why assume you can “wing it” once you shake hands and sit down together? To do so would be to imperil your marketing investment that got you this meeting. This fails you, and probably leaves undiscovered needs or problems not discussed with the client, thus failing the client.

The Structure of Account Development In marketing, one starts in the mind of the client and works back to the mind of the marketer, fitting the message into the market’s needs, awareness, perceptions, and biases. The process of account development also happens in the mind: that of the decision-maker with whom you are meeting, and in yours as you craft your win-win scenario one deliberate step at a time.

Account Development Strategy

You may know—at a single glance—exactly what project to implement within the client environment. Chances are you could be right, too. But if the client, in his or her mind, is not where you are, you will never get the engagement letter signed. Similarly, you may be completely wrong. What may appear obvious on the surface may camouflage a much deeper and more fundamental problem that the client is unwilling or unable to articulate on your first meeting. The client will not take that risk without a plan and lots of assurance. Why should you? A successful consultant has a mental map in his or her mind during account development. That map consists of a series of “bridges” spanning some common ground, as shown in Figure 4-1. Only after the

Figure 4.1

Common ground meeting

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client and consultant can cross the last bridge together can they successfully begin a project and a client relationship. Trying to skip these “bridges” drops you into cold, fast-running water, and you may be dashed on the rocks before you can get out, dry yourself off, and try again. Getting it right the first time is critical. A face-to-face account development mental map is as follows: 1. Meet the client Whether it is the first time, or the hundredth, there is a getting acquainted process that cannot be skipped, even if it is compressed into a few seconds or minutes. What are we trying to achieve? Permission from the client to cross the Validation Bridge, and find common ground to explore needs. 2. Discover client needs Before you can propose a solution, you need to stay on common ground with the client to discover—as fully as possible—the true nature of the client’s needs. What are we trying to achieve? Permission from the client to cross the Understanding Bridge, and find common ground on which the client is ready to listen to your solution. 3. Propose a solution If you have validated yourself, your firm, and what you can do, and properly explored what the client needs, you can present a workable solution that has an excellent chance of being right the first time. What are we trying to achieve? Permission from the client to cross the Viability Bridge and find common ground on which you can resolve specific issues with the solution that you and the client likely agree is workable. 4. Resolve issues The existence of issues does not indicate a problem. If the client accepts the premise of your solution, and has issues, it indicates your decision-maker is “trying it on for size,” and you are making progress. What are we trying to achieve? Permission from the client to cross the Resolution Bridge, and find common ground to decide to form (or continue) a consultant-client relationship. 5. Engagement If you are following a coherent face-to-face account development strategy, keeping the client’s needs paramount, and never trying to skip a step, you will end up at a go-no-go decision with your client. Asking for the work serves both you and the client, as neither of you wish to waste the effort you have invested to that point for the lack of a decision

Account Development Strategy

to proceed. What are we trying to achieve? Permission from the client to cross the Decision Bridge, begin the engagement, and build the client relationship.

Crossing the Validation Bridge To get from the first meeting to a client relationship may take numerous meetings—with more than one person—and throughout the process, the consultant must remember that the client must cross each and every bridge with you. If you are on one side of the river, and the client is on the other side, all you can do is shout at each other and neither of you will make progress. It is the client who must decide to cross each bridge, and many of these “crossing”clues are nonverbal. It is imperative to plan your client contact, prepare your questions, do your homework, and be patient. Some clients are get-it-done people who may want to cut a deal on the first meeting. You may cross all the bridges at a brisk trot. Other clients will need to validate you as a person, your firm as an entity, and what you can do as a professional before they will even open up and talk with you about what they need. Either way, it has to happen on the client’s terms and not yours. The reward for following the discipline is usually a reputation you will get as a thorough get-to-the-bottom-of-it consultant who will get client referrals with phrases like, “By the time we started working together, it seemed like they understood our firm better than we did.” And that is what you want. Who is going to provide all that insight? The client. Let’s go through the steps one at a time in more detail.

Discover the Client’s Needs More of the process of account development takes place as you explore the client’s needs than at any other phase, even though, on the surface, it appears that no actual decision making is going on at all. Indeed, if you slowly pronounce the word “consultant,” you hear yourself saying the word consult. The time you spend exploring what the client needs, rather than what magic you can work, is where the rubber hits the road in the consulting profession. You must consult before you can propose a solution. Asking open-ended questions enables the client to share information with you. More important, good questioning by you continues to validate you as client-focused, and helps you focus on what the client needs before you

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start to talk about what you can do. Many consultants have a paradigm of account development that suggests they should position themselves as the experts and dominate the talking. As you discover the client’s needs, you will need to dominate the listening. Hearing detailed answers to open-ended questions generally enables you to listen yourself to a better client solution than you can ever talk your way into. In the consulting profession, the ability to listen is power. The ability to ask the open-ended, informed questions to obtain the information you need before proposing a solution is your most valuable tool. Examples of good discovery questions might be:


How were your people able to determine that they had a problem?




How do the people you do business with expect to deal with your organization through its IT infrastructure?




In what categories or general areas were the feedback responses you’ve mentioned?




What type of constraints stand in the way of making changes to your systems right now?




What type of resources: people, money and time, did you invest in the systems you have now when you first implemented them?




What approximate time horizon is realistic for making the changes that you are describing?




What type of development skills do you have in house right now?

Questions come from having done your research beforehand. On all but the smallest and most secretive of client prospects you’ll visit, there are enough direct sources (such as the client’s own brochures, web site, required filings, newspaper coverage) to appreciate the size, scope, and focus of the organization. Your own experience and intuition, perhaps augmented by that of colleagues, suppliers, and others, will allow you to fill in the gaps to create a rough appreciation of the organization. As well, an examination of other companies in the prospect company’s industry often suggests that if environmental, local, economic, or other factors and trends affect one company, they probably affect all to a greater or lesser degree. In doing your research, you normally determine a specific purpose for the call. For example, “I will determine what hardware platform and software this organization is using, and get an appreciation for

Account Development Strategy

what their upgrade plans are in this meeting.” Your backup objective might be as simple as, “I will determine who else I should see if this person is not the right contact, or when might be a better time if this time is not right.” What difference does good listening, careful questioning, and developing a thorough understanding of needs before starting a discussion of the solution make? The client will find you are able to propose just one scenario, be right on target on the problem, and within the client’s resources and constraints almost all the time. Furthermore, your rejection rate will drop toward zero, as you will seldom get caught (or let yourself get caught) into moving toward a discussion of a solution before the client has admitted to you: 1. I understand the problems and issues that gave rise to our discussion. 2. I am interested in finding a solution to these problems and issues. 3. It is your solution I am interested in discussing. You will be able to cross the Understanding Bridge once you have a positive answer to a closed-ended question with your decision-maker, such as a brief summation of the issue followed with “Is this assessment of the issue accurate enough for us to talk about a solution for you?”

Propose a Solution Once you and the client have crossed the Understanding Bridge, and found common ground in having you propose a solution, you can then share the talking and listening. Up to this point, your focus has been to ensure the client talks to you much more than you talk to the client. Indeed, you can have a 2:1 or 3:1 ratio of listening to talking in the first two steps. In fact, even as you propose your solution, your challenge is to keep your client involved by keeping at least a 1:1 dialogue going. Note that this process is in sharp contrast to the prevailing paradigm that has the consultant glide into a boardroom as a talking suit with a slick overhead presentation, lay it all out in detail, receive enthusiastic applause, a firm handshake, and get to work on the problem the very next morning. The reality is that as you propose a solution, you will be covering the detailed needs you identified, and marrying the aspects of your

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solution with the specific needs the client has helped you identify. Let the client try it on for size in his or her mind. Ask ongoing questions after you have presented an aspect of your solution, such as “Does this phase of the project work with the timetables and deliverables you had in mind?” If yes, you are still on the right track. If no, you may need to walk back across the Understanding Bridge with your client, stop on the other side, and do more “consulting,” as there is still a need or desire that you did not manage to get on the table. This is normal and healthy. People do not behave like machines. Nice linear models have to bend to the vagaries of the human mind and to the different types of personality you inevitably encounter in the client environment. With some patience, and good listening and questioning, you and the client will have a viable solution sketched out. How long does this take? It may take minutes if the client and the project are familiar, and it may take weeks or months if the relationship and the project is new to both of you. Do not get caught running across the Viability Bridge alone while your client still has business to conduct on the Propose side of the river.

Resolve Issues To some extent, discovering needs, proposing aspects of a solution, and resolving issues is an iterative process that may have both you and the client mentally traversing back and forth across the Understanding Bridge and the Viability Bridge a few times. If you find it happening too regularly, it means you need to enhance your ability to ask open-ended questions and discover aspects of what the client needs. Issues are not problems. Issues are healthy things. Issues mean the client is trying the proposed solution on for size, and is mentally taking some ownership of it. If you were buying a new suit, one such issue might be taking in the jacket and taking up the cuffs on the pants. It does not mean you dislike the suit, and it certainly doesn’t mean the men’s store is not willing to do the work. What is does mean is that you like the suit, like how you feel in it, and want it to be just right when you buy it, a purchase you are increasingly likely to make. Similarly, help the client resolve the issues. Do not get defensive or judgmental. Fit the issue in the context of a win-win solution. Remember that the client may want to run across a bridge ahead of you. That is fraught with as many problems as your being too far ahead of the client.

Account Development Strategy

Consulting is not a product. You can seldom, if ever, say, “I got a steal on it,” and point to good consulting work. For you and the client to perceive lasting benefits from a relationship that begins with a project or an engagement, you will need to resolve issues that might make doing the work difficult for one or both sides later in the project. How do you know when you are done? As with all the steps, a series of closed-ended questions usually give you the clue. You will ask the client if it is time to put your discussion into a letter of understanding, or to work on a draft set of engagement terms. If you get one or more positive answers, it is time to move into what is called in chess “the end-game.” You can still fail, but at this point, it is increasingly your project—or client—to gain. Resolving issues is frequently a multimeeting process. One way of minimizing the recapping, and ensuring that what you thought you heard is what the client meant to say, is to confirm the steps and the interim points on which you think you agree in writing with a short letter or e-mail. Ask the person you’ve met with to confirm that your understanding is correct. If you need to make changes, you can make them before they arise and become issues at a subsequent meeting. More to the point, a client’s confirmation of your assumptions, or suggestions for change, forms part of the body of understanding between you as you proceed in the developing relationship. In essence, you are writing part of your proposal as the client and you build and confirm common ground on a continuing basis.

The Engagement Terms Chapter 2 covers much of what you will formalize in an engagement letter that gets the process of a project or a client relationship started. Once you cross the Resolution Bridge, you are very close to a client relationship (or to being able to continue one). Much like a good prenuptial agreement, your engagement terms set out your terms of reference in black and white. A good process as part of the account development cycle almost always avoids misunderstandings between parties of goodwill later on. It is also true that no contract, no set of terms of reference, and no other document can insure you against ill will, but it is also true that a careful account development cycle will send you more than enough “red flags” that problems may occur later on.

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The Decision From time to time, among people who sell tangible products, a researcher will verify again a fundamental principle: If you fail to ask for it, you probably won’t get it. Among sales people who sell tangible things, remembering to ask for the sale raises success by about a third. There is a strong correlation in consulting. Remember to ask for the work. Formally ask for a decision once you have your questionand-answer feedback that your client has crossed every bridge with you, achieved common ground on your validation, your understanding of the issues, your proposed solution, your issues resolution, and the terms of the proposed engagement. It is not an unspoken understanding. Ask for the work. Get a formal, spoken “yes” to working together. Have the client “cement” the start of your relationship together with some variation of “yes” to a closedended question. Sum up your discussion, and ask when you can start. Ask the client if he or she is ready to begin the project based on the terms of reference you have worked out. Make it a closed-ended, conclusive question, and ask for the work. Cross the Decision Bridge with your client together.

Account Development Tools You need to do more than explore client needs with open-ended questions, and to move from one step to another, crossing a bridge with a closed-ended question. You also need to think through some specific aspects of your consulting practice in order to be able to discuss them with your client during the account development cycle.


Pricing models need to be clear and consistent, domestically and internationally. As well, your practices on expense chargebacks will also need to be thought through before you work face-to-face with a client.




Samples of deliverables, or reference projects, need to be available beforehand. These enable you to validate yourself, the work you do, and your firm’s reputation.




Response templates enable you, or your firm, to remain consistent across consultants, project teams, departments, and entire offices. Clients are intelligent entities, and they can make your life uncomfortable if you neglect consistency and sound policies.

Account Development Strategy




Account development budgets. In the IT business, as a rule of thumb, it costs about a third of a project’s eventual selling price to get that product sold. The same principle tends to apply in consulting. Allowing for the direct expenses in the process and the opportunity cost of the billable hours invested in account development, the one-third rule may well hold true for you on a consistent, annual basis.




Account development channels need to be nurtured and developed on an ongoing basis, much like marketing activity; it never happens by itself. Your own activities often need “leverage” from the words and actions of others with a stake in your ongoing success.

Pricing Models In basic terms, a client can buy the outcome of a consulting engagement on the basis of two variables: inputs and outputs. What this means in practical terms is that you can charge a client based on the outcome of a project (i.e., a “flat” project fee) or on the basis of what you put into a project (i.e., billable hours plus expenses). In many cases, you will use a blend of both. Different pricing models are discussed in detail in Chapter 18. If you have a class of project that you know intimately, and can more or less predict with precision how long it will take, what expenses will be incurred, and how many billable hours will be invested, and the “borders”of the project correspond to something the client can equate to a specific value, you can treat those borders as if they were physical and call that project or that service a “product.” You may want to price it at a standard rate. That standard rate could be dictated by market demand (“Clients are willing to pay this amount for the benefits of that project”), or by your standard rate (“This is what we charge to do that”). Most consultants would prefer to dictate terms and prices, but market forces temper your ability to be a monopolist.

The Project as a “Commodity” In the financial sector, for example, audits have become more of a commodity since computers and software replaced many of the human hours needed to do basic audit work. In the IT sector, some type of conversions or upgrades can be similarly priced. Your actual return on the project might fluctuate, but the certainty to the client of knowing a price may bring you in business you might not otherwise have.

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In most cases, however, the project’s budget sets out an estimate of how many billable hours are needed to complete the work, at what rate those hours will be charged, and how pass-through expenses will be handled.

Calculating Your Hourly Rate Remembering that about a third of your gross is what it costs to get a stream of agreements to begin consulting engagements, and another third, as a rule of thumb, is what it takes to operate the overhead of anything but a home office, a typical consultant in a small- to mediumsize firm will need to take his anticipated annual earnings, triple that number, and divide by the expected number of actual billable hours anticipated in a year to estimate his hourly rate. Assuming a consultant plans to have something of a personal life, takes about two weeks of vacation per year, spends some unbillable time doing normal office overhead functions, and invests some time in account development, a range of between 1,000 and 1,400 billable hours per year is realistic. Keep track of your hours and see how close you come to this. If, for example, a consultant who averages 1,200 billable hours per year wishes to take home about $90,000 after expenses and before income taxes, that individual should realistically plan to bill to clients about $270,000 per year. That consultant’s 1,200 billable hours must average $225 each to meet those numbers. If the price of good consultants seems daunting to clients, achieving those gross billable hours is similarly daunting to the actual consultant. In a large firm, your earnings will be augmented by a portion of the gross billings from billable hours of other consultants working on projects you supervise. In a microcosm, it is literally true that you are a one-person profit center. Depending on the client or the project, there may be either an accepted floor or an accepted ceiling on consulting rates. Some large private-sector or public-sector projects will have an elaborate Request for Proposal (RFP) process demanding details of the hourly rates, dictating what a specific class of work is worth and so on.

How Is the Price Paid? Pricing for the domestic market is usually in the currency in which you incur your overhead expenses. For example, a U.S.-based consultant normally bills in U.S. dollars. However, it is the prerogative of the client

Account Development Strategy

to ask to be billed in the currency of his or her country, or indeed in a common currency such as euros or U.S. dollars. Internationally, it is a good idea to agree on a currency in which the engagement will be billed. In some areas of the world where the currency can fluctuate wildly, an agreement by the client to pay you in pounds, euros, or U.S. or Canadian dollars may work well for both parties. The win-win of consulting must extend to pricing, too. It is as unfair for a client to ask to pay you in an unstable currency as it is for you to accept it if your major expenses are in the currency of your home country. Make the currency of payment an explicit clause in your engagement letter, not an informal understanding.

Expenses and Chargebacks It is said with tongue-in-cheek that any consulting firm that cannot operate its photocopier as a profit center probably also cannot do a decent client engagement. This adage illustrates the two basic ways in which expenses are charged back to a client: with value-added or at cost. Rather than track, for example, how many person-minutes are consumed in such tasks as calculating long-distance costs, fax costs, time spent photocopying or handling other routine paperwork, it is often easier for a consulting firm to simply “mark up” certain client-billed expenses. For example, in the advertising and PR fields, 15 percent of the gross billed to the client is the agency’s markup for handling the expense. What you do depends on your client and the policies of your firm and the terms of your project or engagement. If, however, you add a markup to your client-billed expenses, here is a formula to enable you to calculate them. Price=Cost/(1–Markup) For example, if your administrative markup on phone and fax bills, courier charges, and other sundry costs is 15 percent, you would divide your cost by 1.00−0.15, or .85. This is equivalent to a 17.65 percent markup on your own costs. You can apply this same methodology to billing the client for subconsulting costs if you hire another outside consultant to work with you. Expense pass-throughs are normally costs such as travel, accommodation, car rental, and often meals. In many firms, it is standard practice to “pass through” these charges at their face value to the client.

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During the time you spend resolving issues with the client after proposing a solution and gaining acceptance for the solution, the subject of billable rates and chargebacks often comes up. Whether yours is a one-person consulting practice operating from your study, or whether you are in a structured and established large consulting practice, either draft or know your organization’s pricing structure and stick to it. Consistency is important, as it is a small world, and clients do talk about you among themselves.

Samples and Reference Sites There is no better illustration of the value of what your consulting expertise can do than a referral or a reference site. Doing good work and following it up normally yields you a client who willingly recommends you to someone else. In the IT business, it is often hard to show a tangible “sample” of your work, but there are substitutes for physical samples, and other ways to illustrate the underlying value of the difference you made in the client organization. The most powerful “sample” is a reference site. Not all clients are willing to let you bring other prospects into their environment and let them see the technology you have helped your clients develop and deploy. But some are, and it depends on the circumstances. Clearly, for example, an organization that decides to string you along and ask to see one of your clients, which happens to be their main competitor, will run into difficulty from your client if it seems as if your account development cycle is more corporate espionage than actual interest on the part of the prospect. Even if the interest is genuine and above-board, many clients prefer that being a reference site be limited to prospects that represent no market threat to your reference site client. Interestingly, you will be working your account development cycle to ask a client to act as a reference site. In this case, the end result you will be looking for is an agreement to meet with people who may potentially do business with you, and agree to show them the end result of the IT consulting you have done in your client’s organization. Samples can also be testimonials. Short of a physical visit, your clients may be willing to talk with your future prospects (within reason), or provide you with a document you can copy and give or show to a client prospect. These samples, or tastes, of what you can do help validate

Account Development Strategy

you as a consultant with talent and integrity, your firm as a solid and trustworthy entity, and the work you do as valuable and able to make the client organization more valuable in return.

Response Templates As an adjunct to your marketing plan, client prospects will actually ask for more information. Ultimately, you are looking at responses as a “funnel”that leads to a face-to-face meeting to explore the client’s needs, and possibly propose a solution that leads to a client relationship.

Query Responses The trusty 80-20 rule will tell you that some 80 percent of your incoming queries can be answered with structured information. Your judgment call is that you never want to lose an opportunity for a face-to-face interaction with a live client who can truly use your services. However, in the same manner as the account development process involves crossing specific mental bridges in tandem with the client, query responses must also respect that the client may not be ready or comfortable talking face-to-face yet. If the client wants the initiative, the client must have the initiative. Your queries tend to originate from such sources as articles, advertising, stories, and presentations. Prospects do not write in or circle numbers on magazine “bingo cards” much any more. They’d rather look you up on the Web and see what you have available online. Ask your existing clients to “beta test” your web site, and look at it from the perspective of a new client who does not know you. Invest the nonbillable time into making sure that a client can go to your web site, find a frequently asked questions (FAQ) file, download a suitable range of material, and even request paper reports, brochures, or other publications. Provide inquiry forms on your web site to help the client start the face-to-face process. Above all, provide a telephone number. Consulting is still a people business as long as it is done by human consultants for human clients. Spontaneity says that many prospective clients will pick up the phone and call you; make sure they can reach you. Too many query responses fail because of human factors. Nobody answers the e-mail inquiry. It never gets passed to someone to respond

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promptly. The telephone calls are not taken or not returned. Promised material is not mailed. Your standard query or Request for Information (RFI) response letters can exist on a document template or be generated by your web server. However your practice dictates what is appropriate, always ensure that the systems needed to respond to clients are in place and tested regularly.

RFP Responses The RFP process shows a ritual of the IT consulting profession, namely the drafting of the request for proposal response. Clients issue RFPs for a number of reasons, as shown in the following list:


Policy may dictate that new projects or renewals exceeding a specific threshold of complexity or cost require formal quotes from more than one vendor.




Though the project may be well-understood, the competitive environment among consulting firms may make the issuing of an RFP a sensible way for the client to achieve (or show) objectivity in the selection process.




The client may need input from prospective suppliers in order to know, internally, the range of solutions possible in the circumstances.




The organization may be near the end of a fiscal year, and simply have money left over for a pet project.

To Submit or Not to Submit Sometimes you look for bidding opportunities, and other times the RFP document simply arrives in the mail. The classic RFP decision is whether to bid or not to bid. Just because the RFP has shown up, or because you downloaded it, does not mean you should be gearing up for a response. An RFP response is a project all by itself. In some projects, the exercise of bidding is itself worth upward of 10 percent of the total value of the project in terms of the dedicated time it may consume. Figure 4-2 represents a flowchart to consider before automatically getting cranked up to respond to an RFP document.

Account Development Strategy

Figure 4.2

The RFP response decision flowchart

Indeed, if your firm responds to any significant number of RFP documents, you can easily estimate the opportunity cost of an RFP document by consulting your time records for the number of hours consumed in the preparation of the RFP response, multiply by the average billable rate of the staff involved, and add the firm’s out-of-pocket disbursements. The cost can startle you. No wonder your billable rates need to be so high.

Declining to Bid When do you decline to bid? When the work is clearly outside your scope of qualifications, your geographic market, or your capacity at the time the work will need to take place.

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It is also possible that the client’s needs were unclear in the document, or the RFP itself was poorly drafted. If you cannot make sense out of the RFP within a reasonable period of time, it is likely your response will make little sense to the client either. As well, an RFP is sometimes issued when an organization really has no intention of changing suppliers, and simply needs to comply with either a public sector requirement or a corporate policy. You may be in a position to know this, or a bit of due diligence may uncover it. In most cases, you will want to give the RFP a pass. You may also want to pass on an RFP response if you feel that the document itself is a means of getting either free project work, or its questions require you to part with any significant portion of your intellectual property. A win-win proposition with a client also means a fair and competent RFP document and response. Sometimes a polite response with your reasons for not bidding and an appropriate thank you to the RFP issuer for the opportunity can either change the terms of the RFP, or serve to keep you on the bidders list if you wish to remain there.

Choosing to Bid on an RFP An RFP process is normally designed to give all bidders fair and relatively equal access to information and opportunity. But just like a face-to-face account development process, the quality of your RFP response is often determined by your knowledge of the hidden, undeclared, or real needs that are not always set out in black and white in the document. Ask yourself the following questions before bidding on an RFP:


Do you understand what the client really needs from a reading of the RFP document? You may not. Indeed, the client may not understand what is needed in the circumstances.




Is it similar to a project you or your firm has done before? If so, and assuming you keep careful records of how time and human resources are consumed, you may be able to “mine” your files and records for much of the essential data you need to prepare a bid.




Do you have any firsthand knowledge of what the client needs? Someone you know, inside or outside your firm or your industry, may know the client organization. Ask. Their other suppliers in different areas may be able to provide insight.

Account Development Strategy




Determine your accessibility to personnel inside the client organization. Often, projects require specific bidders’ meetings, in which all information is shared equally. Sometimes, you are simply not allowed to ask questions within the organization, especially in government contracts.

The Local Factor Though it does not happen too often in IT consulting projects, sometimes winning firms may need to line up local firms to do some, or much, of the actual work. See if this is an “unspoken rule” in the circumstances. Local or regional partners may also be able to help you tailor your bid to comply with government regulations, union and currency exchange requirements, or other local factors.

Briefing Meetings Many times, you can just pick up the telephone and ask questions about an RFP document. This is the ideal way to bid. Seldom is everything contained in the document, and nothing substitutes for a site visit or an interview, even if by phone, with a decision-maker or resource person to talk about the RFP. Sometimes, to minimize the odds of favoritism or inequity, or to ensure that all information is available to serious bidders, the RFP issuer will structure one or a series of briefing meetings, at which bidders can pose questions in the company of all the other firms bidding on a project. Neither you nor your competitors has to attend a briefing meeting, though if it is an important project, you would be ill-advised to miss it, especially if you want the project. You will often learn more from your competitor’s questions than you will from your own, and also get an idea of what and who you are up against. One veteran of briefing meetings said that he and his partners always sat in different areas of the room and kept separate notes. The degree to which this minimized the “groupthink” and exposed them to side exchanges of other firms was well worth the extra effort. Sometimes written questions—and their responses—are circulated among all qualified bidders. However the information-gathering process goes, stick to the methodology of account development, and do your listening and thinking before beginning to draft the RFP response. Good RFP responses, like good project solutions, are not a matter of stringing

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together firm-specific boilerplate, but rather of listening intently— and nonjudgmentally—to the client’s needs before beginning to formulate a clear response. Your proposal’s framework is often geared to the flow of information in the RFP itself. Tight and focused text written after you know what you want to propose will make the reader’s job easiest. Here is a brief checklist to make sure your RFP response adds client value:


Do you have a clear idea of what solution you are proposing, or what solution the client is requesting, depending on the focus?




Do you know the decision-making criteria? Have you addressed these criteria in your proposal?




Is the proposal written in clear, plain English? Has it been proofread by someone not involved in the writing of it?




Have you included the charts, tables, and illustrations close to the point at which they were referenced?




Have you profiled the key people who will be involved with the project? Are they the right type and level of people?




Is the last thing you wrote a two- to three-page executive summary for the front of the document?




Have you included a table of contents and a table of figures at the front of the proposal?




Have you taken any tangential or explanatory matter not directly related to the proposal and put it into appendixes at the back of the proposal?




Did your sign-off process on the proposal include a senior member of your firm, and ideally include the person who will act as project leader if you are selected?

Package the proposal well. Present a good image, appropriate to the level of the proposal. If an oral presentation accompanies your proposal, rehearse it—several times. It always takes longer to deliver than it does to rehearse. Practice delivering the proposal in about half to two-thirds of your allotted time, in order to give time for questions. Never make the presentation a document reading; your audience can read the proposal. Talk about the benefits, and point out how your proposal meshes with the requirements. Leave the details for the document and the specifics for your questions. See Figure 4-3 for a flowchart of the RFP process.

Account Development Strategy

Figure 4.3

RFP response process

Integration with Product Sales The IT world is often about bundling: hardware and software in a product sales environment and hardware, software and services in many instances. As entire industries such as application services and

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web-delivered services emerge and mature, the marriage of consulting with hardware/software bundles will drive many firms’ top lines. The consulting part of a bundle is usually the least price-sensitive component in the mix. Emphasize its value in face-to-face client dealings. Hardware is increasingly becoming a low-margin commodity. Software licenses and consulting often drive profits. IT consulting, when done in conjunction with product sales, tends toward one of the following types of project:


Setups and configuration, perhaps with a training component




Conversion from another application or database; training may be a component




Software or maintenance upgrades; ongoing maintenance and support may be a part




Custom applications to “tie together” software and hardware into a client-specific solution




Customization within a specific product or application, such as an Oracle or SQL Server database

The Account Development Plan and Resource Kit If you have developed a workable marketing plan, and worked your plan well, you will find that your task when meeting people is eased by their prior awareness of you, your firm, and what you do. Until you begin your face-to-face account development process, your principal task is to maximize the number of prospects for your services with whom you can talk in specific terms. This process is called “qualification.” They use much the same word in product sales, and it works in both scenarios. More than 90 percent of businesses fall into the category of “small” businesses, closely held enterprises owned and operated by a single owner or a small group of partners or owner-investors. Chapter 6 covers the different “roles” that contribute to a decision. In small businesses, it is common for one person to play more than one role, sometimes all decision-making roles. From among your contacts, and the requests for information that your marketing brings in, consultants use much the same process to qualify prospective clients as they do to qualify prospective employees.

Account Development Strategy

The first pass-through of the information probably eliminates some 80 percent of the names and firms. Perhaps what you do is unsuitable for them. The consulting opportunity may not exist (or has passed). The organization may have been a “tire-kicker” if they contacted you. They may not be able to afford you. What they need done may not be profitable for you. You may not provide services in their language, or in the region in which they operate. If you make a habit—and discipline—of working the outcome of your marketing program, your firm’s consultants who actually do top-line account development will seldom, if ever, be “besieged” with marginal clients wasting your time. Rather, you and your people will be working a short list of good-quality prospects, and gradually learning as much as you can about them before starting the actual account development process in person. Your account development resource kit should include these research tools, as follows:


Personal contacts




Web-based resources, including the company’s web site




Required government and securities filings




Business and trade sources




Published articles profiling the company, its issues, and its people

Account development is no post-graduate research thesis. You will get 80 percent of what you need from the best 20 percent of your sources. No consultant should compile a thick dossier on a client. All you need is a grip on what the firm does, who its key people are, what its issues have been, and what likely problems you may find as you formulate a list of questions to guide you in the account development process.

Budgeting for Account Development One of the toughest things to avoid doing in a good consulting market is neglecting the account funnel. When you’re busy, it’s easy to scale back on marketing and account development, cash in, and bring home the extra money. Then, when the cycle ends, it is equally natural to complain that you cannot afford to do the marketing and account development.

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Budgeting for marketing and account development is part of any consulting firm’s business plan. Make it a line item, and track both the money you spend and the time you invest, just as if account development were a client itself. If you see your numbers begin to slip on either marketing expenses or account development hours, ask why and take steps to refocus. Delegate some work to free up time to bring in new projects. Some 80 percent of your “new” work will come from existing clients, or from organizations that did business with you in the past. And some 80 percent of that will come from the best 20 percent of your client list. This 80-20 rule of thumb seldom disappoints. When budgeting, figure out how to dedicate some specific, nonbillable time to spend learning more about your client organizations. The key metrics to track on your time management and accounting software, and in your plans are


Marketing money spent on a monthly basis




Actual account development money spent




Time spent on specific account development calls




Time spent on marketing-related activities

If the time spent on account development begins to slip below 10 to 15 percent of your total billable hours, you risk falling victim to random events or business cycles. Time and money spent on your best clients often reveals how they make decisions, what their plans and problems are, and which people may be coming in or being replaced.Your activities are generally governed by a handful of actual decision-makers, with perhaps a few others whose opinions, needs, and input influence the decision to select you and your firm as consultants. Not knowing your best clients and their people is like placing your fate on a roulette table. If a key decision-maker suddenly leaves and someone else arrives who doesn’t know you, you could be put back to the start of the cycle in an organization within which you or your firm may have worked diligently for months or years.

Leverage and Account Channels Chapter 3 outlined the market “channels” between the inside of your head and of the heads of decision-makers in organizations that might make profitable clients.

Account Development Strategy

In a similar manner, your account development activity is also governed by “channels”composed of other people’s minds whose thoughts, self-interest, and affinity to you can lead them to recommend or introduce you to prospective decision-makers. Care and maintenance of these channels is the most direct way to keep your billable hours steady and growing.

Clients Who better to bring other people to work with you than those who are working with you right now? Making the assumption that your clients are satisfied with the value of what you bring to them, they will recommend you eagerly. Depending on the circumstances and the individuals, you may wish to discuss a “finder’s fee” if the client introduces you directly to a prospective client and it leads to a project. For many people, however, it is the value of their relationship with you that compels them to suggest you to others. Rewards are both intrinsic and extrinsic. Some people want and are motivated by money. Many more want the value of knowing and working with good people. More new and value-added business will come from existing and past clients than from any other single source. More referrals will come from existing and past clients than from any other single source. No “channel”into the mind of decision-makers will ever be more productive or more valuable than the people you deal with regularly. No channel should be nurtured more carefully, as no channel will ever reward you more.

Suppliers Oddly, even though your suppliers have a direct and personal stake in your continuing success, many consultants, professionals, and technical people overlook them as sources of new business and referrals. For example, firms supplying the hardware platforms for which you configure the software are a natural partner or at least source of leads. The more work you do for clients to whom they can sell, the better off they are, and you are not in direct competition. An organization selling your products and services has a high probability of dealing with similar firms, and with firms with whom you could do business as well. You have a certain degree of leverage with suppliers—you literally feed them. Done in a responsible manner, you and your suppliers may both benefit from looking at your respective

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client lists, talking about what you do now, and what you might do together. Any supplier who does a significant amount of business with you, and whose rep may simply enjoy your company, has a strong incentive to help you succeed. Your prosperity is good for that supplier’s business. Work the supplier channel. It’s a no-brainer and usually a no-lose situation.

Strategic Partners Consider the case of one firm that does Java development on a UNIX platform and another that does Visual Studio.Net development on a Windows server platform. The Java/UNIX firm wants to respond to an RFP from a client with a mixed environment. Rather than lie about their qualifications or hire someone on spec, the Java/UNIX firm asks the Windows firm to “partner” on the RFP response, with the terms of reference extending no further than that one engagement. Maybe the partnership clicks, and maybe it doesn’t. If not, the two firms need not work together past the specific client engagement. If so, then both might have access to a class of client that neither otherwise might be able to serve. Partners come and partners go. They depend on the circumstances. You might partner with the same firm sporadically, just once, or form an alliance that persists past any single engagement. Your strategic partners might be firms able to serve a client in a different language and culture, firms smaller than you able to execute a portion of your plan in a geographic area in which your firm has no presence, or firms able to supply specific skills you don’t have and don’t need regularly enough to develop. Strategic partners do not happen spontaneously. As part of the process of looking for clients, you are certain to encounter other firms that are not direct competitors but are related to your business. You might keep in touch occasionally for months or years before anything concrete arises. Your brainstorming may yield account development scenarios neither firm would have thought of independently. An ideal strategic partner is one whose success complements your own, and whose people, abilities, and processes mesh with, but don’t overlap, yours. For example, opportunities to “bundle”software with hardware purchases offer both the software and hardware vendors the opportunity to work together to their mutual benefit.

Account Development Strategy

Subcontractors A lot of firms get their first growth spurt by being subcontractors on projects they could never manage alone. They subcontract for larger firms, learn experientially what structure, organization, and skills sets they need, and grow to the point of becoming the prime rather than the subcontractor. Subcontractors benefit when the firms who trust them to work on part of a project drive their business by providing more of those large projects. Larger firms often have subcontractors point out an opportunity they may not be able to handle alone, and in so doing, behave more like strategic partners than subcontractors. A small firm can find itself being a valuable window on a specific market or niche to a larger firm in order to get a steady flow of subcontract work. A large firm can find that subcontracting is a fairly profitable activity if it can mark up the subcontractor’s work, thus gaining value added for little investment in overhead or training. A prime and a subcontractor have a symbiotic arrangement. If it works—and many do—both sides can steer client work toward their respective firms, and benefit from the collaboration in a manner similar to strategic partners.

Requests for Information and Proposal Getting on bid lists is itself a channel into the mind of the client. The channels are often formalized, especially within the different levels of government. Whether by partnering or subcontracting, or by going it alone, responding to formalized RFIs and RFPs is a channel that requires investment, research, and nurturing. The actual RFI and RFP processes have been described earlier. The channel management challenge is to define the target opportunity, and then broaden your firm’s exposure to formal RFIs and RFPs that best use your talents and abilities.

Internet Research This topic is discussed last simply because for many IT consultants, it’s probably first in their mind. Yet raw data on the Internet is usually more of a starting point than a channel in itself. Most of that data needs work—usually a lot of work—before it becomes useful in terms of defining opportunities. On the Internet, you’ll spend about

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80 percent of your time and effort in return for only about 20 percent of your total opportunity. Much of the value that many IT consultants deliver comes via the Internet, or by building parts of the Internet. Much of our expertise is spent helping clients use it better, but we need to remember that while it is a channel to account development opportunities, it is by no means the channel on which we should focus most of our activity. People-intensive channels and activities will nearly always yield 80 percent of the qualified opportunities, while technology-intensive channels and activities will nearly always yield only about 20 percent of the total business opportunity. Of course, in a small firm’s early days, this may be one of the few channels open to it. However, as the firm begins to grow, it should keep the Internet in perspective and invest relatively more resources in the channels and sources that generate 80 percent of the new business. As a tool, however, the Internet has few equals. Being able to post and download information quickly allows both firms and consultants to post and get leads more quickly than anyone could have imagined only a generation ago. To prepare for your meetings, to research material for RFP responses, and to look up resource material, the Internet is an unmatched source of raw data. As search engine technology continues to evolve, we may find portals soon being able to apply business rules to sift through the data and do some filtering and processing of it before presenting it to you.

Closing Perspective This is a comprehensive chapter, yet entire books have been written on individual aspects of it. We saw why we need account development activity, and developed an easy-to-remember, five-step process for conducting a face-to-face client meeting on new business development. We learned that account development requires crossing five specific bridges with our clients and prospects: validation of ourselves, our firms and what we do, understanding of the client’s need, viability of the proposed solution, resolution of issues, and decision on starting, or continuing, a client relationship. The pricing models a consultant needs cannot be ad hoc, and should not be replicas of other firms, but should suit the market and its clients, reflecting the value of what is delivered to the client more than the raw price of the inputs.

Account Development Strategy

Work samples, testimonials, and reference sites allow us to help the client grasp the organizational value of what consultants do with their skills. Response templates let us efficiently deal with incoming information from consulting marketing efforts. The Request for Proposal response was treated in depth, with specific suggestions for better proposals and better processes to raise the chances that the time and money invested in RFP responses will translate into client relationships and project work. The account development “funnel” was outlined, as were the mental structure and tools with which a consultant sifts through the incoming stream of information from a capable marketing program. The importance of an ongoing investment in account development and how consulting integrates with product sales was outlined. The account development channels through which consultants leverage their project work and experience were enumerated and also discussed in this chapter. As a final example, consider the following anecdote. AlphaHost was a profitable web development business. The principals, however, kept bumping into the limits of their growth by not being able to advertise consistently enough to attract a regular stream of new business. A colleague helped the principals work out a budget and design a marketing and account development plan, as well as implement some basic software to track time and expenses that went into projects. One of the first recommendations was that the firm’s developers quadruple their hourly rates. Though the firm’s principals knew they needed business development money, they were hesitant about the fee increase. Some of their existing clients did balk at the new rates, but to their surprise, the majority were used to paying similar rates. In the short term, some web-development business was lost. Within nine months, higher-end clients and project work had replaced it all. It was touch-and-go financially for AlphaHost during the first six months, as they stretched their line of credit to cover increased training, marketing, account development, and advertising activity. It required some compromises both on take-home pay and on budgeted expenses. But within a year, the flow of sustainable high-margin business had begun to take a firm that had been stuck in the low end of its market into higher-end work with bigger clients and longer, more profitable engagements.

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5 The Client Account Pipeline and the Decision-Making Process

T

he activities and events that govern whether a consultant deals with a steady stream of work or a cycle of feast-and-famine are subtle ones. Many types of IT projects tend to consume a consultant for their duration. Some proactive—and ongoing—practices by a consultant can crystallize and develop new business opportunities, even as current engagements progress. This ongoing activity translates into a smooth transition between existing projects winding down and new projects gearing up.

Business Development’s Common Elements In 25 years of consulting, spanning multiple industries—information technology, public relations, management training, and film promotion—some of my clients have themselves been consulting firms, generally large ones. While I am always fascinated at the process of consulting, and have studied (and practiced) it intently, the specific things consultants do to get new business varies little across entirely different industries! What does vary is the specific nature of some of the actual consulting tasks, and the details in such things as proposals. But overall, from the vantage point of getting new business, a consultant is a consultant in most aspects inside and outside IT.

The Account Pipeline Are IT consultants always governed by the vagaries of their work patterns and client project cycles? Not necessarily, although the economic 99

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climate and the general health of your market niche and your client base does influence a lot of your activity flow from quarter to quarter. In the resource industries, such as oil and gas, cash flow starts (literally) from pumping the oil and gas from the ground into a pipeline, from which it flows to a market via a pipeline. Once it comes out of the pipeline, the oil or gas is refined or distributed. The customer benefits by exchanging cash in return for the producer’s refined product. Whether you need to do the business development activity yourself, or your firm has dedicated people whose job function is to line up new consulting work, you need to understand the process of how consulting work starts. In IT consulting, the pipeline process is fairly similar. Even when the prices for the product are high—be that crude oil or IT skills—the producer can’t collect revenue until the project opportunity has been defined (prospecting), the decision cycle is understood (drilling), the project proposal completed (distribution), and the engagement has begun (consumption). (See Figure 5-1.) Until the engagement begins, all activities are geared toward the account development pipeline. Consultants in general don’t look for new clients in sporadic bursts, stopping when they’ve found a new engagement opportunity. Successful consultants practice a sustainable and reasonable series of activities. Thus, in the long run, you stay busier, get new clients with less apparent effort, and spare yourself the needless crises of stop-and-start business development. You can’t expect to neglect your account list while you focus on a specific project, and expect your clients to suddenly hand money to you for a new project on your timetable. Aside from being illogical, it’s counter to human nature. People like to do business with people they know, see, and talk with on an ongoing basis. In this sense, business development is like exercise. Sporadic, intensive exercise can kill you. Regular, moderate exercise prolongs your life and adds to its quality. You’ve got to be in good shape to be a prospector, either for new projects or for oil and gas. In both cases, experience and ongoing practice make a little effort go a long way. Let’s start with the client reservoir depicted in Figure 5-1. The eternal 80-20 rule says that 80 percent of your future projects, either in number, in value, or both, will come from existing or past clients, and 80 percent of that will come from 20 percent of your client base. Do the math, and you get about two-thirds of your ongoing project work coming from about 20 percent of your existing client base.

The Client Account Pipeline and the Decision-Making Process

Figure 5.1

The account list pipeline in the IT consulting business

It’s a pretty easy conceptual leap to begin prospecting by going back to project pastures that have consistently proven fertile in the past. As much as those faithful ongoing clients need to be nurtured, as they are the likely source of much of your future revenue, it’s worth a mention of risk here (risk is covered in greater detail in Chapter 13). IT is an inherently risky—and rewarding—occupation. IT businesses are seen as riskier than average investments. If some 80 percent of your business, representing about 20 percent of your clients, are firms susceptible to the type of tech meltdown after the year 2000, you’re running a risk. Maybe a big risk. You need to have a client list that’s able to weather the unexpected meltdown of a major client, or even two of your best clients. As many IT people reading this book can attest, it does happen.

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The Source—The Project Reservoir A good place to find oil is not too far from where you’ve drilled successfully in the past. A good place to find new project work is not too far from where you’ve found it in the past—in the minds of existing and past clients and their “circles of reference.” In Chapter 3, Figure 3-3 takes you through your network and sets up means of reaching prospects in your network. Reaching a prospective client must lead to a specific goal, such as a client site visit, a contact at your level in an organization, or something similar. The continuum of opportunities in your network that become means of reaching prospects and flows into prospecting goals is by no means exhaustive. A bit of brainstorming over lunch, or with some colleagues, at your favorite after-work haunt can easily enlarge it severalfold. This chapter is about what happens after you’ve defined—and perhaps expanded—that network. (For more details, see Chapters 3 and 4.) Now it’s time to do the equivalent of sinking a test drill into a viable prospect source to see what treasures lie within. Influence evaporates when it is not used. So does the value of client contacts. Client projects stem from people, and the value of a project is consumed in the minds of the people in your client organizations. The care and maintenance of the little piece of you that lives in the minds of the people who decide who gets a project is a breathing entity. Keeping in touch and maintaining a healthy relationship with clients takes ongoing and proactive effort similar to that needed to maintain a good diet and healthy exercise program. Remember things about the people in your network. Call and ask from time to time. How did someone’s operation work out? How was a contact’s vacation last month? Arrange the lunch that you both agreed that you really must get together for. In the next chapter, we will cover some aspects of organizational behavior that you can put to work in account development, and show you how to construct a client information sheet. Those client contact points can help you find out more about upcoming opportunities in your client base. The reservoir of possible opportunities, assuming your marketing activities have covered the issues of awareness and name recognition, all starts with client contact. Once the face-to-face process described in Chapter 4 begins, your notes can record the various project opportunities that flow from the discussion. After meeting with your contact, you can refine the notes to form the basis for further discussion:

The Client Account Pipeline and the Decision-Making Process

maintenance long overdue on a project you did some time ago, and that the client hadn’t got around to; an opportunity to get something done with leftover funds near the end of a fiscal year; an opportunity to support a major organizational change with an enhancement of the systems already in place.

Where to Drill for Projects Part of this care and maintenance happens when you begin to define the opportunity, topics covered in Chapters 3 and 4, and put the opportunity into the project reservoir. The opportunity truly takes shape while the project is in the client’s decision pipeline. The time to define future projects is when you are occupied and working, just as the time to exercise and eat right is while you are healthy. Defining client project opportunities and initiating the face-to-face process is an ongoing work-related task that consultants need to schedule and implement proactively. It’s ironic that the easiest thing to put off is the very task that’s going to allow you to buy groceries, put a roof over your head, and look after the people you care for. But just like maintaining a clean living and working environment, having and adhering to a process is a large part of success. Many times, the person with whom you start a discussion in the client organization is not the one who makes the final decision. For example, a consultant in an oil company working on an office productivity application hit it off with the operations manager on whose behalf the project was done. They kept in touch. One day, the manager mentioned a new director who had joined the oil company, and wanted to see two systems upgraded and made compatible with each other. The consultant had some thoughts on the subject, which the manager thought were pretty good. The consultant’s objective was to get the manager to arrange a meeting with the director, which took about three weeks to coordinate. Once together and “validated”by the manager, the consultant had a chance to hear the new director’s vision of how the systems ought to evolve. The process of helping the director clarify the project’s focus and parameters took several meetings over the span of as many weeks. Even though the project would eventually be tendered for competitive bids, this consultant not only had a head start on any other bidder, but also had a hand in shaping the project’s scope, details, and direction.

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The formal act of responding to the RFP, awaiting the result, and doing the work were predictable in terms of people, time, and money, but this consultant got to define the project’s mandate early by keeping in touch with a contact from a past engagement.

Leads from Outside the Box Just as the people with whom we’ve come in contact during our own project work are the source of new opportunities, so too are the people who depend on us. Ever thought of discussing client opportunities with suppliers? There are many other sources of leads, such as those listed in Chapter 3 in Figure 3-3. It’s a small world, especially in specialized vertical markets. If organizations tend to buy the same things, the same people will interact, thus leaving a fairly small number of people in the industry’s supply chain with anecdotal information that can be assembled into a good prospective opportunity. Your working colleagues can be a similarly fruitful source. Just ask. Let their verbal accounts lead you to a client who may need exactly what you do at some point in time, and then give the relationship time to gel into a well-defined opportunity, of the type we’ll discuss shortly. Your working colleagues, either in-house or at a peer level in other organizations, and the suppliers or subconsultants who deal with you, are the traveling minstrels of your profession. What they know and can infer always exceeds the strict limits of the scope of their relationships within their client companies. What’s appropriate in rewarding client leads tends to be situational. Some people like referral bonuses. Some firms set up a commission structure. There’s no one single answer, but the discipline of thinking it through can lead to options from which you can choose to set up a win-win scenario among your colleagues and peers.

The Decision Cycle Seldom in IT will you meet with a decision-maker and get a go-ahead on the spot. It does happen, but it is not only rare, it most often means the client is in some measure of trouble, if not panic, on the issue. IT projects affect so many people that even an anxious-to-go decision-maker with the full authority to say “yes”will almost always need to get other people “on-side” before a proposed project gets the proverbial green light. Normally, you’ll follow the account development cycle outlined in Chapter 4, and build your picture of the organization’s broader

The Client Account Pipeline and the Decision-Making Process

decision-making process, and that of the people who influence the decision, using the principles described in Chapter 6. Not only are organizations composed of people, with their fiefdoms and turf, but the sheer impact of all but the most trivial of IT projects means that a discussion—often a lengthy one—is a given. As well, a decision-maker will need input from colleagues, subordinates, superiors who allocate funds, and users who will personally feel the impact of the project and use the system. Even if you are talking with the right person, there’s a lot of activity required of that individual to cover the organization’s bases. Decision-makers tend to be a single individual: executives, directors, managers, the CEO, the controller, or someone similar. Occasionally, a decision comes as a result of a committee vote or small-group consensus, though even in these situations, a single individual normally dominates the decision, or is most affected by it. The people who influence a decision need more analysis on a caseby-case basis. In broad terms, those influencers can be classified as:


The one (usually it’s just one) who pays for it, or releases budgeted funds




Those who are directly affected by the project’s outcome in what they do from day to day with, or on, the system




Those whose influence is felt by the decision-maker, the funds-releaser, or those affected

Working your face-to-face process with those who make and influence the decision as it progresses through the pipeline is a consultant’s challenge in turning opportunities into paying projects. Every project has a mandate, and every project’s mandate is met through some combination of only three resources: time, people, and money. Figure 5-2 represents the “flow” of priorities and information toward a decision-maker as a linear stream. It’s a deliberate oversimplification. The diagram in any particular project proposal is unique, and it’s almost always circuitous, and sometimes illogical. What happens in the account development pipeline is that the consultant comes to understand the organization’s needs, decision-makers, and the constraints that govern how those needs are matched with solutions. The consultant then works with the individuals in the decision-making

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Figure 5.2

The pipeline activity before a decision-maker takes action

pipeline to match his or her capabilities, or the capabilities of the consultant’s firm, with what the project needs to succeed. As a consultant, you frequently don’t have direct access to some of the people in the decision “loop” in the client organization. Our task, as consultants, is then to identify who does have access to the decision-makers or key influencers. We then either need to arrange to have these people help us gain access to the key people in this decision-making loop, or, when we can’t get access to those individuals, to have our information passed to the key decision-makers or influencers.

Know What Drives the Project Many of the organization’s priorities are spelled out in public documents, required filings, annual reports, web sites, or other sources. They are reported in the business media and trade press. Companies lay them out when they issue a prospectus, or comply with reporting requirements, or apply for funds from public bodies. Depending on your predisposition, you may find it either dry reading or an enjoyable challenge, but like archaeologists and the code-breakers who serve the military, knowing what the other person is thinking requires a lot of

The Client Account Pipeline and the Decision-Making Process

patient and unspectacular spadework in return for a few precious minutes of enlightened information. The chance to speak with a decision-maker is always a valuable opportunity, and Chapter 4 teaches you to prepare for and work your meeting game plan. In most cases, the short-term priorities tend to be spoken for. At this point, it’s either been in your pipeline for some time, or it is unlikely to be a reasonable expenditure of your time and energy. Emergencies do happen, systems crash, conversions and configurations are suddenly necessary. Existing suppliers or key consultants change or disappear without apparent warning or reason. Going in cold to get a project that is a short-term, high-value priority in the organization is not impossible, but in the absence of something urgent driving a change or the adoption of a new consultant, it is improbable. The organization’s medium- and long-term goals and objectives represent the best value for most consultants. Even as you’re engaged in the day-to-day work within a current project, your routine access to information, or your contacts in the client organization, often let you see what’s in the organization’s future several months, or even a year or two, ahead. You might see an opportunity that’s right for you, a colleague, or for someone you know in another company. You can both be part of someone else’s pipeline as well as have them feed value into yours. On a person-to-person level, or in small groups or local offices, this informal, mutual support is common. At an organization-to-organization level, the term is “Strategic Alliance.”The net effect is to cooperate with another organization in ways that the cooperating organizations mutually agree on: sending qualified prospects to one another, pooling marketing resources, coordinating proposals, attending exhibits, trade shows, and so on. As individuals, working groups or entire organizations, you may decide that in some ways, your interests are more complementary than competitive, and begin talking about the ways both organizations can work together. Strategic alliances are common in the IT world. For example, web portals frequently negotiate sponsorship arrangements with one financial services provider, one airline carrier, one travel-related agency, and so on. In IT consulting, you may agree to partner on proposals in a specific geographic area with one other agency with skills complementary to yours. For example, a firm engaged in development of web software

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may partner with a value-added retailer, or VAR, doing proposals for medium-to-large organizations. The VAR can then offer not just equipment, but also a coordinated package enabling the buyer to think through hardware acquisition that includes automating various systems. The alliance thus allows the buyer to deliver access to its clients and employees over the web. This same alliance also enables the software development firm to invite a joint proposal when one of their software clients is planning a new hardware acquisition. On areas where the firms’ interests converge, there is a high probability of win-win synergy in cooperation, in which the client may get a better-integrated, cost-effective solution, and both organizations may get business that on their own, neither might have won nor been able to deliver as well. On proposals in areas other than what is covered by the formal or informal strategic alliance, each organization would more or less be on its own. The organization’s policies, past practices, budget, and plans in progress can tell you a great deal about when an issue on the back burner can heat up. A conversion may follow the replacement of hardware, which leads to a software upgrade as one project cascades into another. One good time for project work—even on short notice—is the final quarter of an organization’s fiscal year. Budgets are as much drafted on hope as on reality. A project is postponed for lack of funds in the last quarter if a business unit’s budget is short. Similarly, a second-tier, nice-to-have project can get a quick go-ahead because a department, a unit, or a division has funds left over in the last quarter of a fiscal year.

In and Out of the Pipeline This section isn’t intended to supplant the tools for managing pipeline activity that may already exist in a consultant’s firm, or in the timesheet management software you use. Those tools, a few low-tech manila file folders, and some ongoing work can enable what begins as a vague prospect to grow into a potential project and proceed through a decision cycle toward an engagement. What this section should do is show you the structure to develop if yours is a small firm, or one that needs a better structure, and offer a basis for evaluating what you have in place in a larger firm. Figure 5-3 shows an abstraction of what a project is. Think of a project as an “envelope” into which resources of people, money, and time are allocated.

The Client Account Pipeline and the Decision-Making Process

Figure 5.3

The resources within a project’s mandate are people, time, and money.

The files (or client dockets or project envelopes, depending on your firm’s internal nomenclature) going into the pipeline usually start small, and grow as you define the opportunity. You’ll work your own, or your firm’s capabilities into the decision-making process. A file goes into the pipeline once you can define the project’s mandate, and put a reasonable estimate of the people, money, and time required into it. How does a file go out of your pipeline?


Its mandate may be taken away, or change with circumstances in the client company. The project may be cancelled or postponed.




The project’s resources may shrink to below what it takes to do properly, or grow past the point at which it matches what you, or your firm, have to offer.




The file might be a better fit for someone—or some other firm—you know than it is for you. If this is the case, do you, or does your firm, have a referral fee structure in place? This can be as informal as “I’ll give you this opportunity, but we get to do the following part of the work at this specific rate.” Hopefully, the favor of a qualified opportunity will be returned to you in the future.




You might be completely occupied at about the time the project comes to fruition. You’ll either have to pass on the opportunity or recommend a colleague or another firm.




You just might not be interested any more or the opportunity might not make business sense. For example, there might be no profit margin, you may not need or want to acquire the skill set, or you might be trying to get away from that type of business.

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How Wide Is the Pipe? The “project” of prospecting for new business has to stay in perspective. As a rule of thumb, and assuming that top-line revenue responsibilities are part of your mandate (i.e., the people who do the work also need to be able to get the work), looking for future work should never be less than about 10 percent of your time, and if you’re occupied regularly, you may not need to spend more than 20 or 30 percent of your time on looking for future work. What are the exceptions? The office responsibilities may be restructured so that one or more senior partners or owners have a primary responsibility for generating new client work. The firm may have dedicated business development personnel on staff. You may temporarily re-assign staff from time to time from project to primarily business development work. How many projects does that translate into? It depends on a number of factors, such as:


The average duration of the type of project you work on




The number of projects you tend to have going simultaneously




The lead time to a decision on the project




The success ratio you tend to have when looking for project work

The Average Value of a Project If you tend to get the profitable engagements you go after, from stable and secure clients, if you don’t handle too many of them simultaneously, and if they tend to last months in duration, then you might not need too many files in the pipeline at any given time. On the other hand, if yours is a small firm, if your engagements tend to be short-term in duration, and if you need to juggle several of them simultaneously at one time from clients who aren’t consistent, then you’ll need numerous active files in your account development pipeline, or you’ll lurch from feast to famine with disturbing regularity. If your firm falls in this latter group, try reducing some of the risk by using, or being, subcontractors on predictable project work. It may not be sexy, but it can even out the base revenue and make meeting payroll and expenses less of a nail-biter.

The Client Account Pipeline and the Decision-Making Process

Let’s assume a consultant can manage three projects competently at any one time, and as a rule, it takes the client about six months to think through the implications and allocate resources to a project’s mandate to get it started. This consultant tends to get about half the jobs the client allocates in that area of specialty and an engagement lasts about six months. This suggests that at any given point, assuming the consultant wants to stay busy with about three projects going at one time, six well-defined projects should be wending their way through the account development pipeline toward a decision. On a monthly basis, at least two new opportunities, on average, should be identified and turned into project files to receive some ongoing attention.

Managing the Pipeline Let’s go back to the oil and gas analogy for the pipeline. The raw material starts at the wellhead, it goes into the pipeline and to a refinery for processing, and finally is distributed and sold.

The Wellhead As consultants, our Wellhead Activity consists of:


Learning of possible new activities among our existing, past, regular, and sporadic clients. Review the material in Chapters 3 and 4 for details.




Defining the mandate and resources to be allocated to those projects, even if it is a quick-and-dirty, informal estimate.




Determining a start date, even if it is a rough estimate.




Opening up a file, putting it on paper, and setting up ways of tracking progress and working on the file regularly.




Defining the decision-making process and the participants in it, within the client organization.

The Pipeline and Processing Once the project is defined, it moves into what is called the “pipeline and processing activity.” At this point, larger firms may begin tracking it in customer relationship management (CRM) software, and firms

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of any size need to set up tracking tools to keep tabs on progress. You’ll now start:


Defining the information you need to understand the project and determine whether it is suitable for you. On a good project, you’ll have a clear set of criteria that will enable you to make a go/no-go decision.




Defining the information required by the decision-maker and those who influence that individual. On a good project, you’ll be confident that you either know, or can find out this information. Otherwise, it is a judgment call as to the worthiness of the effort.




Working your contacts, and meeting and/or providing information to the decision-makers and to those who influence them. On a good project, you won’t be inventing too many new things to get the business.




Covering each information need you have defined with decisionrelated information in a form specific to that decision- maker. On a good project, you’ll know how to do that with the majority of the needs, and the others will require the reasonable “stretch” that professional growth imposes.




Making sure you are a viable prospect for a project decision, to the best of your ability.




Participating in formal and informal decision activity, such as RFP responses, bid meetings, or social encounters and networking with the people in the decision process. On a good project, you do a calculation of the value of the time, people, and money required, and that commitment will be well within the profit margin of the project. Remember, the cost of getting the business is a “sunk” cost, and if your firm doesn’t have an inside track, an expensive proposal and bid cycle might require some careful discussion before you, in effect, “bet” the firm’s resources on a long shot.

The Decision and the Engagement Though much of the buyer behavior information in the client decision-making process will be covered in Chapter 6, our pipeline activity at this phase consists of:

The Client Account Pipeline and the Decision-Making Process




Putting files that won’t be considered in the short and medium term on the back burner, while integrating the opportunity in a keep-in-touch process so networking can continue.




Abandoning opportunities for which the consultant is unsuited, or which are unrealistic long shots. If you’ve worked out the criteria described above, the best way is to have a group meeting in which you and your colleagues set priorities, and decide which opportunities are the most promising. Then have the discipline to walk away from the ones you’ve deemed too long a shot.




Getting to a decision among the most promising files.

Case Study: The Windy City Opportunity Derrick is a conversion specialist working with enterprise software. He lives in an East Coast city. He likes where he lives, and his family is happy there. But he saw the handwriting on the economic wall, as his list of engagements was shrinking, existing clients were not renewing engagements or scheduling new projects, and the files in his pipeline were, to be polite, unpromising. Derrick was still working on two engagements when he attended a conference in the Midwest, and worked some hospitality suites. Contacts made that week led to deeper discussions with two Chicago-based financial firms interested in Derrick’s capabilities. What Derrick had done in the past was almost exactly what they were gearing up to do in the next year. Derrick still had one project winding down and another with several months to go, but made time to stay in touch and to pay two visits to Chicago, visiting both companies’ key decision-makers each time. As Derrick’s two ongoing home region projects began to wind down, both Chicago opportunities were gearing up. The IT heads at both Chicago companies knew Derrick could flatten their staff ’s learning curves. The timing of the two projects was such that he would begin the second when the first was about two-thirds done.

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Derrick spoke to his family and negotiated a package with the Chicago firms that involved covering the cost of periodic travel back home, his accommodation in a Chicago apartment suite, and a very lucrative fee arrangement. Derrick didn’t want to move, and neither did his family. By the time the two Chicago engagements would wind down, he’d have a better chance of seeing more business in his native region again, as business and economic cycles recovered, and his old clients needed software replacements and upgrades again. And his stature would be enhanced with some high-visibility work for two major Midwest financial clients.

Closing Perspective Having a fairly uninterrupted stream of new consulting work doesn’t require the skills of a guru, or the charisma of a movie star. Indeed, in the end, both of those are handicaps, in the absence of solid professional skills and a good work ethic. Far from being an unspectacular grind, getting new projects into the pipeline can be flat-out enjoyable. For some consultants, it’s the most exciting part of the profession. It demands thinking beyond the here-and-now, while also requiring a structure and methods. Most of our pipeline prospects come from among the ranks of existing and past clients. The first place to start the search for new project work is in our professional past. Existing, past, and sometime clients, colleagues and suppliers, and the other lead sources described in Chapters 3 and 4, can supply the information needed, or the personal validation of you and the introductions necessary, to open a file on a project opportunity. These “human” opportunities normally account for the vast majority of project work—and especially repeat project work—done by IT consultants. Internet searches and other literature searches yield opportunities at the margin. In a consultant’s—especially a freelancer’s—early career, these third-party searches done in the absence of a network are often one of the few opportunities open. But even at an early stage in one’s career, networking, alliances, subcontracting, and getting “parts” of the work are the keys to expanding one’s skill set, developing a

The Client Account Pipeline and the Decision-Making Process

network, and building a business sufficient to get the whole business from a client. Consulting work is not a tangible good. Organizations normally treat consulting projects differently than buying, or replacing, a tangible good. Projects start with a mandate, and into this project mandate envelope are the resources of people, time, and money. Getting this mandate past a decision point and being the chosen supplier itself requires time and effort. Getting a project decision is a project in itself. Our best opportunities need an open file, proactive effort and care, and regular maintenance. Defining who, by name or rank in the client environment, is part of the decision cycle is a consultant’s first challenge. Arranging a face-to-face meeting is the best way to discover the decision-maker’s or decision-influencer’s priorities and information needs. Alternatively, we need to be able to provide information to those who influence a decision, a topic that will be discussed in the next chapter. Activities in the decision pipeline require researching the organization’s decision cycle, understanding its rhythms, timing, and constraints, and providing its decision-makers and decision-influencers with the right information at the right time, a topic to be discussed more fully in Chapter 6. You’ll do the equivalent of drilling as you begin your analysis of the project opportunity and the decision process, and it is here that the “dry holes” are drilled, and files open and close quickly. Promising projects go into the Project Pipeline, which can be weeks or months in duration. During this phase, a project opportunity with a good match between the client and the consultant is defined, and its information and personal contact needs are covered. Decision activities include bringing the most promising new projects to closure and beginning the engagement, putting longer-term projects on the back burner, or abandoning files that are clearly leading nowhere.

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6 The Client Decision-Making Process

T

here is a fine moment of acting—and an accurate rendition of reality—in the 1970 epic film Patton. Actor George C. Scott, playing U.S. General George S. Patton at the head of the U.S. Seventh Army at El Guettar in Tunisia in North Africa, is surveying a battle between his st th 601 and 899 Tank Destroyer Battalions and the German Afrika Korps’ Tenth Panzer Division early in the morning of March 23, 1942. Patton’s U.S. forces absorbed the initial German assault and fought back. Soon, 30 German tanks were burning on the field and the Tenth Panzer Division faltered, then turned back. Scott is depicted following the battle through binoculars, and exclaiming to the Afrika Korps’ commander in absentia, “Rommel, you magnificent bastard, I read your book!” The art of filmmaking stayed pretty close to the truth in that scene. Patton was in every way a student of his foes. He had read an English translation of German General Erwin Rommel’s operational book, The Tank in Attack. Patton had an insight, not into what the Germans were actually going to do, but into how the staff in Rommel’s command made up their minds. If you know the decision-making process, you can anticipate the end result with shocking accuracy most times. Are business people metaphorical warlords in expensive suits, with a coterie of staff, corporate divisions, suppliers, and consultants backed and supplied by agreements, patents, trade rules, capital, and revenue? Could troops and equipment substitute in a conventional definition of conflict? Enough people do draw such a parallel that a 2,500-year-old book, The Art of War, by Chinese writer and consultant to kings Sun Tzu, is regularly reprinted and quoted as a modern day business bible. Indeed, many people have heard of Sun Tzu’s famous quote, “If you know the 117

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enemy, and know yourself, you need not fear the result of a hundred battles. If you know yourself, but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”

Organizational Behavior There’s a coincidental parallel between the abbreviations for two important terms, one in business and the other in warfare: organizational behavior in business and the order of battle in warfare. Both are commonly called OB. Both can amount to much the same thing in planning a military or business campaign. Just as individuals have a distinctive decision style, so too do organizations. The patterns are understandable, and are repeated with enough precision to enable consultants to look for the equivalent to an armed force’s majors and colonels whose movements, needs, and counsel contribute to an army commander’s decisions. Let’s begin by differentiating between working one-to-one and working organization-to-organization. Table 6-1 asks you to think about the impact of the proposal under discussion. The more simple, routine, and basic the proposal, then the more routine the decision-making process will be. It will be closer to a face-to-face decision than to a multilayered org-to-org decision. Projects that are large in scope and impact, for which little precedent exists and in which the organization has a keen interest, require a more elaborate decision-making ritual. Typical org-to-org situations might be an enterprisewide adoption or conversion to a new software package, to a new version, or to a new operating system or platform.

Due Process and Accountability Organizational procedures for engaging consultants vary from the ad hoc needs assessments and decisions in client organizations that are small, dynamic, and entrepreneurial to lengthy, specialized, and complex procedures in large institutional or public sector clients. In general, the larger, more established and bureaucratic an organization is, the more complex and involved its procurement procedures will be. Larger institutions, companies, and government agencies normally

The Client Decision-Making Process

Table 6.1 One-to-One and Org-to-Org Attribute

Face-to-face (one-to-one)

Firm-to-client (org-to-org)

Communication process Simple process, only a few (1 to 5) people

Complex process, many people interacting

Time required

Short, a few days or weeks

Long, months to years

People interacting

A few people at about the same level from your firm and the client organization

Many at different levels in both your firm and the client organization

Account development

One person

A team of people in the client organization

Client relations

Project-related, or of short duration

Multilevel, more enduring, complex, and spanning the life of the project

Scope of the project

Standard, or based on similar work

Involved, with a great deal of custom work

Impact of the proposal

Is limited to one or a few areas, offices, or projects

Will affect one or more big projects, many people, or multiple locations

Decision-making

Involves few of your people and the client’s people

Involves many people in different locations

The decision-maker

The end user, or someone close to him or her

A group, committee, consensus, or board

Spending

Small amounts, routine, pre-authorized or budgeted amounts, some tendering or RFP process

Large amounts for both organizations, negotiated amounts, nonroutine budgets or competitive bidding

have very formalized purchasing, contracting, and/or procurement procedures that must be followed to the letter. Just as the key to understanding effective face-to-face contact is to begin with the client’s mind and work backward to your expertise, the key to working effectively with an organization is to begin with the process of organizational decision-making, and work backward to what part of the client’s needs your firm can supply. How do clients choose consultants? Assuming the decision is one that is organizational in scale and scope, and the work is nonroutine, the process is generally similar to the following: 1. Define the problem, issue or situation causing the difference between where the client is and where they want to be

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2. Identify and evaluate different solution alternatives 3. Choose a specific solution, or a class of solutions 4. Contact vendors and consultants qualified to offer the type of solution the organization has in mind, or solicit bids through the RFP or quote process 5. Evaluate the consultants contacted, or the proposals from those who have chosen to respond to an RFP or submit a quote or proposal 6. Select a consultant to supply the solution, negotiate the agreement, and implement the solution The more people involved, and the greater the scale and scope of the project, the more ritualized the process by which the organization arrives at a decision. Figure 6-1 shows schematically that information flows to the project’s ultimate decision-maker through a series of “screens,” represented by one or more individuals in the client organization who perform a ritualized role in making a project decision.

Figure 6.1

The decision-making roles and information flow in the client organization

The Client Decision-Making Process

It would be a stretch to think that a company might post a detailed document called How We Make Decisions on its web site for open and free download. Even to extend the chapter’s opening anecdote, it would be incomplete to say that a mere reading of Rommel’s book is what enabled Patton to deploy his troops to first blunt and then counterattack the Germans at El Guettar. To know what to do with what Rommel wrote, Patton first had to know how armies in general, and the German army in particular, operated. It was this deeper insight, born of years of constant study of the patterns in how a body of armed men trains, supplies itself, moves, and fights that allowed Patton to draw from Rommel’s book an accurate th insight into how the 10 Panzer might deploy against his less-experienced American troops. It is a similar scale study of the decision-making patterns in organizations in which a consultant performs project work that leads a consultant to know what to expect, and how to get the knowledge needed for a decision to the right decision-maker at the right time and in the right format. In the armed forces, they call it logistics. Let’s look at the different decision-making roles to understand their role in an organization’s ultimate decision.

The Gatekeeper’s Role: Is It Right? As stated earlier, a decision normally is made by one person. However, that person is influenced by the opinions and needs of others. As well, information provided to the decision-maker flows through other people, who screen it against their particular needs and roles. These other people can seldom say “yes” to a proposal, but they can—and do—have the ability to say no. One such role is that filled by an individual who screens information or vendors, thus acting as an access point in the organization. Such an individual can be the person whose name is on the RFP document, or a purchasing officer, or a line manager. There may be more than one person with whom you are dealing who fills this role, and someone who acts as a gatekeeper can fill other roles as well, including that of decision-maker. Gatekeepers can say no, but seldom yes to your proposal. In other words, gatekeepers can recommend or prefer, but rarely decide or act. Often, your first contact in a client organization is a gatekeeper. Gatekeepers can also be IT architects, IT analysts, database administrators, other IT consultants, financial officers,

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human resources people, lenders, funders, regulatory authorities, elected officials, analysts, and lawyers. A gatekeeper will evaluate a proposal based on whether it meets specifications, policies, or criteria. Consultants often find gatekeepers among accountants, engineers, and lawyers acting for their clients, managers responsible for risk assessment, and municipal or corporate administrators receiving bids or proposals. Gatekeepers have to sign off on detail, and do so primarily on the basis of facts, figures, and specifications. Passing the value of your proposal through a gatekeeper in order to meet a person deeper in the decision process, or to get that portion of your agenda on the table, means building a rational case, and checking off the items on the gatekeeper’s list of criteria. There can be more than one such person, and indeed, the ultimate decision-maker can sometimes fill this role as well, especially in small companies.

The User’s Role: What About Us? Users are the people who must personally manage, or live with, the outcome of the IT project. Users often start the RFP process by requesting a service, a project, or a study. Often, the person who developed the specifications that a gatekeeper wrote into an RFP is a user. Users are task-, process-, and group-focused in their roles. The user can fill other decision-making roles as well. There may be more than one user whose needs must be determined and their agenda met in an organization. Users can say no, but seldom yes to your proposal. Users will recommend, requisition, or prefer, but won’t likely decide on or issue the contract. Often, the user is the person that the gatekeeper must convince before the decision-maker will approve the proposal. Determining who the users are, and helping your gatekeeper contact work with them will contribute to getting and keeping the IT project work for your firm. Users are concerned with how the project will affect them, and their work groups personally. Users, and those around them, need reference sites, hands-on demos, training, and help desk functions along with implementation plans to help them grasp the value of the project, and minimize the perceived risk with changing something that they recognize needs replacing and/or upgrading, but which is nonetheless stable and working.

The Client Decision-Making Process

The Influencer’s Role: In My Opinion… Influencers are people who affect the decision-making process by supplying information. Sometimes they may be directly involved, and sometimes not. They may assist with the evaluation of competitive bids, screening consulting firms, or even in approving the final RFP before bids are sought. The influencer may not have a line responsibility in the firm, and may not even work there. There are often a number of people who serve as influencers. As well, an influencer can hold one or more other roles in the decision-making process. Like users and gatekeepers, influencers can say no, but seldom yes. They will politick, suggest, recommend, and prefer (or scuttle, backstab, delay, and oppose). The influencer may be someone the decision-maker “runs everything by” before making a decision, or can be some other person with political influence within the client, or over the client. A lobby group within a municipality, a retired founder of a client company, an influential consultant or lawyer, the firm’s auditors, a key line manager in a firm, a staff member or vice president with technical knowledge, or an outspoken elected representative can all be examples of influencers whose opinion governs decisions within the orbit of IT consultants.

The Decision-Maker’s Role: Will It Make a Difference? Decision-makers can authorize the work, retain your firm, or release funds to get a project going. Normally there is only one per project. In a small entrepreneurial development company, this will often be the founder and president. Perhaps in a government department or agency, it may be a manager or director in the department that actually allocates the needed funds. A decision-maker can say either yes or no. In the IT consulting field, this role is often held by someone who will not be working closely with you or your firm: frequently, a chief financial officer (often today, a more formal chief information officer) in the client’s company or a vice president. Often, IT consultants never meet (or ask to meet) the person who makes the ultimate decision to retain their services. This seems odd. Why not associate a name and a personality with an invoice for which payment is due. Get to meet the decision-maker and work some face-to-face account development with the individual. A decision-maker’s agenda is generally results-oriented. Your proposal will stand or fall based on whether or not it seems to get the job done on time

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and on budget, in the informed opinion of the decision-maker, after having received input from the people who contribute to the decision.

Roles Change with Circumstances The specific individuals who are your decision-makers, influencers, users and gatekeepers change within the same client organization from project to project. For example, a midlevel client manager who can personally authorize a few thousand dollars of consulting work may be your decision-maker, and also one of your users and gatekeepers on routine or ongoing work. However, the same person may be a user and an influencer on a much more involved and expensive project such as a complete revamp of a corporate system, when the approval must come from the organization’s CEO (the decision-maker), after review by the senior managers (users) and the board (influencers).

The Art of Finding Decision-Makers Figuring out an organization’s decision-making process is a bit like code-breaking. You work with snippets of information, of varying reliability, and try and deduce a pattern that fits somewhere else. Most consultants start with some background research: such demographic facts and figures on the organization as: name, location, size, and number of branches. This and other information will help you figure out whether the organization has a high-probability need for an IT project you or your firm can deliver, and the means to afford it. One way to do a needs assessment is to look at the organization and its industry. What needs does the organization have? How about the industry? What general industry trends suggest a specific need in any company within it? Once you have an idea of what the client may need, in general terms, you can match it with what specific value your firm brings to the table. At this point, you’re ready to try for a face-to-face meeting. Have an objective. Know, at the end of the meeting, what should have happened, such as, “Once I have met with the staff manager who runs their systems, I will know who the CIO is, and what general process the organization follows to make a decision on a project such as I might propose. I’ll also know who has supplied them in the past, and what similar projects they’ve done in the past two years.”

The Client Decision-Making Process

The Client Contact Report Every firm has its own version of a premeeting or client contact report. Here are some of the elements on effective ones:

Background Research Some of the information you should begin to compile and collect for the prospective client or lead are as follows:


The date the file was opened and by whom; a proposal or project reference number, or client number, if you track it.




Geographic data on the client: proper corporate name, address, phone and fax number(s); web site location(s).




Parent company and parent company location; affiliates or branches.




Contact name(s) at the company, and particularly those relevant to the business of the IT consultant. Search the trade literature, business and local press archives, business directories and other generic sources.




List of key people: name, position, who they report to.




Issues the organization may face, and what specific needs these may give rise to.




The unique advantages your firm can bring to the organization.

Precontact Planning Before you actually make a contact, it is useful to assemble the following information:


Meeting objectives, not too many but as specific as possible




Who will/did/could participate




Questions to break the ice




Open-ended questions to explore the client’s needs




List of present or former clients or familiar organizations that may have done business with this client




List of who can help you work with this client on this project or this proposal

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Possible options that may fill the preliminary needs estimated or identified

Client Needs Analysis During contacts with the client, attempt to collect information in the following areas:


Needs the client admitted




Issues or objections the client raised




Possible ways the issues can be resolved




List of missing information pertinent to this proposal, this project, or this client




Specific followup steps: What action? By whom? By when?




Estimate of client’s priority in getting this proposed project done: urgent; whenever; low




Who (or what) else may be a competitor or substitute for this client on this project?




New needs or information discovered in meetings subsequent to the first

Client Decision-Making Analysis The following topics can be used to understand the client decision-making process that will eventually determine whether or not you win the business:


List of individuals involved with decision-making process by name




Each person’s personal or unspoken agenda




What each person’s role(s) is/are in that specific decision




That person’s expressed, implied or estimated attitude toward you or your firm (favorable, neutral, unfavorable)




Your best strategy with that person on that project




How the decision will be made




When the decision will be made

The Client Decision-Making Process




Where the decision will be made




What you, or your firm’s, chances are on this project




What other projects or services you or your firm might discuss with this client

Making Information Out of Data The scale, scope, and probable profitability of the project dictate how much effort goes into scoping out the decision-making process. So what’s the game plan? Lobbyists, whose clients are greatly affected by changes in public policy, make a religion out of this type of decision analysis, and charge their clients dearly for preaching those clients’ gospels to the congregations of elected officials and government staff they identify. If you know what to ask for when you meet someone in the client environment, you are likely to get as much—even more—than what you set out to find. Using the flow of information in Figure 6-1, you can then arrange focused meetings with those who contribute to the decision, as follows:


Assuming yours is a medium- to large-size consulting firm, use colleagues at a similar rank to the person you need to reach. Brief the individual on the person’s role in the decision-making process, and on what specific information that individual needs. Your colleagues and allies also need to know what input you need back, such as verification of your assumptions; the person’s opinion of you or your firm; a commitment to pass information to someone involved in the decision process or to arrange a meeting and so on.




Having (if it is a large project with a lengthy decision process) charted the persons involved and their role(s), design a personalized campaign to place information before the person in various ways to help build support for your firm, your proposal, or for the people who will implement the project. You may do merge mailings, send brochures, invite individuals (or those who influence them) to meetings and seminars, arrange for clients familiar with you and the individuals to make a contact for you, work the social circuit and so on.

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Within the limits of what is fair, ethical, legal, and sensible in the circumstances, there are many ways you can cover the information bases of the various people who influence the client. The continuum begins with looking up data, and organizing it into information. You then map out a situation-specific decision process, design a game plan, execute your firm’s agenda within that process, and work toward getting a decision to favor you. Other than the initial data lookup, however, the lion’s share of the work is done face-to-face, or in teams of your colleagues and supporters. Account development in the decision-making process is done by pressing the proverbial flesh in person, and not through Internet searches and data entry. Turn off the laptop and get away from the Internet.

Is the Client Worth the Effort and Risk? One thing is patently clear about figuring out a client’s decision-making process and executing your game plan within it: It can be time- consuming and expensive. A firm doesn’t get its high-priced talent together for a low-percentage or low-return effort. To return to the World War II analogy, the Allied forces didn’t marshal their best analytical minds to the task of code-breaking just to eavesdrop on Axis gossip. All that dull, plodding spadework in organizing debrief notes of refugees, compiling reports by spies, diplomats and agents, and breaking the codes of each branch of the Axis forces was done because it had immense strategic importance. When Germany changed its naval codes in midwar, Britain was blind to Kriegsmarine signals to U-boats for months, and ship sinkings soared. Once the codes were broken, the convoys were rerouted, and U-boat captains discovered Allied aircraft waiting for them where convoys were supposed to have been. It was an immense task, by many thousands of people, but it was worth every excruciating, dangerous, and frustrating hour.

The Internal Reward What is appropriate to the situation depends on the risk and the reward. If the project is to design and implement a huge enterprisewide software application for a large private or public sector concern, then the full treatment by the entire organization is probably well-justified.

The Client Decision-Making Process

If it’s a web development project for a local branch or a small company, the decision process and cycle is probably simple to understand and execute. The details and the depth of the analysis and the strategy may vary, but the essence is pretty much the same in just about all instances. Careful tracking of expenses and time will easily reveal how profitable a project is. If the act of landing it is estimated to cost more than about 10 percent of the project’s total revenue, there had better be a strong reason for devoting the time to getting the business. Calculating the return on a project involves an assumption that you can, and do, track your time and expenses carefully, as shown at a high level in Table 6-2. It also assumes that you can turn the project into a mental “thing”with boundaries around it that are as real (on paper) as are the boundaries of shape, size, and weight of tangible things, and even such intangibles as insurance premiums and investment vehicles. Most every consulting firm has a specific way to track profits and losses, as well as its return on investment (ROI) or internal rate of return (IRR). Let your accounting firm and your firm’s past be a guide to what is appropriate in your firm’s circumstances. Assuming you are doing the work accurately, consistency is more important than methodology. A decent methodology executed with consistency is always better than a brilliant methodology done haphazardly. Table 6.2 The Return on Investment of a Project Revenue Sources: Consulting revenue License fees Maintenance and support Other sources Total Revenue: Cost of Project: Account development Cost of services provided Ongoing project-related costs Overhead expenses Other costs Total cost of Project: Profit (Loss) on Project:

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The Project Opportunity Risk So what if the exercise to land this client doesn’t work? What is the cost of failure? In a risk-free world, of course, you would never make an overture to a prospective client unless you were certain of success, and the cost of client acquisition would be insignificant compared with the certain revenue stream from clients beating down your doors for the professional hours of your staff. OK. Back to reality. When you consider risk in a sensible and rational way that relates to your own “real world,” you ask: 1. What is the cost—in money and in opportunity—of doing nothing? 2. What is the estimated cost—in time and money—of pursuing this particular project opportunity? 3. Suppose those resources in point “1” above were allocated to either ongoing work, or to another project proposal. What is the likely return on that alternative scenario?

The Nonoption of Doing Nothing Notice the proactive discipline of calculating the cost of doing nothing. Make it a habit! Indecision and inaction are both killers. Sometimes, though, you’ll want to compare the downside of doing nothing to the calculated risk of a project and figure out which option places the firm at greater risk. No risk, of course, means no rewards, and the certainty of a dwindling client base. If you’re marking time until an imminent retirement, and plan to shut down the practice once the client base passes the point of nonprofitability, you may want to minimize your business development costs and just stop looking for clients. For most of us in the IT consulting business, the analogy serves to remind us how essential an ongoing investment of time and money in business development continues to be. You can look at your project dockets and determine such measurement metrics as the average length of an engagement, its revenue

The Client Decision-Making Process

range, and the normal turnover of your client base. You might find it an interesting exercise to calculate the theoretical point at which the last client will leave your firm if you simply do nothing in the way of business development. In a business where much of the professional staff is analytical by nature, this is a powerful way to remind everyone that next year’s paychecks—and the lifestyle they buy—will probably come in part from clients you haven’t yet met, and for work you’re not thinking about today.

The Risk of Pursuing a Specific Engagement The opposite extreme to resolutely doing nothing, fearing an iota of risk is, of course, betting the whole firm on a high-risk gamble of a project. You could make an argument that in its early days, Microsoft played just such a high-risk business development strategy daily, and in part, you’d probably be right. Of course, it was a different business back then in the dinosaur days of computing. What if IBM had given its operating system business to another firm back in the salad days of the personal computer? After leaning over the precipice to look at the extremes of a strategy, you swing back somewhere close to a more comfortable, and appropriate, center. For a small and aggressive firm, you might want to risk the business on a single roll of the dice with a specific client or proposal. You may not have that much to lose.Most of the time,you want to balance the risk and the reward in your firm. If the analysis of the project’s decision-making process, and its decision cycle takes significant time and resources, then you should give specific people a specific mandate to pursue that business, and give the “project” of landing the business a mandate, people, money, and time to succeed. Give it a budget of money and professional hours. Give it a specific time horizon during which to come to fruition or be buried in the “sunk costs” file. After a short time and not many meetings, a team of professional consultants—in any business—can come up with a fairly accurate assessment of the firm’s probability of success on this project. If you have a time horizon for the decision, an estimated revenue and profitability figure, and a reliable probability of success, you can actually do a calculation to determine if the effort is worth it.

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A firm of IT consultants has a number of projects in process. The analysis on each is proceeding, but not yet complete. At a business development meeting in midyear, the firm lays out the following: Project Name

Est. Revenue Est. Profit

Probability Completion

$ This Year

Alpha Contract

$60,000

$25,000

80%

4Q this year

$20,000

Bravo Renewal

$40,000

$10,000

100%

3Q this year

$10,000

Charlie Proposal

$50,000

$20,000

25%

4Q this year

$5,000

Delta Project

$150,000

$75,000

67%

4Q this year

$50,000

Echo Proposal

$200,000

$120,000

33%

4Q this year

$40,000

Totals:

$500,000

$250,000

50%

4Q this year

$125,000

It’s not a rigorous analysis, but as a quick “ballpark sketch” of projects on the go in this calendar year, probably done on a flipchart, this tells the group that they are pitching some $500,000 in gross revenue with an expected profit of $250,000. Multiplying each project by its estimated probability gives a weighted number. Adding up all those weighted numbers and dividing by the total estimated profits means the firm can probably book some $250,000 in gross revenue with an estimated profit of $125,000 in this calendar year, and do so with reasonable confidence. In your case, the calculations may be a bit more complex, and the list of projects longer or shorter (hopefully longer), but the essential methodology is to know the value of what is in the pipeline, and the probability of getting it. Weight the value of the projects in the pipeline in order to arrive at a figure that you and your firm’s accountant can agree on for the “New Business” entry without having either side wince that it may be complete fiction. Of course, in the example above, the firm considers the Bravo renewal to be a certainty, but as for the rest, it could get none of it. Or all of it. Reality may be different, but tracking what happens enables you to set those realistic probability figures from which to place a value on your new business in the pipeline when you and your principals meet.

Doing Something Else with the Resources Let’s suppose that after a few meetings with the people who influence the decision on the Echo Proposal above, the firm’s principals had adjusted its probability down to 10 percent. That means a weighted profit

The Client Decision-Making Process

of perhaps $20,000, and a certainty of spending between $15,000 and $25,000 to get the business. “Let’s think about that for a minute,” the discussion might go. “We set out on this proposal with the expectation that they wanted to change consultants, and lately we see that they are leaning strongly toward staying with the firm they’ve been with. We’re not going to knock them off their pedestal unless either they no longer want the business, or the client has decided that it is anybody but them.” Is it really worth spending the money on continuing with the proposal? “Listen, if it works, we stand to make about $120,000 on the $200,000 project,” the argument might go. “But that’s now down to crapshoot odds,”the counter would come. Someone else might point out that the same $15,000 to $25,000 in business development costs, spent on the existing client base, would almost certainly drive out about $50,000 in low-risk profits in the current fiscal and calendar year, using much the same resources that the chancy Echo Proposal would have needed. By the time the discussion dust had settled, and the methodology of calculating the risk and reward rehashed several more times, the Echo Proposal might well be history. They could choose to wrap it up, submit a proposal with the information they had in its current state, and stop spending business development money on it. Perhaps the Echo Proposal might just come in. Or, they could withdraw from the competition if the prospective client expected more active participation from the firm. It would be a calculated decision not to pursue some risky business.

Contract Management IT consulting is seldom a handshake business. What is to be delivered is often described in documents whose weight and scope rival the D-Day plans (continuing this chapter’s use of World War II examples). The engagement doesn’t begin once the decision has been made. It normally begins once the agreement, or the contract, has been signed by both parties. See Chapter 14 for more details on the drafting of agreements and other legal documents.

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The details of the system development process or the other ITrelated processes aside, the contract spells out in mutually acceptable detail:


What activity will happen




What hardware or functionality will be delivered




Who will do it




What will it cost




When will it be delivered




How will it be supported, serviced and/or warranted, as applicable to the project




Service level agreements




Costs of nondelivery

Getting the Deal Done While plans are neat and clean, reality is messy. General Eisenhower flatly refused to let any of his Overlord invasion planners “go along for the ride” on D-Day, knowing that he wished neither to risk (or throw away) their lives in foolhardiness, and also that once the plans were set, random events would require changes. The execution of the Overlord plans belonged to professional soldiers, and not invasion staff planners. The planning staff all sat out D-Day listening to action reports at SHAEF headquarters in London. Eisenhower even worked with King George VI to overrule British Prime Minister Winston Churchill’s intention of going along for the Overlord invasion on D-Day. Planning comes to fruition around the time of a decision. As we described in Chapter 4, issues and objections are not necessarily problems. They are random and unpredictable events that need careful, but tactical attention by your consultants working eyeball-to-eyeball with client contacts. Indeed, they indicate that the client has taken the proposed solution seriously and is trying it on for size. A client’s issues and objections can indicate any combination of the following:


There is a need that wasn’t found or properly explored. The need must be fleshed out and matched with a solution, or with an amendment to the solution.

The Client Decision-Making Process




Some aspect of the proposed solution doesn’t pass through either a gatekeeper or a user (or both). Either the decision-maker isn’t getting the information needed, or the information is being colored by the agenda of the influencer. In each case, there is not normally a need to refine the solution, but to tailor information to match the need of a person acting in the role of a gatekeeper. Gatekeepers need to check off specific aspects of the proposed solution. Users need to be comfortable with the actual implementation of the solution.




A decision-maker needs some additional assurance that can be provided by a reference: a site visit where a similar solution has been implemented; a conversation or meeting with a past client who can relate specific and relevant experience with the solution; or a report or analysis of the impact of the solution—perhaps a cost-benefit analysis. At this late stage, you’re not going back to the drawing board, but rather validating some aspect of a solution.




Assuming you understand the client’s needs, decision-making process and constraints, and assuming your own proposal is fair and workable, cost is not normally a factor in and of itself, but often a symptom of some deeper issue. The initial temptation to panic and say, “Well, let’s just cut the price by 10 percent then!” can be overwhelming, and is normally an emotion to resist. If cost were the issue, then more than likely, it would have come out early in the process, and certainly midway through, if your dialogue with the client was in any way ongoing and meaningful.

Patience, persistence, and sticking to your game plan and account development methodology will get you and your client ironing out the issues in the proposal as a team. Late in the process, the client has almost as much at stake in a mature account development process as you do. The client’s time has value, too. Walking away from a process in which both you and the client may have invested weeks, if not months, is a measurable failure for both parties.

The Handshake that Says Yes Who takes the lead in initiating the project? If your account development has gone smoothly, it should be almost a foregone conclusion by

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the time either you or the client takes an action that begins the project. In product sales, this is called the “close,” a term that is wrong in consulting, as the agreement to begin work is in fact the “opening” of the relationship instead of the “closing” of an exchange of cash for a product. This project beginning normally means a closed-ended action:


The client sends you a “you have won the competition” letter if it is a formal bid.




You ask a series of closed-ended questions to explore if you have answered every concern and that the client is ready to decide. If you have received a series of favorable responses, then ask for the project decision, something like, “I can’t think of anything else we need to cover. Shall we get a letter of intent signed, and get the project started?”




If the client’s decision-maker is a bit reticent by nature, make it easier with an assumption, such as, “From our conversation, I think we have the project well defined, and I get the impression you’d like it started on schedule. Can we get this agreement signed, and I’ll start booking our people’s time to get it going?”

To ensure that a decision is clear and unequivocal, you need a positive response to a closed-ended question, such as the above. Once you’ve got it, the pre-engagement activities can begin.

Closing Perspective We began this chapter by showing how a close study of the process, and knowledge of organizational behavior, could help win a battle. We extended the analogy by developing the patterns and tendencies that comprise the decision-making process in any but the simplest of organizations. IT consultants train to do the work. Business development is about how to get the work. The greatest advantage you can have, either in battle or in business, is to know how the other person thinks, decides, places value on things, and makes a decision. Political lobbyists study decision-making very closely, and model it in detail. They figure out who has what agenda, and in what form information must be provided to steer the person’s decision to their

The Client Decision-Making Process

client’s ends, according to the influencer’s agenda. Knowing a little organizational behavior and the client’s decision-making process lets a consultant do much the same. Account development is a people-intensive process. The “black box” that is the human mind can be modeled and estimated, but never completely understood. Intelligent analysis of a client’s decision-making process and persistent application of a consistent and coherent account development plan lets a consulting firm understand the risk of doing nothing, manage the risk of making an expensive proposal, and make a reliable estimate of income in the pipeline from clients who are not yet working with you.

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Part III Delivering Client Engagements Successfully

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7 Pre-Engagement Activities

P

re-engagement, or the period after a project is sold and before it has started, is often a euphoric time, filled with anticipation for practitioners. Everything—the client relationship, timelines, and project requirements—is fresh and unsullied. Any stresses and questions about the client and the engagement take a backseat to optimism, expectation, and hope. Some motivational speakers call this period “ignorant bliss.” After all, a client organization has just accepted your firm above all others. You were the top bidder on a short list. The client has recognized your organization’s skills and abilities and wants to give you money because you’re just that good! Now comes the difficult part of turning the commitments made during the “marketing and sales” periods into reality. What you do at this time will determine the future strength and value of your relationship with this client. The period before an engagement begins is the best time for laying the foundation for a successful client experience, as well as creating reusability and other value for the consulting practice on an ongoing basis. Think of pre-engagement activities as a handshake between the sales team and the development team, as shown by its placement in Figure 7-1. This chapter focuses on replacing “ignorant bliss” with “experienced reality.”

Impact of Pre-Engagement Activities As shown in Figure 7-2, pre-engagement activities have a significant impact on six of the 12 key practice metrics as well as a contribution to

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Figure 7.1

The pre-engagement phase comes after a project is sold and before it starts.

three others. Briefly, here is how this phase affects the significantly impacted metrics:


Client satisfaction Client expectations are established and managed before an engagement starts. Agree on how to exceed the client expectations at this stage, and do it.




People resources Build an organization that accommodates the abilities, career goals, and availability of your engagement team. Involve your team members as early as possible in the engagement lifecycle.




Average billing rate The relationships, organization, expectations, and planning at this stage determine how the engagement will unfold. A well-executed engagement raises the average billing rate by reducing project overruns and proving your value to the client.




Backlog Ask the client what you need to do to win more business from them in the future. A couple of well-executed engagements will add future opportunities to your backlog.




Leverage A well-planned engagement will provide opportunities to increase the leverage and thereby your profit. This means you want to employ as many junior (low-cost but high-profit) resources as possible under the guidance of a few senior (high-cost, but low-risk) resources.




Risk exposure Present all the risks and risk mitigation strategies to your client at this early stage, before blame becomes an issue. As soon as you formally start an engagement, you, the consultant, assume responsibility for the outcome.

Pre-Engagement Activities

Although less significant, you should consider the impact of the pre-engagement phase on the three metrics—utilization, accounts receivable, and costs—as identified in Figure 7-2. The following sections explain these in further detail.

Utilization Define what constitutes a billable activity and what does not, with the objective of increasing the number of billable activities. Be aware of industry best practices when you negotiate. For example, time spent by any of your resources, no matter where the work is physically done, should be considered billable. Some consultants also bill a portion of their travel time. Agree on what approvals are required to bill time. For example, can a manager from your company sign off on a timesheet, or will it require a client sponsor, and how often does

Figure 7.2

Pre-engagement activity impact on the 12 key practice metrics

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time need to be reported? Clearly spell out the conditions under which additional approval is required.

Accounts Receivable The client has just selected you, and you have not done anything wrong yet. Now is the time to reconfirm the guidelines for payment so that you do not have to produce the terms and conditions you have agreed to later. Can you get some portion of your fees, say 30 percent to 50 percent, up front? Try to set up a predefined schedule for payment based on dates or delivery of deliverables. If the client insists on tying some fees to work that is accepted, try to reduce this amount as much as possible. A holdback of 10 percent of your fees based on final sign-off is not unusual. The worst position you can find yourself in is working for a client who is refusing to pay because they don’t like the quality of your work and want you to make it up to them.

Costs Your objective here is to get your client to absorb as many of your fixed costs related to the engagement as possible over and above the fees and expenses that have already been negotiated in the contract. Consider the following best practice areas in your negotiations.

Real Estate Try to get desk/office space for all your resources. A large project room dedicated to your team is especially helpful, as it provides privacy, a place to organize their “stuff,” and a chance to build a team identity. Client real estate also allows your consulting practice to reduce fixed overhead costs, which have a direct impact on the bottom line.

Expenses Establish a policy for charging expenses with the rest of your team. Specify what is included—for example, parking, meal allowances, research materials, specific training courses, telecommunication charges, travel costs, and supplies. Expenses can be billed at cost or capped at a specific per diem. Be specific about the threshold for submitting a bill (e.g., amounts below $15 can be invoiced without a receipt).

Pre-Engagement Activities

Supplies Once an expense policy has been established, the client will be more amenable to loaning you items. Try and negotiate use of computers, software licenses, access to photocopiers, long-distance lines, pagers, cell phones, and beepers. Request access to administrative support—at least on a part-time basis—to handle such things as meeting requests, introductions, and navigation through the organization.

Access Negotiate up front for access to client resources that you will need during the project. This can be from a business user perspective, sign-off perspective, and resource augmentation perspective. You will want access to their technical resources, especially when user accounts/passwords must be set up to access the client systems. You will also need technical resources to move your applications into development/test/staging/production environments, which will require a set of approvals, including database and security sign-offs. Establish physical access to the client’s premises after hours and on weekends; otherwise, you’ll hear about it from resources who went in on the weekend before a deadline, but found their pass-cards were programmed to let them in only during the week.

Checklist for Pre-Engagement Activities After an engagement is sold, the sales team and members of the development team must start communicating. Although significant interactions typically take place during the sales phase, there is no guarantee that the same individuals are still involved because of the time lag between a sales pitch and the actual sale. The sales team generally provides some specific deliverables to the development or follow-on teams to get them up to speed efficiently. These could include an agreement with the client, perhaps a budget, a project proposal, some meeting results, major contacts within the client organization, and a relationship with the client-in-waiting. Pre-engagement activities involve mobilizing, confirming, finding, rationalizing, and laying out relevant boundaries to get the future job done. A checklist can help to ensure that none of these important

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activities are forgotten. This raises the question, Who actually owns the pre-engagement activities checklist? You’ll want to answer this question because it identifies the resource(s) responsible for doing a good job in pre-engagement. Several roles can assume the ownership function, but your best choice is someone who is going to provide continuity throughout the project. The overall engagement manager is a good candidate; to ensure continuity from the earlier phases, identify the sales executive as a co-owner until the handshake between the sales team and the development team is completed toward the end of pre-engagement. Figure 7-3 shows examples of high-level categories you might use to divide the major pre-engagement activities. Use this list as a guide, and customize it for the unique demands of your organization. These activities are meant to be done in parallel, not sequentially, and by “Thin Slices,” we mean they can be done a little at a time. For example, identify the project manager, who then begins to work on the organization, while also working on legal issues and pulling documentation. This iterative approach saves time and allows you to adjust errors in one category and immediately pass the benefits on to the other ones. Each of these categories is defined in further detail in the following sections.

Figure 7.3

Pre-engagement activity groups

Pre-Engagement Activities

Organizational Considerations The engagement organization process consists of three distinct sets of activities. The first one consists of building enough of an organization to kick off the pre-engagement activities. The second set consists of planning for the engagement itself. This can require specific expertise for short periods of time in areas like quality assurance, testing, and architecture. The last set consists of building an organization to execute the engagement itself.

Defining the Pre-Engagement Kickoff Organization Although a relatively short-term requirement, defining the kickoff organization is critical to the engagement and the success of the practice. A primary objective is to build relationships between the sales and delivery teams, and with the client. The engagement organization needs strong leadership and consistency from the sales team as well as the consulting group throughout the lifecycle. The coexistence of sales and consulting in IT consulting organizations offers an analogy with an ecosystem in which organisms must work together in order to survive. By itself, the sales group not only has nothing to sell, but also may not have the ability to sell services without the support of the consulting group. On the other hand, the consulting group relies on the sales team to go out and sell their services. It is one thing to sell an engagement in an organization where you are already established; it is a far more difficult task to drive new business opportunities. This is a skill that many IT practitioners lack, have not developed, or have little interest in. Even though the sales and delivery teams may be from the same organization, relationships must be established between them. Typically, these groups have different compensation incentives and different approaches for getting things done. They also do not always understand what the other group does for a living. You can talk all you want about doing what’s right for the organization; the reality is that dedicated sales resources are primarily motivated by compensation in the form of commissions, contests, and prizes. Do not expect anything else to work here. Their focus will be on optimizing compensation, both during an engagement and in any future contribution to the engagement. At some point in time, the consulting group’s executive may succeed in aligning the metrics driving the sales teams with those driving the delivery teams. Until this happens, be aware of the factors driving the

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behaviors so that they can be leveraged effectively. The IT consulting group, on the other hand, is motivated by a different set of goals. These can include technical curiosity, client fulfillment, lifestyle balance, and building and deploying something. They may not spot a sales opportunity if it is right in front of them. To be successful, IT consulting organizations should not do a complete handover from the sales group when an engagement is sold. The two most important roles in the engagement from the consulting organization’s perspective are the leaders or representatives from sales and consulting. For example, this could be the sales manager and a senior executive from the consulting group. In consulting organizations based on partnerships, a partner or senior manager may fulfill one or both of these positions. Other roles needed to begin planning the engagement are discussed next. Steering Committee You must identify a couple of key resources to participate in a steering committee for the engagement. These committee members become the sponsors of the engagement. One sales and one consulting executive, typically at partner or vice-president level, are suitable choices for this. Some of the resources could easily have several roles in the engagement. For example, a senior manager could also be the architect. Client Relationship Executive A client relationship executive (or client executive) will usually report to the sales executive involved in the engagement. The client executive’s role is to maintain a sales-oriented and quality assurance relationship with the client. As the seller of the engagement, this individual can position himself to gain blunt feedback from the client. Engagement Director The engagement director, or engagement manager, role provides continuity for the remainder of the engagement. He or she builds a relationship with the client based on value and trust. The engagement director’s goal in some ways is to become a “trusted advisor”to the client. This person will be responsible for ultimate delivery of the engagement and must buy into everything that happens at this stage.

Pre-Engagement Activities

Business Expert Every meaningful technology solution begins with a strong understanding of the business requirements and the value statement. The business expert gets involved at this stage to begin documenting the requirements and the outcome of the engagement. This role is typically assumed by an industry specialist. Architect/Designer It is important to involve the architect/designer role at the pre-engagement stage so that she or he understands the technical requirements and the technical people requirements. The architect/designer will be able to help answer questions such as, Which content management system should our lead developer know? Are we likely to find someone with the experience we need? How much technical training should we incorporate into the engagement plan? This role also incorporates the practical implications of the solution, as it is understood by the business expert, into the planning process. For example, if the ultimate solution must be available 24×7 (24 hours a day, 7 days a week) and be capable of handling 10,000 content page updates a day, the architect/designer must incorporate these technical requirements into the technical solution. Quality assurance and testers should explicitly test for these technical requirements.

Planning the Engagement Planning for the engagement is considerably more complex than defining the kickoff organization. Key considerations are the types of skills needed, the duration they are needed, and when they are first required on the project. Training, if any, must be accomplished in short order, and skills must add value to the engagement. The core planning team may not have enough knowledge or bandwidth to plan the engagement. You need enough expertise to support all the pre-engagement categories and build a core engagement team that will see the entire engagement completed. Using inexpensive resources can be forecast here as well, to increase profitability. It may still be necessary to access the experience and knowledge of other industry, content, or technical experience. The client may have significant security requirements that require some input from a specialist, for example. You will also need administrative support at this stage.

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The timeline for executing an engagement can be wide open for this discussion—anything from a month or two to multiple years in duration. Your organization plan must accommodate a lot of unknowns. For example, you do not know the detailed requirements of the engagement, nor the technology that will ultimately be used to build the solution. Members of your engagement team may get promoted, win the lottery, retire, quit, gain other interests, lose interest, or be fired. You will also need to accommodate ongoing client demands for special skills. Some resources may only be needed for a concentrated time well into the project. Other resources may be needed for a short time here and there, or on an ongoing part-time basis. Different team members have different demands, stamina, and work ethics. Resourcing Strategy To make all this work, you will need to have a flexible resourcing strategy that incorporates many different sources and can be scaled to your evolving needs. Some common sources include the following:


Internal consulting This is the bread and butter of consulting organizations. Internal, permanent consulting resources draw salary and benefits in exchange for charging out at a healthy charge rate. Many firms try for a profit margin of 30 percent to 60 (or more) percent on each billable resource. The overhead of maintaining permanent staff can be crushing if the practice utilization goes down. This is where some of the other sources are valuable for augmenting a core, high-in-demand, permanent consulting group for specific periods of time.




Contractors Contract resources are useful for scaling your practice in sudden times of need—either with additional resources or specific skill sets. Consider developing close relationships with independent contractors who have a proven track record for delivering quality, reliable service at a competitive price.




Offshore workers It is becoming a common practice to subcontract specific, well-defined pieces of work to companies in countries that have strong technical resources, but at lower fixed costs. Countries like India and China are popular choices for offshore work. However, any country that has a favorable exchange rate vis-à-vis your own currency

Pre-Engagement Activities

can provide cheaper technical resources. The challenge, which many organizations have overcome, is communication, management, and quality control. A strong methodology is required to pursue this route.


Vendors Another source of consulting expertise is to hire other consulting companies and software product vendors to provide expert advice on the engagement.




Internal operations Consulting organizations, especially the larger ones, have a core staff that is technically inclined, but dedicated to maintaining internal systems. In a pinch, it is possible to allocate some or all of their time to client work and get them over the work hump.

Depending on the strategy you choose, you should enter into legal agreements with the external groups that will protect both your interests. Figure 7-4 shows some of the major areas to cover in drafting a legal agreement. Keep in mind that using inexpensive resources in the project team offers an opportunity to increase overall profitability. Building the On the Web

Figure 7.4

Major components of a mutual non-disclosure agreement

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right external relationships offers a hedge against other project cost overruns. The type of organization that is ultimately defined depends very much on the nature of the engagement and the client. Building a Flexible Organization Being lean and mean is always a sound business objective. However, it is too easy to carry this goal too far. In an engagement crunch time, having few resources puts you in a lose-lose position overall. The consulting resources end up working around the clock and may quit, the client is not seeing enough progress, and you’re throwing money everywhere to keep the client happy. Building an engagement organization that has a certain degree of redundancy in the first place will allow you to scale the organization to meet future demands. Redundancy is required in terms of specific skill sets and the number of resources that can fill a role. You need to manage redundancy carefully. Rather than billing all the resources that are allocated to a project, keep the backup ones involved during meetings and documentation reviews, but have them working on another billing engagement. The 80:20 rule applies here: 80 percent of their time is billable on another engagement, while 20 percent is billed to an engagement that they can get involved in quickly if the organization needs to scale up. The following list identifies some of the key areas that require backup resources in IT projects to minimize risk and improve scalability. It is unwise to make any of these areas your weakest link on an engagement. These areas match up to the core team that was created in the pre-engagement kickoff organization.


Leadership You need an overall leader as well as strong team leaders. Always try to have two perceived leaders in front of the client—one on an everyday client management basis, the other as an executive.




Business Any IT solution must have a strong core business proposition. The business analysts involved in the engagement from the beginning will have the best chance of driving a solution that matches a client’s needs. Always have more than one business resource on an engagement to back up the other one.

Pre-Engagement Activities




Architecture/design An integrated architecture will have many distributed components, systems, and pieces. Just like the business requirements, you need to have at least one lead architect who can explain why things were done a certain way and can make adjustments when necessary. It is also valuable to have a backup to this resource.




Development Ensure that there is interchange across a team in terms of technical skills, the location of key files, and critical functions. It almost goes without saying that a multimillion dollar engagement cannot be dependent on a single developer—or any other resource for that matter.




Testing Usually underestimated no matter how much lip service is paid to its importance, the testing process, in terms of design, should start at this stage. This resource will not be fully utilized and may get pulled into another project before he or she is required. Have a backup from the beginning, if only to share the load in case they are both being utilized elsewhere before gearing up on the engagement.

Engagement-Specific Roles and Responsibilities Although there are many variables, titles, and approaches, a set of standard roles that are required on most IT engagements regardless of the technology, business solution, or methodology used can be defined. Based on the best practices of many consulting organizations that we have evaluated across all types of industries, we offer the following as a starting point:


Project manager (PM)/leader Manages the engagement or a stream of work if the engagement is very large. Can be the methodology expert as well.




Project coordinator Assists the PM with the administrative side of the business, including status reporting, timesheets, and issue tracking. This role is sometimes referred to as a project librarian or coordinator. This role requires a less expensive resource than the PM.




Business analysts Work with client users to understand and document business requirements for the solution being constructed.

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Modelers Use various techniques to model the business requirements, designs, and suggested solutions. Modelers are needed from both the business and technology perspectives.




Creative people Design meaningful user experiences, scenarios, and dialogues. Use words and images in their most effective way. Manage content in all types of solutions.




Architect/designer Builds application, technology, and data architectures and design using a variety of different methods based on the business requirements. May also produce a list of technical requirements.




Developers Translate business requirements (usually in the form of technical specifications) into usable code. Unit test all their work. May work with operations support to control versions of the software.




Database administrators Provide support in modeling the physical database, database security, coding database components, and database maintenance.




Quality assurance leader Periodically reviews project deliverables against consulting company standards to ensure compliance.




Testers Build testing approaches, test scripts, and conduct tests at the behest of the lead tester. Includes functional, integration, system, regression, and stress testing.




Operations support Manage versions of the application code, do backups, set up computers and software licenses.




Administrators Perform administrative tasks for the project team, such as setting up meetings and special events, orienting new team members, collecting timesheets and invoices. Also serve as fact checkers. Good administrators are hard to find and demand 1.5 times the industry salary paid to counterparts in nonconsulting organizations.




Desktop support Improve the appearance of deliverables and presentations. May also be used to provide editing support. This is a lower-cost resource.

In a particularly large IT engagement (many can be in the $20 million+ and 100+ resources range), you will need a much larger management

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structure. The following key roles, however, should be assigned for a project of any size to provide a clear channel of escalation of issues:


Steering committee In addition to the internal steering committee described earlier in this chapter, you should insist on having a client steering committee as well. They will be helpful in removing the many obstacles that always arise on engagements. It may be useful to augment your internal committee with a few more key resources, depending on the complexity and needs of the project.




Sponsors Identify a client sponsor who has ultimate authority for making decisions that affect the functionality, budget, timeframe, and resources at the client site. Ideally, this sponsor should be able to focus on priorities to support your project.




Directors Consulting organizations have an objective to support multiple engagements at the same client. It is useful to have an integrated reporting structure by having engagement managers reporting to a single director who can ensure consistency across all the initiatives.

Executing the Engagement Staffing an engagement requires you to bring specific resources into the team at the appropriate time. An initial cut at a detailed project plan is one of the deliverables that will be produced as part of the pre-engagement activities. This plan will be adjusted repeatedly through the engagement, so the original resourcing specifics may change, but the resourcing strategy should be more or less consistent. Staffing the engagement and finding the appropriate resources will be discussed in Chapter 8.

Engagement Objectives, Scheduling, and Other Early Details No matter how careful the dialogue between the sales team and the client in the sales cycle, there will almost always be discrepancies between expectations of both sides. The sales team wants to deliver the best value for the most fees offered, while the client wants the best value for the least fees possible. This leads to all sorts of misunderstandings, even in seemingly obvious situations. The engagement team must perform some “due diligence” to be on the safe side.

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Due Diligence on the Client It is useful to get to know as much about the client as possible, without violating any nondisclosure rules or ethics. For example, has the consulting firm done business with the client in the past? Were any proposals for work made, even if they were unsuccessful? Are there any acquaintances or colleagues working for the client who may be able to provide some advice? Understanding the objectives and hot buttons of the firm is helpful to both of you. As part of your own networking, check the client’s references. It may sound funny to say this because you’ve just spent a lot of money on the sales cycle. Ideally, most of this due diligence has already been done. Great, get the internal documents and do a little bit of verification. A call here or there to confirm the information is all that is needed. However, if the due diligence has been done, you are about to invest a lot more by starting the actual build cycle. One of the main lessons to understand about taking responsibility for a client engagement is just that: You are assuming full responsibility as soon as you begin to charge your time. Ensure that the sales team was not overly optimistic. It is certainly worthwhile to ask the following questions:


How does the prospective client treat its vendors?




Are any vendors serving the client on a long-term basis, and do they rate them as a preferred client? This can be in any capacity. For example, a water cooler company could suffice, if an IT vendor cannot be located. This will tell you how the client treats its vendors.




How soon does the client pay their bills?




Can the client afford to pay your invoices?

Having performed due diligence on the client quality, it is time to confirm the specific objectives of the engagement.

Confirm the Engagement Objectives This is a good time to strengthen your understanding of the business requirements of the upcoming engagement. The sales team typically works with a few key resources during the proposal process, however, the reality is that most organizations do take a very sales-oriented view initially. Since sales ratios are rarely 1:1—a sale for every attempt is rarely the case—the technical resources are usually too busy billing to

Pre-Engagement Activities

be entirely engaged in doing sales proposals. This means that there is always a gap between reality and what is being sold to the client. This gap should get smaller as the consulting organization begins to mature and build more consistent processes. For the purposes of the engagement, this is the appropriate time to remove ambiguities and misunderstandings. Do this by setting up a meeting with the client stakeholders and walking through an engagement charter with them. The charter should contain the engagement justification, objectives, and metrics on how the engagement’s progress will be evaluated.

Engagement Schedules Schedule is another area that requires modification. Entire engagement schedules are sometimes built for very strange reasons. For example, we have seen many engagements of $10 million or more built around the vacation schedule of a key sponsor. While the sponsor is important, this may not be a prudent driver for the 100 or so other project resources who may have to battle at night or on weekends to make the date. Aside from the unfairness, such a situation also tends to result in lower deliverable quality. Establish an engagement schedule by milestones and include explanations of why a date is important, along with a go/no-go decision date for each milestone and the criteria for making the decision. Also, identify the client and consulting resources who will make the decision. Doing this before any billable work has started on an engagement is a good time to establish less politically charged milestone dates from the perspective of the consulting group. The engagement team has not made any mistakes yet and so is free to argue objective dates that make sense based on work effort. Once the project starts, any changes to the delivery date, no matter how justified, will be significantly more difficult to argue without appearing defensive and without paying some sort of financial penalty. Don’t confuse objectivity with knowledge. The dates selected at this time may be done objectively, but without enough detailed knowledge to make good choices. This is where the go/no-go dates come into play. These dates should be established with the client up front to allow for a meaningful evaluation of the state of the engagement, with a provision to adjust the milestone date. Be clear on the factors that will allow the decision to be made.For,example,if x test cases have not been successfully completed, the milestone date will be shifted y weeks, with another

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go/no-go decision on date z. It is also ideal to arrange a financial agreement at this time that specifies how the additional time will be funded, by whom, and under what circumstances.

Secure Client Availability Build a client organization chart and identify all key sign-off points and project sponsor points. Get contact information for each client member. Get the sponsor to send out an appropriate message introducing you. You can actually draft it and have the client sponsor send it under his or her name—e-mail works fine. You also need to ensure the availability of key client resources for reviewing and signing off on documents in a timely manner based on the established milestone dates. Some of the groups whose time you need to reserve include the following:


Client sponsors




Business users




Information technology (operations, managers, security, database)




Executive assistants

Knowledge Transfer to the Client Another key area to establish expectations involves knowledge transfer, specifically mentoring and training. What are you expected to do in terms of teaching some of the resources to support the initiative after the project is done? What sort of knowledge transfer is expected? If a lot of knowledge is expected, you will need to add staff. Except in hands-on cases, transferring knowledge requires practitioner time that must be drawn away from engagement work.

Sign-offs Include the information gathered in this phase in the engagement charter, and get a formal client sign-off, or include this material in the appendix of a signed legal document. While investment in the sales cycle is a generally accepted expense, as soon as the delivery team gets involved, executive management has no appetite for misunderstandings. Without this signature, you have no defense against future misunderstandings.

Pre-Engagement Activities

Engagement Operations Engagement operations are a subset of practice operations. In most cases, operations, procedures, and tools should already exist to support an engagement. The goal of this activity is to ensure that the processes are actually being invoked. The following sections discuss some key engagement operations that need to be considered and potentially launched in this phase.

IT Infrastructure The consultants going to the engagement will require the following minimal support:


Computers If consultants have laptops (usually a good idea), they are pretty much ready to go to the client site. If not, the client may provide a desktop. Ensure that a login ID and password have been provided.




Voltage compliance If the engagement requires travel to a different continent, you need to ensure compliance with the electricity standard in that region. The power supply of any equipment your consultants carry should support the voltage in the regions of their travel. You may also need to purchase an extender, often available at airports, that connects the power supply to the socket.




Global connectivity You may need a separate connector, also available at airports, that attaches your modem connector to the phone systems of the foreign country.




Home office Consultants are on the road a lot and need access to the consulting group’s network 24×7. A high-speed home Internet connection is becoming a necessity.




Intranet Provide a central repository for all the deliverables and e-documents related to the engagement. Ideally, the repository is available on an intranet/extranet, but a directory structure, at a very minimum, will also suffice. There are too many cases where a project team loses critical documentation because it was stored incorrectly.




Cell phone Members of the project team who need to be in touch should have or be given a cell phone for the duration of the engagement.

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Global Travel Before you put your resources on a plane, consider all the different travel requirements and take the necessary precautions to keep the consultants safe while they are working away from home. Global travel is both exhilarating and exhausting. Your human resources (HR) department may want to assemble a checklist to help consultants deal with all the details of working in a foreign country. The following list shows some of the areas to consider:


Travel preferences Ensure that employees understand and agree that they will need to travel before they are hired.




Safety Implement a safety policy for consultants on the road. Which areas should they travel to? What inoculations do they need? How should they remain safe in a foreign country? Where will they get medical treatment in a hurry? Consider the unique needs of men and women.




Citizenship and passports Employees will need valid passports and specific citizenships depending on the country they are traveling to.




Working visas Some countries (like Canada) require a working visa that requires a formal, advance application. The HR department should build a repeatable process that will get consultants the documentation and permissions they need to work in a foreign country in a short time.




Travel expenses How will the consultants deal with travel expenses? HR may consider providing cash advances or corporate credit cards.




Travel reward Your organization may want to provide additional compensation for consultants working in a foreign country or office (called a pay subsidy) to compensate for currency differences or for the hardship of travel. Your HR department should also identify how consultants can join loyalty programs at hotels, car leasing companies, airlines, and others to maximize these benefits.




Home visit policy Agree on a program that allows team members to spend time in their home cities. Some organizations have what is called a 3-4-5 policy, which says something like three days at home, four days at a client are the equivalent of five

Pre-Engagement Activities

days worked. Essentially, employees fly out to the client on Monday morning and return home Thursday night.

Accounting From an accounting perspective, it is worthwhile to establish a billing process with the client outside of the ordinary process of an invoice going out and eventually getting paid. In some engagements, the most important role for a senior partner is to deliver an invoice and to stay with a client until a check is delivered into the partner’s hand. This may be extreme, but it manages an important process. Fees are the only major source of revenue for most consulting organizations. You may want to take a less drastic approach to getting paid. Begin by establishing an expectation with the client on the revenue flow. Figure 7-5 shows a billing process that ties the work done for a client with the invoice being generated. Don’t be shy about this discussion. Agree on the information to include on the invoice so that the client sees the value you are providing. Definitely include the name of a project. However, does the client also want to see the individual team member names included in the bill? How about their rates? How about their hours during the period being billed? Another interesting approach may be to include a list of deliverables that were completed during the period being billed. Understand how the client wants to see expenses broken out on the invoice. Is a single total line item sufficient? In many cases it is, because the client trusts the consulting organization to audit the expenses for themselves.

Figure 7.5

Billing process

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Figure 7-6 shows a sample invoice from a consulting organization that excels in building relationships with their clients. Notice the clarity of the message—we feel we provide value for the fees we are charging. You may also want to get into a discussion with the client on how you validate or internally audit the expenses and fees being charged to ensure that mistakes are not made. Getting paid in a timely manner from your clients has a direct impact on key practice objectives 4 (Average Billing Rate) and 5 (Accounts Receivable). Your consulting organization is incurring costs in providing a service, even if a client is not paying your bill. You are paying interest on capital until you get paid. Furthermore, a client that avoids paying your bills in a reasonable period of time may be unhappy about something. Growing your receivables in this case substantially raises your risk for not getting paid.

Human Resources The human resource function should be involved in the engagement and provided with all the requirements that are known at this time. On the Web

Figure 7.6

Sample invoice

Pre-Engagement Activities

They can begin to find candidates with the desired profile, negotiate for specific resources who are normally difficult to reserve because of a high demand on their skills, and occasionally, remove team members who are not meeting expectations. For starters, resources that are brought onto the engagement team should be provided with a coach on the team, asked to identify their personal objectives on the engagement (e.g., what they want to get out of this experience), and given an orientation kit containing the project charter, major deliverables, and other background information.

Contact Information You may suddenly need to contact a client who urgently wants to reach you. You may need to broadcast an urgent request to get information from every member of your extended team. Or you may need to call a key member of your team on the weekend. Each of these requires a separate contact method. As shown in Figure 7-7, contact information can involve any combination of the following: Name, Title, Office Phone, Cell Phone, Home Phone, Office E-mail, Private E-mail, Beeper, Fax Number, and Comments. But surely this information should be readily available; why should the engagement team need to worry about collecting it? Well, it is true On the Web

Figure 7.7

Contact information

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that it may be stored in a variety of systems, such as HR systems, internal contact lists, the corporate e-mail system, and the Customer Relationship Management (CRM) system. That’s precisely the problem. The information is all over the place. It gets outdated. If you are not the owner of the system, you may want to send the updates to the rightful owner, but may not want to wait for the change. Electronic copies may not always be accessible. You will find yourself in an airport or a taxi, unable to turn your computer on or having run out of battery power. You need a printed copy available to find that number you may not have programmed into your cell phone. You may be thinking, Why not print hard copies of the telephone directories maintained by the corporate systems? Great idea, if you can customize the lists and select the specific information you need. Otherwise, you certainly do not want to print a 15-page directory whenever a number needs to be updated. So why not store all the contact information directly into your personal digital administrator, or program it directly into your cell phone? This is great as a personal productivity aid, but the list should be shared with every member of the engagement team. A single, central contact list that is easy to update and easy to print is invaluable. This is a good time to begin compiling such a contact list. As this information is collected, you might also want to keep track of when not to call a specific contact. Some people do not want to be called late, on weekends, or on holidays. At some level, the consulting organization will need to develop a policy that protects some aspects of work/life balance. Aside from individual contact points, you’ll need to communicate with groups within the engagement team. For this, you may want to consider establishing some distribution e-mail lists and voice mail lists. You might want to start with the following distribution lists:


Internal engagement team The entire engagement team from the consulting organization.




Internal engagement management Private list that includes distribution to managers or leaders of the engagement from the consulting organization.




Internal engagement sponsors Private list that includes the consulting group sponsors for the engagement.

Pre-Engagement Activities




Engagement team The entire engagement team, including client resources. This will be a very large list.




Engagement management Private list that includes distribution to managers or leaders of the engagement.




Engagement sponsors sponsors.

Private list that includes all project

Best Practices What exactly is a best practice? This term is used generously by most IT consulting organizations when they describe their approach toward conducting business. “We use industry best practices” is commonly included in marketing literature and frequently mentioned during the sales cycle. Although there are several different definitions, let’s consider best practices to be a repeatable, proven set of processes that can be leveraged to produce predictable and excellent results. From this perspective, best practices are a reliable approach for reducing your client’s risk while improving your efficiency. Best practices can be bought from third parties, such as the Gartner Group, through books, seminars, and courses. As a consulting organization matures, it should begin to create its own set of best practices for different types of engagements in different industries. For the upcoming engagement, locate your previous lessons learned in a similar type of engagement. Review the deliverables, time estimates, organization lists, and other experiences. The upcoming engagement should be planned with these references in mind. Also, set the stage to add best practices from the upcoming engagement. Identify the information that should be collected for later reusability.

Documentation For the pre-engagement activities, the core team can expect several different documents to be provided by the sales team. These are the engagement letter/proposal, nondisclosure agreements, and a high-level project plan. A signature by the client shows that the engagement is real, and not anticipation on the part of the sales team.

Other Take the time to consider other activities that do not fit into any of the previous categories for the engagement in question. These could be

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unique details. Do your consultants need specific security clearances to work on the client site? Some organizations require thorough background checks before they allow consultants onto their premises. What sort of pass-card is needed to enter the client’s building after normal working hours? Here are some other questions you may want to consider at this stage:


How will the client judge my ongoing value?




Which client members should we wine and dine? When?




Are any of the key consulting resources in need of an immediate vacation? Is this a good time to make sure it’s taken?




When should the official kickoff meeting take place?




Is there anything else we are missing in the pre-engagement plan?




How do I provide the most value to the client and the client organization?

Closing Perspective The pre-engagement phase is an opportunity for an effective sales team–engagement team handshake. The sales team has a lot of information they can share with the incoming team. Similarly, the engagement team will play a significant role in future sales opportunities with this client and will be the strongest proponents of the sales team. The pre-engagement handshake between these two teams deals with the basic question of account ownership. Whoever owns the account determines how and what gets sold to the client. A key member of the sales organization generally stays in contact with the engagement after the sale. The two most important roles in the engagement are the leaders or representatives from each group. This approach will allow the engagement to be owned by the engagement team, while the sales team may also continue to own the account. An engagement consists of specific activities aimed at satisfying the needs of a client as well as a whole series of activities aimed at satisfying the requirements of the practice. Pre-engagement activities ensure that success is achieved in the other phases and serve to alert resource champions in the other phases about future expectations.

8 Starting an Engagement

S

andwiched between the pre-engagement activities and the full engagement lifecycle is a short phase we simply call “starting an engagement.” You want to accomplish several major objectives during this time, namely: communicate to all participants (e.g., establish a communications plan for various constituents and execute it), establish clarity in terms of scope and expectations, set expectations, and get buy-in from all the participants. You may have heard of buyer’s remorse—a feeling that many buyers get after purchasing an expensive item. It is a powerful negative feeling that they have made a mistake in their purchase. Consulting services are expensive, so use this phase to reinforce the value you bring to the table. The client will appreciate this. If you have completed the pre-engagement phase to your satisfaction, the activities associated with this phase will have short durations. However, their impact will be felt for the entire engagement and in the client relationship itself. No matter how carefully you plan and how many best practices you follow, there will always be obstacles, complexities, and surprises that you can resolve only if you have a personal relationship with the client. This phase begins to establish your mutual expectations and generally lasts for about a week or two.

The Engagement Lifecycle As shown in Figure 8-1, the engagement lifecycle is not the standard project development lifecycle. It is intended to guide the delivery of an engagement, which may contain several different initiatives, including projects. This chapter focuses on the first phase, while the subsequent chapters in this part of the book will examine the others. The phases in Figure 8-1 are described below. 167

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Figure 8.1

The engagement lifecycle




Starting an engagement Bring all the pre-engagement work that you have completed and officially launch the engagement. You should now be billing the client for your work.




Working multiple engagements Leverage knowledge, resources, relationships, and experiences from other engagements being undertaken for the client.




Maintaining engagement controls and techniques Incorporate processes for managing and tracking the engagement.




Running an engagement Leverage a set of methodologies to drive the outcome of the engagement.




Closing an engagement Close an engagement so that there are no misunderstandings and the client will consider you for additional work.




Risk mitigation Be aware of risks across all engagements for a client and continuously mitigate them.




Quality considerations Implement a process for ensuring the quality of work delivered to the client.




Legal considerations Perform standard due diligence and have the appropriate legal documents signed and on file.

Starting an Engagement

Figure 8.2

Relationship of engagement to projects

Engagements Are Not Projects Managing an engagement requires a different set of considerations than managing a traditional IT project. As shown in Figure 8-2, an engagement may include several projects. Subsets of an engagement may require that you follow pieces of the traditional development lifecycle. However, all the subprojects are governed by an engagement model within the engagement lifecycle.

Impact of Engagement Activities on Key Metrics As shown in Figure 8-3, engagement activities have a significant impact on at least 5 of the 12 key practice metrics as well as a contribution to 1 other. The “engagement start” activities impact these same metrics, but with an emphasis on client satisfaction, people resources, and risk exposure. The following list briefly explains how this phase affects the related metric:


Client satisfaction Establish and guide your client expectations in this phase. If you haven’t built up credibility with a client before encountering a problem, it will be too late. This is also the time to describe mitigation strategies for anticipated risks.




People resources Build an organization that accommodates the abilities, career goals, and availability of your engagement team.

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Figure 8.3

High-Value IT Consulting: 12 Keys to a Thriving Practice

Impact of engagement activities on the 12 key practice metrics

Involve your team members as early as possible in the engagement lifecycle.


Risk exposure Get all the risks and risk mitigation strategies in front of your client at this early stage, before blame becomes an issue. As soon as you formally start an engagement, you, the consultant, assume responsibility for the outcome.

What You Should Have from the Previous Phases A lot of work should be available at this point through the efforts of the consulting team in the pre-engagement phase. The team should be motivated and ready to hit the ground running. While the core engagement team is mobilized to deliver the engagement successfully, the sales team

Starting an Engagement

should now be focusing on selling additional services to the client organization without impacting the quality of the current engagement. Keep in mind that most of the work completed to date is generally focused on the consulting organization. Many members of the consulting team may not have visited the client’s premises yet or had any other points of contact. This phase gives you an opportunity to change that. The client organization must now be fully integrated in the process, whether you are delivering an SAP application, implementing a content management system, or providing a single resource to tune an Oracle database. The participants and amount of time spent on activities will vary with the complexity of the assignment. Coming into this phase, you will have access to some combination of the deliverables shown in Figure 8-4. These high-level categories contain a lot of detail. Sample templates are shown near the end of this chapter for a proposal, charter, legal documents, and organization chart. (Operations and governance are covered in Chapter 9.) Based on information you will gather during this phase, you can expect to modify the project charter and the organization charts. There may be some changes to the other documents depending on the results of your information-gathering activities. Modified versions of these documents will need to be approved or signed off by the client sponsor.

Figure 8.4

Early document flow

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Dangers of Skipping This Phase You may be tempted to rush into the full engagement in order to save time and avoid some of the subtleties of this phase. Don’t do it! Pleading ignorance after the engagement officially starts is far more expensive and painful after this phase is over. Above all, you will not have set client expectations to deal with problems that you are likely to encounter. Feel free to compress some of the activities or to limit the number of contact points. The techniques described in this chapter can be scaled back for a single person and will still provide value.

The Engagement Starts—Let People Know Figure 8-5 shows the basic process involved in bridging the pre-engagement and engagement activities. The engagement manager is working toward two major milestones in this phase: full kickoff meeting and official sign-offs. These processes are owned by the engagement manager, but shared extensively with the core management team.

Preparing for the Official Kickoff Meeting Figure 8-5 shows a number of resourcing groups or participants that will ultimately play a role in the engagement,as described in Table 8-1.The engagement manager and core team must focus their activities on involving these participants before the full kickoff meeting.

Figure 8.5

Process for starting the engagement

Starting an Engagement

Table 8.1 Engagement Participants and Touch-Points Contact Area

Key Involvements

Consulting group sponsors

Dedicate the consulting organization to the engagement and assume the risk of taking on the engagement.

Engagement team

Devote their time and energy to work on the engagement and deliver value to a client.

Client sponsors

Sign off on the project charter, pay the fees, and remove any obstacles to successful delivery.

Consulting managers

Review the quality assurance and risk mitigation plans throughout the engagement.

Client managers

Provide direction to the engagement team, manage client resources, and act as “champions” for the engagement.

Consulting resources

Provide specialized knowledge to the engagement per the engagement plan.

Client resources

Work as part of the engagement team in order to provide specific skills and knowledge of the client organization.

Other client divisions

Provide scope and timeline information that will be included in the engagement charter based on direct knowledge of their priorities and abilities to meet deadlines.

Subcontractors

Provide specific business or technical knowledge as well as their availability dates so that these can be included in the engagement charter and reflected in the schedule.

Third-party resources

Provide contact information and expert knowledge that will be included in the engagement charter.

As preparation for the full kickoff meeting, the core project team will want to conduct a series of discussions or workshops with all the different groups that are going to be involved in the engagement. For each of these discussions, you will need to review the document package from the pre-engagement discussions with the other parties shown in Table 8-1 and incorporate their suggestions into the package. The order and priority of your discussions is shown in Figure 8-6. The discussions and workshops are iterative in that you may have to revisit a group repeatedly and out of sequence until a consensus has been reached on the engagement charter, engagement organization, and engagement plan. An issues/risk list should be used to record items that require additional clarity, discussion, and resolution. Also, use this list to avoid getting into discussions on topics that cannot be resolved. Figure 8-7 shows the number of meetings or encounters that the core engagement team should plan to have before conducting the kickoff

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Figure 8.6

Priority of discussions/workshops

meeting. Notice that some of the resources should be in total agreement in order for the engagement to start with a reasonable chance of success. If the core engagement team and any of the groups in the 100 percent

Figure 8.7

Number of meetings and consensus needed

Starting an Engagement

consensus quadrant are in disagreement, we recommend using the risk assessment and issues list to clearly identify these areas of contention. These will need to be resolved before committing to the engagement. Notice the level of consensus you should consider building with the different groups before the kickoff meeting. The graph also indicates the number of meetings you should expect to have. This number will change from client to client, but the relative volume is consistent and indicated as High (five meetings or more), Medium (three to four meetings), and Low (one or two meetings). Depending on the extent of the disagreements you uncover, it may be necessary to postpone the engagement until the issues are addressed and agreement is reached. However, be selective in terms of what you are arguing for and with whom. There is no point in discussing rates with client team members. That is a discussion for the executive sponsors. Similarly, the scope of the engagement is a discussion for the client management and not for third parties. Some typical examples of disagreement include the following:


Scope What is in the scope of the engagement? What happens to out-of-scope items? Who decides?




Roles and responsibilities What are the roles and responsibilities required to deliver the engagement? Will these roles be filled by the consulting organization, the client, or other third parties? Are specific resources ready to be named to these roles? If not, when will this be possible?




System boundaries Where are the boundaries and ownership around a system? Who is responsible for passing what pieces of information and in which formats?




Acceptance criteria What criteria will be used to accept the system, who will interpret it, and when?




Penalties What is the penalty for nondelivery or missing an assumption?

Table 8-2 shows the key areas that should frame the contents of the discussion with the various contact areas. These should be customized for your specific engagement.

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Table 8.2 Key Discussion Areas Contact Area

Key Discussion/Agreement Areas

Consulting group sponsors

Engagement charter (especially budget, plan, risk assessment, and scope)

Engagement team

Engagement charter (especially scope), buy-in to the engagement

Client sponsors

Engagement charter (especially scope), change request procedures, priorities, roles, and responsibilities, identification of client manager(s), list of client resources available for the engagement, list of other client divisions that should be consulted

Consulting managers

QA plan, risk assessment

Client managers

Engagement charter (especially scope), buy-in to the engagement, issues list, roles and responsibilities

Consulting resources

Architecture, design, special requirements

Client resources

Engagement charter

Other client divisions

Engagement charter (especially scope and timeline)

Subcontractors

Project charter and engagement schedule

Third-party resources

Project charter, engagement schedule, key points of contact

Planning the Kickoff Meeting The purpose of the kickoff meeting is to bring the extended team together and get them focused on delivering the engagement. The information in this section can be customized for any size of engagement. If you are a DBA doing some Sybase tuning work, the kickoff meeting may be a face-to-face session with a senior DBA. However, if your IT consulting organization is providing several resources at some level of management, you will want to follow the information in this section more formally. Attendance Ideally, the meeting should bring all the players together in a boardroom, but set up a conference call if key participants cannot attend in person. Invitations should be sent to the individuals corresponding to Table 8-3. Topics In addition to the engagement details, the kickoff meeting is a good time to present logistical information so that everyone has the same data for the engagement. In addition to such things as the scope,

Starting an Engagement

Table 8.3 Kickoff Meeting Participants Contact Area

Participation at Kickoff Meeting

Consulting group sponsors

One or more representatives depending on the size of the engagement

Engagement team

Entire team

Client sponsors

Entire team or strongly representative

Consulting managers

Entire team

Client managers

Entire team

Consulting resources

Entire team

Client resources

Entire team

Other client divisions

Representative

Subcontractors

Entire team

Third-party resources

Representative(s)

timeline, and organization, the topics for the kickoff meeting should include the following areas:


Status meeting Frequency and time of regular status meetings.




Status report What information is required from the team leaders, at what frequency, and when is it due? Identify who will assemble the final status report and circulate it to the team.




Individual contact information Office phone, home phone, cell phone, and e-mail contact information of each project member.




Group lists Several group mailing lists for e-mail and voice mail are useful. You should consider having the following lists for both communication methods: entire client and consulting team, client and consulting management, consulting management only, consulting and client sponsors, and consulting sponsors.




Timesheets Expectations and tools for timesheet entry; regular working hours.




Vacation policy Notice and guidelines for taking vacations during the engagement.




Physical location

Engagement facilities.

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Meeting Logistics With all this in mind, an agenda should be sent to the proposed invitees with a location and time for the meeting. The meeting should last from one to five hours, depending on the prospective agenda. Figure 8-8 shows a sample agenda that can be used for an engagement kickoff meeting. Include a cover letter and other documentation that will be discussed at the meeting. Delivery can be by e-mail, hard copy, or both. Running the Kickoff Meeting The kickoff meeting should be facilitated by combining the efforts of the engagement manager, client manager, and some members of the core team. Timekeeping during the session must be strict and according to the agenda, otherwise the meeting may spiral out of control and over the allotted time. This may create negative feelings that harm the potential success of the engagement. Use this opportunity to promote client buy-in and instill an overall sense of ownership in the growing engagement team. Issues that cannot be reso3lved in an allotted period of time should be included on the issue list for subsequent resolution. It is vital for the presentation to demonstrate the solidarity of the combined engagement team to the other meeting participants. Avoid anything that will jeopardize this display of unity.

Figure 8.8

Sample kickoff agenda

Starting an Engagement

Figure 8.9

Rules of conduct

You may want to post some rules for all the meeting participants to follow. These could contain the items shown in Figure 8-9. Assign someone to record decisions and changes during the meeting for later inclusion in the engagement documentation. Post-Kickoff Activities After the kickoff meeting, the attendees will be waiting for action. Sending a thank-you note to everyone who attended the kickoff meeting can be done immediately to reinforce the engagement. An example is shown in Figure 8-10. All feedback collected during the session should be incorporated into the engagement documentation and redistributed to the meeting attendees.

Getting Sign-Offs After the kickoff meeting, you have one last chance to ensure that all engagement participants are on the same page. This involves redistribution of the key project documents to the key stakeholders, giving them a chance to review them, and asking for their approvals or formal signatures.

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Figure 8.10

Sample thank-you note

Figure 8-11 shows a sample sign-off form that you can put on the front of the documentation package. If a formal signature is not required because the client has already signed the proposal and does not want to sign further documents, you may want to leave the signature lines off the form and just send the documentation along for review with a note to indicate that the engagement team should be contacted in the event of mistakes or omissions in the documentation. Since this is the final version of the documents before the engagement cycle officially begins, you should consider sending printed copies to the participants who are required to formally accept or sign off on them. E-mail versions to everyone else should suffice. It would be great if all the required sponsors signed the documentation at this stage by the date requested. If this does not happen, you will need to follow up until a signature or formal approval is received. The consulting organization may be liable until this is received, and you could lose a lot of revenue if the engagement does not proceed for some reason.

Starting an Engagement

Figure 8.11

Sample sign-off form

Sample Templates There is no single “correct” appearance for the documents (“deliverables”) used in an engagement. In fact, some factors other than the look and feel of the document are just as important, or even more important: Is the document easy to read and




Ease of understanding understand?




Ease of use Is the document easy to build? Is the document actually being used?




Consensus Have the team members agreed to a standard appearance?

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This section provides samples for some the deliverables expected to be used in the engagement start phase, as shown in Figure 8-4.

Sample Proposal The engagement proposal is an important legacy document because it captures the original understanding of the team that sold the engagement as well as the team that bought the services. For the most part, the original proposal, once executed (signed) is not changed, but it could be amended from time to time. Figure 8-12 shows the outline of a sample proposal that is easy to build and understand, and has been used to win millions of dollars of business.

Figure 8.12

Sample proposal

Starting an Engagement

Sample Engagement Charter The proposal provides a first cut of the content that is put into the engagement charter. The engagement charter becomes the most important document after the proposal has been signed off. This document provides the details of project objectives, timeline, resources, issues, and assumptions. The charter is presented at the kickoff meeting, subsequently updated, and then approved again. Figure 8-13 shows the outline of a sample engagement charter that has been used for small to very large engagements.

Sample Legal Documents Figure 8-14 shows some of the standard legal documents you should inventory at this stage of the project. It is important to note that any

Figure 8.13

Sample engagement charter

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Figure 8.14

Sample legal documents

legal documents you use for your consulting practice must be approved by your own lawyers. The law is always changing and has a lot of subtleties that differ from jurisdiction to jurisdiction.

Organization Keeping track of the roles, responsibilities, and resources on engagements becomes a challenge as the number of touch-points and other complexities increase. Figure 8-15 provides a sample organization

Starting an Engagement

Figure 8.15

Sample organization chart

chart that combines roles and hierarchy and is useful for mapping client and consulting resources to functions they are going to perform.

Closing Perspective The “starting an engagement” phase officially launches billing activities on the engagement. While you may or may not bill the activities in the pre-engagement phase—as specified in your contract with the client—the engagement start phase begins to generate revenue for the consulting organization. This phase is crucial for building buy-in from participants in the engagement. Buy-in means that individuals believe in the value of an engagement and are committed to its success. This is as important as the skill sets and knowledge that participants will bring to the

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engagement. Buy-in by client resources is especially important because they will inevitably have key pieces of information that will be needed by the project team. Given the competing priorities most knowledge employees have, without their buy-in and active participation, the engagement team may get involved in unnecessary or counterproductive activities. In addition to buy-in, this phase allows you an opportunity to build your credibility. It is always easier to build credibility in the eyes of a client before problems are encountered on a project. Many problems can be resolved with directed effort, but without credibility, the client may not even give you a chance to improve a situation. Successful outside consultants provide leadership to clients during engagements. Although the client is the final decision maker, they are often satisfied to trust your judgment and recommendations if you give clear explanations and information, and follow the correct processes. Providing leadership in this phase establishes a precedent that will last for the remainder of the engagement.

9 Maintaining Engagement Controls

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inning the business or the engagement is an initial challenge for the consulting organization to overcome. The next challenge is to successfully deliver the engagement and to grow the business. The key to doing this is staying on top of the engagement and managing it proactively. The moment this is lost and the consulting engagement team becomes reactive is the moment that lack of profitability sets in. This is when a client begins to hedge bets and wonder if another vendor would not be able to perform a better job than your organization. Reversing this spiral costs effort and money that comes from the bottom line of the consulting organization. This chapter describes a set of controls and techniques that can be used to monitor an engagement and make appropriate adjustments before a problem becomes a crisis. As shown in Figure 9-1, these controls are in effect until the engagement is completed and closed. Managing an engagement by crisis is a losing proposition, and these controls will help you to avoid following this path.

The Thin Wedge of Profitability Figure 9-2 shows the slim profit margin that must be protected on engagements. It doesn’t take much to reverse the two lines and begin to bleed money all over the place. Furthermore, the relationships between expense growth, revenue, and profit are not straightforward. For example, a dollar of expense does not necessarily yield a “dollar + x” of additional revenue or profit. This is because of the way fully loaded expenses are structured.

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Figure 9.1

Maintaining engagement controls and techniques

Figure 9.2

Thin profit wedge

Maintaining Engagement Controls

Fully Loaded Expenses Fully loaded expenses take into account all the costs associated with an employee. Some of these are relatively fixed for a specific number of employees, some increase at a slower rate as the number of employees increases, while others are more or less incremental. Figure 9-3 shows a typical relationship between the price paid for rent and the number of employees that can be serviced. As the graph shows, spending a certain amount on rent can provide you with the capacity to support a range of employees. For example, paying “X” for rent provides you with the capacity to support up to 40 consultants. After these consultants are hired, more space is required and leased. Assuming that we can now ask for a bit of economies of scale from the building owners, we lease an equivalent amount of space (original lease X + newly lease X = 2X) but ask for and get a discount, “Y.”Furthermore, you also want to find a way to efficiently organize working areas and get more consultants to work on client premises, so you are able to support 10 percent more employees. Therefore, for a price that is just less than twice the original rent, you are able to support just over twice the number of employees. This approach allows you to squeeze a little more margin or potential profit out of the practice.

Figure 9.3

Optimizing rental costs

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In general, plan to optimize your expenditure on physical space by building a practice that supports the most employees for the least amount of rent. Around the thresholds, you could easily lose profit when you rent more space but only hire a few employees. You are then in a situation where you are paying an undesired premium for your premises.

Controlling Revenue Growth The revenue equation, though simpler than fully loaded expenses, still has several factors. Revenue can be increased in several ways, as shown in Table 9-1; however, each approach has advantages and disadvantages that should be assessed to meet your objectives. The table also provides a mitigation strategy to reduce the negative impact of the approach.

Table 9.1 Strategies for Increasing Revenue Strategy

Comments

Impact

Increase chargeable rates.

The math is straightforward.

Client may start Sell your value. looking at other vendors to cut costs.

Increase number of chargeable consultants.

Will increase the size of the team.

Will increase the cost base.

Hire some resources on contract so the cost base increase is temporary.

Have consultants bill and charge more hours.

Longer workdays.

Employee burnout.

Offer them time off later, or provide some rewards that split rewards with them.

Complete fixedprice engagements sooner.

Completing an Quality may suffer. engagement in fewer hours effectively raises the chargeable rate.

Maximize the Be clear on what is Client may feel nickel number of activities billable to the client. and dimed. charged to the client. Do not give valueadded work away. Sell higher-margin business.

Mitigation Strategy

More focus on the testing phases and greater involvement of the client during sign-off. Give back nonfinancial favors to the client (e.g., get them featured in a trade magazine).

May focus your firm You may become Continue to market on specific parts of known only for doing your capabilities in the engagement that type of work. other areas as well. lifecycle only.

Maintaining Engagement Controls

Table 9.1 Strategies for Increasing Revenue (continued) Strategy

Comments

Impact

Mitigation Strategy

Bundle services.

Combine several related services and sell based on their value.

You may be seen as wanting to sell anything and everything.

Ensure that the service bundling is intuitive and sequential (e.g., strategy and planning).

Maximizing the Gap Some revenue-generating approaches are ideal for pumping up volume for specific time periods. However, their impacts, such as employee burnout, eventually harm the organization if the approach is followed for an extended period. A wiser growth strategy is to balance these approaches over time and keep focused on the fundamentals of business management using controls on engagements. There are some things you want to increase and some that you want to decrease, as follows:


You want to increase Number of clients, quality of clients, client satisfaction, number of chargeable employees, size of engagements, backlog




You want to decrease Overall expenses, number of unprofitable clients, turnover of strong resources, unsuccessful implementations

In essence, you want to build the least expensive infrastructure to support maximum client billings with minimal risk and built-in scalability while satisfying clients. These are a lot of moving parts.

Controls With so many moving parts on engagements, controls are needed to protect the fragile profit line shown in Figure 9-2. Controls are intended to provide structure during an engagement. However, their implementation, as with most things, can have both positive and negative impacts. At their best, controls can help you achieve the following:


Check current status Gives you a recurring view of how an engagement and a business are performing.

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Provide clear guidelines Identify resources available to consultants and under which circumstances.




Take corrective action in a timely manner Provide an opportunity to fix a problem before it becomes severe or permanent.

At the worst, when misused, misapplied, or misinterpreted, controls can have the following negative impacts on an engagement:


Add unnecessary work Controls can waste a lot of time. Do you really want a highly paid consultant filling out a form to buy a couple of pencils?




Make your company’s internal process the client’s problem Controls are for your organization. They should not cause a client to do unnecessary work.




Focus on the wrong things You don’t want consultants, who work for $400 an hour, worrying about how to expense a $40 textbook they need so they can answer a client’s question.




Provide disincentives One organization implemented a quality system that basically required a half day to set up a new engagement. Pretty soon, senior managers were no longer accepting engagements for less than $10,000 in fees because it wasn’t worth the hassle to set them up. This was an unintended consequence that was not helpful to the business.

Scope Control When you enter into an engagement with a client, you must have a signed contract that clearly specifies what you are expected to deliver, when, and how much you will get paid. Scope control always affects delivery time. Obviously, the smaller the function set, the faster it can be delivered. However, when a project is fixed price, your profitability also depends entirely on scope control. It is generally in everyone’s interest to make engagement requirements as clear as possible and to maintain tight control over what is included, and not included, in the price. An item that is not included should be put through a change control process, as shown in Figure 9-4. Here the Request for Information (RFI) or the Request for Proposal (RFP) defines the set of requirements that the client wants your solution

Maintaining Engagement Controls

Figure 9.4

Change request process

to support. These are clarified and included in a formal business requirements document when the engagement begins. Requirements identified by the client after the project starts that are not included in the business requirements document are out of scope. They need to be documented, assessed, and accounted for separately so that the engagement’s original scope is not impacted without the formal approval of the engagement sponsor(s). Evaluate all functionality requested by a client that is not in the project plan against the project charter and business requirements. If the requested functionality is not in either of these documents, it is out of scope. The request is then typically documented, and the client and consultant determine its priority, impact on the existing engagement, and cost of providing it. Based on this information, the client may accept the

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functionality and agree to pay additional fees for it. Figure 9-5 shows a sample form that can be used to capture change requests. A master index can also be used to track the status of all change requests considered during an engagement. Change requests are an excellent vehicle for protecting both the client and the vendor. A process should be documented in the project charter to avoid future misunderstandings. The client will naturally want every piece of functionality to be in scope, especially on fixed-price projects. The consulting organization will want a limit on the scope of functionality to be delivered. These two opposing forces can cooperate by relying on a clear process to determine a resolution. Change request processes have been known to more than double the fees (and profits) that were signed off in original project budgets while maintaining a happy and satisfied client. You must use this process on all engagements.

Management Controls Regardless of how straightforward an engagement may appear or how well things are proceeding, always put two management controls in place: a status report and a status meeting. These tools are invaluable in resolving misunderstandings and discovering errors before they become severe. This section also examines a few additional management controls.

Status Reports A common comment we hear about status reports is, “We do real work and don’t spend our time building useless documentation.” Nobody wants consultants to build useless documentation; they should do real work. However, status reports are real deliverables and very useful. No matter how well an engagement appears to be going, status reports should be completed on a regular frequency, such as weekly or biweekly. People get busy, they forget decisions were made, and things get mixed up. Status reports provide a record of the changes made during an ongoing engagement. Status reports represent you when you are not at a client’s office. If your client has any doubts about the value you provide, the status report should be enough to convince them otherwise. Your client can also show the status reports to other people in the organization to justify the ongoing fees you are earning. Clients, just like employees,

Maintaining Engagement Controls On the Web

Figure 9.5

Change request form

move around from time to time. Your client may get promoted or leave, and the status reports collected until that time will represent you with your new boss. You can format a status report many different ways—one is not necessarily better than another. But once you settle on a format, use it consistently. Let’s look at some of the important pieces of information that a status report should contain:


Heading information Your company name, status period, and who to call if there is a problem on the report. This will usually be the engagement manager, with a phone number and e-mail address. An engagement status indicator, such as a color, is also useful to indicate at a glance whether the engagement is on track or in trouble.

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Work completed A list of activities completed in the reporting period.




Work planned for the next period Activities planned to be completed during the next reporting period.




Work that was planned List of activities that were planned to be completed, but were not.




Financial update Summary of the engagement budget and other pertinent financial information.




Key decisions that were made List of key decisions made by the combined project team that need to be remembered.




Outstanding issues List of outstanding issues and their current status. We’ll look at the common information to include in an issue log below.

Figure 9-6 provides a template containing headings you may want to include in your own status report. Information should be gathered from the individual team leaders or team members and then compiled into a final status report by the engagement manager. It is helpful to distribute the status report on the same day each week—say on Monday. Distribution can be done through e-mail and hard copy. A copy of the status report should also be stored in the project document repository. It may be useful to generate several types of status reports at different frequencies for different audiences. For example, a short version of the status report can be generated on a weekly basis, while a more comprehensive version can be built once a month for a detailed walkthrough with all the engagement stakeholders. Use meaningful filenames to distinguish between all the different status reports that are created for a typical engagement. General examples might be “engagement name status report date LONG. Doc” and “engagement name status report date SHORT.Doc.” For a specific engagement, this could translate into “Braxton DBAtuning STATUS jan 15 LONG.doc.”

Issue Logs A lot of issues keep popping up on engagements. Some are real, others are fleeting. Some are brought up and then dismissed because they are not really a problem—only to be raised again. An issue log that contains

Maintaining Engagement Controls On the Web

Figure 9.6

Sample status report

all the issues ever raised during an engagement, their status, and their disposition/resolution must be maintained. Figure 9-7 shows the type of information to capture in a central issue log.

Status Meetings Regular status meetings are another control that should be put in place whether they seem to be needed or not. By the time you realize that an engagement actually needs a regular status meeting, you’ll be in catch-up mode. It is better to recognize this value up front and leverage it for the entire engagement. Like status reports, status meetings are often met with comments like, “Let us get on with our work, not spend our time attending meetings.”

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On the Web

Figure 9.7

Sample issue log

Well-executed status meetings will never be a waste of time. In order to make them successful, keep the following guidelines in mind:


Frequency Status meetings should be conducted on a weekly or biweekly basis. Consider having them on a more frequent basis during difficult times on an engagement.




Audience Include all the resources from the client and the consulting team that are responsible for making things happen on the engagement.




Length Be flexible to keep status meetings relevant. One hour is a reasonable timeframe, but allow an adequate amount of time to cover the topics that the engagement manager needs to discuss. If this is only a few moments, use the meetings as a touch-point. Cover the topics and let the team get back to work. Don’t keep them there simply to fill out the hour.




Facilitation Respect everyone’s time. The meeting owner should have a clear agenda, preferably collected and assembled before the meeting, and keep the meeting on topic and moving

Maintaining Engagement Controls

along. A meeting with no agenda gives the impression of wasted time. Figure 9-8 shows the format for a sample meeting agenda.


Review of management controls One of the agenda items should be a review of the most recent status report, engagement plan, and issues list.




Accessibility Everyone on the invitation list will not be able to attend every status meeting in person. It is useful to set up a regular teleconference that off-site team members can dial into in order to attend some portion of every meeting.

Documentation Sending out a summary of the meeting’s discussion not only demonstrates to the attendees that their time is valuable, but also leverages the information discussed in the meetings. You may want to send a draft of a weekly status report before the meeting, capture the changes during the status meeting, and then send the final version after the meeting. An alternative is to have one of the attendees keep minutes and send these as well. How can you tell that the status meetings are successful? You can always ask the participants for feedback after a month or so of status


On the Web

Figure 9.8

Sample status meeting agenda

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meetings. But don’t ask, “Are these meetings useful?” Phrase the question in terms such as, “What else can we do to make the meetings more useful?” You will find that even the toughest critics eventually start to rely on the regularity of these status meetings to discuss their own issues. That’s one way to know that the meetings are making a difference.

Engagement Plan and Schedules The engagement charter contains a high-level plan or schedule that can be updated with details as they are planned or as they become known. It is worthwhile to update the plan and include it with the status report so the team can see their progress. Resourcing at the activity level is another useful piece of information that should be regularly updated on the schedules to keep it as tight as possible.

Management Meetings Engagement sponsors, stakeholders, and senior managers from both the client and the consulting organization should attend management meetings. The agenda generally covers topics that may be confidential or controversial. An example might be the performance of a team member or the chemistry between some resources. Other topics could include financial incentives, penalties, and payments. Management meetings may not be necessary at the start of an engagement, but when deadline pressure begins to build, they often become imperative. Have them as often as necessary. Once a week is a good starting point.

Financial Controls This section examines some of the financial controls that are needed to protect engagement profitability. These can be divided into two broad categories, namely consultant expenses and team expenditures, as discussed next.

Expenses Consultants incur expenses in the normal course of doing client work, looking for client work, or doing work for the consulting organization itself. Some of these may be eligible to be charged back to the client. Establish a clear policy that identifies what is a valid business expense, under what circumstances, and to what limits. For the purpose of this discussion, we’ll examine expenses in the context of those billable to a client or those billable to the consulting organization.

Maintaining Engagement Controls

Corporate Expense Policy A consulting organization should begin with a documented corporate expense policy that is available both online and in printed form, and is distributed to consultants who may incur expenses in doing their duties. A surprising number of consultants don’t read expense policies, thereby depriving themselves of leveraging legitimate expenses, or causing someone in accounting a lot of aggravation in removing items that should not be expensed in the first place. The following list describes some areas to consider in drafting a corporate expense policy:


Credit cards Should consultants use their own credit cards and submit expenses? Should they use a corporate credit card and submit expenses? Should they use a corporate credit card that is automatically billed to the company? Each option offers pros and cons that must be weighed.




Per diems Who needs per diems? Consider at least four categories: breakfast, lunch, dinner, and sundry. Perhaps something in the range of $10 for breakfast, $10 for lunch, $20 for dinner, and $5 a day for sundry/incidental items (e.g., newspapers, movies). You also need to consider the currency (e.g., local currency where the consultant is working).




Expenses incurred Senior consultants may want to expense their actual costs. Determine the level and conditions to allow this to happen.




Authorizations Who needs to authorize an expense, either before or after it is incurred? Two management-level signatures are often required.




Expense categories What are the eligible expense categories (e.g., travel) for reimbursement? Set up specific codes within each of them (e.g., taxi, air). (See Table 9-2.)




Reimbursement How long will it take for reimbursement? Specify the period of time that it normally takes to process expense forms and to make the money available to the consultant.




Documentation How much documentation is required to justify expenses? A copy of the original receipt with a note on the purpose of the expense, who was involved, and the location

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is standard practice. Expenses that are less than a certain amount (say $10) may not require an original receipt. Table 9-2 contains some of the broad expense types that many consulting organizations build their policies around. You can customize these for your specific needs. Each type contains a set of expense codes that further identify the expenditure. Expenses Billed to Clients For expenses billable to a client, get a copy of their expense policies and adopt those unless they will create undue hardship for the consultants (or spoil them with luxury). Expenses incurred by consultants while serving the client should be sent to the consulting head office at regular intervals. This means submitting a completed form and expense receipts to the accounting group of the consulting organization. Many clients do not expect or want to see receipts for billed expenses, but they may ask to see them from time to time, so the accounting department should have them available. Clients generally expect consulting organizations to audit expenses before invoicing them. It is a good idea to have an internal audit process, even if it only involves random checks, to ensure that mistakes are not being made in filling out the expense forms. All it takes is one questionable charge to destroy a lot of trust. Table 9.2 Expense Types and Expense Codes Expense Type

Expense Codes

Travel

Flight, taxi, mileage

Lodging

Hotel, motel, room and board

Entertainment

Movie, theater, amusement

Meals

Travel meals, training meals, client meals, general meals

Telecommunications

Cell phone, Internet connection

Parking

Parking

Training

Internal course, external course, internal seminar, external seminar

Learning

Books, magazine subscriptions

Professional memberships

Certifications, dues

Business supplies

Stationery, information technology

Other

Specify

Maintaining Engagement Controls

As difficult as it may be to convince some consultants to do, a description indicating the purpose of the expenditure and who was involved must be included with every receipt. This takes a lot of time and effort if the receipts are batched and dealt with after the fact. However, the process is straightforward if consultants get into the habit of doing it right away. It is also required for tax purposes. I’ve known consultants to build up a backlog of receipts over a period of several months, which can lead to outstanding amounts as high as $15,000 or more. Don’t expose yourself to this kind of liability. You can’t bill the client until the consultant fills out the expense form. Have consultants submit their expenses within periods of a week or two—no longer than a month. For busy consultants, this also makes the time required to fill out the forms fairly short. There are many automated systems that manage the expense process for professional services firms. These provide everything from templates to web delivery. Most of them use some variation of the form shown in Figure 9-9. On the Web

Figure 9.9

Sample expense form

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The consulting firm can reimburse consultants by direct deposit or paper check. As the policies are being built, keep in mind that consultants appreciate receiving their expense checks before the credit card payments become due. Expenses Billed to the Consulting Organization Consultants also incur expenses that are not directly billable to a client, but are of value to the consulting organization, the consultant, or the client. The corporate expense policy should include provisions for handling these types of expenses as well. Examples include telecommunication capital costs, entertainment for clients, and entertainment to gain more engagement work. It is sometimes not good manners to ask a client out to lunch and then to expense them for it. Expenses Incurred by the Consultant Consultants may incur expenses that are not billable to either the consulting organization or the client, but some jurisdictions may provide specific tax incentives (e.g., certain training courses, automobile costs, home office). The consulting organization should consider identifying these for consultants to leverage at tax time. They vary dramatically from state to state and country to country.

Team-Level Expenditures Engagement managers should be given latitude to invest in or reward their teams. This is imperative for morale and team building. Some of these expenditures may be billable to a client. As mentioned earlier, align these with the expense policies set forth by the client. Some team-level expenditures to evaluate are as follows:


Team events Taking team members to dinners, shows, and other forms of entertainment after normal working hours. Clients should be invited to these events.




Team lunches Going out or having lunch brought into a working meeting—called “lunch and learn” sessions.




Rewards Giving gifts for, say, less than $200 in value, to team members who have performed particularly well or done something above and beyond normal duty.




Time off Giving time off to employees who have worked overtime. Note that time off for overtime essentially transfers

Maintaining Engagement Controls

revenue from one period to another. Most consulting firms consider a 1:1 trade for overtime hours worked beyond a certain number.

Resource Controls A lot of conflicting emotions and ideas emerge when examining resource controls. Resources on engagements generally do not like filling out timesheets, while those responsible for tracking revenue are fond of them. Resources generally do not like to be swapped on and off projects in short time periods, while those measuring profitability want to minimize any unnecessary costs to the project. Sales staff may want the best resource dedicated to an engagement, while other engagement managers will want the same “star” resource.

Resourcing Strategies The resourcing strategy is generally established in the pre-engagement planning phase. Controls are required to ensure that it is followed consistently for the duration of the engagement. Consistently track the following information:


Subcontractors Pay subcontractors 1:1 for hours that are billable to a client. This means that there is a built-in profit on all of their working hours. Time that a subcontractor works but is not billable to a client should not be payable. Include this condition in the subcontractor’s agreement.




Permanent resources Reserve permanent resources for specific time periods on the engagement. Resources in high demand may need HR assistance to ensure that another engagement does not snap them up. With many competing engagements in a consulting organization, an engagement manager should get a commitment from executive management that the desired resources will be available when they have been reserved.




Spikes in demand Establish a policy to find resources with specific skills in a short timeframe under crunch-time pressure.




Vacation policy Establish a vacation policy that identifies the amount of notice needed, the maximum block of vacation allowed, and the authorizations needed for approval of a vacation request during the length of an engagement.

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Orientation Establish an orientation package for all resources that come onto an engagement to reduce their ramp-up time.




Skills/training Establish the level of skills and training required of specific roles before the resources come onto the engagement.

Billable Utilization While the number of hours consultants spend working is an important measure of their drive, value, and initiative, it is the number of billable hours that have a direct impact on the revenue and profitability of an engagement. Determining Billable Time We’ve already said that you need a clear policy to identify which activities are billable to a client and which ones are not. In practice, this is not always clear cut. Generally, all activities that add value to a client should be considered billable to them, but several activities fall into a gray area. Table 9-3 presents common activities and considerations for drafting a policy, along with our suggestions for best practice. Determining Billable Locations Consultants are generally in a “have laptop will travel” mode. This means that they can be doing value-added work from just about anyTable 9.3 Billable Considerations Billable or Not

Considerations

Suggestion

Training

Is the training course specifically for this client? Will there be value on future engagements with other clients?

Normally should be billable.

Travel

Was work done for the client during the travel?

Normally not billable.

Overtime

Are you locked into a per diem rate or an hourly rate?

Normally should be billable.

Meetings

Did the meeting add value to a client? Was the meeting intended to sell more business to the client?

Normally should be billable.

Lunches

Was the lunch intended to build a relationship?

Generally no, although you may get the client to pay for the lunch.

Maintaining Engagement Controls

where—home office, consulting office, and client premises. Your policy should state that work done in these types of locations is chargeable to a client. The policy also needs to be communicated and agreed to by a client. Ultimately, it is up to the client to accept or reject this practice. Capturing Time Many consultants see accounting for their time as an enormous chore. In some cases, this may be an accurate observation. Consulting organizations should make this process as efficient as possible. Many web-based applications can automate much of the work. Consultants should enter their time as frequently as possible to maintain accuracy. Submitting completed timesheets on a weekly basis to the head office is a good target. Generally, a consulting organization needs to establish a cutoff time when all employees must submit their timesheets, wherever they may be. This way, accounting can generate utilization and revenue reports early in a week to track how the organization is doing. If even one consultant does not enter his or her time, the results are skewed. Figure 9-10 shows a process for capturing time based on a weekly cycle. Notice that On the Web

Figure 9.10

Process for time capture

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consultants have a couple of days to submit timesheets to the head office. While they are doing this, they should also identify their availability for the coming weeks so that resource availability reports can be generated. A common practice is to generate a report on the morning of the cutoff period and to remind all the consultants who have not yet entered their time to do so. We know of one company that threatened to fire consultants who did not make the deadline. While this was effective in getting 100 percent compliance, it reduced morale to the point that some resources left the company. We recommend a firm approach, but far short of this threat—perhaps a lower performance grade at review time if more than three timesheets are late. Getting the senior partner or executive vice president to make a personal call to the consultant is also an effective remedy.

Closing Perspective This chapter examined several types of controls to ensure that an engagement remains profitable and effectively resourced. Additional controls for risk mitigation, quality management, and standards are discussed in subsequent chapters. Controls are tools that must be used in the proper way to get the desired benefits. Ineffective use of controls can cause unnecessary overhead and team morale problems. Streamlined financial and resourcing controls, whose importance can be properly explained to consultants, provide the optimal value.

10 Running an Engagement

T

he activities preceding this point of the engagement lifecycle, if completed correctly, significantly reduce the risks associated with running the engagement. You should have a detailed project charter, a timeline, a risk assessment, and a list of all the key stakeholders involved in the engagement. The engagement team must focus on proactively staying ahead of obstacles that could arise in the future, while successfully delivering the engagement solution according to the business requirements in the engagement charter. At the same time, you need to be flexible, consultative, and adaptive, as issues and obstacles inevitably arise. As shown in Figure 10-1, this chapter focuses on the major activities related to delivering the engagement. The client may be retaining you for only a portion of these activities, in which case you can adapt your engagement plan to reflect the reduced scope. You may also be able to complete the piece of the engagement the client has ordered and then provide proposals for follow-on work if the client needs it. The key to a well-executed engagement for a consultant is learning how to successfully interact with and manage the client. Only by staying ahead of the client, letting them know what they really need, showing them how to prioritize, and regularly providing them with competitive analysis, can you hope to build the relationship and respect necessary to deal with the complexities of many engagements. All this helps to win additional business from them as well.

The Quest for a Standard Methodology Looking for a standard development methodology to run all your engagements is similar to searching for a unified theory in physics. First, 209

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Figure 10.1

Running the engagement

whenever we think we’ve found one, something new comes along that is not addressed by our current understanding. Second, we firmly believe that a single methodology exists, but we just have not found it yet. Since the rise of client/server architecture, business process reengineering (BPR), and web computing, many consulting firms have reduced their search for a single methodology that works for all engagement situations, and instead have turned to generic computing frameworks. These provide a general road map for conducting consulting engagements, but with lots of on- and off-ramps so that only specific deliverables are produced for a client based on the requirements agreed to for the engagement. This approach is shown in Figure 10-2. The basic idea is to jump in where appropriate, produce the necessary deliverables, and then jump out again. What makes IT consulting engagements so different from each other? The simple answer is that a client can hire consultants to complete or assist in any activity that assists their business. The permutations and combinations involved in starting and stopping at any point on the road map shown in Figure 10-2, and doing some or all deliverables, are always growing over time. Consider, for example, the activities required to support an SAP implementation in a Fortune 100 organization. This requires a different approach than, say, a few database administrators (DBAs) needed to tune an IT database environment.

Running an Engagement

Figure 10.2

Engagement road map

As another example, consider an engagement with the objective of building a strategic plan for an organization. This will not require any implementation activities. The engagement requires the consultants to complete the strategy work and then take an off-ramp when it’s finished. Despite the limited scope of this engagement, the client may still ask you how this strategic engagement feeds into other parts of the their business. They may ask you to recommend a technology architecture, but may come back from time to time and ask you to explain why this is necessary for their organization. “Because you asked me,”is not an adequate answer. Always be prepared to explain the bigger picture, or road map, to a client, regardless of the limited nature of the engagement you are retained to complete. Even technology-based solutions that solve the same business problem can require different methodologies. For example, tuning a Sybase SQL Server database requires a different approach than optimizing an Oracle database. These differences can also be seen across industries and business applications. The auditing capabilities required of a banking application, for example, are much higher than those for an insurance illustration laptop program that will be used by agents to sell policies in their clients’ homes. An application to promote free tickets over the Internet to a hot movie will require web stress-testing activities to show that the site can handle spikes in traffic (perhaps as many as a million concurrent requests), while the same

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application may only need to be tested for 50 concurrent users if it is not directly accessible by the public. How then is it possible to define an IT engagement development methodology that can be used on all the different types of IT consulting engagements you might be called on to do? How can the methodology also be leveraged by different roles on an engagement? For example, account managers need a framework to manage their client relationships, managers need a framework to help manage their engagements, and developers need a framework to help build software. The answer is that you need to be flexible and adaptable. One rule of thumb is to use the client’s methodology on your engagements. But this has a few drawbacks. There is no guarantee that this methodology will be sufficient, so you may still have to provide some best practices to augment it. In addition, since you must do most of your planning, estimating, and accountability before you are likely to get a chance to study a client’s methodology, you cannot always depend on this approach. A potential solution is to seek a higher level of abstraction to the problem. Move away from the specifics and examine the problem as a whole and in its purest sense. If you examine IT history over the past 35 years, you will find that a set of common phases have been required to solve every IT-related problem. Furthermore, there are times when only a subset of these phases are required to solve a specific business problem. Crafting a flexible framework around this collection of phases allows you to customize a unique and appropriate solution for your engagements. For the most part, IT engagements require a set of planning activities, a definition of a business problem, a design that everyone agrees to, the actual construction of the solution, testing of the solution, implementation, and some type of post-implementation support. These phases may be completed using different tools and techniques. The relevant weighting may vary between assignments. But the generic phases, as shown in Figure 10-3, can continue to serve as a starting point on all engagements. Any number of specific items can vary, but you always need to be thinking in the basic terms of the five phases in Figure 10-3: Plan, Architecture/Design, Develop, Test, and Deploy. Figure 10-3 also identifies a list of the minimum deliverables required to support a generic IT engagement and suggests the phase in which they are initially constructed. The activities to create them, the techniques, and formats can change over time, but the deliverables themselves are required to support the five major phases in this approach.

Running an Engagement

Figure 10.3

Generic IT development methodology

Combining deliverables and processes at a high level of abstraction allows you to define a framework that can be adapted to a specific methodology already being used by a client, or to provide them with a flexible framework if one does not exist. You are empowered to identify the deliverables you need and to identify an approximate delivery date for each of them using five basic universal phases as a consistent reference point. Specific techniques and activities can then be plugged into these phases depending on other constraints in the engagement.

Impact of Running an Engagement on the 12 Key Metrics As shown in Figure 10-4, engagement activities have a significant impact on at least 5 of the 12 key practice metrics as well as a contribution to one other. Briefly, this phase impacts the related metric as follows:


Client satisfaction Continue to guide client expectations that have already been established. Consider asking for informal

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feedback from the client to gauge how the engagement is being perceived and how activities can be improved to avoid problems.


Utilization Measure chargeable utilization and nonbillable activities on a weekly basis.




People resources Make your expectations for each resource clear, and ensure that you are also supporting their career aspirations.




Average billing rate Increase the number of chargeable activities to increase this value. The higher this rate (all things being even), the better the profit margin you can begin to expect from an engagement.




Risk exposure Limit risk on an ongoing basis. The risk mitigation strategy should continue to be evaluated and implemented.

Many engagement-related expenditures cannot be billed to the client. Although these are important to the health of the team, the client relationship, and delivery of the solution, they will reduce your profit margin. Don’t let these expenditures get out of control. Some examples include the following: client lunches, team events (dinners, entertainment), gifts for team members on birthdays and other special occasions, some types of training, some types of books or learning materials, and morale budgets.

Major Phases and Deliverables for Running an Engagement Recall that the pre-engagement phases defined and guided the development of a set of deliverables that can now be used to run the engagement. This set included a proposal, engagement charter, organization chart, and the terms and conditions. These are fed into the phases described in this section. Think about the approach you will use to get the job done. Getting involved in an activities- or process-based discussion with anyone is frustrating at the best of times. With clients, this approach can guarantee that you will not only create a lot of friction at the client site, but also go over budget in the process. Client employees and practitioners

Running an Engagement

Figure 10.4

Impact of engagement activities on the 12 key practice metrics

are used to doing things their own way. Unless you’re hired to change their processes, they may become defensive if you show up in their departments and try to tell them what to do on a daily basis. First you’ll have to explain why they need to do something a certain way. Then you’ll need to explain the importance of the deliverable that you’re asking them to create. Then you’ll have to try and figure out how to fit specific activities into their busy schedules. There is a better way. Consider what you want each of the subteams to do, whether they’re from your own consulting organization, the client’s organization, or even a third party. Unless you’re trying to change their processes, you’re really after a specific deliverable, with a specific level of quality, at a certain time.

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Experience has shown that an approach based on deliverables leaves less room for contention within the extended engagement team. In other words, “a technical architecture is required before we build a test plan” identifies two deliverables without providing specifics of how they are built. Using this type of focus, you can specify the set of deliverables that are required before the team can proceed to the next set. Tying deliverables to one of the five high-level phases allows you to provide another time-based reference point for the team. For example, you can’t start development until the architecture is done. You can’t start the architecture until the business requirements are captured. Table 10-1 describes the phases shown in Figure 10-3. The Duration column provides guidelines for what percentage of the total effort should be directed toward that phase. These ranges are guidelines and can be customized for your project. For example, if your client relationship is hurting due to a lack of quality deliverables, you may want to spend more time within the testing phase on a specific engagement. Adjust the duration ranges accordingly, so they add up to 100 percent. Table 10.1 Description of the Five Phases Phase

Description

Duration (%)

Plan

Identify and understand the engagement scope, 10–20 engagement requirements, complete the engagement plans, and define the organization.

Architecture/ Design

Use the requirements to construct the architecture and design for a solution. This deliverable should be signed off by the client’s technology group as well. If the architecture is untested, the engagement plan should be updated to confirm the feasibility of the proposed solution, perhaps through a proof-of-concept.

20–30

Develop/Build

Construct or build the solution and conduct unit testing. Implement peer reviews and deliverable walkthroughs to enhance the quality of the solution. Consider prototyping techniques to iteratively build the solution.

30–50

Test

Use the requirements to construct testing plans, 20–30 conduct tests, fix errors, and get sign-off to deploy the application. Many different types of tests should be evaluated for your specific engagement.

Deploy/ Implement

Deploy or implement the solution into a production environment, test it to ensure it works, and train the users. Implement a help desk or offer other post-implementation support for the application.

10–15

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The deliverables shown in Figure 10-3 are the minimum set required for most end-to-end lifecycle engagements. You can scale these back if you are only involved for a portion of the lifecycle. As a rule of thumb, the deliverables discussed within each of the phases below should be signed off by the client sponsor before work is started on the subsequent phase. Depending on the impact on the timeframes and the amount of risk that is acceptable, partial acceptance of a deliverable may suffice for work to at least begin on subsequent phases. A client may, for example, sign off on specific parts of the requirements document that can then be passed to the next work activity. The client may also offer to conditionally sign off on a deliverable and state specific changes that need to be made in order for the document to be considered officially signed off. While there is a specific phase marked “test,” it is crucial to remember that the activities related to testing the solution that is being built—whether it is an application or a document—need to be defined and also built throughout the engagement. Some types of testing, such as stress testing and unit testing, are generally conducted outside the official “test phase.” Another way to look at this is to consider all testing outside the “official test” phase to have the purpose of incrementally evaluating the ongoing quality of the solution being built. The successful test is generally not an indication that the solution is finished, but only that more material can be added. In other words, “so far so good.” The test phase, on the other hand, is intended to inspect the completed solution and determine if it is ready to be moved into the “deploy” phase.

Plan Phase The objectives of the planning phase (also known as planning and scoping phase) include confirming the previous assumptions and expectations while drilling deeper into the business requirements. The project charter, engagement plan, resourcing schedule, and other deliverables are updated with this new information.

Business Requirements In some ways, the business or user requirements document is the most important of the engagement deliverables. It captures the business requirements of the application so that both the delivery team and the users see each other’s direction on paper. Once signed off by the client,

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this becomes the most objective record of what both the client and the consulting team have agreed to build. Always get some form of sign-off to ensure that both parties are in agreement. You can use a variety of formats or techniques to document business requirements. Figure 10-5 shows a straightforward approach for documenting business requirements under a table of contents. Each of the business requirements should be explained in plain English and signed off by all the stakeholders.

Technical Requirements The technical requirements document is sometimes an afterthought in the requirements collection activities. This is risky because the architecture and design decisions can be radically different depending on the technology-related needs of the clients. Some areas to focus on during the investigation activities are as follows:


Scalability How much growth is the solution going to experience and at what rate? Consider this in terms of data, number of concurrent—that is, simultaneous—users, processors, and throughput.

On the Web

Figure 10.5

Sample business requirements template

Running an Engagement




Reliability Is the application required to be available at all times under all circumstances (that is, 24×7) with no exceptions? If the application is down, what is the monetary cost? What is the opportunity cost? How much will the client pay to keep the application up all the time—even under normal and catastrophic circumstances? If the application goes down, how fast does the client want it to come back up again? How much will they pay for this service?




Standards Does the client have corporate technology standards that must be reflected in the solution architecture? Is there a central technology group at the client that must accept your solution? What is the future technology direction of the client organization?




Response time How rapidly must the application respond to users? How should the application behave as the number of concurrent—that is, simultaneous—users increase? What is the minimum acceptable response time? What is the average acceptable response time? What are the most critical transactions?




Security What level of security must the solution support? From internal users? From external users? What are the physical security requirements? What are the IT security requirements? What standards should be adopted?

Figure 10-6 can be used to collect and record technical requirements.

Engagement Plan Careful planning is the consultant’s best tool, with the engagement plan being the main plank. Approaches for building an engagement plan can vary widely. At its best, an engagement plan should tell a story. A reader should be able to see the logical construction of milestone deliverables and the activities that lead up to them. The flow of resources and the consumption of revenue should also be evident. A good plan should contain all of the elements required to demonstrate that the engagement is going to be delivered successfully. The high-level engagement plan or schedule brought into this phase is updated with additional details based on the business and technical requirements. Some considerations for building an engagement plan are discussed next.

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On the Web

Figure 10.6

Sample technical requirements template

Level of Detail Be careful not to get bogged down in unimportant or obvious details. Let the plan reflect important activities and tasks that lead to the production of major deliverables. There is no need to have an itemized list of a consultant’s desk and computer being set up, for example. But if unusual software needs to be ordered, this should be included on the plan. Be prepared to use your judgment in making these calls, and be prepared to defend them. We have seen engagement managers go through painstaking effort to build a highly detailed plan over a period of several weeks, with thousands and thousands of tasks, only to discover that it is too cumbersome to use. It takes too long to update with new information that will inevitably need to be reflected in the plan at some point. It takes too long to track progress because it takes the manager away from other pressing concerns. The plan is usually rewritten to fit into a few pages that are much easier to work with. An engagement plan is only useful if it can be used.

Running an Engagement

Changing the Plan Do not be afraid to rewrite a plan if it isn’t working. I once built a plan for a senior client at a large financial institution headquartered in New York City. The client reviewed my first plan, which had taken two days to build, and then shook her head as she put it on the table and said it wouldn’t do. After understanding her concerns, I rewrote the whole plan to tell a “story” of how the engagement would proceed. At the next meeting she put the Work Breakdown Structure (WBS) and the engagement plan side by side and studied them for a few moments. Eventually she looked up and asked if all her managers could be taught to write similar plans. This led to a seven-figure consulting deal. Format Select the format that is easiest to explain and maintain. A Gantt view is good for showing the dependencies and time relationships between activities. A spreadsheet view is easier to maintain. A presentation slide is easier for demonstrating high-level trends, as shown in Figure 10-7. On the Web

Figure 10.7

High-level engagement plan in presentation format

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Tools Your organization should adopt a standard project management tool, spreadsheet software, and presentation software for use on engagements. Be sure that your consultants know how to use these tools effectively. This directly impacts your ability to turn information around to your client quickly and efficiently. Estimating Build a best practice database that allows you to estimate a range of work effort for the activities you are normally being requested to do for a client. For example, how long does it take to gather requirements? How long does it take to build functional requirements? Consider other factors such as the skill level of the consultants, the challenges of working with the client, and the number of review cycles you are allowing for the deliverables. Tracking Consider tracking the percentage completed against activities on the plan, and send out updated versions to the engagement team, along with the status report, on a frequent basis. This demonstrates attention to detail and reinforces the importance and seriousness of the timeline to the extended team.

Quality Plan Quality does not just happen. It must be explicitly planned, tracked, and executed. This deliverable is your opportunity to impress on the client your understanding and commitment to the quality process. You also need to win their support for the quality process during the engagement so that they will be willing to invest their time and resources to make it work correctly. The objective of the quality plan is to define touch-points throughout the engagement lifecycle where specific activities are conducted to ensure the quality of the deliverables. The following information should be clearly identified on the engagement plan:


Who is responsible to ensure quality?




Who signs off on the quality?




What are quality activities?




When are the quality activities to take place?

Running an Engagement




How is quality being measured?




What is the plan to address poor quality?

Organization Chart An organization chart is necessary to learn about relationships on the engagement team. It functions as an orientation tool for new resources, a checklist, and a contact list. Consider assembling an organization chart for your engagement that shows hierarchy, relationships, and contact information. This could be in the form of a traditional block diagram or a spreadsheet that can be enhanced with the pertinent information about each contact. An example is shown in Figure 10-8. You can also record information such as a member’s utilization, key assignments, and special skills.

Testing Strategy Testing must start at the beginning of an engagement, not after the development phase is completed—which is the more commonly used approach. Testing early is the best way to maintain control over your On the Web

Figure 10.8

Sample organization chart

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engagement. As soon as you ask your team what they’re going to test, you’re forcing them to clearly understand what they’re building. At the same time, asking the client what they’ll accept forces a decision to be made. If neither of these are done at this stage, you have identified a problem that would have hit you after most of the engagement budget was spent. Determine which types of testing techniques are required for this engagement to provide the sponsors with enough confidence to launch the solution. These are discussed in the next chapter. The following items should also be considered for each testing approach that is selected for the engagement:


Technical architecture How closely does the testing environment need to mirror the production one? Which browsers and operating systems need to be tested? When are these required? Who is going to maintain the environments?




Physical testing environment Where are the testers going to sit? Beside the users? Beside the developers? What times are they going to test so that the development team can optimize their work effort?




Test tools What tools are required to support the testing effort? Automation tools? Scripting tools? Regression tools? How are issues or bugs going to be logged and tracked?




Test team How are testers going to be resourced? Which ones should be dedicated full time to the engagement? What engagements can share testing resources? If you don’t need them full time, consider bringing in subcontractors as you need them. Which test roles should be staffed with users? It is useful to have a testing architect or a testing manager dedicated to the engagement. Figure 10-9 shows a template that can be used to capture the resources involved in the testing process as well as the sequence in which they will be involved in the engagement. Who do the testers report to? Make sure there are no conflicts of interest. Should some of the testing be subcontracted offshore?




Test scripts When are testing scripts going to be written? Who is going to write them? What information is going to be used to write them?

Running an Engagement




Acceptance criteria How is the acceptance criteria being determined for the different components of the solution? Who is making the ultimate decisions? Is there any flexibility in how these are made?

Communication Strategy The objective of a communication strategy is to build buy-in and support for an engagement initiative by disseminating key and exciting information throughout the organization. It must clearly identify the “what’s in it for me” to all the people in the client organization and the engagement team who need to support the initiative in order to make it successful. There are many reasons to implement a communication strategy to coincide with your engagement plan. It needs to touch all the extended members of the engagement team, including client users and stakeholders affected by the solution being built. The strategy should identify the types of information that need to be communicated, the frequency of the communication, and the intended audience. A three- or four-page newsletter produced once a month or so is a good information vehicle for all the relevant parties. A collection of newsletters provides a good orientation to the engagement. The contents should describe benefits to the organization, create a sense of excitement, and introduce team members to the wider organization. On many engagements, there is surprisingly little known about the work done on a routine basis by anyone outside the immediate teams. On the Web

Figure 10.9

Testing team and sequence

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This can become a problem when additional funding, access to centrally managed technology, access to users, and access to key executives is required for resources brought into the project. A regularly distributed newsletter, in electronic or hard-copy format, can go a long way toward building an ongoing business case for your engagement within the client organization. A newsletter is only one part of the communication strategy. Other considerations include the following:


Are management reports available that can provide a detailed description of the engagement?




How much effort is required to keep the engagement charter up-to-date?




What needs to be communicated to the user acceptance testing team and when?




What needs to be communicated before the solution launch/deployment?




What needs to be communicated after deployment? Who do client users call if there is a production problem?




What is the escalation procedure? How does the engagement team prioritize new requests?

Management Kit The objective of the management kit is to maintain controls on the engagement, to explain or communicate all issues and timelines, and to track progress against the engagement plan. It is really a collection of deliverables that have already been produced by the engagement team. At a minimum, a management kit contains the following deliverables: engagement plan, status report, issues log, and contact list. It can also include any of the other deliverables discussed so far in the book if they are regularly updated or reviewed with different members of the team or with the engagement sponsors. This is typically provided in hard copy, as an e-mail, on an intranet, or on a shared drive.

Facilities The facilities component of the planning phase is intended to ensure that the engagement team has access to the physical resources required

Running an Engagement

to work effectively on the engagement. Most of the considerations deal with questions relating to the client premises, as follows:


What pass-cards are needed to work on the client premises during normal business hours and outside normal hours?




Does the client require background checks on individual consultants before they can work on their premises? What is the impact on your organization and the consultants themselves if any of them do not pass the background checks?




Can the client reserve a meeting room to act as a war room for the engagement team?




Are consultants going to get dedicated desks on the client premises? Can they work off-site? At home?




Will the client provide computers and other tools for the consultants? What tools do the consultants need to bring to the client site? What software licenses do the consultants need?




Are consultants going to get access to the client’s network?




Will any client policies affect the way your consultants work? How rigid are the working hours? Can people read newspapers at their desks during breaks? Consider even the most obvious policies to ensure there are no misunderstandings regarding the use of client premises.

Risk Review The risk review performed in the pre-engagement phase should be brought forward and updated throughout the engagement. With the additional information available through the requirements gathering, it should be possible to refine this list. Risk reviews must be continuous to remain effective because the level and types of risk continue to evolve over an initiative.

Architecture/Design Phase The objective of this phase is to define and then to design a complete solution to satisfy the business requirements that have been carefully documented and signed off in the plan phase. The first step is to define a set of architectures that support the business requirements.

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There are several types of architectures related to IT consulting engagements, namely, a technical architecture, an application architecture, and a data architecture. Designs are created after the architectures are established. From an engagement success perspective, it is vital to have access to an accurate overall architecture—especially on larger engagements. It is the only documentation that can act as a reference for all the different subteams so that they understand how their piece of the work effort impacts the overall solution. One useful way to look at architecture is to consider what it is today (“as is”) and what it will be at the end of the engagement (“to be”). Most organizations do not have an accurate picture of their “as is” architectures, or if they do, it is often out of date. In fact, a useful engagement—or early part of an engagement—activity is to produce an “as is” architecture view. Without this, it is difficult to ensure that all the different dependencies are accommodated in the “to be” architecture. We have definitely seen the investment necessary to create an “as is” view easily pay for itself. Once approved, you can drill down on each of the architectures to build a detailed design document. The design will typically consist of different types of models so that detailed functional and technical specifications can be built using them.

Technical Architecture The technical architecture is a complete logical and physical view of the infrastructure required to support all phases of the engagement. Logical and physical views are commonplace when discussing architectures. The logical view is usually the place to start defining the architecture. It captures all the technology pieces and connections required to support the solution. It generally does not contain low-level technical details, however. This allows the logical architecture view to be used as a discussion document. For example, such a view could show a technical architecture that consists of Oracle 8.0, ATG, and Java running on a combination of Linux boxes. This is not enough information to actually implement the software or even purchase it; the technical architecture view provides that information. The technical and logical views should have high-level perspectives that fit onto a single page each. This provides a conceptual picture that people can visualize. To support a more thorough analysis, each of the high-level views should be accompanied by lower-level views that get progressively more detailed.

Running an Engagement

Several additional snapshots of the technical architecture may also be required if it evolves over time. Each of the intermediate views should map to the engagement plan.

Application Architecture The application architecture captures such things as business processes and work flow. It is also the place to show application-level software, as opposed to system- or infrastructure-related software. This architecture format can generally be presented at a logical level. The physical level can be captured within the physical technology architecture. The application architecture and subsequent design should show all components that are part of the total solution. Each of these is then further described in the functional specifications document so that developers can reference all the information they need to write the code modules. A good application architecture deliverable shows all the major functional components involved in a solution and how they tie together. The engagement team should be able to use this deliverable to explain to users how the application architecture will meet the set of business requirements identified in the previous phase. This deliverable should also identify the number of modules that need to be coded, the number of interfaces involved, and links to external parties. Figure 10-10 shows a high-level architecture that encapsulates the functional pieces of a solution.

Data Architecture The data architecture models the information related to the solution being managed. It should describe how the information is distributed across the enterprise, which data entities are involved in the solution, any data conversion considerations, and the data infrastructure. Figure 10-11 shows a view of how data elements can be represented. The physical data architecture is entirely dependent on the technology tools selected for the solution. It is created to optimize the performance and efficiency of the solution. Consequently, optimizing an Oracle database is very different from optimizing a DB2 database in terms of the use of indexes, constraints, rules, disk partitions, and other database objects. Identifying this type of information before the tools are finalized will require you to rework the architecture. The logical data architecture is often created significantly in advance of the physical data architecture in order to avoid duplicating effort.

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On the Web

Figure 10.10

Application architecture example

On the Web

Figure 10.11

Logical data architecture example

Running an Engagement

The data architecture should also identify data warehouses, data marts, replication tools, and flat files—in fact, any object that contains information.

Business Rules Business rules are the key to any solution. In an IT environment where user interfaces and big applications (like CRM and ERP) are resold to many organizations, business rules become the point of competitive differentiation. One of the benefits of the Internet and n-tier architecture, and wireless computing, is to wrap business rules into a single layer that can be ported to any other architecture without rewriting the entire application. The logical format of business rules can be captured in a variety of formats. It is common to use a combination of modeling techniques (such as use cases) and structured English to represent all the business rules for an application.

Storyboards, Mock-Ups, and Scenarios You can use storyboards, mock-ups, and scenarios to demonstrate how an application or solution will work without actually constructing it. These are useful for presentations because clients can be walked through a storyboard, for example, to see how an application will work before all the time and money is invested. As for user interfaces, they traditionally consisted of screens and reports that needed to be user friendly. This meant that the interfaces were readable and memorable. Users were willing to memorize specific sequences of alphanumeric codes and menu structures to use applications. The graphical user interface (GUI) changed user expectations dramatically. They are less willing to memorize sequences of codes or navigation. They demand intuitive interfaces that allow them to use educated guesses to learn the application. But they are typically still willing to go through some level of training. Web sites have gone even further in the demand for intuition. Since anyone can be an application user, the interface has become a true art form. Mock-ups are consequently very detailed views of web sites and other information a user will see that clients accept or modify before the application is built. Tools like Flash, Photoshop, and XML can be used to add sizzle to the mock-ups.

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Models and Flows Many types of models and flows can be used to capture the essence of the business requirements and represent how the different pieces of a solution will work together. Each of these can also be represented in an “as is”version and a “to be”version. Most of them can also support logical and physical views. The models and flows that will ultimately be used to define or validate the functional and technical specifications of the solution are designed in this phase. While the specific techniques and formats are outside the scope of this book, here are some of the tools that must be used to design the solution:


Data model These have been around for decades. While there are several data modeling approaches—namely, hierarchical, network, and relational—the last one has become a de facto industry standard. The entities identified in the data architecture are used to represent information at a low level—field by field and element by element. These often begin with a more detailed Entity-Relationship (ER) diagram.




Process model/process flow Process flows are used to represent movement in a solution. For example, if the proposed solution needs to support a credit application group, a high-level process flow can be assembled to capture the major steps, as shown in Figure 10-12.

On the Web

Figure 10.12

Logical process flow example

Running an Engagement

Other common modeling and flowcharting techniques include data flow diagrams, object models, use cases, and SWOT (strengths, weaknesses, opportunities, targets) analysis.

Environments The physical implementation of the technology architecture is known as the environment. For example, while the architecture specifies that a database is involved, the environment will identify the brand and version of the database. The environment is a deliverable that can be given to a technology group so that they can implement a solution. For most end-to-end (from planning to implementation) applications, the following environments should be considered:


Development




User acceptance




Production




Mirror of production




Backups




Staging

System Management The chances for overwriting someone else’s work increases as the size of the engagement team continues to grow. Clearly specify policies for the following areas to avoid losing information:


How are the different deliverable versions being controlled so that work is not overwritten?




How often are complete backups of all the documentation and code being done?




Has the recovery process actually been tested? It is surprising that this is not always the case.




Who has the authority to promote code from one environment to another?

Development Phase The objective of the development phase is to build the application and put it through a unit testing process until it meets the functional or

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program specifications. Some of the deliverables created in the earlier phases will be detailed enough to give to the developers to code the solution. Others will still need to be migrated into a more technical format. For example, a process flow that describes a function can be broken down into specific modules that need to be coded by developers. Figure 10-13 shows that three modules need to be developed and two databases designed or documented. There are also three flat files and a set of reports. In the figure, processing is taking place over more than one platform, so some sort of file transfer protocol (perhaps FTP) is also required. This information guides the process of writing detailed specifications, perhaps one specification per module.

Specifications The objective of the specifications document is to create a development view of the business rules in the context of the technical, data, and application architectures. It is common to consider building two types of specifications, as shown in Table 10-2. There is a great deal of flexibility in the type of format used to capture specifications. The important element is that the logical functional specification should capture and clearly explain all the business On the Web

Figure 10.13

Physical process flow example

Running an Engagement

Table 10.2 Types of Specifications Document

Description

Owner

Functional specifications

The business rules are used to describe Business analysts how each of the different components in the application design will work. As these are driven out, the design and architecture may also need to be adjusted to reflect the new information that is uncovered.

Technical specifications

System analysts/ project The functional specifications are leaders/ senior developers sometimes used to create a more technical view of the specifications that developers can use to write the code. This step is sometimes skipped, but if you skip it, do so with caution. The technical specs can act as the communication vehicle for both the business and the technical teams.

requirements identified by the client.This document should be capable of supporting the testers in building the functional test scripts. Figure 10-14 shows a format that has been used quite successfully. On the Web

Figure 10.14

Functional specification example

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The technical specifications are usually driven out of the functional specifications. These must provide developers with enough clarity to code the solution. The example shown in Figure 10-14 could be modified in several ways to accomplish this. The Requirements section could be changed to hold pseudo code or coding fragments. The Interfaces section could be expanded to include physical database table names and the Systems Affected section could point to actual batch program modules.

Just-in-Time Training Teams often lack relevant experience using specific tools or products that are required on an engagement. Several options exist to deal with this situation, such as hiring temporary resources with the appropriate skills, providing training to team members before they start on the engagement, or providing training just before it is needed. The latter option is fairly common and is referred to as just-in-time training. This can consist of in-house documentation, video training, computer-based training (CBT), courses from the product vendor, or third-party training. Deliverables consist of the training documentation, training schedules, and training agreements.

Code This deliverable consists of the actual code produced by the developers. The engagement team should already have established how quality and standards will be maintained. This can be done through preestablished templates, reusability targets, and regular code walkthroughs. In addition to the physical code, it is useful to build a table that contains the following information for each module:


Module name




Purpose




Language/format




Date first created




Author




Last modification date

Running an Engagement

Test Cases Test cases should evolve from the planning phase. They should essentially document every piece of functionality that must be tested and the expected result. Any specific setup instructions for preparing the test should also be documented in this deliverable. Instructions are required for the different types of testing that are going to be performed in the engagement. At a minimum, test cases should be included for unit testing, integration testing and user acceptance testing.

Unit Test Results Unit testing is performed by the development team to ensure that the code essentially performs to the technical or functional specifications. This deliverable should document the tests that were executed, by whom, and the results.

Integration Test Results Given the highly distributed nature of contemporary architectures, one of the biggest risk areas is the integration of the different components of the architecture. It is highly recommended that this be tested well in advance of the application’s development. There will almost always be problems when you integrate different parts of an application. The sooner you find them, the better because you can resolve the problems early in the lifecycle. We have seen too many engagements run into trouble because the very first integration test was left until after the development and unit testing was completed—and that part of the budget was consumed. Conversely, we’ve seen many engagements successfully delivered when an integration bed was created at the start of the development cycle. Even without any code being written, the team could successfully connect the major projects together to ensure that they could talk with each other. Components can then be incorporated into the integration bed as they are developed. This test only examines the integration feasibility, not functionality. The components can continue to be replaced in the integration bed as they are fixed or updated with new functionality.

Deployment Plan Actual deployment of the solution may still be a phase and a half away, but for the process to go well, many things need to be planned for all but

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the most trivial cases. To ensure that enough lead time is available to complete all the necessary activities, the deployment plan should be built as early as reasonably possible in the lifecycle. Here are some questions to consider:


What equipment needs to be ordered and installed for the launch?




Are all relevant licenses purchased for the launch? What needs to be reviewed?




Who needs to give the final launch signal, how will this be given, and to whom? What do they need in order to make this decision? When will the test results be available?




Are there any legislative constraints? Are any special permissions required outside the client organization to proceed?




How will you know that the launch was successful? What reports do the users need to see?




What happens if the launch or deployment is unsuccessful? What are the rollback procedures?




What is the disaster recovery plan for the application once it is successfully running in the production environment (post launch)?




How will the production data be entered into the new application?




Is a data conversion required?




Are any systems going to be decommissioned following a successful launch? When?




Will any systems be running in parallel after a successful launch?




What training do the users require?




Who needs to be on call during the launch activities? Who needs to be on-site? Who needs to be reachable 24×7? How can they be contacted?




Who is managing the deployment?




How will the additional work be compensated?




Has a formal meeting been set up with the client stakeholders after the launch to review results?

Running an Engagement




Does the production environment need an exact mirror? At what times?




What types of backups are required before, during, and after the launch?




How is the launch going to be communicated to the end-user community?

Closing Perspective This chapter discussed a generic IT development engagement lifecycle based on five key phases that can be customized for clients using a “deliverables focused” approach. This serves as a reference point for running client engagements. Some engagements may only span a portion of the overall lifecycle, while others may require a focus on the non-IT side (e.g., strategy- or people-oriented change management). The framework allows you to add and remove deliverables to suit any of these situations. In this chapter, we focused on planning and scoping, architecture and design, and development phases of an engagement. The next chapter examines how to confirm the quality of the solution and close an engagement successfully so that a consulting business can thrive by winning more work, getting outstanding references, and leveraging the increased skills of the consulting team.

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11 Testing, Deploying, and Closing an Engagement

O

nce the engagement deliverables have been built and reviewed by the core engagement team, they are ready to be tested, deployed, and improved. Only then can the engagement be formally closed, or deemed complete. These steps are required regardless of the scope and nature of the engagement. If the client asked for a strategic or an architectural recommendation, these three activities will consist of collecting and incorporating feedback into the report before final publication and distribution of the deliverables. If the client hired you to integrate or build an application or a component of an application, the unit testing process discussed in the previous chapter should confirm that what was produced already meets a minimal level of quality. It is now time to implement the wider testing strategy that was defined in the planning phase and kept up-to-date ever since. As shown in Figure 11-1, this chapter examines the remaining phases and activities required to implement the application(s), close the engagement, and then follow up with the client. These final activities are necessary for a clean close so that you can not only get paid for all the work you’ve done with no haggling, but also get the client to give you a solid, unconditional reference, and award more business to you. Ideally, the latter is done without forcing you to compete with other vendors and thereby reducing your cost of future sales, or at least put you on a very short preferred list.

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Figure 11.1

Closing the engagement and post-engagement activities

Impacts on the 12 Key Metrics In addition to the impact that running an engagement has on the 12 key metrics, closing an engagement offers a final opportunity to improve customer satisfaction, the pipeline, and backlog, and to reduce risk exposure. There are several softer impacts to consider as well. These are shown in Figure 11-2 and discussed here:


Client satisfaction Continue to ask the client how well you are doing and what you can do better. If their feedback seems legitimate, incorporate it into business practices. Address their concerns, even if they are only the result of a misperception. You may need to improve their knowledge about the engagement process. Send a formal survey to the client after the engagement ends. Ideally, this should be processed by an impartial third party. This will augment client satisfaction information that the engagement manager should be collecting informally for the duration of the engagement.




Pipeline Ask the client about future opportunities and build a pursuit strategy. If you are not yet on their preferred vendor list, ask how you can be included. This will also augment the list of opportunities that the sales team members collect during an active engagement. After the successful close of an engagement,

Testing, Deploying, and Closing an Engagement

clients are likely to provide more detailed information to you. Since the pipeline is unsold work accompanied by probabilities of closing, it is crucial to keep adding to it or risk running out of work.


Backlog Identify immediate value-add opportunities for the client, and ask them to give you the work right away to keep the “successful” engagement team intact. This is in the client’s interest because it avoids having to retrain new staff if the current resources are released and put on engagements with a different client. Backlog, as sold work that is waiting for consulting resources to become available, provides guaranteed cash flow.




Risk exposure Ensure that the client pays the remainder of the fees owed to you, collect outstanding expenses, and get formal acceptance after the system is launched.

This phase also impacts people resources, accounts receivable, discounts, and the sales-hit ratio, as follows:


People resources Members of the engagement team generally have made personal and perhaps even some professional sacrifices to get an engagement to this point. As the engagement begins to wind down, keep morale up by doing what you can to ensure that their original personal objectives are met. This could include working on a specific type of engagement for their next piece of work, letting them take a vacation, or getting your support to take specific training. Your focus still needs to be on the engagement, but the consultants are starting to think about their next opportunity and career progression. Your thoughtfulness here will likely keep them well motivated to see things through to a successful completion.




Accounts receivable Get the client to pay all outstanding consulting fees as the engagement begins to wind down.




Discounts Discounts are not always directly based on the rates you negotiate with the client. For example, you may be inadvertently giving away discounts by incurring interest charges on delayed fee payments. Work that is done for the client for no pay is effectively another discount on your rates.

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If you are working on a fixed price engagement, do everything you can to build a case for another pool of money if you are starting to reach the contractual limit. This will continue to require careful scope control, but also a focus on functions or items that can be done in a future phase (that will have its own budget).


Sales-hit ratio If the quality of your work and strength of your relationship influence the client to award you with more work, your sales-hit ratio is going to start going up dramatically. You’re essentially winning more work while incurring minimal costs for the sale, thereby raising your profits.

Figure 11.2

Impact on the 12 key practice metrics of closing an engagement

Testing, Deploying, and Closing an Engagement

Testing Phase A lingering side effect of the Internet revolution has been a general slackening of testing rigor before applications are launched into production environments. The pace of the Internet made many businesses pretty much eliminate a lot of controls and due diligence activities in order to launch their business programs (including web site applications) quickly. For example, contrast the different approaches and due diligence that would have been followed for building a national marketing campaign for an insurance carrier before and during the Internet boom. Assume that the application is designed to sell more insurance by focusing on television commercials, print commercials, and a back-end application to handle the new insurance products. At one time, this may have taken six months or more to design and implement with a lot of dependencies and sequential activities. On “Internet time,”many of the same activities would be done in parallel, with a lot less due diligence between them so that elapsed time might be as little as three months. This type of need for speed ran through organizations until every level began searching for shortcuts to all their business challenges. The poor practices resulting from this approach continue to influence the way applications are launched. The Internet/intranet has also added to testing sloppiness. Since applications are routinely launched over this medium, it is possible to launch patches and updates, without having to replace a huge pile of floppy disks, CDs, or tapes. This encourages a more relaxed attitude on the part of deployment teams, who sometimes seem to view production users as a final test bed. The thinking appears to be that if a production user doesn’t complain about a certain feature, it’s either working or not needed anyway. A quick, inexpensive reload of the software on a web site covers up the problem and lets the users automatically download the fixes. As painless as this is to the process of software distribution, it really hurts product quality. This last part can destroy a consulting organization’s reputation. The testing process continues to be one of the most cost-effective ways to satisfy a client, maintain morale on your team, make margin on an engagement, win repeat business, and win more business through outstanding client referrals. Yet, despite all these positive benefits, testing is still under-resourced or misunderstood in the IT industry. Here are some points to consider and some talking points when

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you encounter resistance or misunderstanding about structured testing approaches within your organization or at client sites:


Misconception 1: Testing is done in a single phase. This point has been stressed a number of times in this book: never leave the testing process to a single phase that occurs sometime after development is completed. It is an ongoing process that starts in the planning phase. If your engagement focuses on producing deliverables like studies, architectures, and designs, ensure that you are building client buy-in while the documents are being constructed. This means testing your assumptions and conclusions iteratively throughout the engagement so that the client knows what you are going to deliver before you actually publish the final versions of your documents. Only this will allow you to establish the necessary infrastructure, test cases, and teams that are necessary to properly assess or recommend a nontrivial application.




Misconception 2: Testing is expensive. Compared to what? It is much more expensive to fix a problem the farther out you go in the lifecycle of an engagement. The return on investment (ROI) on testing has been proven time and time again. A problem found in the planning phase takes one unit of work to finish. By the time the same problem gets into the development phase, it can easily require five units of effort to fix. Losing a client means losing a revenue opportunity and a potential reference.




Misconception 3: Developers don’t test. No piece of code should ever be passed to a QA team until it is “unit tested” by the development team. Saying that code is x percent done is meaningless unless unit tests have shown that it conforms, at a minimum, to the technical specifications. Bad code quality is one of the fastest ways to ruin morale on a development team.




Misconception 4: Testing is a scientific process. Testing is partially a scientific process, but there is also a strong artistic component to it. Get your resources to try creative ways to break an application before it is launched. The testing architect or testing manager should find resources who may have some spare cycles to examine the application while it is being built. Don’t forget to track their findings so that they are acted on.

Testing, Deploying, and Closing an Engagement

Different Types of Testing Each type of testing is driven by a different set of objectives. Some are highly suited to automation and tools. Others are dependent on prewritten test plans. Table 11-1 summarizes the more common types of testing approaches used by practitioners. For each testing type, the table identifies the common objectives, the primary owners, and how much the testing types can benefit from the use of automated scripting and testing tools. The primary owner of a testing type is also its chief champion. He or she guides its activities to completion. Primary owners or champions are generally supported by other resources and typically report to a testing manager or testing architect. These roles ultimately report to the engagement manager, who is responsible for the engagement quality. The engagement manager may also be coordinating different testing teams, some of which are at other vendors, locations, or even offshore.

Table 11.1 Common Types of Testing Chief Champion

Benefits from Automation

Type of Testing

Objective(s)

Unit

Determine the Developers conformance of code with technical and/or functional specifications.

Some

Usability

Creative manager Test and improve the usability, elegance, appearance, stickiness (e.g., get visitors to stay on the site longer and to come back), and efficiency of the user interface(s).

Low

Functional

Examine in detail the Business analysts application functionality and how it conforms to the detailed business requirements.

Low

Integration

Test the interfaces between the different solution components to ensure that they function together (sometimes called end-to-end testing).

High

System analysts

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Table 11.1 Common Types of Testing (continued) Chief Champion

Benefits from Automation

Type of Testing

Objective(s)

Stress

Technical architects Push the limits of the architecture to test that it can support the maximum data volume, throughput, and response time requirements of the users. Stress testing is often based on key transactions that the solution must support under extreme conditions.

High

Regression

Test lead Ensure that a modification has not affected some other part of the application. This is a comprehensive set of tests.

Very high

System

Test the full capability of Architects & analysts the application and the infrastructure together, as opposed to in separate pieces. This will identify incompatibilities at the application, software, or hardware levels.

Low

Installation

Ensure that the technical architecture and system software is compatible. For example, does the database version function with the version of the operating system?

Technology administrator

Low

Testing, Deploying, and Closing an Engagement

Table 11.1 Common Types of Testing (continued) Chief Champion

Benefits from Automation

Type of Testing

Objective(s)

User Acceptance Testing (UAT)

Determine whether the Client users solution should be implemented, rejected, or fixed. This is also referred to as acceptance testing; the client users leverage the UAT test cases to make a determination.

Low

Postimplementation

Ensure that the Test lead deployment was done correctly. This set of tests is conducted after the solution is launched.

Medium

Ad hoc

Test the solution as it is Team being built, to uncover problems or issues. This is an opportunity to look for strange occurrences and unexpected application behavior.

Low

Testing Timelines and Durations Figure 11-3 shows the relative positioning of the different testing approaches discussed in Table 11-1. Their timing and duration are key considerations in efficient use of the time that is available throughout the engagement. The testing approach must start during the planning (and scoping) phase. This will mobilize the team to think in terms of completion and drive important decisions, and also give them a chance to purchase and set up the equipment and technology necessary to support the testing initiatives. Testers, who generally have operational responsibilities because they are borrowed from production departments, can also plan their time with more certainty because of this advance notice period.

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Figure 11.3

Common testing durations

Table 11-2 provides justification for the relative positioning of the testing activities. You may want to consider splitting some of the testing activities across a longer time. For example, usability testing may start in the architecture/design phase, but can be conducted again in the testing phase to identify any final tweaks required by the user interface. The Duration column contains a suggestion for the relative length of the test. For example: short = 1 day; medium = 2 days; long = 5 days; very long = 8 days. Table 11.2 Testing Timelines Type of Testing

Positioning

Duration

Unit

Conduct after a component is coded.

Short

Usability

Conduct before major investments are made in coding the solution.

Medium

Testing, Deploying, and Closing an Engagement

Table 11.2 Testing Timelines (continued) Type of Testing

Positioning

Duration

Functional

Systematically test the business functionality of the application after unit testing.

Long

Integration

Start early in the process, and integrate and test components as they are being built.

Very long

Stress

Medium Confirm the feasibility of the technology architecture to support the maximum rigor and extreme conditions that will need to be supported by the solution. This should be done as early as possible to ensure scalability and robustness of the technical architecture. This is often, erroneously, left to the end of the lifecycle on most engagements.

Regression

Confirm that modified code has not caused bugs Medium in other parts of the tested application. This is especially important near the end of the testing phase and to support modifications after a system is in production.

System

Perform as part of the testing phase.

Medium

Installation

Conduct following every technology implementation to ensure that the software and hardware interfaces are operating.

Short

User Acceptance Testing (UAT)

Conduct as the last major testing cycle just before Medium application launch.

Postimplementation

Conduct immediately after a system is launched Short into production to ensure that the process was done correctly. This is sometimes done just before the switch is flipped to let production users access the system.

Ad hoc

Perform at any time during the lifecycle of an engagement by resources with the time to spot-test the application as it is being built.

Short

Generic Testing Process A generic testing cycle is shown in Figure 11-4. It consists of identifying a testing organization, building test cases, establishing the testing environment, conducting the tests, recording bugs and issues, correcting the bugs, and retesting until all the test cases are completed successfully.

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Figure 11.4

Generic testing process

A formal sign-off from the client is required before an application is launched into production. The form this takes should be agreed upon at the start of the engagement and potentially even written into the engagement contract. Some clients have strict policies that make it difficult to get a written signature from them in a timely manner. You want to make an e-mail response acceptable. (For example, e-mail from test lead: all functional tests show that the financial calculator is ready to be implemented. E-mail from client: proceed with financial calculator launch.) You may also want to be in a position to accept a verbal confirmation. It is important to get legal advice and include the required statements in the contracts to make these decisions legally binding. A testing results log is a critical support component for the entire testing process. It should contain enough information for each error reported during testing to allow a developer to understand the problem and find it. Consider referring to every problem in the test log with a generic term such as “item”so that it can represent reported bugs, errors, and problems that could become change requests. The “item log” usually becomes the primary schedule for the engagement team in the

Testing, Deploying, and Closing an Engagement

final days of User Acceptance Testing, as the number and severity of the items it contains will be used to determine whether to launch or not. The following elements should be included in the item log: Unique identifier for each bug or problem.




Item#




Status Identifier for the status of the item. Common values are New, Open, Closed, On Hold, Being Confirmed, Canceled, Duplicate, Not a Bug.




Item type Indication of whether this is a bug, problem, or a change request.




Short name Short description of the problem being reported.




Allocation The name of the subsystem or project that the item impacts.




Date reported The date this item was entered into the log or reported to the engagement team for resolution.




Description




Reported by Identification of the person reporting the problem (e.g., e-mail address).




Priority An indication of how important the problem’s resolution is to the engagement. Common values include Show Stopper, Urgent, High, Medium, Low, Nice to Have, Change Request, Unknown.




Assigned to




Resolution date




Resolution resolved.




Other instructions Additional information required to understand or resolve the problem.

A detailed description of the problem or item.

Identification of the person who owns this item. The date this item was resolved.

A detailed description of how this problem was

You can get good value from an item log, even if it is only implemented in a spreadsheet format or document file. Usually at this time of the lifecycle, the timelines are right down to the wire. Every efficiency needs to be considered to launch the solution on time. Consider

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using a tracking system that supports an item log and has the following minimum features:


Internet access Accessible through a number of standard Internet browsers to support the maximum number of testers.




Searches Able to search on several of the information elements listed above, including Item#, Status, Priority, and the date fields.




Reporting Able to produce several types of standard reports to show the outstanding problems and support go/no-go decision making.




Logon Use of a logon/password combination that restricts access to registered users. Privileges should also apply to individual users to restrict access to sensitive functions.

Test Cases For a successful testing experience, test cases should be built from the business requirements that have been accepted by the client. A test case should be written for every piece of functionality that must be supported by the solution being constructed. Figure 11-5 shows a template that can be used to build test cases. It is divided into several areas. Testing instructions are included in the upper-left corner. You could add the type of test this case is going to support. Testers fill in their contact information in the box at the upper-right. There is also an area for any special setup activities or data. The main part of the form identifies a name for the test and the expected results. These are written when the test case is being developed. The actual results and Observations/Bug column are filled in by the tester after running the test. The Fixed? column can be used to identify problems that are fixed by the developers and have been shown to be correct by the tester.

Testing, Deploying, and Closing an Engagement

On the Web

Figure 11.5

Test case template

Common Testing Concerns Bugs and errors can exist in any part of an application being developed. Your testing process needs to be comprehensive—going both wide and deep in the test cases that are designed. Here are some of the areas that need extra attention in modern Internet/intranet applications:


Content Web applications open to the public often need to have a lot of content as soon as they are launched. Unfortunately, many teams underestimate the amount of work required to assemble this content and the complexity of linking it correctly.

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Performance This is commonly an afterthought. Test plans should include the setup required to test application performance under the maximum number of expected concurrent users.




Creativity This is closely related to usability testing and may need to be of global quality, depending on the expected audience.




Security security.




The unexpected Look for problems that might arise from unusual or infrequent conditions. For example, what happens when you search only for a number? What happens if you search for a string that contains 50 zs?




Backup/recovery Confirm that the application and data are really being backed up. Has recovery ever been tested?




Data growth How does the application perform with massive increases in data volume?




Contingency What happens if the application fails? How long does it take for a contingency plan to kick in?

Remember to test internal, external, and physical

Deployment Phase After receiving a go from the client following a successful UAT phase, it is time to deploy the application to the production environment. Just like the testing process, the deployment plan should have started in the planning phase. Any equipment, resources, and other dependencies needed to support the deployment process should have been planned and executed by this time. Here are a set of considerations to process for the deployment phase:


Environment preparation Prepare the sites and facilities that support the deployment activities and the production of the application. Include instructions on how an existing application should be turned off and how the new one will be engaged following a successful launch.




User training Define, prepare, and conduct training courses for user groups.

Testing, Deploying, and Closing an Engagement




Back-out and contingency process Develop a plan to abort the application launch and revert to the original application (if there was one) in the event that a major problem is encountered during deployment.




Deployment approach Confirm and execute the deployment approach. It might be one big bang (e.g., all the systems at once) or a set of smaller implementations that can be rolled out sequentially in a more controlled way.




Conversion process Describe data to be migrated, identify current system data, new system data, data mapping, conversion issues, acceptance criteria, and special instructions.




Documentation Identify, prepare, and share documentation that includes user manuals, system manuals, release notes, and contact information.




Help desk Distribute information needed by users to contact first-line support in the event that a production problem occurs. This could be a cell phone, e-mail, or 1-800 number that provides 24x7 support.




Communication strategy Decide how all the people affected by the new system are going to be informed about what they need to do during the deployment process. This is closely related to the documentation strategy. A letter from the highest ranking stakeholder is a common approach for doing this. A follow-on message after a successful launch is useful to let users know when they can access the new application.




Operations Decide how the system is going to be supported in the production environment after a successful launch. This should include change management/version control to ensure that the different versions of the application are carefully separated and not overwritten by others.




Decommissioning Identify systems that are going to be decommissioned after a successful launch, in what order of priority, and how this is going to be done. It is useful to identify the cost savings that will be earned when each applicable system is deactivated.




Launch Perform the actual steps required to launch the system into the production environment.

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Production test Perform a final test to ensure that the launched application supports the key functionality identified in the test cases. Something could have unknowingly gone wrong or been missed.

Clearly, a lot of activities must be completed in this phase within very tight timeframes. The engagement plan needs to be updated with this information. It is also useful for the engagement manager to construct a series of checklists to identify key deliverables that must be completed before the actual deployment. Figure 11-6 shows a sample deployment checklist. On the Web

Figure 11.6

Deployment checklist

Testing, Deploying, and Closing an Engagement

Post-Engagement Activities The application has been successfully deployed, so the engagement is finished, right? Not at all. Proper close-off of the engagement is crucial for continuing a relationship with the client. This can involve tying up a lot of loose ends. There may be some bugs that were not severe enough to stop launch of the system, but which still contractually need to be fixed. You may not even get paid for these if the engagement was sold on a fixed price basis; nevertheless, they are your responsibility. This section examines some of the other activities to be completed after the application launch, including asking the client for more work.

Sign-Offs After the application is successfully launched or the deliverables have been presented and distributed (if implementation was not in scope), you need to get final sign-off from the client that the engagement is done. The format of this should be agreed to in the original contract.

Deliverables All the engagement deliverables should be packaged or bound together in a couple of volumes and presented to the client, with copies archived at head office. A table of contents should be added to the front of each volume. All intermediate documentation, including notes and scribbles, should also be physically archived at the head office. Electronic versions of the final formats of the documentation should be copied to one directory or location and backed up.

Warranty Period For application implementations, clients generally want some sort of warranty period during which defects can be reported and fixed without additional cost to them. The warranty period should be negotiated as part of the original contract. It is in your favor to negotiate the shortest possible warranty period. One to three months is common. Reported defects should be logged and tracked in the item tracking system used during testing. They need to be assessed carefully to ensure that they are defects as per the original contractual business requirements. You may want to position them as change requirements if

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they are not defects, as these are usually chargeable to the client. A lot of this can become the subject of negotiation and compromise.

Final Invoicing and Payment Instead of mailing the final invoice to the client, consider hand-delivering it and collecting the check as well as dealing with a few other procedural items. Chief among these is getting client feedback about your performance during the engagement.

Client Satisfaction Collect feedback from the client regarding the performance of your team during the engagement. This will provide you with valuable information to improve performance on future engagements, but it will also show the client that you care what they think. This is critical for winning more work from them. If you have followed our process, gathering client feedback has been continuous from the start of the engagement. Everyone on the engagement team needs to be a part of this initiative. Figure 11-7 shows a continuous process you might want to leverage to get the most out of this information. You must also act and learn from this information to make the process worthwhile. As you close the engagement, ask the client for a written reference and capture testimonials from a number of stakeholders at the client site. You may also want to do a case study in conjunction with a product vendor and get it published in a trade newspaper. Finally, send a note to the consulting organization (especially the sales teams) to let them know about this latest accomplishment so that it can be leveraged in other accounts.

Postmortem, or Sunset Review Shortly after the engagement, conduct an internal postmortem with the key engagement resources to identify lessons learned. You want to identify things the team did well, what was not done well, and what could have made things better. This information should become part of the consulting organization’s best practices. You may also want to conduct a sunset review with the client to share the same lessons with them.

Testing, Deploying, and Closing an Engagement

Figure 11.7

Informal client satisfaction process

Employee Satisfaction Mentors and coaches should work with engagement team members to ensure that all their issues were addressed. Do this by revisiting the personal plans that each employee completed at the start of the engagement and tracking how well they did, what they got out of the engagement, and what they expect from their next engagement. Collect formal performance feedback on every consultant and keep it at the head office.

Closing Perspective This chapter examined some high-value activities that are required to close an engagement so that the client’s expectations are exceeded, your organization gets an excellent reference, and the relationship with the client grows stronger. We examined a series of testing approaches that should be applied to an application before it is launched into production. We also examined a generic deployment phase from a deliverables-focused perspective to reduce risks when an application is being launched and to communicate effectively with the team and, especially, the client resources.

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The period after an application is launched, or when an engagement ends and reports or studies are delivered to a client, is critical for bonding with the client to generate a long-term relationship. This chapter looked at the simple process of asking for more work from a client, as well as other key activities that need to be addressed before the engagement is considered complete, including a sunset review with the client. Just as the engagement starts before the team lands at the client site, the engagement does not end when the team begins to leave the client site.

12 Working Multiple Engagements for a Client

W

orking on a single large engagement is not the same as working on multiple parallel engagements. The latter are accompanied by a set of unique issues and challenges that must be addressed in order to achieve overall success on a client account. The strategy for any IT consulting organization must be to win and support multiple concurrent relationships. This reduces fixed costs, such as the cost of sales, and thus improves the bottom line. This strategy also provides some opportunities to reuse and leverage the same resources and intellectual capital across the multiple engagements. To realize these potential benefits, it is necessary to consider building the infrastructure required to support multiple, concurrent engagements from the start of the client relationship, as shown in Figure 12-1.

Extending the Engagement Office Clients find it annoying, when they have awarded several pieces of business to a single vendor, to have multiple contact points for different purposes and different circumstances. Whether this is a result of the vendor’s internal politics or their organizational structure, the client will often feel frustrated. It is highly recommended that every client relationship start with an “engagement office” that acts as the single point of contact for all future dealings. The engagement office does not remove the need for individual relationships between the client and the consultants. Rather, it creates an entity within the vendor organization that must share information

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Figure 12.1

Working multiple engagements

and hide internal complexities from the client, who should not have to deal with them in the first place. Some megavendors have at times let their internal processes and limitations drive the client’s needs. For example, a large consulting company, encouraging internal competition, created a structure in which multiple salespeople had individual incentives to sell their group’s services to a client. In principle, they were asked to work together, but in practice they viewed themselves as competitors. This meant that the relationship to the client was complicated by the consulting group’s internal compensation process. The client had multiple business cards from the same organization and was forced to make a decision on which contact to call when they needed help. At times, they were not sure who this was and ended up calling a third party to stay out of the vendor’s internal politics. This is not an outcome any consulting organization wants. The engagement office approach allows credit, blame, and rewards to be determined and shared outside the client’s view. Although you still want to encourage healthy competition within the team by recognizing individuals, there is some level of shared victory or defeat between team members. This allows the team to service the client efficiently and with clarity of purpose. The engagement office presents an outer structure that hides the complexity of the consulting organization from the client (see Figure 12-2).

Working Multiple Engagements for a Client

Figure 12.2

The engagement office structure

All opportunities and engagements with any part of the client organization are pursued through this office. It scales with the load that is placed on it—or removed from it. The client is no longer dealing with multiple service lines or groups within the consulting organization. They are no longer concerned with who gets credit for a sale, or who gets paid the commission. If they have a request, they call the single contact (or two) that they have come to know in the engagement office. This contact will put them in touch with anyone else they need to hear from. The client no longer feels any confusion, guilt, or frustration. The members of the engagement office worry about the protocol of engaging account, sales, or delivery resources. Ideally, a “war room” can be established at either the client premises or the consulting offices. This can be a meeting room that is temporarily converted for this purpose. It will help establish an identity for the engagement office and allow participants to clearly communicate timelines, objectives, and goals with the extended team. As Figure 12-3 shows, several key roles need to be determined by the consulting executive, as described in the following sections.

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Figure 12.3

Engagement office organization

Executive/Senior Manager One or a small group of lead client partner(s), executive(s), or designate(s) essentially own the client relationship and take charge of status reporting, profitability, invoicing, and customer satisfaction. You want to ensure that turnover is low for resources that establish these client relationships. This can be done through good career management, bonuses, salary, and other retention tools. The executive/senior manager is a good focal point for finding and selling new business. This person or small group is in a position to build strong relationships with the client resources. They will also be able to understand the business, systems, culture, and other aspects of the client’s organization. They will naturally become the contacts for the client who needs more work done well. The engagement office structure supports these informal relationships, because regardless of where an opportunity arises, it will filter through the other consultants working for the client, and if unfulfilled, will be brought back to the consulting organization as another

Working Multiple Engagements for a Client

opportunity. Any firm of reasonable size will be only too happy to fulfill more work.

Account/Sales Team Hunting and farming are two very different activities that are often incorrectly viewed as being the same. This gets a lot of consulting organizations in trouble. Hunters and farmers each have their own specialties and cannot always cross over to the other role. A lot of IT consulting firms who assume that it is possible to do this either run out of business or, through bad delivery, destroy the client relationships in the business they are awarded. Hunters spend time thinking about new relationships that can be built, where to wine and dine new prospects, how to get a referral for a new bid, and how to drive strategies to build links into new accounts. They may make several sales calls or friendly visits in one day. Even when hunters are not selling, they are still networking. Hunters may not always close (win) the business, but they are instrumental in finding, qualifying, and mobilizing the resources to win it. Farmers spend time winning some work, but they focus on working with a client and understanding the technology and details of the engagement. Their focus will often be on learning new tools, getting deeper into existing ones, and going out with the team. Many farmers support sales activities, but only when someone has brought an opportunity to them. Farmers like to close business. If an opportunity is not in front of them, they are as likely to search the Internet to learn about the next and greatest application server than to think up ways to meet with a newly appointed CEO at a corporation that could be a good client of the firm. Having an account or sales team dedicated to a client is necessary to continue hunting for new opportunities. They will be supported in their pursuit by the senior executives in the engagement office or by the respective consultants, but their daily activities consist of browsing the corridors and boardrooms of the client to identify new potential engagements. This team can also leverage the personal and professional contacts of the other members of the engagement office. They can use success stories of engagements completed for the client to get referrals to other decision makers within the client organization.

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Engagement Office Controller It is useful to designate a full-time controller in the engagement office. This resource can ensure that the teams are communicating and leveraging each other to their fullest potential. She or he can also take a lead role in building status reports, ensuring that everyone has completed their timesheets correctly, organizing events, ensuring that there is strong team morale, invoicing the client, collecting revenue, following up, maintaining engagement plans, and orienting new team members. Engagement office controllers that stay for the duration of the engagement (which could be from months to years) provide ongoing continuity. They have the history and perspective of the client that can be shared with others. They are also 100 percent focused on the client and can follow up on details that other consultants may miss. Engagement office controllers must enjoy working with people, numbers, and plans. They usually have three to five years of industry or consulting experience. They must be detail oriented and have a desire to plan.

Engagement Manager The engagement manager, leader, or champion is responsible for the delivery of an engagement. This generally consists of several deliverables and can be many months or years in duration. This resource may become a farmer in terms of bringing on parallel or follow-on business, but the main focus remains on delivering the current engagement, maximizing client satisfaction, and maintaining team morale. There may be several engagement managers within the engagement office. Each engagement manager may, in turn, be responsible for multiple engagements. The role of an engagement manager is the same whether the organization is working on multiple engagements or a single engagement for a client.

Engagement Team The engagement team will be drawn from the different service lines of the consulting organization to staff an engagement. The team may also include subcontractors, other consulting organizations, vendors, and third parties. Client resources may also be included on this team. For the most part, these resources are more or less dedicated to the specific engagement. This is where the business analysts, systems analysts, developers, data modelers, object modelers, database administrators, project

Working Multiple Engagements for a Client

leaders, testers, creative designers, architects, and subject matter experts reside on the organization chart for the engagement.

Shared Resource Pool Consulting organizations that are running several engagements at once have the ability to build a shared resource pool to help improve their profitability and deliverable quality. Key resources with unique or high-demand skills can be shared across multiple engagements. For example, suppose you have an outstanding architect. Instead of having this resource work on a single engagement for $1 million, you have the option of dividing the time across several engagements, each worth $1 million to $2 million. With sufficient support to ensure that your star architect has the bandwidth to support these initiatives, the same architect can also leverage his or her unique skills to benefit multiple engagements. Servicing the same client should not raise conflict-ofinterest concerns in the client’s mind because it is the same organization. The architect will also be able to leverage knowledge of the client more completely. Figure 12-4 shows how a team can be built around a single strong architect. This practitioner’s skill, expertise, and leadership can be leveraged on four different engagements for a client at about 25 percent of the architect’s time on each one. However, full-time presence will still be required on each of the engagements. Less expensive designers can be dedicated to each engagement. Assuming a salary of $150,000 for the top architect and a range of $50,000–$75,000 salaries for the less experienced designers, this resourcing model has an annual salary commitment of $425,000. This model offers the advantage of maximum leverage of a strong skill set. The disadvantage is that the strong skill set (in this case, the architect) can become so overworked as to become ineffective if care is not taken to manage time and commitments properly. Many consulting firms have learned to do this well. Figure 12-5 presents another approach to staffing an engagement office. In this approach, an architect is dedicated to each engagement on a full-time basis. It is assumed that each architect is strong, but not an expert. This fact is reflected in the reduced salary that each architect earns, namely, $100,000. However, four of these resources are required to support as many engagements. Being architects, each may require some documentation, modeling, and diagramming support. We have created a shared resource that is available to any of the engagements

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Figure 12.4

Leveraging key resources, model 1

for short periods of time. We have also added an “expert” architect to the pool who may be called on by any of the architects to answer complex technology questions. This would be on a consulting basis, meaning that the engagement architect must ask for assistance, or none will be offered. (This could be a problem if engagement architects do not know what they don’t know!) The annual salary commitment of this model is $485,000. The shared super-architect model is $60,000 cheaper than the dedicated architect model. This is about 14 percent of the total cost, which is a decent margin and worth evaluating in order to maximize profitability on a set of engagements.

Challenges of Multiple Engagements Although consulting organizations and clients contemplating multiple engagements face several challenges, there is a lot of evidence in the

Figure 12.5

Leveraging key resources, model 2

Working Multiple Engagements for a Client

industry to show that these can be overcome. Some of the challenges to consider, and strategies for dealing with them, are shown in Table 12-1. Multiple engagements can also become highly addictive as a source of revenue. The consulting sale becomes relatively easy, the profit is good, and the consulting organization can be fooled into believing the good times will continue uninterrupted. This, of course, is seldom true. Sometimes the client organization goes through a change that causes all the engagements to be completed at once, thus releasing a lot of consultants all at once. This experience is traumatic for the consulting organization that suddenly has a lot of nonbilling overhead to support. For this reason, we recommend limiting dependency on a single client to no more than 30 percent of the overall business. When things are going well with one large client, always begin to branch out and start billable engagements with other organizations. Table 12.1 Mitigation Strategies for Common Challenges Challenge

Mitigation Strategy

Keeping track of all the engagements that are being done for the client.

Maintain a one-page status report that tracks key information about all the engagements.

Keeping track of all the resources, when they’re starting, and when they’re ending on the various engagements.

Build and maintain an integrated organization chart.

Continuously scaling the organization for new engagements that are concurrent.

Build an external pool of trusted contractors who can be brought in to temporarily strengthen the engagement teams.

Keeping track of the interdependencies between the engagements.

Maintain an integrated engagement plan to track these.

Keeping track of touch-points within the Coordinate outside events with client client organization, each of which needs to resources on a regular basis to strengthen be nurtured. Consultants can get caught up the business relationships. in the politics of the organization. Overusing key, expensive resources.

Stagger engagements in such a way that they are more or less parallel, but with some offsets in start dates.

Keeping abreast of the current status of a group of engagements.

Maintain a one-page status report that tracks key information about all the engagements.

Keeping all the balls in the air.

Maintain an integrated risk assessment and issue log that is tracked within the engagement office.

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The Combined Status Report A useful approach for overcoming the complexity challenges is to format your status report so that it shows all relevant information for the collection of engagements being run for the client. Figure 12-6 shows a format that can serve as a quick index into the status of individual engagements, and as a total set. This information is often required by the management team and requested by clients.Each field is described next. The information shown in this example can be customized to suit the unique needs of your engagements. This type of report has proven to be invaluable on complex engagements, especially in communicating with clients. Maintaining this information will help you keep clients in the loop on all the engagements they have approved.

Overall Status Indicator A colored box in the heading captures the overall status of all engagements. This could be red (urgent issues that threaten success), yellow (urgent issues that require attention), or green (no major issues). You On the Web

Figure 12.6

Combined status report

Working Multiple Engagements for a Client

will need to define some business rules to drive the color selection. For example, if more than a third of the engagements in the set are in red status, the overall status of the report is red. Other potential business rules include the following:


The overall committed budget to complete the engagements is not enough according to the latest projections.




There may be an accounts receivable problem.




Engagement sponsors may be in the process of being replaced.




The client may be considering canceling some or all of the engagements due to budget constraints.




Competition from another vendor may be increasing.

Engagement Status A colored circle (with red, yellow, or green) indicates the status of each engagement. Business rules at the engagement level need to be defined to indicate the status. Some possible areas to consider include the following:


The overall budget to complete the engagement is not enough according to the latest projections.




There may be an accounts receivable problem.




Engagement sponsors may be in the process of being replaced.




The client may be considering canceling some or all of the engagements.




The technical architecture may be unproven.




Business requirements may not be signed off.

Period Ending This field can contain the start and end dates of the period covered by the status report. Or it can be a single date corresponding to the end of the period covered since the date specified in the last status report.

Total Budget The total budget is the one agreed to with the client for the engagement. If it is a time and materials engagement, this can be an estimate based on the detailed engagement plan.

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Engagement Name, Start Date, and End Date These three fields are straightforward—include the engagement name, start date of the engagement, and end date of the engagement.

In UAT This field is the planned date for the engagement to enter User Acceptance Testing. You may want to include any other dates of interest to you (e.g., development start date). UAT is a key date for clients because they are generally expected to provide resources for testing and can use this information for their internal resourcing plans.

Budget Spent and Projected Budget These fields contain the budget spent to date and the projected budget based on the updated engagement plan.

Manager Use this field for the name of the engagement manager or other resource contacts of interest. When there are a lot of active engagements, this information is useful for communicating key contact names to all the engagement teams.

Comments Include any comments in this field to remind the team of important concerns or activities. The area is limited, so if more space is required, you may want to direct attention to an issue log for more details.

Totals There are three totals at the bottom of the report. The first is the total accepted budget for all engagements in the status report. The second total is the total budget spent to date, and the last total is the sum of the projected budget. These three totals are useful for indicating the risk facing the engagements. When either of the second two fields approaches or exceeds the first one, the engagement(s) are beginning to lose money, and the status indicator should be modified to reflect this.

Combined Invoicing We don’t think you would intentionally want to keep your clients in the dark, so we recommend making it as easy as possible for them to understand how much they are paying your organization. Develop an

Working Multiple Engagements for a Client

invoice, or invoicing system, that shows what you are charging across all the engagements that you are working on. Your clients will eventually build this information anyway. The presentation of the invoice depends on the level of detail you want to include. You may take a highly summarized approach that essentially shows all the costs across all the engagements that are in progress on a single page. Some clients like this level of clarity. They know what you cost anyway and have accepted this. You should help them focus on the value you are providing them. As one senior executive once told me, “I like writing checks to contractors because I know I got good value for every dollar I’m paying out.” If the client wants a higher level of detail, you may opt to generate an invoice per engagement. If you use this method, create a batching system that will make it relatively easy to relate invoices together by period (e.g., either by a consistent date or by a batching number on the invoices themselves). It is better to make it as easy as possible for the client to follow the financial trail. Don’t put them in a position of trying to figure out the payment history by following a convoluted trail of paperwork.

Selling Multiple Engagements A client that awards you multiple engagements is essentially confirming the strength and strategic nature of your relationship. Until you have proven some value and built some level of relationship, it is generally not possible to win more than one engagement at a time from a client. However, at some point it begins to make sense that you pursue this relationship. It is in the client’s interest to leverage the experience and familiarity you are building across their organization. It saves them time and money, and reduces risk. Of course, this is only true if you are contributing to the client’s success. Multiple engagements should not be seen as a way to make more revenue off a client, although this is the end result. A more accurate way of looking at it, and one that will provide a win-win relationship to both parties, is to maximize the value each receives. A consulting organization is better able to commit key resources to a client that has made them a part of their success. Similarly, a client will more naturally award business to a vendor that has committed themselves to the client. This should be stated in no uncertain terms to

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members of both parties. State the commitment, demonstrate the commitment, and ask for more business. Multiple engagements are not the same as getting a new engagement when one is completed; they are parallel engagements. The goal is to work on multiple engagements at the same time, influence a broader cross-section of the client’s business, and put more of your resources on the ground at the client site. It is the client’s right to award you business. Getting single pieces of business from a client is a sign of confidence. To earn the right for multiple engagements, set up the following prerequisites:


Why not one vendor per engagement? It may seem like a natural way to do business from the perspective of some clients. Keep the environment competitive by bringing in multiple vendors. The ones that succeed get another engagement. The ones that don’t, well, they just don’t get more work. However, there are many efficiencies that clients can leverage by partnering with a single vendor. Clients realize this and naturally move in this direction.




Can you scale? The client needs to understand that your organization can handle the work they give you. Do you have enough resources to work on multiple engagements for them? Do your resources have the necessary skill sets? Demonstrate that your organization can support more of their requirements. You may also want to make it clear that you will invest what is needed to build the infrastructure to support their future requirements.




Are you committed to their success? Clients want and need to know that you are committed to their success. There are several ways to demonstrate this. You may place a key executive in a sponsorship role. You may agree to share in losses they might incur. Sincerity here is vital, and clients will often know whether you are genuine.




Have you demonstrated your abilities? Your references and especially the work you have successfully completed or excelled at are effective ways of demonstrating your abilities. Show them how you will be different and better than other vendors. Why should they choose you over the other companies that want more of their business?

Working Multiple Engagements for a Client




Do they know you want the work? It’s amazing, but sometimes clients don’t understand that you want more work from them. It’s a good idea to tell them about your ultimate objectives and your vision of the mutual relationship you want to develop with them. Let them know you are interested in doing more work for them, ask them for work, and ask them what you need to do to become their primary vendor of choice. Then listen to their response and build an appropriate pursuit strategy.

Closing Perspective “Partner” is a common word thrown around when dealing with consulting-client relationships. For a consulting business, being a partner ideally means that the client awards all business to them. To a client, partner means reduced fees, the best resources, and lots of freebies. “Partner”has to work for both parties; it must be a win-win situation. Successfully conducting multiple engagements where there are opportunities to share rewards and risks is one example of partnership. To prosper, consulting organizations must form client relationships that are not one-offs. The price of selling one-off engagements is high, and making a consistent profit is difficult at best. The goal for every consulting organization must be to establish relationships with a key set of clients that bring from 20 percent to 30 percent of the business to the organization. This efficiency helps both parties win. Going above this number opens the consulting organization up to enormous risk if a large client is lost. Some of the most successful consulting organizations have followed this model, including the Big 5 consultancies, the system integrators, management consultancies, and many strong boutique firms.

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13 Risk Mitigation

B

oth IT consulting organizations and engagements face substantial risks all of the time. Fortunately, every consulting organization can define a set of best practices to identify and mitigate risks in both of these areas. Risk mitigation is the key objective. There are times when a risk cannot be entirely avoided, but its impact can be substantially negated. This chapter examines risk at both the engagement and practice levels. As shown in Figure 13-1, risk mitigation extends throughout the duration of an engagement, for the length of a client relationship, and also affects other aspects of the consulting organization. This chapter ends with two risk assessment case studies.

Three-Point Risk Assessment for Engagements We are going to discuss a risk assessment lifecycle based on three focus points for an engagement: (1) pre-bid risk assessment—assessing whether to bid on an engagement; (2) post-proposal risk assessment— assessing whether to sign an engagement letter; and (3) engagement risk assessment during the engagement itself. A risk assessment involves identifying and evaluating potential risks and documenting the findings in two primary deliverables that drive subsequent risk mitigation activities, namely:


Risk indicator The number of “yes” and “no” responses to a set of questions are added together. The result is translated into a single digit or a word, for example: low, medium, high, and extreme risk. This becomes known as the “risk indicator.” Your firm’s response to each risk indicator must be predetermined and customized for specific points in the risk assessment lifecycle. 279

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Figure 13.1




Risk mitigation strategies

Identification of the specific risks involved A clear statement of each specific risk identified during the risk assessment should be recorded. Your response must then be to identify a risk mitigation strategy and owner for each of these.

You need to ensure that the consultants can access these risk assessment documents in the future. Depending on the sophistication of your organization’s risk assessment systems, you may be capturing information electronically or in paper files. Whether in a filing cabinet or on a corporate intranet, be sure that the results are centrally stored and retrievable.

Pre-Bid Risk Assessment There is no value in bidding on an engagement that you have no chance of winning or delivering on. In fact, assuming liability for such an engagement could threaten the survival of the consulting organization if the client defaults on payment or takes legal action. The formal bid may use up valuable resources that could be engaged more profitably elsewhere. Consequently, the first risk assessment point is used to determine whether you should invest in pursuing an opportunity at all. Figure 13-2 shows a set of sample questions that the engagement pursuit team should answer before investing a lot of time formulating

Risk Mitigation On the Web

Figure 13.2

Pre-bid risk assessment

a bid. This particular example contains 12 questions—enough to gauge risk, but not enough to discourage the pursuit team from completing the survey. A team that is busy chasing or delivering business opportunities will look for ways to bypass administrative work if it is too cumbersome. It is better to have a streamlined process that is used than a thorough one that is ignored. These questions are a starting point, and they should be customized for your business. The number of “yes”and “no”responses to the survey need to be interpreted to understand the level of risk your organization is being exposed to by this project. Ranges can be established to correspond to a number of “no”responses, and each range can then be translated to one of the risk indicators, as discussed in the previous section. Table 13-1 shows how the risk indicator can translate to a set of ranges. The table also provides an interpretation or set of follow-on actions for each risk indicator. You can customize the ranges and interpretations to suit the number of questions you feel should drive your risk questionnaire.

Post-Proposal Risk Assessment If your firm is selected as a finalist or a client is prepared to accept a bid for work from your organization, you run a post-proposal risk assessment. You are essentially about to submit a binding agreement that will legally obligate your organization to deliver on the contents. Before doing this, you want to run a risk assessment to understand the level of

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Table 13.1 Pre-Bid Risk Assessment Indicators Challenge

Mitigation Strategy

Keeping track of all the engagements that are being done for the client.

Maintain a one-page status report that tracks key information about all the engagements.

Keeping track of all the resources, when they’re starting, and when they’re ending on the various engagements.

Build and maintain an integrated organization chart.

Continuously scaling the organization for new engagements that are concurrent.

Build an external pool of trusted contractors who can be brought in to temporarily strengthen the engagement teams.

risk involved in this proposition and decide how much more due diligence is involved in arriving at a decision. As with the pre-bid risk assessment, Figure 13-3 shows another set of sample questions that the pursuit team should answer, tabulate, and then interpret. This particular example contains 15 questions and an adjustment for large engagement budgets. The adjustment considers a base engagement budget that is an acceptable amount of risk for the consulting firm to assume. Anything above this amount iteratively adds to the risk factor already tabulated for the engagement. In this example, an adjustment of one point is added to the number of no’s tabulated in the survey for every $500,000 of additional budget. On the Web

Figure 13.3

Post-proposal risk assessment

Risk Mitigation

Table 13-2 shows the interpretation of the risk indicators and the translation of the number of no’s into a specific risk indicator.

Post-Proposal Risk Mitigation Strategy If the post-proposal risk assessment identifies a risk indicator of medium or more, the pursuit team is also required to complete a risk mitigation strategy for all the “no” answers they provided. If an electronic tool is being used, these “no”responses should automatically be pulled into a template like the one shown in Figure 13-4. In the absence of an electronic tool, the pursuit team should be instructed to print out the template or construct a new one and complete it manually. The engagement plan should be updated to reflect the mitigation strategies.

Engagement Risk Assessment The pre-bid and post-proposal risk assessments are completed to de termine whether or not to undertake an engagement and what the risks are if you do. Once the engagement starts, you want to take the risks identified in the post-proposal assessment (as captured in Figure 13-4) and manage this list throughout the engagement. This involves reviewing the risks, identifying new ones, and processing or refreshing the mitigation strategies. The engagement manager owns the risks, but may rely on different resources to resolve the individual items on the risk mitigation form or template. This list needs to be kept in front of the engagement teams so that the risks are not left behind or forgotten—as often happens on Table 13.2 Post-Proposal Risk Assessment Indicators Risk Indicator

Number of “No” Responses

Description

Low

Less than 4

Proceed with the engagement letter.

Medium

4 to 7

Get manager/director/partner approval to sign off on the engagement letter. Complete the post-proposal risk mitigation strategy.

High

7 to 9

Get two managers/directors/ VPs/partners to sign off on the engagement letter. Complete the post-proposal risk mitigation strategy.

Extreme

More than 9

Get general manager/managing director/president to sign off on the engagement. Complete the post-proposal risk mitigation strategy.

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On the Web

Figure 13.4

Post-proposal risk mitigation template

engagements. One way to do this is to include it in a weekly status report and to revisit the risks in the regular status meetings or the management meetings. Figure 13-5 shows how the pre-engagement risk assessments feed into the risk assessment and mitigation form that will be front and center for the remainder of the engagement. In addition to the engagement manager being the owner of the risk mitigation process, it is sometimes useful to have a senior executive in the consulting firm play the role of risk manager. Providing another contact point for the client during the engagement allows them to bring up additional risks without involving the day-to-day engagement team. The senior executive assuming the risk manager role will rarely be involved on the engagement on a full-time basis. Other engagements or practice priorities might divert the attention of the part-time risk manager. For this reason, we recommend that the engagement manager retain the ultimate responsibility for ensuring that risks are given appropriate attention until they are resolved. The risk assessment team consists of the engagement manager, the risk manager (if one is identified), and any other expert resources required to manage the risk process.

Risk Mitigation

Figure 13.5

Risk mitigation process

The post-proposal risk mitigation template provides a good starting point for capturing the information required to track and resolve risks during an engagement. Figure 13-6 identifies a few additional fields that will make the process more efficient. You may want to customize this form with specific information that your engagement requires.

Risk Checklist Identifying risks is an uncertain science. Risks can arise from any number of sources and at any time before and during an engagement. You will find a checklist useful to start the identification process. But don’t stop there. Look for any other sources of risk—think inside and outside the box. Be prepared to continually uncover and deal with new kinds of risks. This section contains a number of categories that can be used as starting points for a risk checklist. Timeline Evaluate risk in the following areas:


Sufficient time for delivery Is there enough time to produce the milestones shown in the engagement plan?

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On the Web

Figure 13.6

Risk assessment and mitigation form for the engagement




Launch date Is there enough elapsed and billable time to complete the engagement?




Completeness the timeline?




Timeframes Does the plan allow for sufficient time to set up environments, orient new team members, and review deliverables?

Are all the engagement activities included in

Budget Evaluate risk in the following areas:


Sufficient amount Is the budget large enough to do a quality job?




Contingency Is contingency built into the budget, especially if it is a fixed-price budget?




Warranty




Cost adjustment Does the fee structure established with the client change in the future? Do the fees increase to reflect the

Is the budget available for warranty? How much?

Risk Mitigation

future fee schedule and promotions to team members? Will the fee schedule support pay increases to consultants in the future?


Expenses How are expenses being handled? Have the organization and client agreed on relevant expenses?

Team and Resource Availability Evaluate risk in the following areas:


Vacation Does the engagement plan include vacation time for the key resources?




Retention Is there a risk of losing key resources during the engagement?




Skills Does the engagement team have the right business, technical, and other skills to conduct the engagement?




Morale Are there any morale concerns regarding the engagement team? What is being done to maintain good morale on the engagement going forward?

Testing Evaluate risk in the following areas:


Environment Is a suitable test environment available to do sufficient testing?




Test cases Have clear test cases been established? Has ownership been established for producing these?




Approach




Timeline Has enough time been allocated for sufficient testing? Does the engagement plan include testing throughout the engagement lifecycle?




Resources Do the resources have sufficient knowledge to test the application? Are they able to test the application objectively?

Has a testing approach been established?

Technology Evaluate risk in the following areas:


Environment Are the technology platforms available to support development, staging, and production phases?

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Scalability Do we understand the scalability requirements of the system, and is the technology available to support them?




Reliability Do we understand the reliability requirements of the system, and is the technology available to support them?




Response time Do we understand the response time requirements of the system, and is the technology available to support them?




Security Do we understand the security requirements of the system, and is the technology available to support them?




Proven architecture Does the technology architecture and configuration have a proven track record? Do the vendors providing the technology have a good track record?

Commitment Evaluate risk in the following areas:


Client Have enough levels of the client (executives, users) demonstrated their commitment and availability to support the engagement? Have they demonstrated flexibility in dealing with issues that may come up?




Consulting group Is there enough support in the consulting organization to provide the resources and investments necessary to deliver the engagement, despite unexpected problems (especially in terms of going above and beyond what is expected for the fees being received)? Is executive management sponsoring the engagement?




Team Has the team demonstrated enough commitment and flexibility to the engagement?

Quality Evaluate risk in the following areas:


Owner Has a quality owner been identified and committed to the engagement?




Process Is the consulting organization’s quality process being applied to the engagement? Is a proven quality process being used on the engagement?

Risk Mitigation




Standards Do we have standards for the deliverables, code, architecture, and design?




Quality plan




Resources Does the engagement team understand quality expectations?

Has the client signed off on the quality plan?

Sign-off Process Evaluate risk in the following areas:


Stakeholders Have all the stakeholders and sponsors who need to sign off on the engagement deliverables been identified? Do they understand the timelines? Is their participation included in the engagement plan? Have they agreed to respond in a timely manner?




Process Have we established a suitable sign-off process for the key deliverables?




Requirements Have we established clear guidelines and requirements for every deliverable being produced? Have these been accepted by the client?




Timeline Have we left enough time in the engagement plan to allow sponsors and stakeholders to review deliverables, ask questions, and follow the sign-off process?

Post-Production Support Evaluate risk in the following areas:


Support Have we identified the resources and materials needed to support the client after the system goes live?




Help desk/contact information Has a central help desk function been identified to support the business after the system goes live?




Funding Have we negotiated a reasonable fee schedule to support our team after the system launch?




Client resources Has the client committed the resources to support system launch, including the time it will take to train the organization?

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Legislation Evaluate risk in the following areas:


Existing Are there any legislative impacts on the engagement? (For example, in some countries, employees cannot be asked to work overtime.)




Anticipated Is any legislation in consideration by any level of government that could impact the engagement in the future (for example, the time required to complete a stock trade)?

Engagement Plan Evaluate risk in the following areas:


Methodology Has the engagement plan been built using a proven methodology or framework?




Completeness Is the engagement plan complete? Are all deliverables that need to be produced covered? How sound are the resourcing expectations?




Buy-in Has the engagement plan been reviewed with the engagement team? Have they bought into the timelines and deliverables?




Sign-offs Are there enough sign-off activities to control scope creep?

Dependencies Evaluate risk in the following areas:


Identification How completely have the dependencies on the engagement been identified?




Communication Have the dependencies been communicated to all the resources involved in their resolution?




Processing What concerns do we have around meeting the dependencies? Are there any obstacles that have not been dealt with yet?

Communication Evaluate risk in the following areas:

Risk Mitigation




Identification Do we have a contact list of all stakeholders, including engagement team, client users, sponsors, executives, third parties, and other client departments? Do we have tested e-mail and phone lists to communicate with each of these groups?




Standards Have we established standards formats and frequencies for communication? Have we identified what information needs to be communicated?

Deliverables Evaluate risk in the following areas:


Identification Have all the deliverables for the engagement been identified?




Consensus Has consensus been reached with the client and members of the engagement team on the number and type of deliverables being produced?




Format Has the client signed off on the format of each deliverable?




Acceptance Have we established clear acceptance criteria for each deliverable being produced?




Time Has sufficient time been allowed to document the engagement? Is there enough time to create training materials?

Shortcuts Evaluate risk in the following areas:


Skipping steps Are we skipping any necessary steps to meet a schedule? If yes, do we have enough mitigation activities in place to reduce the risk?




Unproven approaches Are we attempting anything that has not been proven to work in the past?




Compressing timeframes Are we compressing timeframes unnaturally to meet an imposed deadline?




Reuse Are there reusable components (technical, documentation, business, training, etc.) that could be applied on this engagement?

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Operations Evaluate risk in the following areas:


Support from head office Is there enough technical support from the consulting office (for example, do consultants have appropriate computers and software)? What happens if there is a problem?




Contracts Do we have a clearly signed statement of work that includes a clear payment schedule?




Timesheets Have we determined how the organization and the client will recognize work done? Does the client need to sign timesheets?




Receivables When will the client pay their bills? Is the client financially stable? How do they treat their vendors? Do they appear to be happy with our services? Have any payments been missed?




Insurance Do we need additional insurance for working on this engagement?




Cancellation What guarantee do we have from the client that the engagement will not be canceled without warning? Can we negotiate a one- or two-month notice period including guaranteed payment?

Third Parties Evaluate risk in the following areas:


Reliance Are we relying on third parties to deliver the engagement?




Expectations Have expectations been clearly understood by all third parties involved in the engagement?




Liability Are we liable to pay the third parties? What guarantee do we have that payment will be made?

Practice-Based Risk Assessment Risk assessments are just as useful for a consulting practice itself as they are for engagements. At a practice level, you can use the 12 key metrics to determine what you need to accomplish and how the practice is

Risk Mitigation

doing at a particular point in time. Figure 13-7 shows a “corporate dashboard” that displays all the relevant information on a single page so that the health of the practice can be evaluated at a glance. There are an infinite number of variations to this format depending on the type of information management wants to highlight, but in general it should focus on the items shown in Figure 13-7. When evaluating practice performance, it is useful to compare the previous period’s dashboard with the current one to see which areas improved over the duration. The dashboard shown in Figure 13-7 can also use color to highlight areas of concern or success. For example, metrics that improved in the past month could be highlighted in green, those that went down could be yellow, and those that were below target could be red. On the Web

Figure 13.7

Sample corporate dashboard

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The color light icon at the top of the dashboard requires a set of rules to interpret the status of the practice as a whole. For example, if expenses are greater than revenue, the red light could be highlighted. If there are more than five red highlighted areas anywhere in the dashboard, the overall indicator at the top could be red. A consulting practice needs to identify the rules that are important to them and implement these for the dashboard.

Examples of Risk Assessment Let’s look at a couple of case studies in which an early risk assessment in an IT consulting situation helped an engagement manager save an engagement that would have failed without strong intervention.

Insurance Web Site and Back-End Application An IT engagement team was experiencing a great deal of difficulty working with a chief actuary and his assistants at a life insurance company. Deadlines kept getting missed by substantial amounts of time. Everyone was working hard, on the weekends, and into the evenings. Both groups started pointing fingers at the other group. It got to the point where neither group would volunteer any commitments. “How long will it take to build the system?” the actuaries would ask. “What are the detailed requirements?” the engagement manager would respond. “It depends on how long it will take to build it,” would be the user response. It became clear that neither group understood or respected the challenges of the other group. Was it a technology problem? At first this was the assumption. The technology was three-tier with some bleeding-edge pieces. An overall architect was brought in to review the situation and determine where the problems were occurring. Question 8 of the post-proposal risk assessment form (“Do we have a clear set of business requirements and objectives for the engagement?”) clearly identified the problem the team was having. A solution to break the logjam was to focus on components of the application for which the functionality could be clearly defined, articulated, and signed off. This allowed the technical team to provide estimates they were willing to back up. Had the risk assessment process been followed correctly from the beginning, a mitigation strategy would have been developed and included in the plan, saving the team several weeks of aggravation.

Risk Mitigation

Billing Application Example A large consulting organization was hired to build and deliver a billing application for a large telecommunications provider. The pre-bid risk assessment showed a low level of risk because work had been done for the client successfully in the past. However, it should be noted that this work did not include implementation. The post-proposal risk assessment also showed a low level of risk based on the questionnaire, but identified a risk that had the potential to greatly impact the engagement timeline in a subtle way. The major risk to the engagement involved the nonavailability of a specific client resource. While the client dedicated many full-time resources to the engagement, they could only spare a part-time DBA to support the project. This DBA supported several production systems for the other portion of her time. The production systems were prone to failure, so the DBA was always fighting fires and would rarely be available to the engagement team to tune the database environment for testing, performance, and security. Based on the proposed engagement plan, this would have delayed delivery by a minimum of one month. The engagement manager worked with the client sponsor to find a solution to the risk. Since the DBA could not be relieved of her production responsibilities, a business case was made to allow a consultant to gain DBA-level privileges on a test platform. This was normally against the client’s corporate policy, but an exception was made in order to deliver the engagement on time.

Closing Perspective While the objective of strong engagement planning and management is to eliminate risk, in reality you are trying to mitigate as much as possible. The process for conducting a risk assessment requires a thorough examination of potential risks and then building mitigation strategies for each one. A successful track record with your clients will go a long way toward generating future revenue streams for your consulting organization. Likewise, poorly handled engagements will cut into future revenues. But even before the long term, poorly handled engagements will drive up your costs while you attempt to rescue them. They will also absorb a lot of your best resources in the interim. Other impacts include resource morale problems and retention difficulties. This becomes a downward, costly, grim spiral.

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Consulting is a high-stakes game. Clients are willing to pay top dollar for your services, but by the time they are prepared to make this investment, the situation is generally pretty intense. The risk assessment process outlined in this chapter is your tool for identifying problems before they happen, and for getting your client to buy into the process and help solve problems with you. Once a risk turns into a problem, most clients will expect you to solve it, and will question why they brought you into the engagement in the first place. Good risk management allows you to stay proactive instead of reactive.

14 Legal Considerations in IT Consulting

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icture this scenario: You’re a software developer who is practicing much of the advice outlined in other chapters in this book, and have even managed to have a social life. You’re a member of a local health club, and one of your acquaintances is a solid, competent local lawyer. As you relax after your workouts, he’s thinking out loud about how he plans to put together a web site for the law firm. Although your lawyer-friend has read a bit about the software and web development process, he freely admits he is a lawyer first and foremost, and uses Word and Outlook as his most frequent software tools. He’s just “tinkering” with web development software. At this point, the discussion can go in two directions. Your lawyerfriend may have nothing more than a basic, or “brochure-ware,”web site with perhaps a dozen or so static HMTL pages, several pictures, a map, and some contact info. You absorb the scale and scope of the lawyer’s plans, and agree that he can probably do a credible job, even as a novice. Alternatively, the lawyer says that what he plans to develop is a fully integrated client-server application with links to specific libraries of online law resources and other research sources. He plans to develop a full-blown browser-based piece of software. You may offer the understated suggestion that the lawyer is getting a bit out of his league as a software developer. Now let’s take this problem and switch roles. You’re an IT consultant, and you need legal support from time to time.

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Legal Documents Are Part of IT Consulting On an ongoing basis, the most frequent need by an IT consultant for legal support is in the drafting of legal documents. What’s a legal document?


Articles of incorporation of a company




Complaints




Employment contracts




Provision of goods and/or services




Software or web development agreements, or agreements in general




License and sublicense agreements




Contractor and consulting agreements




Nondisclosure agreements




Statements of work




Terms and conditions




Warranties




Ownership of intellectual property




Service level agreements




Dealership agreements




Outsourcing agreements (national and international)

The list could be lengthy. If you perform work, or contract for work, and…


If the nature of the work is nontrivial in terms of the money, labor, and time it consumes




If the work’s outcome is significant to either or both the provider and the client




If the performance (or failure) of the system (or the software or the configuration) affects many people or an entire organization




If the nature of the work is complex and technical, and the potential for misunderstanding exists

… then you need some legal support and/or legal advice.

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And if you think the legal advice is expensive (which it often is), as this chapter unwinds, you’ll also see that the risk of not having good skills in the drafting and enforcement of the legal documents that govern your work is even more expensive.

Legal Documents Are Hard Work The drafting of legal documents is often described as the most intellectually demanding skill needed from a lawyer. Legal documents are hard work. As if the sheer abstract nature of legal documents were not challenging enough, drafting also requires superior skills in organizing information; the ability to anticipate trends, events, and contingencies that will affect the document’s content; sound research ability; and an ability to encapsulate a complex concept in language that is both exact and unambiguous as well as simple and clear. A legal document is a complete and accurate description of the scope of the agreed work or services, and it is also a tool to be used in the resolution of problems or disputes. This is part of the reason why the expertise of a good lawyer not only costs as much as it does, but is worth as much as it costs.

Expectations In IT consulting agreements, as in marketing, it is the user’s perspective that prevails throughout the process of drafting documents. In legal documents, this perspective translates into a clear idea of what the user expects from the software you write, the services you provide, the license you grant, or the configurations you provide, balanced with what you are prepared to say those services, software, and so on, will do. Note that this is very different from telling a client that what you do will meet the client’s needs. Even if almost every aspect of what you provide has been completely custom designed to meet a client’s precise need, making a claim or representation to a client that what you do will meet their needs is a pitfall to avoid. What is appropriate, however, is to be clear that the outcome of your consulting will be software, or web services, or networks, or whatever you do that performs according to specifications agreed upon between the client and you. That’s different. If the client later decides that the specs provided by them don’t meet their needs, it is the client organization’s issue, not yours. Assuming your legal documents have been properly drafted, you will be free of risk and liability for “specification creep.” If the issue is clearly stated

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on paper, both parties can understand what is and is not within the spec to which you are working. If it’s a “handshake agreement,” it may be that neither party will be able to agree on what it is that they shook hands on. Handshake agreements have their place, and that place is for simple projects, of limited scope and size, and with minimal impact on either party or on a market or public served by you or the client.

Form and Style of Agreements Have you ever noticed the form and style of your favorite genre of TV show? Something happens to start the plot. You meet the cast of characters. The plot evolves and thickens. The critical event or clash occurs. Somebody wins and somebody loses. Perhaps the hero gets the pretty girl or boy, and a memorable line of dialogue concludes the show. Everything is encapsulated within the “four corners” of the script. In legal agreements, the process is virtually identical. The cast of characters is generally the parties to the agreement. The plot elements are the specific representations of the work to be done and the exchange of valuable considerations (generally money) in return for doing so. The plot thickens with clauses that determine how the agreement will be interpreted. Possible clashes are covered in how disputes will be resolved. The clause stating that the legal document represents the entire agreement wraps it up, and the parties’ signatures are the memorable last word. Everything is encapsulated within the “four corners” of the legal document. Let’s examine the structure of a legal agreement, element by element.

Parties Most contracts begin with words similar to “This agreement made as of the xx day of Month, 20xx between:” and then list the legal names, and often addresses or locations, of the entities (or people) involved in the agreement. The parties of the first and second part are also often referred to as “offerer”and “offeree.”In most cases, the clauses describing the parties also contain a shorthand reference, so that, for example, John H. Smith and Associates System Integration Specialists Inc. will hereinafter be referred to as “Smith & Associates.”

Legal Considerations in IT Consulting

Preamble and Table of Contents The preamble of a legal document exists to help someone interpret the document. Think of it as the agreement’s executive summary. A preamble is useful in litigation if it accurately and concisely encapsulates the intention of the agreement. In a way, the legal document’s preamble is its “splash screen.” In much the same manner as a complex proposal, specification, or report has a table of contents, so too does any but a short or simple legal document. The purpose is the same.

Articles of the Document The body of the contract is divided into articles, or clauses, akin to chapters in a novel or scenes in a film script. The following sections cover how to organize the clauses and other necessary preliminaries.

Headings Just like subheads in a report, headings for specific clauses make finding something easier. They break the document into sections, and allow the word processor to generate your table of contents. The Headings clause usually takes less space than this section describing it, and also notes that the insertion of headings into the document is for the convenience of reference only, and does not affect the construction or interpretation of the agreement.

Governing Law You’re based in Florida and doing business with a company that has offices in Tennessee, Illinois, and Ontario. In interpreting the clauses in the document, whose laws apply? Any of the four states, or Ontario? U.S. law or Canadian? You need to agree on the legal jurisdiction in which the agreement is constructed and under whose jurisdiction it will be enforced.

Severability Suppose that in a 150-clause agreement, one clause, however important or obscure, is poorly worded, invalid, redundant, unenforceable, or otherwise unworkable. Does that clause bring the entire agreement down like a house of cards? Normally, you will specifically state that the problem clause does not affect the validity, legality, or enforceability of any other provision in the document. Severability is

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important in allowing a court to stay within the boundaries, or “four corners,” of an agreement, in the event of a dispute.

Entire Agreement Unless you’d like to have your agreement subject to real or imagined side deals, verbal undertakings, or any other agreement, you should state (assuming it applies in your case) that your agreement constitutes the entire agreement between the parties, and contains all the representations, undertakings, and agreements of the parties. Just to be sure, state specifically that there are no other verbal representations, undertakings, or agreements of any kind between the parties with respect to whatever the agreement concerns, except for those contained in your document. To put it another way, this clause states that if it is not in the legal document, then it is not part of the agreement.

Currency Agree on which country’s currency will be used in making payments if it is even remotely possible that your agreement will transcend national borders.

Amendments You probably want to state that an agreement can be altered (“amended, modified, released, discharged, or abandoned”) only by the duly authorized officers of the parties, or their successors or assigns. Successors means that if one organization’s signatory—perhaps a specific VP—leaves, that person’s successor can agree. Assigns means that you may be able to delegate, license, or in some other way assign the power to agree to amendments to another party. In essence, if either party wants to make a change, it needs to be in writing, and needs to be executed by someone that the parties agree has the right and ability to do so.

Definitions In IT consulting documents, definitions are everything. For example, exactly what do you mean by an expression like “the software” in the context of the project you are doing with a particular client? It may mean, for example, the licensed software to be installed on a specific number of workstations; or it may mean the customized software you are developing for the client. It is not only important, it is critical that

Legal Considerations in IT Consulting

all relevant terms you use in the context of an agreement that you put into writing have a project-specific definition. You may need to define not only what the term is, but also what it is not. The Definitions section may easily be the longest and most detailed part of the document or agreement. The many pages of precisely worded text allow you to refer later, for example, to the “Third Party Joint Venture,” and not have either party, or an arbitrator, later ask, “What did you mean by that term?” Defined terms are customarily typed in title case, as opposed to all lowercase, simply to denote that the term is defined within the scope of the document. It may not be proper English grammar, and certainly is not good newspaper writing, but in legal document drafting, the convention of using title case for defined terms has a purpose. Unless there is a reason to do otherwise, sort the defined terms in alphabetical order.

Body of the Document How the information is organized after the document has dealt with its preliminaries and defined its terms depends largely on the purpose of the document. For example, a legal agreement describing an organization, or a joint venture, will deal at length with the organization, including clauses on such items as licenses and their terms; the trade name; ownership of intellectual property; how marketing will be conducted if more than one entity is involved; revenue streams from e-commerce; responsibilities on shared web sites; exclusivity clauses; and whatever else may apply in that situation. Here is a checklist of some common items you may wish to address in your negotiations with your clients, or with others:


If you are working with another organization on a project, what will the name of the project entity be? Who can change that name? How?




Where will the office, if one is needed, be located? If there is no office at the outset, and one may be needed, who can open one? Where? How?




What is the purpose of the document, or agreement, or contract? In simple terms, describe what economic activity the agreement is designed to cover.

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How will the entity, if one is being formed, be organized? Can any party to the agreement enter into a similar type of venture with others during the term of the contract? You will need to be specific on this point.




How often, in what location, and for what purpose will the parties meet? How can one party formally request a meeting? How many days notice are necessary? Is there any restriction on where such a meeting may (or may not) be held?




How are profits and losses distributed among the parties to the agreement if this applies in your case?




Address the term, or time period, of the document or the agreement. When does the term begin? How long does it last? If it has a fixed end date, what is it, or describe the conditions that cause the agreement to terminate.




If someone is to be named as manager, or one entity is named as taking a lead role in an agreement, what are the specific responsibilities and expectations of the person, or people, or entity named to manage anything?




Who gets signing authority, or in legal terms, who gets to “execute documents” that are binding on the parties to an agreement?




Who manages the bank account? Where are funds deposited? How are funds deposited to the bank account used? Who gets to sign checks?




How is technical support handled? Exactly who supports whom, for what term, and within what boundaries? The cost of tech support can be very high, and setting out clearly either what you expect or what limits you are offering is vital in any IT consulting agreement.




During the term of the document, or the agreement, who gets to do what with any intellectual or other property? Does any party have exclusive rights to intellectual or physical property?




How will pricing be handled? In what nation’s currency will payments be made? How are volume discounts handled? What exceptions exist, and how are they handled?




Who pays for shipping? What are the terms of payment when an invoice is rendered? If a down payment is, from time to

Legal Considerations in IT Consulting

time, necessary, what is the amount or percentage, and when is that payment due?


Do any of the parties to an agreement get access to the technology owned by any other party? If so, how much access? For how long? Under what terms? What are the limits to this access?




Does anything in the agreement you are drafting affect any other business or entity owned by any party? If so, how?

Standards and Warranties Performing consulting work applies skills to an abstract problem to produce tangible results. The goal here is to relate these results to the issue that caused the client to engage you. To say, “This project will solve your problem and make your systems do what you want them to do”may be fraught with as much risk as saying of a car that “this vehicle will get you where you want to go.” If someone bought the car and later began litigation against the vendor, claiming that the intended destination was a mid-Atlantic island, and the car didn’t get the purchaser there without a boat, is the vendor liable for the boat freight charge for having made the claim? Similarly, in consulting, you don’t work to an abstract notion of what the client wants to do, you perform your work to meet a specific standard set out and agreed between the two of you.

Intellectual Property Much of what IT consultants do involves intellectual property in one form or another. We use software code and other intangible technology; we write code, plans, and specifications; we integrate our work with that of other vendors. Here are some considerations to address in your legal documents regarding intellectual property: 1. Nondisclosure provisions You may need your Nondisclosure Agreement (NDA) as a separate document, or you may wish to include it as a schedule within your existing document. Either way, you need to address: a. How should archives or backups be made and kept? By whom and where? Who grants permission for copies to be made? (Remember to require that the location of any such copies be made known.)

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b. Acknowledgment and description of what software, documents, or other intellectual property constitutes the property of which party in the agreement. c. The names or positions or roles of any persons to whom disclosure of intellectual property may be made, and who has the authority to make disclosure. 2. Noncompetition clauses Are noncompetition clauses reasonable in the circumstances? If they are too restrictive, you run the risk that they may be struck if they are disputed. 3. Ownership of source code Does the consultant own the source code written on the project, or does the client own the source code as a work made for hire? Unless you want someone else to interpret who owns what, this must be stated within any document or agreement. 4. Trademarks, patents, and copyrights New ways of doing things and new products may come to light during some projects. If they can be, or should be, protected by copyright and/or patent, who owns those rights? Who owns the rights to any trademarks that are planned or that may be produced in the course of the project?

Fees and Accounting If the consulting project requires the overseeing of others’ work, or of the work output from another group, or from machinery, it may be appropriate to build in a management fee. Describe it in the contract. 1. Is the consultant to be reimbursed for out-of-pocket expenses directly related to the project? How much, when, and by whom? 2. As the consultant, do you have the right or the freedom to contract portions of the project out to subconsultants? Get it in writing if you need to do this, and frame the permission with the limits and conditions under which you can do it, and how the subconsultants will be reimbursed for their work. 3. Do accounting records need to be maintained? If so, by whom? In what form do the parties agree that the records will be kept and made available? Who can examine the records, and under what circumstances or conditions?

Legal Considerations in IT Consulting

4. In the event that your documents describe a company, or some similar entity, make sure you address who the agreedupon accountants will be, when financial statements should be prepared, what type of statements are needed, and what the fiscal year is.

Defaults and Disputes What constitutes a default? It is essential that the parties agree in the project’s documents what happens if things break down. That begins by defining just what a breakdown is. If the consultant is unable to fix a problem after the expenditure of a specific quantity of resources—billable hours, time and/or money—the agreement might be considered terminated. If the client fails to provide payment within 15, or 30, days of a notice of default, the parties may declare the agreement null and void. Play out the scenario from both sides. Set out the causes in an ordered (numbered or lettered) list. Typical reasons, aside from the preceding, include


One of the events that causes a default happens, and the nondefaulting party chooses to dissolve the agreement.




The parties to the agreement agree mutually to terminate it.




One of the parties becomes bankrupt or insolvent.




A specific term, or period of time, set out in the agreement expires.

Then set out clearly what happens once the agreement is dissolved:


Are there any affairs that need to be concluded? Facilities to close? Other contracts or agreements that will subsequently become null and void? Expenses to pay?




What happens to any unfulfilled obligations within the body of the agreement? Who is responsible for them, and how are these unfulfilled obligations discharged?




If any funds or budgets are allocated but unused, what happens to these funds? If a project is dissolved early in its anticipated lifetime, this could be a considerable amount of money. Think it through.

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What happens to intellectual property? Your provisions on intellectual property should make this clear, but you may want to refer to these statements, or augment them by describing what happens in the event of a default or dissolution.




What clauses survive any dissolution? Your nondisclosure agreement may, for example, need to survive the dissolution of an agreement.

Disputes refer to a set of agreed steps to be taken if the parties disagree on some aspect of the agreement as the project progresses. Your clauses may need to describe the steps to be taken before proceeding to either arbitration or litigation. For example, any one party can, within one month of giving written notice, demand the appointment of an arbitrator within a specific jurisdiction, and subject to the laws governing arbitration in that jurisdiction. If arbitration is declared to be part of the dispute resolution process, then obviously, define the jurisdiction in which the arbitration process must take place. Disputes can be more easily resolved if you have defined in what form communications must be made (usually writing, fax, or e-mailed document), to whom, and where.

Counterparts Let’s assume you are dealing with clients or people in multiple jurisdictions. Now imagine the problems and expense of trying to get documents signed. A clause on “counterparts” allows people to sign documents by fax. If you and other parties are equipped to use a digital signature, be sure this will be valid in your documents. Agreements and changes can then be executed in counterparts, and they take effect when each party has executed a counterpart. Make sure your agreement states that a faxed version of a document with the party’s signature is sufficient to bind both parties and give the agreement force.

Additional Resources A surprising amount of information, lots of it free, is available at your local library and on the web. Among the things you can find, or buy for a nominal cost, are sample contracts for many specific types of

Legal Considerations in IT Consulting

agreements. Search under such topics as “forms and agreements,” or “consulting contracts,”or something more applicable to your business. Much more information can be found in the library of any major city. Many lawyers themselves look up Warren’s Forms and Commercial Agreements in the library before drafting their own agreements. A few useful web links (among the more than 500,000 hits in a search while writing this book) include


www.weblawresources.com




www.lawcommerce.com




www.bitlaw.com




www.ipbookstore.com

Closing Perspective Perhaps you’ve heard the expression, “a verbal agreement isn’t worth the paper it is printed on.”In law, it is literally true, and can give rise to a lot of unnecessary litigation. Even honest people will honestly disagree on the interpretation of a poorly drafted, scantily described, or badly documented written agreement, let alone a handshake agreement. If your project involves anything significant for either you or your client, an agreement protects all parties. A well-written agreement is not merely time (and often money) well spent; it also forces the parties to think through the contingencies and problems, and how to resolve them, before those problems occur and cause ill feelings. Yes, the law professionals make money from this type of pre-project commerce. But they may earn it all back for you and your client in efficiency if their work has made you think through and streamline the project, and the conditions in which it will take place. If the project’s terms of work and reimbursement are important enough to document in an agreement, the agreement is important enough to be as well done as the work. Think along the lines that if it isn’t in the agreement, it isn’t in the project. Good lawyers are also good communicators. Lawyers are not paid by the word. Neither are IT consultants. Say what you want to say with simplicity and clarity. If you can say it in two words, do it. Even the people who write legal mumbo-jumbo don’t like it. Good writing of any kind is not only clear, it is easy to understand and interpret. Good software writers always strive for code that is simple, well defined, and

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organized, and is as short as possible to get the job done. The same principles that enable software engineers to write code that is so clear as to be almost self-documenting can be applied to writing an agreement that does everything the project needs, and only what the project needs. Properly prepared legal documents, if they have contributed to a successful project, are often never subsequently read, except, perhaps, to serve as a model or template for writing other similar documents in the future. Nobody gets into IT consulting to write contracts and agreements, but many IT consultants stay busy and profitable, and better serve their clients, in part because their legal documents clearly frame their projects and allow reason and logic to govern the development of the systems they studied so long to be able to build.

15 Quality Considerations

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lients measure IT consultants on many things, including time to deliver, professionalism, deep product or industry knowledge, and integrity. Quality is now at the top of the list and cannot be an afterthought or an add-on at the end of an engagement. It must be planned into your organization and on all your engagements from the ground up, or it will not happen. Like risk mitigation, quality assurance (QA) and quality considerations need to be in effect at both the practice and the engagement levels, as shown in Figure 15-1. Nothing is more persuasive in our buying decisions and the satisfaction we feel with our vendors than the quality of the product they leave behind. This is what we remember about them every time their product is used. A product that is delivered early and under budget is wonderful, but the positive impact is erased if it has poor quality. However, this may not be the best way of looking at these three attributes. They are actually not trade-offs. Thinking quality throughout the IT consulting practice reduces the risk of engagement failure. It also provides value to the client through cleaner and more consistent delivery.

Why Quality? It is not uncommon for clients to ask you about your organization’s quality process before awarding you a piece of business. Your answer will make or break a deal. To win the deal, you must be able to respond by stating that quality is important to your organization and that you have defined, implemented, and regularly enforced a quality process. After these assurances, you must be able to describe your process and provide examples of your successes. 311

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Figure 15.1

Quality considerations

Consider a situation in which a web site you’ve set up crashes when a visitor enters a search string greater than 25 words. How does the client explain this to their customers? How did this get by the various testing phases? Is this indicative that other test cases were not applied? The client will ask you these questions, expecting to understand the tests that were applied before the system was deployed. You are now in crisis management mode. A missed bug is bad enough. Now you need to go back, audit what was successfully tested, explain how this bug was missed, and give the client a definitive expectation of other problems on the site. Without a quality process, you will not be able to do this. With a strong quality process, the bug may not have made it through the lifecycle without being caught and corrected. Many studies prove the value of a quality-centric approach. For example, a one-year return on investments of 350 percent and more is not uncommon. As shown in Figure 15-2, quality assurance and quality considerations have a significant impact on at least 5 of the 12 key practice metrics, as well as contributing to one other.


Client satisfaction Build satisfaction by repeatedly demonstrating quality to the client through a range of deliverables throughout the engagement lifecycle.

Quality Considerations




People resources Morale problems and cynicism quickly spread through development teams when product quality is poor. This also marks the beginning of potential retention problems and poor use of resources, resulting in negative impacts on your business. Build quality assurance skills in your consultants for long-term positive results.




Average billing rate Poor quality will generally require you to rework the deliverables until the client is satisfied. The expectation is that you will do this at no additional fees—or at reduced fees. This will also impact chargeable utilization.




Costs Your cost for future sales will go up after poor-quality deliverables are given to a client. Senior members of your firm and the business development groups will need to rebuild trust with the client. Your engagement team will need to be

Figure 15.2

Impact of quality assurance activities on the 12 key metrics

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active longer, until the client is satisfied. Chances of winning more work to defray costs also go down considerably.


Risk exposure A lack of built-in quality raises risk throughout the engagement lifecycle. A client’s refusal to pay their fees can destroy the profitability of a consulting organization.

Quality Assurance Strategy IT consulting organizations have many options in defining a quality assurance strategy, ranging from a highly defined and thorough process to a set of loose frameworks. You need to determine which approach suits your organization from a demand and cultural perspective. It is useful to examine some of the broader issues that influence an organization’s selection of a QA strategy. The golden rule is that it must be manageable, usable, value added, and realistic. QA strategies pay for themselves by contributing to the following:


Reduction of effort required to rework unacceptable deliverables




Reduction of overall time to delivery when all the reworks are factored in




Reduction of sales cycle time by creating a satisfied client




Identification of efficiencies in building deliverables




Production of high-quality reusable components

Obviously, it is cheaper to build a product once than to have to go back and fix it later on. Figure 15-3 demonstrates this by using the project development lifecycle as an example. Fixing an error—say, an incorrect business feature—in the planning phase requires one unit of activity. Fixing the same error in the architecture phase now not only requires reworking the architecture, but also reexamining all the implications of the incorrectly identified business feature. The error could have led to a series of assumptions that impacted other features, the data model, and the system architecture, for example. Fixing this error after development has started causes substantially more work still—perhaps 30 to 40 units of work. While errors cannot always be avoided, implementing a QA process will improve your chances of finding them when they are less expensive to correct.

Quality Considerations

Figure 15.3

Work effort required to fix the same error in different phases

Components of a QA Strategy A quality assurance strategy requires several components that provide clarity to the entire organization for promoting QA on all engagements. The basic components include the following:


Process A clear definition of the process to be followed by employees from start to finish is required. Checklists and templates should be used to drive the process correctly.




Tools Use electronic tools or their physical equivalents to decrease the costs of a QA program. A data repository is required to store deliverables by client, engagement, and project. Process tools are also useful to ensure that responsibilities are allocated to the right person in the right sequence—and then followed up to ensure that the work was completed properly.




Executive mandate There is a perceived overhead to quality that requires an executive mandate to overcome. QA must be backed by the senior executive in the consulting organization for the process to be effective.

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Success criteria Clearly specify the criteria that will be used to measure the success of a QA program. Tracking against this information will provide justification for retaining and expanding the program.




Deliverables Use the engagement lifecycle or the project development lifecycle to identify the deliverables that must be included in the QA data repository. Use templates to drive the same look and feel across all engagements.




Enforcement or advisory team A core QA team is required to maintain the process and templates. They are also responsible for evangelizing the executive mandate for strong QA. This team will consist of three to five full-time people who will be available to audit engagements and answer engagement team questions.




Continual examination and testing If an organization adopts a formal QA process, provision must be made to certify the organization on a regular basis and guide specific employees through examinations.

The following sections examine two approaches for creating a QA program for a consulting organization.

Certified Quality Programs There are several reasons why an IT consulting organization might want to choose an external certification QA process:


The firm’s client list may demand it.




Only an external audit will get the employees to take QA seriously.




Results can be used to differentiate the firm from the competition.




Inferior QA in the current environment demands significant rigor.

There are many QA certification programs available, and their differences can be used to select the program that works best for a particular organization. For example, Six Sigma is a manufacturing-based approach that has five phases: Define, Measure, Analyze, Improve, and Control. The key points are a feedback loop, selection of control subjects, and selection of dominant variables (setup dominant, time dominant, component dominant, worker dominant, and information

Quality Considerations

dominant). This approach measures product quality with the goal of improving processes and promoting cost savings. This approach is useful for IT consulting organizations that are heavily involved in software production. Perhaps the most widely known independent quality assurance program is offered by the International Organization for Standardization (ISO). The ISO 9000 program is part of a family of quality standards that focus on quality process conformance. It is almost impossible to find another set of procedures that generate as many starkly contrasting opinions as ISO does. Some love it, while others hate it. However, based on effort, cost, and payback opportunity, the ISO certification process is worth an examination by IT consulting organizations. In Europe, the British Standards Institute (BSI) and Lloyds of London are contact points for this sort of certification. ISO, established in 1947, is actually a collection of standards bodies from over 100 countries. It supports organizations in establishing a set of processes that assure the quality of deliverables. ISO 9001 is more difficult to attain than the ISO 9002 designation. ISO 9001 is required by organizations involved in design work. This can include building software, electronic components, or widgets. The ISO 9002 standard is applicable to any business, as it primarily involves operating processes. Adopting the ISO standard can provide several important benefits to an organization. For example, going through the process of ISO certification focuses an organization on identifying and documenting core business processes and services. This can easily lead to process improvements or the identification and correction of weaknesses or flaws in the way things are done. Organizations involved in product design will be forced to examine all the stages and end products generated in the design process and the production cycle. Since ISO is a common standard, certification offers a known calling card between organizations doing business. In fact, some organizations only conduct business with vendors who are ISO certified. The ISO certification process includes following these key steps:


Define key operational processes.




Maintain records on key customer requirements, processes, and service level expectations.




Conduct continuous internal audits.

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Apply for external certification.




Continue to recertify on an annual basis.




Communicate regularly to all employees, explaining the potential benefits of ISO certification.

The costs for attaining and keeping certification can be calculated by adding up the individual amounts in several categories. The first of these includes the capital costs for maintaining documentation and disseminating the process to employees. This cost is variable and can be reduced by relying on a manual process that involves storing documentation in filing cabinets or cardboard boxes, instead of building an electronic storage system on top of an intranet, Lotus Notes, or some other development tool. The next cost category to consider is also the least flexible. This involves assigning an individual resource, generally on a full-time basis, to maintain the system, train employees in the use of the quality process, collect customer feedback, and coordinate interaction with external certification organizations. The last cost category includes the actual cost of certification and supporting an annual external audit. ISO certification is effective for a period of up to three years. Like most other processes, ISO certification has its own potential pitfalls and traps. These are what generate the extensive public pro and con debate. For example, one potential pitfall is that the ISO process does not guarantee quality in services or products, but rather that a documented process was followed. This means that inefficient or impractical processes could be documented in the first place and then followed diligently by the organization as part of their quality process. Another pitfall is the expense associated with generating too much documentation and too many processes, compared to the actual business of the organization.

Home-Grown Quality Programs An organization might opt to produce a proprietary QA process using the components discussed earlier. Figure 15-4 provides the major touch-points of a QA process that some organizations have adopted. The essential elements of this approach include the following:

Quality Considerations




A quality assurance team of three to five individuals is established to build a QA handbook.




A quality assurance manager reports quality issues to a chief executive sponsoring the program.




Engagement managers must use the QA handbook to explain quality expectations to their teams.




The engagement manager must ensure compliance with the QA handbook.




The QA manager routinely audits engagements to gauge compliance with the QA handbook.




The QA handbook is kept up-to-date by the quality assurance team.

Quality Assurance Plan Figure 15-4 shows that a quality plan and an engagement plan both need to exist. These could be in the same physical format, but from a logical perspective, quality activities can be highlighted for clients and the teams in order to demonstrate how quality is going to be ensured throughout the engagement. At the beginning of every engagement, a quality plan should identify key points in the lifecycle where the following events will occur:


Sign-off process Specification of which deliverables will be reviewed, for how long, and who will sign off on them from the client side.




Deliverable walkthroughs Identification of the deliverables that need to be produced and specific points in the engagement lifecycle where they will be reviewed by the QA team.




Testing Involvement of the QA team and the testing team in building the test cases for ultimate acceptance of the solution being built.




Roles and responsibilities Identification of the roles, responsibilities, and the people involved in QA for the engagement.

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Figure 15.4

Sample QA process

Tools Several tools have a mandatory role in implementing an effective QA program. These are examined here. Process Definition The QA handbook contains the process definition for the organization to assure quality. The most up-to-date version of this handbook must be available electronically or in hard copy. From an electronic perspective, an intranet or web site is useful for allowing access to all consultants wherever they are working in the world. Hard copies offer a good backup approach, but they are difficult to maintain in the most recent version. Information/Data Repository This is a vital tool for the QA process. By specifying a data repository for all engagement deliverables, you automatically create accountability and an audit trail. Documentation should be maintained for every client. The collection process should begin at the pursuit level. At this time, a directory structure can be created on a network or mapped to an intranet with a graphical metaphor (such as a notebook table of contents). Such a structure could consist of the following sections:

Quality Considerations

Client Name Engagement Name RFI-RFP Proposals Contracts Administration Contact Lists Human Resources Team Reviews Team Expectations Team Personal Plans Processes and Guidelines Training Seminars Vacation Schedules Organization Resumes Resource Requests Business Specifications Change Requests Sign-offs Architecture Design Presentations Reports Deployment Meetings Agendas Minutes Management Legal Documents Financial Results Timesheets Budget Projections Engagement Plans Memos Risk Quality Assurance Testing Test Cases Test Scripts Results Release Notes Status Reports Management Team Quarterly Background

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Information Working Papers Other

The indentations show the folders contained inside other folders. Multiple engagements can be stored under the same client. The “Other” folder is a temporary holder for information that may not belong anywhere else. Physical copies of the deliverables should also be stored in a filing cabinet, folders, and even cardboard boxes—so long as the information is retrievable when needed.

Closing Perspective Quality assurance is everyone’s responsibility. But making it everyone’s responsibility, runs the risk of no one actually taking ultimate responsibility for its implementation. IT organizations must identify a process that is mandated by executive management for all consultants to follow during client engagements. Skipping quality assurance activities does not save time or money. Building it into your development methodology will reduce the number of iterations required to build a quality product. In general, the following areas are known to experience quality problems:


Business process reengineering




System integration




Application partitioning




Integration of manual procedures




Testing




Change requests during a development engagement




Future business requirements




Building a consistent definition of quality




Change management, system management, and version control




Deliverable quality, whether it is software, reports, audits, studies, or documentation

Celebration, Communication, and Other Considerations

16 Celebration, Communication, and Other Considerations

E

xperts on personal finance overwhelmingly recommend that their clients plan to pay themselves, to “budget” for the money they get to keep. In effect, financial planners recommend their clients set a goal, work toward the goal, recognize when the goal is achieved, and celebrate the accomplishment. This is a common theme in the literature and practice of motivation as well.In the introduction to the best-seller Success Through a Positive Mental Attitude (Simon & Schuster, 1992), W. Clement Stone, a self-made insurance tycoon who died in 2002 at the age of 100, commented, “The greatest secret of success is: there’s no secret.” What it takes to succeed isn’t hard to understand. Most of it isn’t even hard to do. Doing it consistently, and staying upbeat, even through the worst adversity, is the trait that separates the best performers from the rest of the pack. Every consultant on an engagement should keep these simple strategies in mind throughout an engagement so that the cumulative benefit to the consulting organization, client, and individuals will be significant in terms of satisfaction, growth, and loyalty.

Never Crowded at the Top Early in the twentieth century, steel maker, philosopher, and philanthropist Andrew Carnegie granted an interview to a young writer from Virginia named Napoleon Hill. Carnegie was impressed with Hill and challenged him to spend 20 years of his life studying American

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achievement. Carnegie gave Hill letters of introduction and reimbursed him for out-of-pocket expenses while traveling to meet more than 500 American millionaires and high achievers between 1908 and 1928. Hill interviewed Henry Ford, John D. Rockefeller, George Eastman, W. H. Woolworth, Thomas Edison, Alexander Graham Bell, William Wrigley, and others whose names are indelibly imprinted in the legends of U.S. business. Hill did learn from his subjects, and in 1928 he published an eight-volume work called Law of Success (Wilshire Book Co.). It has been widely reprinted and is still available today. Hill went on to become an advisor to two presidents: Woodrow Wilson and Franklin Roosevelt. One of Hill’s well-known quotes is “The ladder of success is never crowded at the top.” If there is lots of room at the top, this chapter will explore how the members of a consulting team should climb this ladder on professional engagements.

Celebrating Success Many people who are drawn to consulting, often because of its cerebral and knowledge-intensive nature, have a mistrust of anything “motivational” because if they’ve been exposed to some of it, the “motivation” can be seen as “manipulation.” And yet, the fundamentals that authors like Napoleon Hill and Norman Vincent Peale (The Power of Positive Thinking, Running Press, 2002) outline in their writing are in every way based on inspiration and discipline that comes from within people. A success attitude is often a virtue that needs to be awakened and reinforced by those around us. Many people trace their roots back to tough circumstances. There is always a reason not to do something, to be overwhelmed by the size and scope of the challenge, to refuse to risk. Cartoonist Charles Schultz (Peanuts) had his character Linus say, “There is no problem too big to run away from.” Many memorable figures in professional sports and entertainment are athletes and actors who were not born with a superabundance of natural talent, but took what they did have, made the most of it, and led teams of individuals more talented than them to championships, or to success in the most competitive and fickle business in the world. We call that trait “heart.”

Celebration, Communication, and Other Considerations

Can You Do It? Think for a moment about where you are in your career right now. Maybe you are just starting out, with a few clients, perhaps working for yourself, or in a small firm, and struggling to get the organization off the ground and keep it afloat from quarter to quarter. Perhaps you’re working for a larger firm and yearn to start your own practice, but wonder if you can give up the security of a big practice for the often wrenching uncertainty of being “out there” on your own with no safety net. Or you may have built a practice, merged it with others, and reached a comfortable plateau in your career. You remember what it took when you started, and wonder if you still have that special blend of inspiration and energy to take your firm, and your career, to the next level. Let’s explore some of the intangible factors that impel consultants to lift their gaze from the day-to-day, dream about something greater, and make plans to get there. To quote Napoleon Hill again: “Hold a picture of yourself long and steadily enough in your mind’s eye, and you will be drawn toward it.” There’s a Chinese saying that goes, “If you don’t know where you are going, it doesn’t matter which road you take.” When you ask yourself, “Can I do this?” does the question cover the assumption that you know what you want to do, have an idea how to get it done, and can visualize what it might feel like if you succeed?

Reinforcing Success Little successes, when they are reinforced, lead to bigger successes. The way we learn and grow, personally and professionally, depends on feeling the thrill and benefit of little successes, thus believing if we can succeed at small things, we can succeed at bigger things. In Napoleon Hill’s literature, it is called a “positive mental attitude.” A consulting firm this author belonged to not only reinforced quantitative things like targets met and clients acquired, but also celebrated individuals on personal occasions, such as birthdays and anniversaries. In fact, our president liked to have a toast for each staff member before he or she went on vacation! It was always nice to leave knowing that the firm and its staff wanted you to relax and forget about work for a while. We had very little staff turnover. People wanted

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to work there, and by extension, those of us who did work there reminded each other in many and subtle ways that we were members of a special group, and being part of that group had a high value for us all. We liked the firm, liked each other, and wanted to stay together. Clients sometimes joined us for these Friday afternoon elbow-lifting sessions. It had to rub off on our clients that the people who served them were a competent and cohesive team who took pride in their work— work done on behalf of that client base, indeed, their organization. How you do what you do is up to you. The timeless business literature from all continents and all cultures consistently points out that high-achieving companies and individuals celebrate their successes and build belief in more success, higher goals, and greater expectations by rejoicing in the gains day in and day out. Here are some approaches you may want to consider for celebrating successes on your engagements.

Talk and Learn about Achievement The first IT firm I belonged to, back in the 1980s, had policies and guidelines that encouraged the staff to absorb new knowledge and expanded beliefs, and to share the company’s philosophy with others. As a manager, I was instructed to ensure that my staff (and myself) used the professional development opportunities (and they were generous) for more than technical knowledge. It was a far-sighted and wise policy, as some of the sessions I gained the most from were those that had, on the surface, the least to do with the day-to-day technical things I did, or supervised. We had the freedom to know that something off-beat was not only okay in a seminar that took time away from work, but was encouraged. Similarly, the company was generous in its incentives for its people to carry their message to other companies, again in ways that may have been unorthodox. Earlier in this book, we talked about the ways you can communicate to clients with a subtle commercial message: seminar exhibits and presentations, speeches, guest articles, and so on. You can do the same through your regular participation in a church group, service club, charity, or volunteer effort. Participation in the

Celebration, Communication, and Other Considerations

community makes a statement about you, and by extension who you work for and what you do. If you are reputable and honest, the company that employs you (or that you own) must be reputable and honest, and therefore the work they do must be the same. At work, find ways to keep in touch with clients and prospects:


Get to know something about them, within the bounds of what is reasonable for your level of acquaintance. You need not know, nor should you know, the guarded details of their life.




Match what you have a reasonable right to know with what the person needs from time to time: a short letter or card if someone has done something noteworthy; condolences if a loss is widely known in the company or industry; articles or short pieces on things you know that interest the individual.




If you have a client newsletter—paper or electronic—ask permission to put specific individuals on it, and ensure it is published and sent regularly (but not so often that it is paper or junk mail or electronic spam).




Within the bounds of what you feel is common sense, find a reason of common interest to call and talk, or to invite the person to a speech, dinner, lunch, or other special event you may be attending.

Reflect Well on Yourself and Your Firm A Canadian politician I know—who, at the time of this writing, is leader of the Ontario Liberal Party—reminds people in his party constantly that the reward of public office is the act of service itself, not the title or the proximity to power. It certainly isn’t the pay, compared with the IT sector. You communicate more about your principles and ethics in how you live your life than in just about anything you can say or write. Figure 16-1 represents the many ways that clients form an opinion about you, or decide to do business with you.

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Figure 16.1

Factors influencing client decisions

Client Satisfaction In plain terms, the twin objectives of a harmonious and mutually beneficial client-consultant relationship are more business and referrals to new clients. The measurement and determination of client satisfaction can be quantitative: business volume growth, surveys, referrals, testimonials, renewals, and so on; or qualitative: quality circles, focus groups, incentives, and debriefings. Either way, no single technique—or even a combination of techniques—is likely to retain its effectiveness forever. Change and renewal in measuring and bringing out client satisfaction are ongoing imperatives. Ask yourself first if you are doing any determination of client satisfaction. Being paid within 30 days and the absence of a complaint is

Celebration, Communication, and Other Considerations

nice, but it reveals little about the client’s thinking or overall satisfaction. The client could, in the extreme, simply harbor resentment at being forced to deal with you and be ready to dump you or your firm at the first opportunity of meeting a replacement, or whenever your agreement expires or project finishes. You won’t know unless you ask.

Asking about Client Satisfaction Effective research into client satisfaction is more than a ritual. It means more than a manager saying, “Good project. Did they pay their bill? Does it work? Doing anything else there? Did you send them a survey form?” and expecting a “yes” to each question before forgetting the matter and moving on. The challenge is to reverse the old law that says you learn more from your failures than you do from your successes. Begin to learn from your successes. What is an appropriate way to measure client satisfaction? Remember, there is no single answer, and no way that will be right all the time, even with the same client. Some options:


Interview the client’s decision makers.




Debrief some of the people who use the system you worked on.




See what a tangible difference the system makes in the client organization.




Measure the degree to which the to-do items and performance specifications indicated in the contract or proposal were met or exceeded.




Determine the extent to which the new system places the client ahead of their competition, or implements new benefits or functionality.




Determine the project outcome’s bottom line, increased revenue, or enhanced profitability to the client.

One effective way to make a reliable assessment of client satisfaction is to discuss at the outset of the project, with the client, how you will measure and assess satisfaction. The client may have a simple and workable suggestion that will surprise you. Regardless of how it is done, build it into the project, and ensure that you do it.

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Team Satisfaction and Loyalty What keeps people of all types—production-oriented staff, creative types, consultants, factory hands, office workers, hourly paid people— happy and productive? The secret again is that there is no secret. Whether they lift boxes, type documents, run machinery, work the store floor, design and configure systems, install networks, or write code, the basics are the same. Listen to your teams and staff. Recognize their achievements—personal and professional. Give them the greatest flexibility possible in managing their work. Tell them what you need done, not how to do it. Manage by example, and by being there. Offer them training on an ongoing basis. Make their work a meaningful part of their lives.

Advance Others’ Careers, Build Morale Consulting staff need to know there is a senior consultant, partner, or owner moving their careers along. If you advance your people’s careers, you can expect them to reward you with loyalty that borders on devotion, and with results that consistently go “above and beyond” expectations. At times, this even means recognizing that a staff member may need to leave your firm, or your office within your firm, to keep growing professionally, and helping to facilitate or support that move. Most often, however, looking after your staff ’s careers means you should


Review their career direction and progress once or more each year.




Match each person with both “hard” and “soft” skills training.




Ensure that projects are properly planned, and the people who work on them have had as large a role in planning and shaping those projects as time and common sense dictate.




Make work enjoyable to the limit possible. Encourage socializing within and among team members, build a sense of mutual support, trust, and camaraderie based on the attributes of the individual, not just the professional skills brought to bear on the project.




Set up an easy two-way dialogue between consulting staff and the project leader or manager to whom they report. Sometimes

Celebration, Communication, and Other Considerations

this requires as much training of the leaders as it does the staff. It’s human to forget that feedback meant to improve results on the project is sometimes heard by leaders and managers as criticism of the individual.


Set up monthly meetings with people reporting directly to you in which they own the agenda. These should be one-on-one and long enough to cover the items the employee feels are important.




Reward your team members. Never forget to say thank you, and when in doubt, express appreciation.

Keeping the Practice Competitive If people knew how to design and run their IT systems, write code for their business applications, keep their networks and hardware platforms stable and running, they wouldn’t need consultants. Not only do they not know; in many cases, they don’t want to know the fine details of their IT systems. In addition, the pace and scope of change is enormous, and “investing”in a rented specialist, or consultant, is often the wisest and least expensive choice for a client firm. They need you. You need them. In earlier chapters we discussed the theory and practice of finding clients. Let’s now discuss a handful of issues that bear attention in the consulting environment and during engagements. Most of them, at some point, will affect you as an IT consultant.

Certification and Licensing The truth is that many of the best IT people are types who actually read the manuals and technical literature, and have an honest curiosity that builds their knowledge step-by-hands-on-step. You can’t buy that, and formal training often can’t replicate the thorough expertise and intuitive knowledge learned in the technical innards. But someone who’s come up through the self-taught ranks will never fail to benefit from continuing education and from being formally certified.


Certification processes require professional staff to look at their expertise as a whole entity, independent of any specific problem. A good certification process gives a hands-on person a well-rounded grasp of a specific body of knowledge. It also

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tells a client that this consultant has cleared a formal set of hurdles and achieved a specific performance level to be granted a specific certification: as a software engineer, a network administrator, or other title.


Certification is a discipline. It is also a yardstick. Encourage it and invest in it for your people’s expertise. It’s normally a no-lose proposition for the firm, the consultant, and the client.




Vendors of software and hardware, as well as universities and community colleges, offer every type of certification, from degrees to technical diplomas to hardware- and software-specific certification. Pick what is appropriate for the person, the client base, and the changing times.




Certified consultants can command a higher fee. You may recoup the cost many times over if the investment is intelligent.




Engagement contexts are a good opportunity to certify your professional resources. Some clients will share the cost with you if there is value in the certification or training to the engagement itself. This is a win-win-win situation. The client gets the technical assistance they need, the consulting firm gets a more expensive employee, and the consultant becomes more valuable.

Managing Client Expectations Within Client Norms There are many different standards of behavior and expectations within the IT industry. Some practitioners have relaxed working styles. Others like rigid processes. Many staff and consultants do cerebral, complex, technical work in front of machines more than they do work with people. Make a conscious effort to determine the client’s expectations, and live within the client’s working norms. If it’s a downtown financial services company with upscale offices and a high-end client base, the relaxed attitude a consultant enjoys in his or her home office may need to be temporarily exchanged for a power suit while working on the client’s premises. Clothes must suit the client’s work environment, not the consultant’s personal preferences. Consultants often get involved with a client company and can work in the client environment for weeks, months, and even years. Remind your consultants (perhaps remind yourself) that you are an outsider, not an insider. Don’t traffic in the client’s corporate gossip, and try not

Celebration, Communication, and Other Considerations

to be in a position to be exposed to it. Be careful in socializing with clients. It’s not a taboo, but it does require some common sense. In this world, there are two kinds of people: “us” and “them.” In the client environment, you are—and will always be—one of “them.” Among your professional colleagues and the other members of your consulting firm, you are one of “us.”Part of a consultant’s real and enduring value in a client organization is impartiality. Don’t give away advice. “Oh, while you’re in the office looking at this system, would you mind looking at the software configuration over on that computer? It will probably only take you a second to pinpoint what’s wrong.” Again, this is a judgment call. It’s easiest to exercise the discipline to keep your engagement within its scope (that you wrote down and agreed to with the client before you started, of course). If a client realizes that informal add-ons have a price, they will also have value. You may end up with a maintenance or monthly retainer agreement. Alternatively, you may direct the client to a supplier that honestly can match those periodic problems with solutions, especially if that isn’t your area of expertise. After all, if the advice in question were medical instead of IT, you wouldn’t reasonably expect a dermatologist to offer a professional opinion on cardiac problems.

Referrals and Additional Business When you are talking with a prospective client, one of the more effective means of “validating” your expertise is with a testimonial letter from a client on whose behalf you’ve solved precisely that problem. Clients seldom spontaneously write such letters, but are usually willing to write them if asked. So ask. Here’s an example dialogue: “From time to time, we discuss this type of problem with other firms like yours, and your satisfaction is one way of helping us get new business. Would you agree to write a brief letter, addressed to me, on your letterhead, summarizing this benefit to you of what we did here, so that a client can see this letter, and grasp that we’ve diagnosed and solved this problem successfully?” You would make the above request more specific in the context of your discussion, of course. The client will normally ask you what you’d like to have in the letter. Explain that you need three to five paragraphs (ideally, on one sheet of paper) describing how you (or your firm) have successfully solved one

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specific point. If you want to address more than one point, get multiple letters. Keep testimonials short. If you ask, and ask regularly, you can have many such letters for all occasions. Sometimes a client prospect will ask your permission to contact a present or former client and discuss the issue in more detail. A satisfied client providing you a testimonial is a powerful referral agent.

More Prospects in the Pipeline The future is something that requires ongoing attention in the present. The 80-20 rule says that 80 percent of your business will come from 20 percent of your clients. And 20 percent of your best sources will give rise to 80 percent of your referrals.


Look for opportunities for new projects within the existing client base. Document the opportunity and start the account development cycle while existing projects are ongoing.




Ask your existing client how you can be considered for additional work and for larger pieces of work.




Ask your existing client how you can be placed on a preferred vendor’s list.




Ask your existing client how you can be given the responsibility for managing specific systems or parts of a system.




Look for opportunities within the client’s orbit, or within the client’s industry. For example, a client that is a division of a larger corporation, chain, franchise, or conglomerate can often provide the opportunity to replicate a project several times.




Let the networks of your clients lead you to new opportunities. Using common sense to avoid being manipulative, or abusing a trust, see who your clients’ people know who can lead you to new work.




New skills that you learn, or refine, on one project can always be honed by using them on other projects. What one consultant has learned on one client’s project can represent real value in the client environment of a different consultant. This is where the mutual support and team-building you should be doing pays off.

Celebration, Communication, and Other Considerations

Closing Perspective This is a chapter about the “soft skills” consultants use during engagements—the people-oriented stuff that usually makes the difference between a consulting firm that’s a daily grind, and one that draws dedicated people together, welds them into an interdependent community of people who enjoy each other’s company, and keeps them focused on a common vision of success. Most business literature on excellent or high-performing companies candidly admits that people productivity motivators are “pure corn,” or “schmaltzy.” But there is no substitute for emotion, affection, praise, reinforcement, and other things that get beneath the cool and detached technical exterior and stir the soul. So do it. It’s important. Be a consultant who builds teams; a project or team leader who is as interested in the people on the team as in what they are doing with their skills; an owner who is after the best people and is also someone to whom they gravitate because everyone knows there is no more stimulating and rewarding environment in the business. Read the literature on what it takes to attract and motivate talented, creative, educated people. It’s not easy, but as Napoleon Hill said, “The greatest secret of success is: there’s no secret.”

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Part IV Running an IT Consulting Group or Practice

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The Evolving Practice

17 The Evolving Practice

R

unning an IT consulting practice that not only survives, but also thrives over time requires significant leadership and dedication from all levels of the organization. The need for flexibility and adaptability can also be added to this list. Consulting organizations must periodically revisit their business vision and goals, core values, and the reason they exist to ensure that what they are practicing is in alignment with these beliefs. Most consulting organizations find themselves going through a sort of evolution of their practice, with the changing demands of the marketplace, employees, clients, and competitors. Consequently, you don’t have to be a startup to benefit from applying these principles. With a rapidly changing business and technology climate, organizations must be prepared to adapt quickly and effectively to fulfill their business vision and goals. It is never too late to start thinking about reviewing and revising your corporate strategy. In fact, it is becoming a requirement to do so every six months or so. This process essentially consists of answering these three questions: 1. Where do we want to go? (vision) 2. Where are we today? (assessment) 3. How do we get there? (road map) The first two of these can sometimes be evaluated in parallel or reversed. For example, you might not be able to define a vision or goals that are realistic unless you understand your current situation.

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What Are Your Business Vision and Goals? To define your vision, ask yourself why you are in business and where you want to be after a certain amount of time. What do you want your business to become in 1 year? 2 years? 5 years? 20 years? 100 years? Is there an exit strategy? Many IT professionals open consulting practices to earn a living, employ some other people, and perhaps save a little bit of money for retirement. Others set up a business to become the next multibillion-dollar IT success story—perhaps the next Oracle, Microsoft, eBay, or Yahoo. There are lots of other reasons in between and beside these. Regardless of what you want to accomplish, you need leadership and planning to get there. You might want to seek outside assistance in building a board of governors, a board of directors, or a strategic advisory board to help define and manage the organization in this or other areas.

Mission Statement In some quarters, corporate mission statements have lost their luster and urgency since the early 1990s when they were all the rage. However, there is still a place for them in the current corporate environment. The CEO should own the process of selecting a meaningful mission statement that focuses the organization around the corporate vision. We recommend a one- or two-sentence statement of an objective, using a strong verb, and containing a challenge to the organization. For example, one format for a mission statement is as follows: [We] are committed to [what] to help [who] to [accomplishment] [remaining qualifications]. You can start the process by filling in the parameters in the brackets. For a niche consulting company that specializes in CRM, this statement could become [CRM Associates] is committed to [using CRM Solutions] to help [our large enterprise clients] to [create strong customer loyalty] [in their top accounts]. Dropping the square brackets leaves a first draft mission statement that an organization can validate and enhance with the help of employees:

The Evolving Practice

CRM Associates is committed to using CRM Solutions to help our large enterprise clients to create strong customer loyalty in their top accounts. You might want to examine the public mission statements of some leading corporations to see what works and what does not.

Core Values and Guiding Principles Having decided on a corporate mission, you need to identify your core values and guiding principles. What is it that executive management really cares about? What will they reward? What will they punish? What is totally unacceptable? You may want to organize your core values and guiding principles by categories (e.g., employees, clients, community) or present them as a shortlist. Be sure that they are realistic and attainable, otherwise your employees will end up disillusioned. Here are some examples of guiding principles to consider:


We will find, nurture, and reward excellence in our employees.




We will promote work-life balance in our employees, and we will invest in their well-being and growth.




We commit to being an equal opportunity employer.




Client satisfaction is our top priority. We are willing to lose money on a deal in order to ensure that a client is satisfied.




We are committed to producing quality deliverables.




We will only work for clients who can afford to pay our fees.




We will be the best supplier in our market.




We will provide a competitive compensation and benefits package that is in the top 25th percentile of the market.




All our dealings will involve the highest level of corporate and personal integrity.




We will be involved with community improvement projects. We will be a major supporter of at least one local and one global charity every year.

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Is There an End-Game? A fundamental goal that transcends normal tactical and strategic concerns involves identifying an end-game or ultimate objective for the consulting practice. If you are an owner, chief executive, or senior manager, you need to ask either one or both of the following questions: (1) Why did I start the business? (2) Why am I continuing to be involved in this business? The answers to these questions are also important to employees of consulting firms to help determine whether they should invest their loyalty, effort, and time in the organization. The questions might be reworded as: What’s in it for me, and how does this map to the vision? Knowing in advance what the potential end-games are helps management steer in the desired direction and greatly improves the odds of achieving the goals. Table 17-1 shows potential end-games for IT consulting organizations and provides some accompanying considerations and strategies. Table 17.1 Possible Corporate End-Games Considerations and Strategies

Objective

Description

Corporate survival

Tight control of costs so that Manage resources very they are always less than tightly. Have access to revenues. outside funding in time of need.

Financial success

Escalating profit expectations.

Growth

Escalating growth Fund a carefully scripted expectations in terms of growth strategy. revenue, employees, and/or influence.

Initial public offering (IPO)

Work with a brokerage to go Invest in developing assets public. such as intellectual property, best practices, and tangibles.

Product development

Invest resources to develop products such as reusable frameworks, software, and methodologies.

Try and find a client who will share costs in developing a product. Consider sharing the intellectual property.

Takeover or merger target

Become an attractive purchase or merger possibility to another organization.

Build core competencies and products that complement market leaders that have lots of cash to invest.

Rate increases and ongoing cost reduction.

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Assessment: Tactical and Strategic Considerations Having established a long-term vision and direction for the organization, it is necessary to understand how you are currently doing. This includes an examination of tactical considerations for staying in business and strategic ones for fulfilling your objectives. The first step in assessing your current situation is to build a strategy, followed by defining critical success factors that impact your business. Any organization in business for any meaningful period of time experiences the normal ups and downs of the marketplace. How the organization deals with the downs determines the type of organization it will be and tests the resolve for achieving long-term objectives. You should also take this time to evaluate how management reacts to difficult situations.

Growth Strategy In some ways, it can be argued that an IT consulting firm does not need to grow in order to satisfy the corporate vision or objectives that are set out. IT consultants can set up solo practices and earn about 20 percent more money than the same position would pay in a permanent capacity, even after vacation, benefits, and other intangibles are factored into the equation. However, as soon as the solo consultant wants to pursue larger engagements, do other types of work, improve profit margins, or build additional skills, it begins to make sense to partner with other practitioners. When this happens, several pressures come into play that drive the need for additional revenue and growth, as follows:


Requests for additional compensation




Requests for additional benefits and perks




Requirement to invest in training and marketing to remain competitive




Need to build the infrastructure to support complex client business requirements




Demands from star or key resources for continual career progression, which can only be available by increasing the size of engagements

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Requirement of satisfying investors if the organization is publicly traded




Profit sharing, management issues, org development, and so on

For these reasons, a lack of continual growth can result in a rapid collapse of the organization. Without the resources to compete in the marketplace, competitors can hire your best resources and/or win your key clients. The following considerations can be used to develop a corporate revenue growth strategy for an IT consulting organization:


Establish executive ownership. Identify at least one executive to assume responsibility for the corporate revenue growth.




Set a growth target. By setting a growth target you are more likely to attain it. Leaving it as a loose guideline will not establish the pressure necessary to force decisions that will support corporate growth.




Establish funding sources. Define a clear source of funding to support the growth initiative. Define clear criteria to source the funding of initiatives and establish expectations for the return on investment.




Define interim targets. Track progress on the growth initiatives on a regular basis. Don’t wait until the end of a long period. Be prepared to change the strategy if it is not working.




Define what success looks like. In addition to the growth target, define what success will look like. Is it a revenue target or number of employees? What about the nature of the clients? What about the type of work that is being done?




Determine the sources of growth. Where is the growth going to come from in terms of markets, products, services, and clients? Can existing clients support your growth in terms of increased fees or additional opportunities?




Define an exit strategy. Determine when the growth strategy will be abandoned because of a lack of success.

The Evolving Practice

Critical Success Factors (CSFs) A list of critical success factors identifies the areas that are vital for your practice to survive and thrive in the future. You should focus on optimizing every critical success factor that you identify. Also assess how your organization is performing in each of the CSFs. Here are some examples for IT consulting practices:


Quality of your consultants How can you determine the quality of your consultants? Are you retaining the best employees? What training programs are in place? How do you recruit the best employees?




Client satisfaction How are you measuring client satisfaction? How are you dealing with clients who are not satisfied with your services? How are employees empowered to ensure the highest client satisfaction level? Do your salespeople and executives have incentives for meeting satisfaction measurements? What is the minimal client satisfaction target?




Access to the best technology Is the latest and greatest technology really going to give you competitive advantage? What are the minimum technology requirements for consultants working out of the office? From home? From the client site? How often should the technology be refreshed with updates? What are the priorities? Do you want your consultants to have the most up-to-date technology to improve productivity? Do you want consultants to sport up-to-date technology to develop an image in front of your clients?




Alignment with a product Should your services focus on promoting the popularity or sales of a software or hardware product? Should you have a material interest in the sales of the product?




Marketing Who needs to know about the services you offer? What is the best way to reach them (e.g., web banner ads, preferential placement in search engines, radio ads, print ads, television ads)? How much are you willing and able to spend on marketing programs?

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Dealing with Negative Situations How you respond to negative events will send a powerful message about the type of organization you are trying to build. A major client may suddenly be forced to cancel your contract, sending dozens of your consultants to the unbillable “bench.” A key resource may decide a take a boat trip around the world. Other resources may decide to go back to school. Costs may start to go up. Resources may start unhealthy competition with each other. How will you solve the problem? Will you change your core values to clamp down immediately? Will you try to find people to blame? Will you give employees the benefit of the doubt? There is no right or wrong answer here. In fact, it may take many years to see a definitive impact from the approach you choose to take. You need to draft policies that are clearly thought out, articulated, and defensible to cover some of the unpleasant events that a business must deal with from time to time. Here are some more examples of situations that you should consider:


How will you deal with underperforming employees?




How will you reduce costs when your revenue goes down?




Will you retain key employees by acting only when they threaten to resign?




Will you reward all employees for excellence without being asked?




Will you share profits with your employees?




Will innovators be punished if their ideas lose money?




How will you deal with a general market slowdown?




What should consultants on the bench be doing?




What if someone wants to take time off without the vacation being accrued?




How will you deal with a dissatisfied client?




How will you deal with an engagement that goes over budget?




How will you deal with an employee who is sent back by the client because the client was difficult to work with?

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What if one person abuses the expense policy? How do you treat the rest of the organization? Are they all guilty until proven innocent?

Building a Corporate Road Map You can’t be all things to all people. You can’t sell all services to all clients. You need to evolve what you want to sell, and to whom. That is a key objective for having a checkpoint on a periodic basis so that you can control the direction the organization is moving in. You may discover that the demand for your services has diminished in the last six months, with no likelihood of a turnaround in the near future. This requires you to reexamine your business and your clients, and then to revisit the 12 key metrics to support the evolutionary goals you are pursuing.

Refining Your Services It is necessary to continue refining the services that your organization offers to clients based on your ability to deliver, market conditions, and alignment with strategic objectives. While it is true that the tactical direction you take may focus primarily on earning enough revenue to survive, it should also be building critical mass to support the long-term vision. This requires management to make some tough, and sometimes unpopular, decisions on a regular basis to ensure ongoing alignment between the tactical and strategic directions. Here are some key considerations:


Which service offerings are in the sales pipeline?




What are the skills of the existing staff? What is the cost of retraining them?




What’s in demand in the marketplace?




Can demand be forecasted for the next 3 months, 6 months, 12 months, 2 years, 2+ years?




Which service offerings can command the rates that the organization wants to charge? Is there enough margin? Are clients willing to pay for these service offerings?

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What experience do you have with the service offerings?




Can you sell these service offerings?




Do you want to sell by fixed price or time and materials?

Refining Your Client Lists Clients are one of your most important assets. Does this mean that you should go after every client that wants to talk to you? Of course not. If you do, you’ll end up spending a lot of time on unqualified pursuits that may lead nowhere. Winning certain clients can also cause you to focus your resources on services that you might not want to deliver anymore. Maintain a preferred client list that identifies the clients and opportunities that you want to pursue during the next period. It is useful to break this list into priorities as well, and even to establish financial targets. Figure 17-1 shows a template that can be used to track multiple opportunities for a given client. A revenue target is also provided for each block of clients, reflecting the financial importance of that group. On the Web

Figure 17.1

Preferred client list

The Evolving Practice

Some criteria to consider when determining which clients to include on a preferred list are as follows:


Industry Clients often want to hire consultants who bring solid industry experience and competitive information with them. Do you want to focus on clients in specific industry groups? Some common industry categories include financial, telecommunications, manufacturing, health care, government, retail, media, and entertainment. Each of these can have subcategories as well. For example, financial includes insurance, banking, and securities.




Client size Do you want to focus on clients who fit within an employee or revenue range? For example, you may want to focus on small, medium, large, or multinational companies. Maybe you want to focus a payroll application on companies with 10–100 employees. Perhaps you want to focus on clients who have at least $1 billion of sales revenue per year in your local geographic area because they are likely to buy the services you are offering.




Vertical vs. horizontal Do you want to focus on a vertical market, say, lawyers or doctors? Or do you want to focus on an application that every business may want to use (e.g., employee self-service benefits kiosk)?




Services You may want to focus on clients who are predominantly purchasing the services that you offer. For example, retail stores may be looking for upgraded content management systems or point-of-sale applications.




Likelihood of closing a sale You may only want to include clients who have already purchased services from you, or those likely to close the deal within the next period for any number of reasons.

Assembling the Road Map With the updated service offerings and the preferred client list, you are ready to assemble a road map for the future. Figure 17-2 shows the table of contents for both a strategic and tactical plan. Tactical plans are included in this road map for the next month, the next three months, and six months out. New tactical plans can be swapped in on a regular

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On the Web

Figure 17.2

Road maps

basis so that there is always this level of detail available to support the organization.

Closing Perspective The last few years have shown the importance of evolving a practice to align with a changing marketplace, while remaining consistent with the core values and vision of the business. Every consulting organization has a reason for being. Whether it is to be sold in the future, to go public, or simply to enjoy the consulting profession, articulating a vision to the entire organization is important for getting buy-in. The consulting industry requires a significant amount of commitment from IT professionals, who are generally more than happy to invest their energy and personal time for the improvement of the organization. Just be sure that you explain clearly, “what’s in it for them.”

Financial Management: The Bottom Line

18 Financial Management: The Bottom Line

F

inancial management describes a set of activities that are vital for both monitoring a practice’s performance and ensuring its continued growth. Financial management involves managing one or more profit and loss (P&L) centers for your organization. It is essentially a continuous process cycle that includes establishing fees, setting expectations and standards with a client. Practice management implications include invoicing, managing accounts payable and receivables, recognizing revenue, working with third parties, and implementing taxation strategies in the countries of business.

Impact of Financial Management Activities Within the operations phase, the set of activities included in financial management have the biggest impact on the 12 key metrics. Everything else can be going well, but if a vital financial activity is skipped or unsuccessful, the entire consulting practice may suffer. Figure 18-1 shows the impact that the operations phase has on the 12 key metrics. Of these, financial management has the strongest impact on the following specific areas:


People resources All positions in the consulting organization depend on the revenue flow into and out of the firm on a quarterly and yearly basis.

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Figure 18.1




Accounts receivable You need to maintain a continuous, well-qualified accounts receivable list (e.g. clients that are highly likely to pay their bills). Outstanding receivables will hit your organization with unnecessary interest charges.




Costs A process to monitor, process, measure, and control costs incurred by the organization should be implemented through the financial management group to keep costs under control and in line with anticipated revenues.




Risk exposure Continue to monitor and reduce risks to the organization through an ongoing cost/benefit analysis.

Operations/financial management impact on the 12 key practice metrics

Financial Management: The Bottom Line

Financial management also has an indirect impact in the following areas:


Client satisfaction It’s difficult to keep a client satisfied after you get into difficult financial conversations with them because of heavily delayed receivables or other disputes.




Utilization Depending on how your organization is measuring utilization (billable work), it may be necessary to reverse charges if a fixed fee ceiling is reached, if you need to refund fees, or if you have to write off fees.




Leverage Financial disputes will involve more resources to achieve resolution, which effectively reduces your leverage.

Keeping a Running Score with Financials At the risk of breaking the stereotype of IT consultants, not only do very few of them carry plastic pen protectors in their shirt pocket, but most even have a life! In fact, those of us who enjoy the luxury of family life, free time, and other pastimes often find that one of the things we do early in a working day is flip to the sports section of the newspaper to check on sports scores, team standings, and individual statistics from our favorite teams or leagues. We track our investments in the same way. We know what we paid to get in, we have (or should have) a selling price in mind to cash in our gains (or stop our losses), and we keep a running total in our minds. It’s the same in business. And consulting is first, last, and foremost a business.

Client-Consultant Fee Arrangements Consultants’ tools of the trade are as real as the number of times at the plate or minutes played. We sell the value of what we do with our skills, and to one extent or another, we bill based on units of time or projects completed. How do consultants bill for projects? Though there are many variations on the consulting theme, let’s look at the most common scenarios in this section.

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Straightforward Time and Expenses Time and expenses put into the project are recorded and billed from the timesheet and expense records of the staff and contractors working on the project. This includes billing by the hour or by the day (per diem). This approach provides good control over profit margins and is generally the preferred approach.

Fixed Fees A fixed price is set for a specific project, regardless of how much time and expenses are required to achieve the agreed-upon end result. This can have benefits to both the client and the consultant. For example, if you’re converting a number of workstations to a new application or operating system, you can charge a fixed fee based on a per-workstation charge. If your record keeping has historically been good, you know how to set this per-workstation rate. This also gives the client a measure of security in knowing what the final bill will be. There is only an upside (e.g. financial benefit to using fixed fees) if everyone involved in the engagement has the relevant experience or if the fee is adjusted up front to account for inexperience. Change management is a key issue in this pricing method.

Fee Brackets Fixed fees and time charges are blended in a pricing scenario called “fee brackets” (or “not to exceed” contracts). This scenario states that the final bill is estimated at $X, but can vary plus or minus a certain amount. For example, a project can be quoted and agreed upon as $150,000 plus or minus 10 percent, making the range $135,000 to $165,000. This takes into account some uncertainty on the part of both consultant and client about whether there is more or less work than estimated in the project. From the client’s point of view, the upper fee bracket places a limit on cost overruns. From the consultant’s point of view, the lower fee bracket indicates a minimum revenue floor for the project.

Percentage Fees Though not historically used on a wide scale in IT consulting, percentage fees have some strong proponents in the industry. On large projects, normally with a heavy component of outside purchasing, the consulting component is set as a percentage of the total project fee. This guarantees the consulting firm a specific proportion of the overall

Financial Management: The Bottom Line

project cost. You can use this method if your cost tracking shows a very accurate trend of the consulting time being worth a consistent and repeatable fraction of a specific class of IT project.

Contingency Fees We normally think of contingency fees as a means for litigation lawyers to collect their portion of a judgment if, as, and when the case is concluded successfully in favor of their client. In IT consulting, you and the client might agree on a contingency fee based on a specific set of outcomes or events. For example, you might agree to troubleshoot a specific problem, and set a price that is billable by you to the client only if you find the problem and fix the system. This is a high risk to the consulting organization that requires careful management of anything that can impact the outcome of the engagement—a difficult task at best.

Value to Client Fees A story—allegedly true—is told of an American tourist visiting Spain, and meeting Pablo Picasso. She asked Picasso to draw a picture for her, which Picasso did. She offered to pay for the drawing, and Picasso demanded a thousand American dollars. Aghast, she said to Picasso, “But that picture only took you a few minutes to draw!”Picasso replied to her, “Madam, that picture took me a lifetime of learning to draw.” If the American had had any foresight, she’d have paid Picasso his price. She, or her family, would have seen a handsome return on her chance meeting. Value to the client is a pricing strategy you’ll use when your specialized knowledge is seldom used, but absolutely mission critical when it is needed. Say, for example, you have a veteran staff member with many years of experience in some ancient system architecture and its supporting software—knowledge that is carefully maintained but not normally in high demand. A client of yours has a serious problem on such an older computer platform, and your firm is the only alternative they have. The cost of not being back in service may be much higher than simply paying your staff member for that critical expertise. Look upon that type of niche knowledge as being equivalent to locating a new transmission for an antique car. The original value of the part is not the issue. The value of having a functioning car vastly exceeds it, and you’ll pay a high price and air freight for a reconditioned transmission that is shipped across the continent for you. Indeed such a strategy is part of how Caterpillar built its tractor business after

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World War II, when many of its machines had been left all over the world by departing American construction battalions (Seabees). Another approach to selling “value pricing” is to sell by value: What is the client willing to pay to get a solution in a certain time? How important is the solution to the client? How much is the solution worth to the client? Your fees can reflect the urgency, or lack thereof, accordingly.

Bonuses and Penalties If your client is facing a competitive deadline, and you’re confident in the abilities of your people, you may wish to consider bonuses for beating your agreed-upon delivery dates and performance objectives, and penalties if you’re late or fail to live up to your commitments. This is risky, as you not only absorb any cost and time overruns, but with each missed milestone, your revenue actually decreases.

Equity Sometimes you may be offered equity in the finished product or ownership of the firm, often by fledgling firms with unissued shares in their treasury after an initial public offering. Many consultants and other professionals who provide services for a living have become rich or been burned by such stock options. This fee arrangement can be a bit of a “lottery ticket” in that if the client’s shares don’t perform, you’ve given away your services for nothing. It is situation specific, and be sure to look into the legal implications in your particular case.

Retainer Fees A retainer fee can be a flat fee—usually per month—for which the client receives an agreed-upon range of services from you or your firm. Calculating a retainer fee is like setting a price for the daily lunch buffet at a restaurant. The diners can eat all they want, and the restaurant owner gets an appreciation of just how much food people eat and how much is left over before setting a daily lunch buffet price. Do it right, and both parties can be happy. Retainers must be a win-win combination for both the client and the consultant. A retainer fee can also be a specific sum paid to your firm by the client in order to have specific staff members, or specific skills, on call. For example, a client could pay a specific sum to a consulting firm to have staff available during Christmas, when most people are away on vacation, in case a data center should crash and a disaster recovery plan needs to be put in place.

Financial Management: The Bottom Line

Cost Plus Some large corporations are using their purchasing powers to create internal vendor procurement offices (VPOs) to control their consulting costs. These departments work more closely with the organization’s vendors. They typically find out how much a technology firm is paying its consultants and use a formula to determine how much of a markup they are willing to pay for the resources.

What Should the Fee Be? How do consultants set out per-diem or hourly rates? What are they worth? Some of the problems in consulting firms are not from overcharging, but undercharging for consulting skills. Allowing for the cost of staying in business, paying your consulting staff, and making a reasonable and fair profit, consulting organizations in many fields have concluded that a consultant must generate between 2.5 and 3.5 times his or her annual compensation. Let’s operate on the assumption that a consultant working 50 weeks per year has about 40 billable hours per week. Yes, we know that consultants are hard working, but this also includes lunches, work-time socialization, and other nonbillable hours. Using this approach, of these 2,000 annual billable hours, roughly 400 per annum (or 8 per week) are needed for administrative tasks, like making out bills, attending internal meetings, doing “housekeeping” chores, and so on, and another 400 per annum are needed for new business development. This leaves about 1,200 billable hours for charging out to clients, and assumes that most consultants want to have a life most years. A list of parameters is available to consulting organizations to maximize their profitability. This begins with the total number of hours available to do work. This number varies greatly, but standards are 7.5 hours per day to 9 hours per day as minimums. This gives a yearly range of between 1,950 and 2,340 hours. Specific activities are then subtracted from this pool to provide actual billing hours available to each consultant:


Vacation 10 to 20 working days/year (up to 30 days in Europe)




Holidays and float days




Training 10 to 20 working days/year

10 to 15 days/year

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5 to 15 days/year




Sales support




Administration




Internal meetings

5 days/year 2 days/year

From a billing perspective, best practices show that a consultant wishing to earn $100,000 per year will then need to bill clients between $250,000 and $350,000 per year in revenue. Let’s assume we are considering a small- to medium-sized consulting firm. This firm wouldn’t have, or need, the overhead of a large downtown consulting firm, and would be at the lower end of the bracket. This consultant will need to bill $250,000 per year. That means if the consultant targets, and meets, the goal of billing 1,200 hours in that calendar year, the average billing rate will be about $210 per hour. In a large firm, with lots of support staff, an in-house marketing department, expensive downtown office space, and prestigious advertising to bring in business, a consultant earning the same $100,000 per year will be billing about $350,000, or roughly $300 per hour on average. It’s a startlingly accurate rule of thumb. Size up the consultant’s practice, find out his or her hourly rate, and casually ask how many billable hours in a year that individual racks up, and you can pretty much nail the gross annual income. Of course, project fees, contingency fees, bonuses, and other arrangements can complicate such a rough calculation, but it’s still a valuable benchmark.

When to Bill Normally, bills are rendered to a client on a monthly basis. This billing and payment history helps both parties keep track of time and expenses, as well as progress, and provides interim income to the consultant as a long-term project progresses. There is usually a compelling argument not to break with this practice (most often made by your firm’s accounting people), and the discipline of sticking to it is very important to maintaining a predictable cash flow and in keeping track of data. On a short-term project, or one that ends in midmonth, get the billing done as quickly as possible. If a client requests the entire project to be billed in one large increment at the termination of the job, work to separate the billing into monthly, or at least periodic, increments.

Financial Management: The Bottom Line

Over a period of weeks or months, carrying unbilled expenses and time results in your financing the client’s organization. It also greatly increases your exposure to bad debt. It can be done—the decision is yours—but it’s a risky practice to get into. If yours is a small- to medium-sized firm, you are almost certainly one of the principals or senior consultants. As such, you have considerable flexibility in setting your firm’s policies on how to bill for a project or an engagement. This is a long-term, ongoing consensus-building process with your firm’s principals and consultants based on the type of engagement you do, the type of clients you serve, the economic climate and region you are in, and the personal preferences you collectively have. The important thing to do is to keep working on the process until you have policies you can put on paper and codify. In this sense, you either have a plan or you don’t. And if you have a plan, you either follow it or you don’t. And if you don’t follow your plan, there’s either something wrong with the firm, or with the plan. If you work within a large firm, much of this procedure probably predates you, and will long survive you. The system is the system, and you’ll work within it, changing or tweaking it only at the margins. Understanding the firm’s policies on how to charge for work is the single most important factor in using those policies effectively and in knowing their boundaries, strengths, and drawbacks. The accounting and billing system may reside on a server or within a distributed computing environment, in your office or on servers in multiple locations on the globe. Dig out the documentation, which, if nothing else, may be an effective nonprescription sedative if you’ve been overworking. Read it. Figure out how it works.

Accounts Payable and Receivable Accounts payable is normally a straightforward discussion, in that your firm controls both the acquisition of the goods and services on behalf of the client, and the time of payment. If a large purchase by you on behalf of the client is dictated by the terms of an engagement, it’s best to agree with the client up front on the payment terms based on estimated costs so that your firm does not become the inadvertent banker for the client, carrying the cost of the money until such time as the purchase has been paid.

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No Surprises on Payables For example, a contract calling for the acquisition of a large amount of computer hardware in the course of an engagement should also stipulate payments by the client in amounts allowing you to settle with the hardware vendor on fair and timely terms. You don’t want to make your suppliers wait for their payment while you wait for the client to pay you. In the extreme, this could cause a small- to medium-sized consulting firm to have unacceptable financial risk in the event of a default by the client, as you’d be out not merely the money, but also the hardware that it bought. By the time litigation is settled, the hardware, if it still exists, will be worth a fraction of what you’ve paid, and both the consulting firm and the client could go into bankruptcy. The hardware vendor is at risk, too. A good accounts payable strategy is best addressed at contract negotiation time, not when the big bills begin to come in. If you’ve worked with your client’s financial people, and showed them a proper cash flow analysis of how charges will be billed over time, the client can arrange fair interim payments. More importantly, the client will not be surprised. The client’s financial people can ensure that sufficient cash is on hand to meet the obligations on which you’ve agreed. Alternatively, you may wish to arrange for billing of pass-through charges directly to the client, which more or less takes the risk off your books. However, the need for the client to see a proper cash flow analysis is just as strong, even in a pass-through arrangement. A client whose financial and accounting staff are never surprised by unexpected demands for payment is one that normally returns to you over and over.

Stay on Top of the Receivables Nobody ever got into consulting in order to collect past-due bills, but it is a fact of life. Just as you want no surprises when the time comes to pass through the charges you incur, you also want no surprises when the time comes to collect what you’ve billed. If you’ve worked with your clients diligently, negotiated a fair contract, and put all the essentials in writing, you’ll normally get paid within the requisite 30-day period. This is made so much easier by staying on top of your bills and getting interim billings done accurately and promptly. In a large firm, you’ll usually see a list of aging accounts each month. The easiest time to collect is right away. Within a few days of an invoice going past 30 days, pay a courtesy call—in person or by phone—on

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your client, or on the client’s financial people, and ask about the status of your last bill. See if the client needs more time to pay, or if the invoice is being processed. Record the discussion. Your notes might be critical if the matter goes to extremes and ends up in court. Include payment terms on every invoice you send out. Some general terms include the following:


Please pay upon receipt This is probably the best choice, as it sets the expectation that the invoice should be paid immediately. It still generally takes 15 or so days to receive payment.




Net 15 This is another common choice, as it offers a polite grace period for the client. Payment is expected after 15 days from the date the invoice is received.




Net 30 A period of 30 days is perhaps too generous, but still used by some organizations that probably do not suffer from a restricted cash flow problem.




Please pay by date This approach removes the ambiguity of the mail service from the transaction by providing a fixed date for the check to be received. This is a good method for setting a clear expectation with the client.

Early in my consulting career, our firm was approached by a client who wanted us to do work for them. They had been through most of the consulting firms in our city. The other firms this client had retained and dismissed had done good work. Between meeting days with this client, I called some of the firms this client had been through, and spoke with the consultant who had handled them. In every case, the issue from the perspective of the consulting firm was that this client had been slow paying bills, and in the end had stuck the firm with expenses incurred in serving the client when the relationship ended. We discussed whether to accept the account at all, and settled on a take-it-or-leave-it policy with this client wherein they paid their retainer fee at the beginning, rather than the end of the month, and paid up front the estimated costs of materials and supplies acquired on their behalf. The monthly billings also reconciled any differences between estimated and actual costs in the previous period. This removed much of our risk. Looking after the account, I kept detailed records—detailed even for a detail person like me. After about two years, the relationship

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began to deteriorate, and the client refused to pay a bill. We stopped service, and after several requests for payment, began litigation. At the first examination for discovery, this client’s lawyer made wild allegations about how I had misused the time for which I billed. I produced a stack of records and carefully refuted, with documentation, each such claim, for which they had, of course, no documentation. We adjourned after a few hours, and the next day our consulting firm’s lawyer phoned me and said this client (now ex-client) would settle at the original bill if we’d waive the interest payments we had demanded. We settled on those terms. That client had gone through yet another consulting firm, but we had done good work for them, and not lost any money.

Who Pays for What and When? Over and above the things you buy to stay in business as a consulting firm, such as support staff, premises, facilities, services, office and other supplies, your firm lays out cash for products and services on behalf of your clients, later collecting back the value of those purchases in your invoices. One of the things your firm addresses in thinking through accounts payable issues is who pays for what and when? You may need to pay for some things that are subsequently billed to the client if you are a value-added dealer or reseller, or a wholesaler of some other type. In these cases, your supplier’s policies and practices may dictate that the supplier will sell to you, but not directly to the client. Indeed, you may need to do a threshold level of purchases with one or more suppliers simply to retain your standing as an authorized dealer or reseller with that vendor. Normally, you’ll add a markup on the price you pay to the price you charge to the client for the products and services. This is often done over and above any consulting revenue and time charges your work accrues in the project. Other things are often best left billed directly to the client. For example, service bureau fees, line and telecommunication charges, software license agreements, and similar things on which you really add little ongoing value are best separated from your consulting projects and are normally billed directly to the client by the specific vendor. You may assist the client in the best possible negotiation, but at that point, most consulting firms assess whether there is any purpose or profitable reason to act as the middleman. If not, they connect the client with the supplier and let them deal with one another.

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Internal Allocations A careful assessment of what expenses are payable, and by whom, also reduces your own financial risk and minimizes the expense volume you carry on an ongoing basis. It forces you to focus on what is important, what adds value, and what is profitable to you rather than the gross billings for that account, most of which may be pass-through expenses.

Paying Your Suppliers Without letting a book about IT consulting get sidetracked into a detailed discussion of cash flow, for which there are many other sources available, your main preoccupation with accounts payable, as a consultant, is to retain your relationships with valued suppliers, maximize the mutual value of those relationships, serve your clients, and get your own bills paid on time. I had one large client on a monthly retainer to our firm. One day, I was in their office to discuss a project with their president, who was in a meeting. I stuck my head into the office of their controller to say hello, and we got talking (it was midsummer). I started to discuss the issue I needed to meet with their president about, as it concerned several large projects and the outlays for them. Not only did he answer every issue I needed to discuss, he also told me how to word the billing so that he could best understand the charges and allocate these charges to the client’s internal accounts for which there was a specific budget. He also told me when he did his monthly and quarterly reconciliations, and how to manage the timing of the billings. As a result, I made a regular trip, in person, nearly every month, to this controller before I submitted my bills to their president. Not only was the controller then able to answer the president’s questions, we never had an issue of any significance with pass-through charges or other expenses we incurred on behalf of this client. I also began to do the same with other clients, and it is a practice I still follow whenever the circumstances are appropriate. Attention to when your firm pays its bills lets your suppliers deal with you from a position of trust and confidence. Confidence that you are looking after their interests prompts your suppliers to do a “handshake” agreement with you, or try some new products and services in unorthodox bundles or contractual terms. The “partner” arrangements that firms strive to strike with their key clients and suppliers are rooted in a trust that the money will be well managed, that you will pay on time, and bill accurately and promptly.

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Dealing with Suppliers When consulting firms purchase products and services in the course of doing business, they assess the following factors for the items to be purchased, or the skills to be acquired:


Sources of supply Have we identified enough sources to enable us to determine the best price and the best products or services? Have we identified backup suppliers in the event of a problem?




Availability Have we located additional people with the skills we urgently require in the event that a subcontractor leaves or a resource is not performing well? If we need products, are they manufactured in standard sizes and configurations? Do we need to customize and configure the products we buy?




Quantity Do we need to purchase in sufficient quantity and sufficient frequency to negotiate terms with the vendor, or to become a dealer or reseller?




Lead time How much time is needed to ensure that people with the required skills will be available and that products needed can be identified, acquired, assembled, customized, configured, and delivered when and where they are needed?




Attributes Does the acquisition of specific products give rise to other costs, such as shipping or warehousing for bulky or heavy items?




Quality How do we establish the quality of resources that are being procured? What do we do if the quality is not acceptable? How can we learn for the future?

When choosing suppliers themselves, selection depends on some or many of the following factors:


The supplier “universe” To maximize the benefits to your firm and the client(s), identify enough suppliers from the supplier competition on the basis of optimum technology, not necessarily the newest or the most proven, but the optimum blend of cutting edge and dependability; price competition among suppliers; and service offerings to support the technology, services, or products you acquire.

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Supplier proximity A supplier close to you is worth a bit more—sometimes a lot more—than one that is remote in terms of distance, language, or even culture. Normally, you’ll try to minimize the cost of transportation and the time required to get goods from where they originate to where they are installed.




Supplier capacity The supplier you choose must be able to produce what you need when and how you need it. Assess the supplier’s plant capacity, order frequency and backlog, skills inventory, working capital in order to purchase the things they make for you, R&D expenses and commitment to ensure that what you get is what is in demand, and physical space. A garage operation or a small plant probably can’t meet many significant demands regardless of the other factors.

See if your clients can’t be your suppliers in ways great and small. Buying products and services from a firm that you sell to certainly increases your client’s perceived value of the relationship they have with your firm.

Getting Complete Information In asking a supplier to quote for you, remember to ask for, and receive, information on the hard and soft aspects of the purchase that turn into accounts payable items for you. The following cost-related, shipping, design, and legal issues should get you started. Remember, no surprises!

Cost-Related Issues Beyond the bottom-line price of the products or services, be aware of these aspects that may or may not be included:


Price protection: how are you protected against price changes, under what terms, and for how long?




What are the terms of payment, including late penalties, early payment discounts, volume discounts, frequency discounts, and so on.




Transportation costs: who bears them, and what is the free-on-board (FOB) point?




Installation costs: are there setup charges, installation fees, or other nonproduct and nonshipping costs at either the supplier’s end or the destination?

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Are there any tooling, manufacturing setup, or other assembly charges not included in the product price?




What are the applicable sales, excise, or other value-added taxes, and how do they change if shipping to multiple jurisdictions?

Shipping You may find that some of these items are negotiable:


What are the options: your carrier or truck, their carrier or truck?




Where and when will products be delivered?




What rights do you have to inspect and approve the goods at the time of receipt?




Who bears the cost of insuring the freight, if applicable?

Design Let your suppliers know that you have standards and will hold them to agreed-upon standards for the project, as follows:


At what point do you receive the right to ensure that the supplier has complied with the project’s or the client’s specifications?




What are the deviations or tolerances that you expect, that your client expects, and that the supplier guarantees?

Legal and Warranty These will vary considerably depending on the type of project, but here are a few ideas:


Are you protected from patent and/or copyright infringement?




What are the warranty or guarantee provisions that the supplier offers? That the client expects? That you expect?




What terms and penalties apply if either you or the client chooses to cancel the purchase?




Are there any public liability concerns, or does the project require any type of special permit from a municipality, government agency, or regulatory body?




Are there any disposal concerns to address?

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The Bank: What to Do, What to Expect Perhaps the fundamental and most enduring financial relationship any business will have is the one with their principal supplier of money and financial services: their bank. The bank is the option of first resort in managing your money to even out the peaks and valleys in any business. Strive to use cash flow wisely; it finances your normal business operations. The extraordinary needs require other people’s money (often abbreviated OPM in business).


Loans to acquire new equipment, facilities, and other capital expenses usually start with a visit to the bank. In the consulting business, this is a fairly normal source of funds. If your business involves other forms of activity, such as manufacturing or R&D, a bank may not be the best source of debt capital, and it’s worth seeking some advice. A good bank manager will often frankly advise you to go somewhere else if the bank’s policy cannot or will not allow a loan to you in the circumstances. As my own bank manager once said to me, “The banks don’t take risk. We buy security.” I didn’t feel it polite to ask about the various banks’ large loan-loss provisions for failed investments every few years after an economic cycle ends, but that’s another book.




Lines of credit smooth out the peaks and valleys in your business. A line of credit loan allows you to use the money if, as, and when you need it, up to your assigned limit, of course. It’s ideal to smooth out the times between when you pay your supplier for a purchase and when you collect the client receivables to cover those purchases.




Credit instruments can be used to track purchases. You may need or choose to have a corporate credit card, or to reimburse your staff and employees from the use of their own credit cards. In any case, your bank may or may not be the best place to get that credit instrument, but it is a vital shopping stop as you determine what you need, and compare it to what is available. As long as you deal with a competent and interested bank manager, you probably have a consultant you can talk with on questions of this nature.

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What the Bank Needs At least at the beginning of your relationship, your bank needs a well-thought-out business plan that includes a pro-forma balance sheet (or an actual balance sheet) and existing and projected P&L statements, ideally for the previous two years, as well as the current projected year. In anything but the smallest of consulting firms, your accountant, or accounting staff, will help you prepare these financial statements. Your firm’s fiscal year need not coincide with the actual calendar year, and that is a decision your firm’s founders will normally make early in the firm’s history. The reasons vary with the rules in the country in which you reside. Your bank is often the appropriate source of funding for safe, secure, and routine investments in your business, where both you and the bank manager (or loan staff) understand the situation from quarter to quarter.


An operating loan, or line of credit, secured by liquid assets, such as securities or other deposits




Mortgages to acquire such assets as land or buildings that normally have a predictable lifecycle and resale value, and where the asset itself serves as security against the loan




A general, or term, loan that is secured by the residual value of assets and equipment that you buy




A mortgage, or “chattel,” loan secured against such movable assets as a fleet of trucks, or office furniture

Lenders other than your day-to-day bank are usually more appropriate (depending on the acts that govern banking in your country) for such purposes as inventory financing, leasing, other types of debt, and equity issues.

Insurance in IT Consulting An old friend’s father, who was an insurance agent, once remarked to me, “The essence of insurance is that you’ve bet that something bad will happen to you, and the insurance company has bet that it won’t. Thus, if you lose, you win, but if you win, you lose.”

Financial Management: The Bottom Line

Beneath this saying flows a business of gigantic proportions, both in terms of the money it handles and its impact on our lives. One of the consultants you need to consult is an insurance agent or broker. Looking after your firm’s insurance is a responsibility of the firm’s senior partners or managers. If yours is a large firm, or even a medium-sized one, you’ll likely inherit the outcomes of these decisions, but perhaps some of the points in this section will suggest better coverage where and when you need it. If yours is a small firm, or your responsibilities in a larger firm include the other professional staff ’s welfare, this section is for you.

Begin with a Review You won’t know what you need until you know what you have. And even if you know what you have, a review will tell you whether it’s enough. Circumstances change, and your insurance coverage should be reviewed annually, or every two years at the most, to see if you are properly covered. Like most things, regular maintenance is easy. Coping with a crisis if something breaks down and you don’t know what your coverage is, and what it does, is painful. If you are involved in insurance matters in the firm and haven’t reviewed your coverage in the last 12 months, then get on with it and set up a meeting with your insurance agent or broker. The outcome of your meeting should be


An inventory of what insurance coverage you have, what it covers, and what its benefits are.




A list of the risks for which you are not covered, and what the likely impact of those risks on your business and your people will be.




An action plan on what steps are needed next. If you are properly covered, this list could read “Meet again in 12 months.”

The Big Risks and the Small Stuff When you begin to unravel the tangled web of insurance terms and conditions, you can’t help wondering what’s worth insuring and what isn’t. Making a claim is expensive, and being claim free for a period of time lowers your insurance premiums. You and your broker or agent might want to identify what small risks are worth self-insuring: setting aside a regular block of money to invest and keep separate from other

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accounts in the firm in the event of a minor calamity that is a judgment call between calling up your insurer to make a claim, and dipping into the self-insurance pool to pay it off and be done with it. In many ways, most people already self-insure with the deductible limits on their insurance policies. You don’t call your insurance company every time something breaks, is lost, or stolen; you only replace the important or expensive articles through an insurance claim.

Your Obligations to the Insurance Company When you apply for insurance coverage, you agree to tell the truth about your past claims record and the other relevant facts about what you have and what you do in your business. In most jurisdictions, the laws, as they apply to insurance, allow a claim to be refused if you have withheld material information about past claims or other facts affecting your insurance, even if the insurance company didn’t ask for that specific information directly.

What to Insure Against Lloyd’s of London, one of the world’s larger insurers, has received a great deal of publicity for its unorthodox policies, such as insuring actress’s legs and other unique and one-time policies. But it was also one of the insurers that met its obligations for the 1906 San Francisco earthquake, thus establishing its reputation in the United States. They have proved that if you can identify and quantify a risk, an insurer can write you a policy to insure against it. Most companies will have several insurance policies, as one size does not fit all. In addition, there are “boutique” risks, for which there are boutique, or specialized, insurers. For the unorthodox aspects of your business, you and your insurance agent or broker will likely do some shopping.

Fire and Theft For fire and theft insurance, if you are a tenant, never rely on your landlord’s policy, which will not normally cover the assets you have in the facilities you’ve rented. If you keep or store valuable or dangerous materials, inventory, or supplies, your policy will normally require that you undertake specific measures of due diligence to prevent valuables from being easily stolen, or to prevent fire and damage from hazardous substances. If, for example, you purchase and incorporate computer parts, you’ll have a difficult time claiming for theft if they

Financial Management: The Bottom Line

were left unlocked in view in an office or store with few barriers other than a closed window and a locked door.

All Risks This type of policy covers damage or loss from all causes that are not excluded. Therefore, it’s essential to read what’s in the fine print. For example, if your facility is close to a major river, flood or water damage should not be excluded.

Inventory or Stock Resellers or dealers with wide fluctuations in stock owing to business cycles can vary their coverage with their stock or inventory levels. If your firm either wins a major contract to install a large amount of hardware, or has cyclical variations in what they buy for the purposes of resale, you may need specific coverage for the value of the stock on hand at a given time.

Rent You may need rent insurance if your lease terms do not absolve you of your rent obligations in case the premises are rendered unusable, for example, by fire, flood, or wind. This may be included in your business interruption insurance, and you should check.

Business Interruption Business interruption insurance (BII) is valuable for just about any type of business. After a fire, disaster, or accident, a firm without BII may find itself unable to restart operations because of the continuing drain of expenses while the firm could not earn revenue. Your BII will probably cover lost gross earnings, and/or profits, and/or extra business expenses incurred, such as legal fees. The policy may need to allow you, for example, to pay staff their wages, or some fraction of them, during the time between the incident that caused the business interruption, and when revenue can restart.

Fidelity You can purchase fidelity insurance to cover your firm against employees who steal from you. Usually you can arrange to insure against theft by everyone in the company, but specify certain job descriptions with an especially great risk of being able to materially damage the company through theft.

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Vehicle If you or your consultants travel by road extensively, you will probably want vehicle insurance. Damage awards for injury or death, especially in the United States, are often so large that you should not overlook this risk. Ensure that the policy also covers leased and rented vehicles, and that there are no restrictions on where they can be driven. In other words, such a policy in Europe should apply to all countries in the EC, and in North America, a policy of this type should apply in Canada, the United States, and Mexico.

Product Liability, Contractual Liability, and Errors and Omissions You will need to discuss these types of coverage with an insurance agent or broker. Product liability awards in the United States can be very high, less so in other countries. If your consulting business involves the supply of products, ask about the need and the risks involved in product liability insurance. Contract liability covers the risk in contractual clauses that make your firm liable for certain things. Have examples of specific contracts typical of the ones in which you routinely engage with your clients when you discuss this risk with an experienced broker or agent. Errors and omissions policies exist to protect consultants from damages arising from litigation over mistakes they may have made in the course of their work.

Miscellaneous If your business does a significant amount of shipping to clients, you may need insurance coverage against damage or theft in transit. If your consulting business deals in matters of intellectual property or patent, you may need coverage against inadvertent infringement. You may also need coverage against the cost of important papers, or the cost of regenerating them. And you may need coverage against accounts receivables that are uncollectible if the records in which they reside are destroyed. You will also need to discuss whether you should carry actual cash value insurance, which pays you what the asset is worth after depreciation, or replacement cost insurance. The latter is, of course, more expensive, but it may be worth it in the circumstances.

Financial Management: The Bottom Line

Covering Your People Your firm may be growing, adding people, and you may need to compete with other firms’ benefit plans. This means taking on some of the health and life insurance coverage for your employees. This is definitely a senior management responsibility, as these are tangible benefits that may be taxable. The specifics depend on the country where you live and do business. If you are a principal or owner of the firm, you may need a policy that allows time for your family to decide whether to continue the business, liquidate it, or sell it if something happens to you. Similarly, you may need to insure against the loss of one or more specific individuals on whom the business is particularly dependent. Your employees (and you) will probably need a package of benefits, which may include a blend of the following:


Group life and accidental death or dismemberment for the consultants and employees in the firm.




Major medical coverage to supplement what government-run plans offer in many countries. In the United States, the need for such a plan is more important.




Dependent life, for staff who need coverage on the lives of their spouses or dependents.




Basic dental coverage.




Long-term disability coverage to pay staff and employees a percentage of their earnings, as long as the individual remains disabled. This coverage usually ceases at age 65.




Short-term earnings coverage if a staff member should become temporarily unable to work due to accident or illness.

It is never a good policy to rely on someone else’s insurance, be it the government’s plan, the landlord’s, or anyone else’s. This list of points will help you set up the agenda to discuss your firm’s insurance coverage and needs with a good insurance broker or agent.

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Taxation for IT Consultants Taxation is one of the principal means by which a society provides for its common good: police protection, roads, social services, education, health care, government itself, national defense, and so on. In essence, from the business and personal activities that create wealth, a portion of that wealth provides for and sustains the society that is itself vital for the business activity to take place. And as authors of a book for businesspeople, our advice is similar to the advice dispensed in the Bible: render unto Caesar that which is Caesar’s. Give the state what it is entitled to, know the rules that govern what you owe the state, and make sure you use them to your maximum legal advantage. Just as tax professionals are major consumers of the services of IT-related firms, so too should you and your firm be a consumer of the services of a professional accountant and/or tax consultant. This section isn’t going to try and equip you to build your own tax strategy, but merely give you an agenda on which you can discuss taxes with a competent, reputable tax advisor. Tax rules change often, and vary from jurisdiction to jurisdiction. A reader of this book in one state in the United States could face a very different situation than a reader in an adjacent state, let alone a reader in Canada, the UK, Australia, South Africa, or Hong Kong. No matter where you are located, businesses and individuals are taxed on just about everything:


Personal and business income




Capital gains




Property income




Sales, consumption, value-added, and excise taxes




Fees for some government services

The taxes in this list may have other names in your country. Small businesses, a category in which most consulting firms fit, are also taxed differently in many countries, and a careful look at small business taxation is often a pleasant surprise for consulting business owners.

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Tax Credits It’s hard to get specific about a highly political topic whose content changes with annual budgets and varies widely in different countries (and within different regions of the same country), but tax credits exist in many countries for specific types of investment. Investigate the rules on tax credits thoroughly. If possible, obtain a written letter allowing your proposed investment. This ensures (reasonably well) that the tax authorities in your jurisdiction don’t change their minds later on and disallow your claim for a tax credit. The benefits of specific tax credits are often considerable, but so is the risk if you don’t follow the rules to the letter. Besides disallowing your claim, the tax authorities in your jurisdiction could go after you for the unpaid taxes, as well as interest and penalties. This also gives rise to legal fees as the ensuing litigation drags on.

Tax Payments You’ll almost always deduct the tax payments made on behalf of your employees before they receive their salary deposits if they work for you, and it may be worth discussing a similar arrangement for subcontractors if they do a regular amount of business with you. Depending on the size of your business, you will remit the tax every quarter or every month. Check carefully on the rules of the state, province, or country in which you are operating.

Tax Deferrals Taxes can be deferred—paid later rather than sooner—in a variety of legal ways. Capital cost allowance allows you to write off the cost of a significant asset with a specific lifetime over a number of years. You may use reserves to handle unrealized profit from your business operations, normally when the funds are not due until a later date. Different types of income, such as interest, capital gains, and income from operations are taxed differently. You may be eligible to set aside a reserve against bad debt, depending on your business and where it is located. Inventory can be valued at actual cost or fair market value, and the decision on which to use may

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benefit you in terms of tax treatment. You need the help of a good accountant in all these matters, as tax laws are complex, constantly shifting, and different from one state (or province, or region) and country to the next.

Tax Strategies You and your accountant, if yours is a small- to medium-sized firm, may need to discuss whether you want to be reimbursed (assuming you are a partner or business owner) in the form of a salary, a dividend, or a blend of both. The specifics depend on your personal situation, the profitability of the business, the number of owners or partners you have, the share structure, and the tax laws in your jurisdiction. It’s a significant concern, but you need help from a good tax accountant, and perhaps a lawyer as well. Your business may transcend either regional (multistate or multiprovince) borders or may be a transnational company all on its own. If so, you may need to determine where income arises based in part on the tax consequences of billing from that jurisdiction, or that country. This type of determination is usually subject to a test to see if your decisions are reasonable in the circumstances. For example, if your office is in Pennsylvania, and your client is in Maryland, and you happen to have an office in a low-tax jurisdiction like the Cayman Islands, it might be hard to explain why the income is billed from the Cayman Islands if the work was done almost exclusively by consultants working out of Philadelphia, buying supplies locally, on behalf of a client located in Baltimore. Sales tax rules also vary widely according to the jurisdiction. In Canada, for example, a single transaction is normally taxed at the federal level with a Goods and Services tax, and then taxed again under different sets of rules, and at different rates, in different provinces—except for Alberta, where there is no provincial sales tax, and the Atlantic provinces, where the federal and provincial taxes are blended into a single “harmonized” sales tax! In Europe, the value-added tax must be incorporated into the price of the goods or service. The rules for the value-added tax not only change from country to country, but also continue to evolve. See why you need a good accountant?

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Revenue Recognition Establishing consistent and objective rules for when income can be recognized on the P&L is known as revenue recognition. Because of the different types of billing approaches, this can become complicated when you move away from time and materials (T&M). In the T&M case, you recognize revenue when you complete the work. This has nothing to do with invoicing the client or when the client pays for the work. A more complicated case occurs when you are doing a fixed-price project. In this case, you are going to get paid the same amount regardless of the actual number of hours worked. In this case, you need to keep track of how much of a project is completed in a specific time frame and then recognize only that amount of revenue in a period. As an example, consider that you are working on a six-month engagement that is worth $1.2 million. You could set up the project so that you are completing and recognizing $200,000 of revenue per month. You could also compare the amount of work that you do in a given week as a percentage of the total and calculate how much revenue you’ve actually realized. Say in week x, 10 percent of the project is completed. You have then realized 10 percent of $1.2 million, or $120,000. Now, say in week x + 1, you have completed 15 percent of the project. The delta (10 to 15 percent) is the incremental revenue realized during that week. In this case, it would be 5 percent of $1.2 million, or $60,000. This is the money available to you to pay all the resources, overheads for the project, and to generate the profit, regardless of the actual hours billed to the project.

Closing Perspective An IT consultant’s business is consulting, not necessarily financial management, insurance, and taxation. Certainly not taxation! But like most aspects of being in business, you need to know enough about the parts of the business that are not your core competency to understand what they do and why, and also to be able to pick good people to help you out.

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You need the help of a competent insurance agent or broker to be properly insured. And you need to help your agent or broker by being able to explain the aspects of your business that pertain to risk. You absolutely need the help of a good accountant, and maybe a tax lawyer, to understand the decisions that give rise to the way you and your firm pay taxes. You need to give the various levels of government from whom you draw services and labor all they are legally entitled to, and nothing more. Taxation is a location-specific concern, and you need help in each location in which you operate. Understanding how to bill and set fees allows you to get the optimum return for the hours you and your firm invest in client work. Setting the right price nets you a fair return on your efforts and keeps your clients coming back for your services, too. Managing accounts receivable and payable keeps your cash flow even, prevents your firm from becoming an accidental banker to its clients, and minimizes or eliminates bad debt and delinquent accounts. You don’t need to be a financial genius to be a good consultant. You do need to do the basics consistently well in order to remain successful and profitable as a consultant.

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19 Day-to-Day Management of an IT Consulting Business

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tarting a business and getting it to the point of being a going concern is enough of a challenge. Not only the stereotypes, but also the literature, advisors, and consultants all portray the successful business owner as one who eats, sleeps, lives, breathes, and thinks their business. Then what? If you are an owner of, or a partner in, an IT consulting practice, do you then find yourself perpetually denying yourself most of the trappings of a “normal” life to sustain your business? Is your day a stream of tasks, such as trying to keep an engagement on schedule while the landlord wants to talk to you about a lease renewal; the bank needs you to sign some documents relating to your line of credit; your PR consultant needs you to review a brochure, web site changes, and a direct mail program; mail needs to be answered; two performance evaluations are getting seriously past due; you’ve missed the last three consecutive Chamber of Commerce luncheons; your hardware supplier needs to talk to you about shipping product to one of your clients; and there’s a server-related issue in the office that they need you—and only you— to look after? After practicing family and personal denial for a few years, you had hoped you could have a simple vestige of a life by now, but the merry-go-round just seems to keep speeding up. Success, not failure, is killing you! IT consultants—indeed consultants of any stripe—are too frequently their own worst enemies when it comes to running their businesses. We let activities manage us, and not the other way around.

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Rather than the 20 percent of our activities that generate some 80 percent of the value, we seem to get caught in the 80 percent of the activities that generate maybe 20 percent of the value and satisfaction in our business.

Priorities and Discipline If there is one thing business owners never need to hear, it is that even the successful, wealthy, powerful, rich, and/or famous have the same 168 hours in a week that they do. In fact, it’s just not true. Executives in major businesses, political leaders, or the functional equivalent in some other field have the ability to add time to their schedule with staff—often legions of staff. Thus, for example, an executive vice president with an executive assistant, two administrative, and three professional staffers has seven hours for every one of yours each week. Your 50 weekly working hours are matched against perhaps 300 or more that could be brought to bear on a single issue, with upwards of seven minds thinking independently about various aspects of a problem. For us mortals, setting priorities, having the discipline to stay within what we do best, and steadfastly declining to do the superfluous are the first rules of running a business effectively. “Delegation”: it’s a snap to say, and a delicate art to practice. It means saying no, and few consultants like to say no. After all, effective solutions mean saying yes, and going the extra mile. If that extra mile takes us over the edge of a cliff, then neither we, our firms and staff, nor our clients benefit from either saying yes too many times, or from going that fatal (perhaps literally) extra mile.

Priorities and To-Do Lists It almost goes without saying that a task management list is included in everyone’s personal information manager (PIM). And you can likely set priorities, assign yourself reminders, and manage other aspects of the task in the PIM too. Is it up-to-date all the time, and do you live within it absolutely? No matter who you are, you don’t. But are the significant deviations from priorities and scheduled tasks the exception rather than the rule? As an educated and intelligent consultant, you can deal with exceptions.

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If at all possible, and assuming you work in a team or a small group in your office, schedule a short weekly meeting—and keep it short—on planning and priorities. It is sometimes possible to hand off tasks to others, or combine tasks with others, if you lay out your commitments as a group and think them through as a collection of tasks with priorities attached. How do you know if a task or commitment is truly important? Ask yourself:


Will a client project or firm commitment be placed directly in jeopardy by not doing this task?




Will a major contract or a significant increase in sales be missed as a result of not completing this task right now?




Will a decision by a client to take—or not take—an action that could affect your consulting practice result from doing, or not doing the task you are now considering?




Can someone else do this task, even if not as well, or as fast, as you can do it?




Will a client pay for this task?




Will an internal budget cover this task?




What is the long-term value of doing this task?




Will this task allow me to better serve clients, sell more business, or improve employee morale?

Time-Sinks The tasks you know about in advance are time-sinks, but others that occur spontaneously, such as phone calls, call for creative management.

E-mail Sometimes the bane of our working existence, e-mail sucks up an unholy amount of time—if you let it! If you are linked live to a network, set your e-mail client application to check e-mail every hour instead of every few minutes. Resist the urge to look every few minutes. Eventually, that urge will just go away,and your time will be more productive for it.

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Telephone Calls It’s harder to be ruthless with telephone calls. You don’t like to play telephone tag with others, and you probably hate to inflict it on anyone else. Sometimes, you can ask to have your calls screened. Even in a small office, you can send your calls to a switchboard when you absolutely need a period of time in which to finish important work. If your phone has call display, you can often recognize a number and send it to voice mail by not answering it. Do this with numbers you don’t recognize as well.

Business People Business people, clients, or otherwise, who respect the time of others and who value their own time seldom “just drop in,” but you’ll have to use your judgment. When you have a pressing task in progress, it is possible to be firm without being rude, and not get sidetracked. Indeed, you may change other people’s behavior by letting them know you value your time, or by teaching them to manage theirs.

Crises Every firm has its crises. Do you have to be there to sort it out? Can someone else do it? Is the event a case of brinkmanship by other staff trying to take it to the next level over a trivial matter? In many cases, the time-wasting wounds are self-inflicted. Business owners sometimes allow themselves to be concerned with day-to-day “fire fighting” because it’s an unconscious reason to postpone difficult work, or not to think about the fundamental problems of the business.

Open-Door Abuse Unscheduled face-to-face meetings do happen. An open door usually means “I am accessible” in today’s office etiquette. In the client environment, you may have little protection against the impromptu dialogue, even when a milestone or deadline is approaching faster than an onrushing freight train. Close the door, have someone screen your calls, or turn away from the door if you don’t wish to be disturbed. Turn off your cell phone. Today’s unwritten office etiquette says that means you are busy. Otherwise, be polite, professional, understanding, and firm. Schedule a time, but not just now.

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Delegating and Staying Organized Piles and piles of paper, unopened envelopes, unanswered correspondence, and unread literature seem to breed on our desks. By definition, if it is on paper, it probably doesn’t need attention right now. Get out of the office in time for dinner once or twice a week, and take a briefcase full of the stuff home. Managing it away from the office not only gets it done without interruption, it also cleans up your desk regularly, keeps your office time productive, probably lets you throw more of it away, and do a better job in dealing with, or delegating the paper. In delegation, how much should be delegated? In general, delegate both authority and responsibility in equal measure. Neither ask someone to give directions without being personally accountable for the end result, nor ask someone to take ownership of an outcome without delegating all the authority needed to get the job done, even if such authority is temporary. Earlier in this book, we discussed the concept of an engagement as a work entity with definable boundaries, an “envelope” into which the resources of time, money, and people are folded. To manage an engagement, its manager needs, aside from the preceding resources, both the responsibility to get the parts of the engagement done, and an equal measure of accountability for its end result. No single part of the engagement planning lifecycle is conceptually difficult, though the discipline of encapsulating it all into an entity with lines of authority and responsibility (even if temporary) allows effective delegation of the engagement with reasonable confidence in its outcome. Will you sometimes be disappointed if you practice effective delegation? Yes. It is inevitable, given human nature. But that’s not the point. The point is to get the maximum done, not perfectly, but to the optimum degree of quality needed to make the firm a success. In some businesses, such as medicine, pharmaceuticals, engineering, and other endeavors with a life-and-death component to them, what constitutes “optimum”will be much more stringent than what is “optimum”in an inventory management system for a local spare parts company, for example. When you delegate, you need to establish effective feedback mechanisms that allow you to go deep in areas that are in trouble, and to avoid spending time on those that are going well.

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Organizational Structure and Documentation Most consulting firms have a pretty flat organizational structure. The firm’s partners, principals, executives, or owners retain a direct-line relationship with its professional staff. As the firm grows, so do layers of management. The trade-off between management layers and cost is that the lack of management usually results in counterproductive infighting or confusion, or outright anarchy at the expense of getting anything done, or done consistently. If yours is a large firm, you have likely inherited a structure and set of standard procedures. If you are building your firm, you will need to devote some management time to planning both growth and control. It’s better, quicker, and cheaper to think the org structure through the first time than to do it a second time, with egos getting in the way of the most trivial move. Remember the infamous academic motto: the smaller the stakes, the more bitter the infighting. You’d be surprised at how many consulting firms reorganize several times a year, often alienating their best consultants because of the lack of stability.

Org Structure Options Let’s assume that in your firm, either it is time for a review, or things have not yet been set in stone. Given that more than 90 percent of most types of personal services businesses consist of fewer than ten people, this is a reasonable expectation for most of the readers of this book.

Keeping the Lines Simple Your firm may be a small- or even medium-sized firm with a single location, and likely does most (remembering the 80-20 rule) of its business within a well-defined geographic area. One of your options is to designate one or more partners to deal with the firm’s management, rather than be both IT consulting practitioner and manager. Either every consultant, in a small firm, or every team leader or other functional manager in a medium-sized firm, reports to (generally) one partner or owner whose function is to act as chief operating officer of the consulting firm. It is an easy structure to understand, and in many firms, it is economical and effective. In addition, from time to time, if the firm is owned or run by more than one individual, this role may alternate among two or more people who “take turns” managing while the other owners continue to do professional work.

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Organizing by Unit In a growing, specialized, or geographically diverse firm, it may be impractical for a single person to try and manage the entire entity. The consulting practice may then be divided into definable units:


Based on geography if the practice and its business are more or less “replicated” in more than one location.




Based on a specific unit if the practice has reasonably separate and independent disciplines or business lines. This has the added advantage of allowing you to judge the relative success of specific business or functional units on a standalone basis.




Based on client group if the practice organizes into definable units that serve definable or specific “groups” of clients.

Documentation One of the most essential exercises in documentation is that of job descriptions. Staff never last forever. In order to replace staff, or make an effective performance evaluation, you need a formal description of what the staff position does. This includes, in general terms:


Purpose or objectives of the position




Scope of authority (supervision to give) and responsibility (key outcomes and supervision received)




Accepted range of salary and benefits




Specific duties and responsibilities, both ongoing and in terms of business development




What qualifications are expected in the ideal candidate




What professional growth and development is either offered or expected of the holder of the position




What special skills are desired or essential to do the job




Who the person reports to




How the position relates to others in the organization (optional)

Another worthwhile exercise for business owners is to write a job description for every job or role needed to support the organization.

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This will provide a clear understanding of the owner’s responsibilities and encourage her or him to reorganize or delegate responsibilities. In updating job descriptions, you quickly learn that many staff don’t do what their position description says they do, nor—in many cases—what they think they do. A wholesale review of such position descriptions is a full-time project that needs the full-time attention of one of the firm’s partners or principals for a surprisingly long time. Done thoroughly and with due care to the individual, a review of position descriptions achieves the equivalent of tuning up a powerful motor: the organization runs more smoothly, performs better, and lasts longer. Doing such staff planning turns up trends you probably never thought of asking about: turnover ratios, trends in career paths, and long-term skill needs for your firm—those you can grow from the inside and those you will need to bring in from the outside. If your discipline is IT, and the need for some organizational structure can attract a budget for doing it thoroughly, consider hiring an outside consultant who specializes in this exercise. This could yield tangible results from a very intangible, but (you hope) widely held opinion among your staff and those who wish they were on your staff: “This firm is a great place to work and advance your career, and they treat you right.”

Career Enrichment People will go through the motions for the money. Or in the sardonic words of the old Soviet-era factory workers, “We pretend to work, and they pretend to pay us.” The difference is motivation. Even by the standards of the day, the pay at NASA in the 1960s was okay, but not great. But NASA got far more than its share of the best scientific and technical minds available, and kept them through long hours, high stress, and crumbling marriages that frequently broke down beneath the strain of the job. The reason: the NASA staff believed in the project and invested their egos and credibility into seeing it succeed. In Houston’s Manned Spacecraft Center, nerve hub of the space program since the Gemini program of the mid-1960s, the average age on the consoles was in the mid-20s! It was a great vision. It took great genius, ingenuity, and adaptability. It brought out the best in people that money and security could never buy. And when many NASA staff knew that job termination notices were coming, even as Apollo 17 completed the last manned moon mission in December 1972, the best people stayed until the very end.

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NASA’s management was very good, but not outstanding by contemporary standards of the day, in career motivation. But it was the vision and the challenge that were great. Think through what specific programs, actions, policies, and practices your firm can do to awaken a dream or fulfill a need within the minds of the people who gravitate to you to pursue their career. Beyond a certain competitive point, it is seldom, if ever, an issue about money. Is your firm providing a way for its staff to live out a dream, or a career wish? Do you provide a “community”for like-minded people that they cannot easily find somewhere else? Is there a nonprofessional reason that people like to get up in the morning and come to work? Are people surrounded by others they can learn from? Are there enough mentors and coaches in the organization? Here are some more questions to ponder:


Can you, or a manager, easily and spontaneously reward someone for a job well done, or a result that goes above and beyond expectations? I recall trying to do this one time while working for a large computer services firm. I discovered that while the procedures that governed my managerial scope gave me many ways to discipline an employee for a fault or transgression, there was absolutely no way to confer anything significant in the way of a tangible or spontaneous reward for actions or behavior that significantly added to our results as a team.




Do employees have access to career and skills development? Can they explore new avenues and grow in new directions? As an employer, you will receive more benefit from a productive and developing employee than you will likely give back. This is a management issue to address seriously in a growing IT consulting business.




Do you keep the work interesting and meaningful? Are people, especially administrative staff, able to do new things within the organization? Job enrichment or rotation also adds to your safety margin by developing some redundancy. If one person suddenly leaves, is sick, or incapacitated, the office or practice isn’t in crisis if another person has done the job before and knows its details and rhythms.

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Do you get rid of the problem cases? The preceding suggestions all build harmony. Can you achieve greater productivity, harmony, and team spirit by removing someone who irritates others or is just not a “good fit” with the firm’s culture? It’s tough, especially if the individual is actually good at the job. But sometimes it is better for everyone—the individual, the other staff, and the firm as a whole.




Are there clear and simple lines of two-way communication? The grapevine is always remarkably efficient, and there are few secrets in today’s organization. It’s better to be up front with situations, as your management gains credibility and instills confidence in your staff.




Is your space productive? Probably no greater area exists for turf warfare and ego problems than who sits where. One unconventional option is to offer the best office space to the staff who need to stay in it the longest. Thus, for example, the admin staff would sit closest to the windows, while the professional staff, who are expected to be out doing client work anyway, receive the inside locations away from the sunlight. Space is overhead, and it can be expensive. Delegate this issue to a small group that includes staff who stay in your office space from day to day, and be prepared for a possibly innovative and productive way to use your space.

Expense Controls Although not as exciting as helping staff grow their careers and clients, expense controls are critical for the survival of the business. Money comes in, and money goes out. The art and science of business is how much stays behind to become profit, grow the business, and compensate its owners and staff. Consulting businesses are not complex entities in terms of pricing or granting credit to clients. To keep the optimum amount of money that flows through a firm within the firm, its partners and staff need to exercise some basic controls and discipline over the firm’s use of funds (charges not being billed to clients): how it grants clients credit and manages receivables, and how the firm uses its funds with its own suppliers.

Day-to-Day Management of an IT Consulting Business

Credit and Receivables Consulting services are not a cash-and-carry business, such as dry goods retailing. Under most circumstances, you will bill a client monthly for work completed, or in progress, and that client will make a monthly payment to your firm. In the absence of credit, a client would pay an estimate of fees and expenses up front, before any work is done on their behalf. In some cases, where you have deep doubts about the client, it’s actually necessary to do business in this way. Normally, however, we assume that once an invoice is sent, the client has at least 30 days in which to pay it. While 30 days of credit is normal business practice, it is not necessarily a pillar of your consulting practice, and even a cursory examination of it suggests that some thinking is necessary so that the staff have a set of guidelines to protect you. For example, say a firm that you have never done business with contacts one of your staff, places a huge order for hardware, and offers a handshake agreement that your firm will come in and do the configuration and networking. They say they will pay you within 30 days of receipt of the equipment. It might be perfectly legitimate, but:


The address might be an empty office or a warehouse, and the prospective client might be a numbered company (with no perceivable corporate identity) you’ve never heard of, run by people nobody knows.




The client might take delivery of the goods ordered on their behalf and not pay at all; or lengthy litigation might be required to get payment; or they might delay payment for many months, leaving your firm holding the bill for a huge hardware order— a bill that could take you into serious financial difficulty.

The preceding scenarios are as reasonable and probable as the ex pectation that this hypothetical client is financially sound and reputable. Such situations do happen. Rendering payment of an invoice within 30 days is a courtesy and not an entitlement. Normally, it’s not much of an issue. When the exceptions occur, as in the preceding cases, you need to be able to fall back on some protective policies and guidelines that your firm and its staff have agreed upon.

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Granting Credit You also need to think through your policies for granting credit. You can begin the process by answering the following questions:


What factors determine who will and will not receive the standard 30 days worth of credit? For example, should new clients receive only 10 days of credit for an established period of months?




At what point, under what circumstances, or at what estimated expense threshold must higher approval be obtained before a client can receive credit?




What procedures are appropriate in your firm for screening new clients?




Are there any special terms and conditions for dealing with new clients, such as requiring a deposit during the first two, three, or four months?




Do you have, or should you have, a formal credit application form with some legal teeth in it when dealing with clients?




Are your firm’s payment terms clearly stated in letters of engagement?




Do you, or should you, divide your client base into specific risk categories, establishing credit limits and special terms such as supplier purchase procedures, deposits, and so on, for each category?




Are your firm’s policies reasonably in line with established practice within your industry, or your trading area?




Are your firm’s basic credit terms clearly stated on your invoices?

Bad Debts Are bad debts just a part of doing business? Eventually, every firm gets the occasional bad debt. If the firm stopped to calculate the true cost of a bad debt, its partners would be a great deal more stringent with credit. For example, if a firm’s margin on consulting advice is one-third, and a client leaves you with a $2,000 bad debt, that means your firm needs to earn $6,000 in order to make good on that bad debt.

Day-to-Day Management of an IT Consulting Business

Here is the formula for calculating what additional sales are needed to make up the profit lost from bad debt: Sales = Bad Debt / Firm’s Margin

Checking Out the Client’s Creditworthiness How do you avoid or minimize bad debt? There is no perfect solution, but risky clients can be identified by consulting your bank, the local credit bureau, credit associations in your area, suppliers such as Dun and Bradstreet, and don’t forget other firms in your industry. The bad apples have a way of getting around. Though people don’t talk spontaneously about who the bad risks are, the other companies in your industry know, and most will tell you about their experiences and recommendations. Watch for these red flags:


Apparently innocent oversights such as unsigned or postdated checks. The client may be looking to buy time on your good will.




Established companies that have never done business with you before suddenly wanting to become your client. There is no free lunch. There has to be a reason.




Clients making lump-sum payments, but not full payments on current and past-due invoices on an unscheduled basis. A good client can keep their account with you current almost all the time.




A credit report that states a client of yours is involved in litigation or insolvency proceedings. As an unsecured creditor, your chances of seeing payment become problematic at best.




If your geographic region, or your industry, falls on hard times, so too might your clients. Revisit your firm’s assumptions about credit if granting it places you at risk too.

Monitoring and Collection Be as regular at sending out your invoices as you expect clients to be in paying them. Make the first few days of the new month invoice time, and it will become a discipline in your firm. Plus or minus a day or two isn’t that vital. Letting the sending of invoices drag into the middle of the month is a sign of trouble within your firm. Be consistent in getting sign-offs on project deliverables and receipts when goods or software from you have been delivered. In the

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event you grant a quick-payment discount, such as 2 percent if an invoice is paid in ten days, enforce it strictly, and withdraw the privilege from clients who abuse it. Overdue invoices normally don’t get paid without prompting. Most professional staff dislike dealing with clients to collect past-due invoices, but the person with whom the client has the most contact is usually the most effective in getting the invoice cleared up. The key in maintaining a client relationship is good communication. For example, the web development firm where one of the authors works once did a project for a new client. The client’s check came promptly, but was returned for insufficient funds. The client was contacted, and we made the problem a joint issue. We asked the client how they would like us to resolve it. In this case, the client was very apologetic, couriered a new check, and praised our handling of the matter. The approach of “we have a problem” is always easier to work with—at both ends—than a more confrontational approach, such as “you owe us…” After 90 days, a past-due account is usually put on credit watch. In general, don’t undertake new out-of-pocket or third-party supplier purchases for this account. You may wish to advise the client if the late payment is in breach of your contract provisions. Be careful in granting further credit to a client whose past-due bills have stretched beyond 90 days. Depending on your assessment of the risk involved, you may need to consider stopping work on projects as an option. Be sure to get proper legal advice if the clients’ systems are mission critical in this instance. In the best circumstances, with patience, a little compromise, and ongoing communication, you can help a client through what might be a legitimate short-term cash crunch. Afterward, you may well have a more secure relationship with a valued client than you had before the aging receivables offered you the opportunity for this type of communication. And you never know, the opportunity for a new consulting project may easily turn up while you are resolving the past-due payment issue.

Sources of Supply Relations with suppliers are as critical in the IT business as in any other. Because a significant part of the “value” that IT supplies to clients is often in the form of intellectual property, supplier relations can be complex in the IT consulting field.

Day-to-Day Management of an IT Consulting Business

Many of the credit terms discussed previously in the context of clients apply to your own organization and your suppliers. At times, good relationships with suppliers can steer businesses through an unexpected cash crunch.


Make sure demands on suppliers are realistic and reasonable given the circumstances.




Suppliers need help in knowing what clients want and need. Especially in small- and medium-sized consulting practices, careful choice of suppliers often gives you “virtual staff ” on a project—people who work neither for you nor the client, but whose help and knowledge may be instrumental in getting a project to succeed.




Be aware of everyone’s lead time—the client’s, your own, and your suppliers’—in order to schedule equipment shipments that are usually expensive, and balance them with fair and equitable payment for the goods from the client to you and from your firm to the supplier.




You need to know what are fair, reasonable, and accepted terms when purchasing from suppliers: product availability, volume discounts, customization, bundling, return policies, warranties and tech support, as well as repair service if it applies.

Supplier Sources You may think the universe of supply sources is fairly narrow in IT consulting, but a little work often turns up interesting alternatives. Good supply sourcing often flows right to your firm’s bottom line.


Trade shows usually yield a variety of specialty firms looking to deal with IT consultants.




Regional or board of trade directories usually contain suppliers of all types. You won’t know if there is a nugget of gold in those pages until you look. Often, there is such a valuable supplier just waiting to be found.




Industry-specific buyers’ guides organize suppliers by category and region. These days, you can often request an online search for a reasonable fee, thus filtering the supplier universe through your criteria.

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The trade press does a lot of the work for you by carrying the ads of willing suppliers.




Other sources include professional organizations in your field, your own suppliers’ sales representatives, your clients, and other organizations in the same field.

Supplier Selection The process you define for selecting suppliers should be self-correcting, efficient, and well communicated to all your decision makers. Here are some questions to consider:


Do you need competitive quotations? If so, from how many qualified suppliers?




How will you evaluate the bids? How do such parameters as a competitive price, warranties and service, tech support, brand-name versus generic components, and licensing of intellectual property enable you to evaluate the bid?




Does the supplier need to be local? Are shipping costs a significant factor? Can you visit the supplier’s premises and make a quality determination of the organization, its operations, and its people before doing business with them?




If your client needs to have an ongoing relationship with the supplier (for example, you are configuring network hardware, and may need to have it serviced), does the supplier have the ability and the capacity to meet your needs and that of your clients?




Who pays for shipping, and from where to where? In other words, what is the free-on-board, or FOB, point?




Are there any warranty considerations? Does the supplier comply with any local, regional, or national laws pertaining to the supply of goods and services? For example, some hardware and software may not be sold outside North America without a specific permit.




Are there any patent issues or intellectual property rights to deal with in an agreement between you and the supplier, or between your client and the supplier?

Day-to-Day Management of an IT Consulting Business




Are there any installation costs? Who bears them?




Is what the supplier provides proprietary, or is it interchangeable with industry-standard parts and software?

Investments The business is “doing okay,”which often is an understated way of saying, “We’re starting to make serious money.” At the end of the month, the suppliers have been paid. So has the staff, the landlord, the taxes, insurance, maintenance, the whole lot. And there’s money left over! What now? Consider the options: 1. Invest it in the business to grow it—buy advertising, do marketing, hire more staff, renovate, expand or move, modernize facilities, create new products and services, enter new markets, invest in methodology (key contributors to growth). 2. Acquire another firm as an alternative to growth. If you choose carefully, you may get a solid and profitable client list, perhaps even a physical location and an infrastructure in an area in which your firm had not been established before. You may buy out a competitor. Growth through acquisition is a powerful way to invest a consulting firm’s savings and its borrowing capacity. 3. Distribute the savings to the partners, owners, and staff in the form of partner income, shareholder income, profit sharing, or bonuses. In a year when the firm’s profits may be due to some luck and hard work, plus good economic times, sharing it with the people who created the value may be a good idea. 4. Invest the savings for a future time. The nest egg of savings may tide the firm over in rough economic waters, and perhaps avoid layoffs or pay cuts. What to invest in? It would be a topic for a separate book, and the specifics depend on your firm’s— and your partners’—tolerance for risk. If you think you will need the money, you may want to retain liquidity: bonds, money market funds, term deposits, and the like. If you think you can live without the money for a while, you can try common or preferred shares. With the reward, of course, come the risks.

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Legal Support In this chapter, we have used the expression “virtual staff ”to describe a person, perhaps from a supplier organization, who does important work for your firm and makes a difference in your client relationship. One such “virtual staff ” member is your firm’s lawyer. Proportionately, there are about as many lawyers who have deep and intuitive IT skills as there are IT people whose legal acumen ranks with their software skills. There is no judgment made or implied on any reader of this book with both an IT certification and a law degree. Legal support is a must-have in IT consulting. What IT consultants do affects too many things in the client’s environment for you to deal with the client without the occasional benefit of good legal advice. And a lawyer needs to get to know your firm, what you do, and what type of clients you serve. Once you’ve got your lawyer up to speed, he or she will be able to operate on a flatter learning curve when an issue arises.


Your lawyer should always read any nonstandard (to you) agreement of any consequence before you sign it.




When developing an agreement in the context of beginning a client engagement, your lawyer needs to see what commitments you may be making and assess what other risks, commitments, or obligations these imply. Given the interdependency of office systems, your legal liability may be governed more by recent precedent than by what is in the actual agreement.




Software licenses—not so much the packaged kind as the custom-developed variety—require legal support to determine who owns the code, who can use it, for how long, under what conditions, and who is responsible for maintaining that code. Once you’ve got your lawyer up to speed on these issues, the cost to switch lawyers becomes very high, so you’ll probably choose your legal support very carefully.




If you operate in multiple jurisdictions, especially if a different set of laws governs your activity in those jurisdictions, you will need a lawyer with local knowledge. It is a good idea to take the time to ask questions and consult the “wandering minstrels” of the local industry to see who has the best expertise in the IT consulting that you do. Quality legal advice is worth looking carefully for and worth paying a fair rate for.

Day-to-Day Management of an IT Consulting Business

A lawyer working for a heavy equipment firm often consulted with the controller of the firm, who managed its IT function. The lawyer, who worked in-house, carefully read and drafted every agreement the organization signed. The controller often said of the firm’s lawyer, “What I like is that instead of saying I can’t do this or that, he asks me what I am trying to do, and then shows me the options I have to get it done. After we have both finished working on an agreement, with all the required contracts and supporting documents, our lawyer often jokes with me that his best work is written once, and if it is a successful client relationship and contract, is designed never to be read again. But I wouldn’t want to work out an agreement without him.”

Closing Perspective Day-to-day IT management isn’t that much different from managing a firm of accountants, architects, engineers, or lawyers. IT consultants—and the people who manage them—need to exercise discipline in setting priorities, managing time and resources, and designing an organizational structure that works for that firm. To succeed at this, start with a foundation of clear expectations, policies and guidelines, and communication between and among peers, staff, and management. Solid, productive, and rewarding consulting careers don’t just happen. People and firms plan them, and work at the plan. They make time to keep careers moving. It is the difference between a staff with average turnover, who do what they have to do, and a loyal staff who go the extra mile all the time. Keeping a grip on expenses means thinking through the ramifications of who can spend what, and how much your firm is prepared to order for clients without an advance on the purchase. You should also have a set of reasonable, workable, and simple criteria that govern how you grant credit to clients, and stay on top of receivables to minimize bad debt. Remember, to make up for bad debt, you need to earn after-tax and after-expense income. Checking a client’s creditworthiness and establishing steady, nonconfrontational practices to collect receivables before they age past 90 days minimizes your risk of incurring bad debt. Supplier sources and supplier selection allow your firm more latitude in finding and working with partners to supply the aspects of an IT solution you don’t provide in the client environment. None of the principles are hard, and few are new to IT consultants. Putting the right

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combination together for your firm and practicing good sourcing and selection as a discipline make the difference between smooth projects and ones where finger-pointing is rife between the client, IT consultant, and supplier. The options for using the firm’s profits are to invest in the firm, grow by acquisition, distribute some or all of the money to the firm’s staff or partners, or save it in an appropriate manner for a future time.

20 Using Information Technology in IT Consulting

I

T consultants advise people on how to make their businesses more effective with computer technology, but do they need to “showcase” the hardware and software configurations on which they advise clients? Normally, no. More than one client, in a social aside, has said to me, “I’d be really interested to stand behind you for a while as you work, and see how you put into practice the advice you give to us in our business.” After hearing a few versions of this statement, I countered one day with a question, “Which do you think I come closest to: the proverbial shoemaker’s children, in which my own office is relatively low tech, or the techno-to-the-max in which everything is done on a computer, whether it needs to be or not?” The rough anecdotal consensus of my own clients is that my consulting practice isn’t top heavy with technological toys, tending toward the simple rather than the complex. It’s more or less true. But then, one of the more effective things I’ve always told my clients when advising them on business issues is that software technology is the last thing I learned. I studied and practiced business and management consulting issues for many years before that.

Keeping Technology Focused on Your Business In the early 1960s, as newly formed NASA was scrambling to build a launch vehicle capable of safely transporting men into orbit around the earth, its scientists hotly disputed the role of the spacecraft’s passenger: was he a pilot or a passenger? This role definition went to the 399

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core of Project Mercury in the early 1960s. In the end, the working slogan was to “man-rate the machine, and machine-rate the man.” NASA’s Project Mercury compromise neatly encapsulates the IT business issue faced by IT consultants, who become their own clients when it comes to automating their practices with technology. Space exploration was made possible only by advanced technology, and yet it requires the all-important human being at mission-critical moments. Much the same is true of oil drilling, military deployments, law enforcement, engineering, architecture, and just about every nontrivial career or profession in the industrialized world. IT professionals and consultants help organizations organize, process, and use the information needed to get people and material where they are needed everywhere today. So how much technology does it take to run an IT business?

Who (or What) Serves Whom in IT? The business of IT consulting sells advice, perhaps bundled with products and services—or hardware and software—to clients. The IT infrastructure needs to be sufficient to fulfill this mission, neither less capable nor more top heavy. What is “sufficient”is as subjective as what is appropriate in business attire. You wouldn’t wear your gardening jeans or your formal theater attire to a client’s office, and they wouldn’t expect either extreme of the spectrum from you. And within the spectrum of options, good judgment defines a range that is appropriate and acceptable to your clients and to your business. Your office is served by information technology to the extent that it enables you to carry on business in an efficient and effective manner, as illustrated in Figure 20-1. The time and money you spend buying, configuring, learning, and using hardware and software in your business is overhead. As such, your overhead expenses need to be reasonable within the scope of other similar professional services firms.

The Business Essentials You can separate what’s essential and what’s nice to have depending on your business and the type of consulting you do. This section deals with business needs, not what type of software or web development tools, graphics, or document management software you may create as your firm’s products, or use in the course of serving clients.

Using Information Technology in IT Consulting

Figure 20.1

Implementing technology in an office environment means finding the appropriate level for the business of consulting rather than showcasing what the technology does.

What you use at the office may depend on many factors,among them:


How much technology you or your company, or your team’s budget, can afford




What you had before, or already have, in the office




What platforms your clients use




What standing purchase agreements may be in force within your company, or at your clients’ premises




What platforms you develop, test, or deploy software on, or what your firm’s management or other software runs on




Any applicable professional, trade, association, or industry standards




What hardware may be available at the time you need it

Computer hardware generally has a higher resale value if you keep the original packaging and manuals, preferably in pristine condition. In addition, the next owner, who may be someone to whom your old hardware was “cascaded,” will appreciate having much the same documentation that you did with the hardware.


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More and more IT consultants are carrying laptops, which is functionally equivalent to putting your memory and critical office information and management tools into a machine and carrying it over your shoulder. That leads to three issues that are frequently neglected until it is too late: 1. Is your laptop insured? Laptops are hot theft items, and the thief who slams a tire iron through your car window and snatches the laptop off the seat while you dash into the corner store will probably sell it at a bar that night—with all your information possibly still intact. Insure your laptop, especially if yours is a small firm and that laptop is essential. 2. Is your laptop secure? If it’s going to be stolen, at least password-protect your operating system access so that the thief will have to reformat the hard disk. You might think about using a BIOS-level password as well. 3. Do you have a backup strategy? What’s that? You don’t! Well, you mean, there are guidelines in place, but you are just too busy to follow them more than sporadically. How many of us admonish our clients this way? Back it up. Back it up, and back it up. It only takes one occasion when you need to use a backup of your critical data to make a lifetime of good habits well worthwhile.

Backups The value of a backup strategy is consistency. In a weak moment, you might delete critical files. We all do it now and then. After the ache in the pit of your stomach goes away, the realization that you actually still have that file on your last backup tape will send a wave of relief through your panic-stricken body. Once you’ve figured out the right rhythm for you, stick to it!


Make a backup to a dedicated partition on a file server if your company offers this option.




Get a USB tape drive and a few backup tapes. Make a monthly full-system backup, and an incremental backup at least weekly. Keep your last full system backup off-site. (If it’s a work computer, take it home, and vice versa.)

Using Information Technology in IT Consulting




At the very least, periodically create a few writable CDs with archives of your most important data, and keep them away from the computer, preferably off-site.




Put copies of client-related materials and deliverables on a regularly backed up central filing system.

Don’t back up to another partition on the computer except, perhaps, for incremental backups. Suppose the computer is damaged by water or fire, or is destroyed or stolen? Keep backups away from the machine where the data resides. Perhaps your partners and colleagues may understand a loss of data due to a bad backup strategy, but your clients are less forgiving. For handheld computers, their accompanying utilities usually enable data backups on a host hard disk, which is itself then backed up to another storable medium.

Managing for Growth Once your firm begins to grow and your billable and receivable accounts expand, your staff grows, and the scale and scope of your projects become increasingly complex, managing the business becomes an issue. You have three main choices for managing growth:


Do it manually, with assistance from different standalone software packages.




Use an application service provider (ASP), with your data residing on their server, and pay a single management fee for the ASP’s application.




Use a single integrated enterprise software package.

Your choice depends on the business, its size and complexity, and its needs. If you choose the first option, you will find dozens of commercial products available for any particular purpose. What you use will depend on a careful and systematic needs analysis. This analysis can itself take weeks or months to do before the choices seem obvious to you. A bad choice can force your business to run the way the software does, not the way you want it to. It may cost you not only higher licensing fees, but also lost productivity and possibly the cost of switching to another option once your patience has worn too thin. Short-list your

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choices, then test run an evaluation version on a subset of your data for a period of 30 days or less to make an informed decision.

Application Service Providers The notion of “software as a service” is controversial in mainstream computer applications. Nevertheless, it is an existing, often successful, business model in many specialty business applications in which remote access and administration are key components. In essence, the ASP designs and maintains the application, while your firm pays a fee for using it and gaining from its functionality. Using an ASP is advantageous in that you are not buying a license and chasing upgrades, and possibly paying a smaller fee to use the software rather than to license a copy of it. The disadvantage is that your data may be stored on the ASP’s servers, not your own. In addition, your firm’s operations and possibly its financial health are affected by how well run the ASP is, and how diligent the ASP’s staff is with its own business affairs and your firm’s private data. Get to know the ASP, talk with their other clients, understand their application, and make a decision based on your firm’s operations that you will be comfortable with for a period of years. The cost of changing that decision can be high in monetary terms, and disruptive in the work environment. In a productive relationship with an ASP, however, you stand to gain from their technical expertise, use software that is up-to-date, and gain functionality at a fraction of what it would cost you to develop and keep that expertise.

Integrated Software If yours is a medium-sized to large firm, you will likely consider using an integrated software system that allows your people at all levels to perform work, manage projects, view progress, and see reports within the framework of the software. An enterprise-wide system will reduce—and often eliminate—incompatible standards and isolated “islands” of information within your firm. If you choose an appropriate package, or compatible set of modules within a system, you should be able to eliminate duplicate data entry and shorten your billing cycles to improve your firm’s cash flow. Much information can be delivered via a firm’s intranet, or in other web-based browser solutions. The system should be easy to configure and customize, and ought to be able to meet your firm more than halfway in terms of adapting to the way you work rather than forcing you to adapt to the way it works.

Using Information Technology in IT Consulting

Software Functionality Needs If your projects tend to be predictable, short in duration, and relatively simple in terms of the activities, people, resources, and time needed to coordinate, you may not need contract management software. Otherwise, you will quickly look for something to keep track of the details. Here are some typical questions relevant to an IT consulting firm that you may wish to consider as you assemble your needs analysis parameters. Use these, or others specific to your business, to evaluate the software your firm may be considering, whether outsourcing to an ASP or bringing the function in-house through an integrated software package.


Can decision makers review and monitor work in progress with this software option?




Can senior management receive consistent management information in a convenient format, either paper or electronic?




Can you create, store, and use project templates to ensure that staff remember the fundamentals of your business, associate key information with the project, and plan in a thorough and consistent manner?




Can the software make initial budget estimates? Can the software (or should it) use a data table of your standard costs and generic project information?




Does the software assist your staff at all levels and keep them from accidentally forgetting details during a project engagement?




Can project estimates connect directly to your firm’s accounting system? Or should they? Is automatic update and display an issue?




Can you assign people and other resources to the project once it is planned? Should the software be able to search for a specific skill set and suggest a member of staff, contractor, or other resource? Is it appropriate for the

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software to be able to notify people that they have been assigned to a project, and if so, how does the software you are considering handle this task?


Can important project documents be viewed on the integrated software? Can staff and consultants collaborate on documents if there is a need for this within your firm?




Can the software enable project leaders and senior management to track issues and discrepancies within a project?




Does the software compile timesheets in a manner compatible with your firm’s business operations? Does it (or should it) allow approval of timesheets, and do you need to allow (or restrict) the ability of staff to make changes to data once it has been entered?




Does the software help coordinate the ordering of supplies and other consumables needed in the project? Does it show the costs incurred to those affected by the project?




Can invoices be created, reviewed before sending, amended, and approved by the software, or is there a need for this function to be done?

Software and Office Tools Your offices and staff obviously need to run on the same office productivity suite. Unless there is a strong reason to the contrary, you and your clients should also be able to exchange documents in the same format. Normally, you’ll acquire your office suite with a volume license. Only in a small firm will you consider doing otherwise. Your relationship management software (to manage information about your clients, prospects, and other contacts) can be a standalone package in a small firm, and is more likely to be integrated into software that you license through an ASP or a vendor in a medium-sized to large firm. Similarly, proposal software depends on the structure of your firm and the nature of work you do. Proposal software can be as simple as a document template—one that you write, or one that you buy from a vendor—in your word

Using Information Technology in IT Consulting

processor. It can also be a relatively complex piece of software to coordinate the efforts of different writers and allow merging of detailed subdocuments into the final proposal. Available alternatives can also be application specific, ranging from templates to apply for grants, to guidelines on bidding on specific classes of projects. Web searches to see what is available generate many thousands of hits.

Stationery and Document Templates Perhaps a member of staff can program your suite of office applications, or learn to. With more and more letters going out electronically, one task worth addressing is that of conformity between your electronic documents and your paper graphic standards. Setting up your firm’s graphic look for professional staff to use— and use in a consistent manner—is a task of surprising complexity and scope. Document templates often need a medium-level amount of logic built into their code, and the code itself is medium-complex to write. The template files themselves should reside on a server, and a means must exist for each workstation on the network to regularly ensure that a user has an up-to-date set of document templates for such uses as letters, reports, proposals, expense forms, quotations, news releases, memos, technical documents, and so on. If you have a wide area network, instead of a local one, you have issues of security to program as well. More than doing the actual programming, the question of training arises. The professional staff must be trained to know how to find and use the document templates. Staff must know the purpose and the protocol of using the firm’s documents through their templates. The intelligence built into these document templates grows along with their number, and teaching your people, especially contractors and new hires, to use them properly will be an ongoing challenge. Though help files for documents can turn the product into a mini-application of its own, there is nothing like regular hands-on seminars during routine staff meetings to provide a refresher for old hands and new hires alike.

Human Resources and Employee Performance In simple terms, with a combination of staff, contractors, and other employees in a firm that’s not too big, paper files will do just fine. Just because performance data can be stored on software, that doesn’t mean it should. But if the data needs to be accessible in distant offices,

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and parts of the evaluation need to be available to managers at different levels with different permissions (you get the idea, you’re an IT consultant), then software may be an appropriate solution. If you’re small, keep it simple. If you’re a medium-sized firm operating out of one or two locations, keep it simple. Beyond that, do not let the software’s theoretical capabilities force you to focus more on data input to your software than on keeping your office procedures, staff relations, and client work going smoothly. If you are working with an ASP or planning to implement integrated software, both of these may have a range of human resources (HR) functionality, from payroll management to employee performance tracking.


Can the software manage your firm’s benefits, such as sick time, pensions, health plans, and so on?




Will the software provide “ticklers” to managers on such matters as review dates, birthdays, and other events that help maintain a high personal touch?




Does the software understand your geographical area’s legal framework and help you deal with issues of compliance, documentation, and regulatory requirements as they relate to HR needs?




Can you track such things as training and skill inventories through the software, or do you need to?




Can the HR package (or component) interface with your other systems to avoid duplication of data entry or the inability to merge “islands” of data in order to draw a meaningful conclusion from it?




Can you manage the process of recruiting: posting, evaluation, offers, and correspondence from within the software, and does the software’s functionality improve the recruitment management process?

Financial Packages Software that enables you to manage your income, expenses, accounts payable, and accounts receivable is essential in any business today. Even

Using Information Technology in IT Consulting

a small firm, or an independent consultant operating a home-based business, should be using a money management application. As the scale and scope of the firm’s operation expands, the likely “client” for your financial package is the firm’s accountant, or accounting department. Even an IT consulting firm of perhaps five to six professional staff will employ a full-time or part-time accountant. At that level, the involvement of actual IT consultants may hinder more than help the process. Within the overall framework of your company’s hardware platform and software standards, and governed by whatever applications absolutely need to interact with your financial software, let the financial people handle this decision and the ramifications of it. About the only time you will have to decide which financial package will govern your company for some years to come may be when growth takes your firm to the point where you plan to move from contracting out the function of accounting to bringing a person on staff full time. Even then, set guidelines and policies, but delegate the software selection process to the people you’ve hired (or plan to hire). Participate, but don’t micromanage.

E-mail and the Internet Whether yours is a one-person home-office consultancy, or a multinational firm with thousands of people, if there is a single constant in the twenty-first century, it is access to and an address on the Internet. In a large firm, your connection might be directly to a T1 or T3 line. Otherwise, a combination of an Internet service provider (ISP) and a web hosting firm will give you a presence on the Web (for the scope of your business) equivalent to any large firm. The Web truly does level the playing field for the small firm in many ways. In running a small firm—perhaps a home office—a cable modem or DSL connection gives you Internet access at a modest price. Most high-speed Internet providers charge businesses a higher rate, and their terms of service prohibit home users from running server software on home-based connections. Read the fine print from your ISP if you run a small firm. Most IT professionals today have multiple e-mail accounts, often an e-mail (or forwarding) account with each of their large clients. Make one of those multiple e-mail accounts a personal one that you can access

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anywhere. This allows you to separate your personal business from your professional work and avoid any embarrassing explanations when politically incorrect messages go to the wrong people. In the eyes of the evolving body of law governing cyberspace content, the client or employer owns the content of communications passing through their dedicated mail servers. This gives organizations the right and privilege, if they are so inclined, to read the communications passing through their mail servers. Although your message may be a tiny part of a diluted mix of mostly meaningless e-mails, it’s still best to pause and think before clicking Send. Also, if your message could arouse controversy, ask yourself whether a phone call or personal visit might be better than an exchange of a dozen sharply worded e-mails. In most cases, the personal touch is the wiser of the two options.

Your Web Site Information technology in IT consulting often assists you, your colleagues, and your staff to connect with clients and potential clients. One of the most valuable tools is your own firm’s web site. Here, you can


Post your staff biographies.




Post your statements of qualifications.




Describe projects and post generic references from clients.




Use server-side software logic to enable clients to describe a situation within a structure, and thereby “self-qualify” by determining whether your firm has the ability to help them. If so, they can connect with the appropriate staff quickly through the Web using either e-mail or forms.




Post copies of conference papers, technical documents, and other reference sources, behind a password if appropriate, for existing clients.




Allow clients to log in and then use specific databases you may have set up for them.




Set up a media room for the trade and business press in which journalists can download such things as news releases, information sheets, profiles, reports and filings, and other public documents.




Post newsletters, links, and other helpful information.

Using Information Technology in IT Consulting

Mobile Tools for the Professional Staff Recent advancements in mobile technology allow consultants to be more productive when they are on the road—e.g., at client sites, traveling, at home, or in the corporate office. This section examines some of the options that should be considered because they generally provide an excellent return on investment.

Handheld Devices Is there a benefit to standardizing on handheld devices? Maybe yes and maybe no. If the professional staff collaborate closely, and specific individuals team up with one another routinely, you may wish to standardize on a particular family of handheld devices, as well as whatever licensed software you may need. In a larger environment, the standardization issue is often driven by support needs. A medium-sized or large firm does not need to force the support of a number of perhaps incompatible devices on its staff, and should look to standardization to make support easier. Compatibility with desktop devices is needed, not only to share data within the company, but also to enable a quick and seamless backup of handheld data to the desktop computer. Choosing handheld devices is normally not a hard task. Even if the decision isn’t perfect, there are no dire consequences. Delegate it to a competent staff member and ask for a recommendation. You’ll usually get a better policy than you expect. Or, make the choice yourself if there are not enough people to whom you can delegate.

Cell Phones If the consulting firm is supplying the phones and contracting for the accounts, then a corporate plan is another no-brainer. If not, you may simply be reimbursing employees and staff for business-related expenses. First ask yourself, if the company is contracting with a cell service provider, will your people receive cellular service everywhere your staff travels? If you need to exchange more than voice on the devices, look for hardware that can carry data. Examine what options are available from different providers, but the following benefits are tangible to most consulting firms:


A number of minutes per month in your contract is applied to the entire group. This provides a greater volume discount and

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prevents unused minutes from being lost because one person doesn’t use them, while another pays extra for heavy usage.


In many areas, certain calls are free, such as calls among other numbers within a group (those you’ve covered in your firm’s contract) and to a base number, such as your firm’s switchboard.




A corporate plan also gives you some leverage with the service provider. When a phone breaks, they may be more than willing to replace it at no cost to you.

Pagers and Fax Machines It’s still premature to say, “Real IT people don’t page or fax.” These products are in their sunset days as this book is being written. You may be able to combine your cell phone service with pagers, if you still use them. If text messages are important, most cell phones offer them as a low-cost option, even standard with some plans. But like the Betamax videotape format in the 1980s and eight-track tapes in the 1970s, the world has moved on. For people who still have pagers, however, most providers allow you to log onto a web site, type your text message, and send it. Okay, it used to be a big deal. Instead of a dedicated fax machine, you can always designate an old desktop or laptop computer to be a fax server, and let that old hardware live out its days storing all the junk fax it gets on a hard disk instead of consuming actual paper.

Laptops By the turn of the millennium, the average new passenger car or handheld calculator had more computing power on board than the lunar module that landed six pairs of Apollo astronauts on the moon between July 1969 and December 1972. Now, the average office worker can carry more computing power over a shoulder than supercomputers yielded just a few years ago. Laptops are where the action is. Should you have a firmwide policy? Again, it depends on your firm’s size and the scale and scope of the work you do. Do some people need a high-end laptop, while for others, it is not that critical? What options

Using Information Technology in IT Consulting

are available? Are there advantages for doing a wireless network in the office? Can you get a volume purchase price or lease arrangement? Laptop computers change so quickly that manufacturers tend to manufacture all the components at the same time, and then discontinue them. This means that there is no case for procrastination. Get all the features and accessories you think you will ever need when you buy the laptop, because the spare parts door will close very quickly.

Home Office Support It is part of the nature of IT consulting that in many circumstances, a significant amount of work is location independent. This can be attractive to self-starting people who don’t need ongoing interaction with others and can do parts of projects from home. It is especially attractive if you’ve scheduled your work days at home when you have the place to yourself, and the weather is bad, thus allowing you to skip the commute to work or to the client’s site. This also allows you to skip getting dressed up—one of the small advantages of working from home. Supporting that home office, and perhaps many like it, means allowing staff access to as much of what they could access at their desks at work as good judgment and security allow. Dial-up or network access, perhaps implementing a virtual private network (VPN) with today’s technology, gives a well-designed and properly secured server the ability to allow an authenticated and authorized staff member access to just about everything except the cappuccino in the coffee shop downstairs. Much of this functionality is available more or less outof-the-box with server software, though some code-writing is usually necessary to get it to work exactly the way your people want it to. Synchronization is built into both server software and the operating system now. Default behavior usually synchronizes document files when you log off your account, and synchronizes them again when you log back on. This means that your work is current when you leave the office, and your server is brought back up-to-date when you return. Your operating system and network software are usually able to resolve changes, or prompt you for a response if they cannot. In fact, at the operating system level, you can change the default options, and force a synchronization operation on demand, when the computer is idle, or on a specific schedule.

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Putting It All Together The following table summarizes the type of office technology that may be appropriate in an IT consulting office. Technology

Small Office

Medium or Large Office

Internet access and e-mail ISP and web host.

Dedicated connection and servers to host web site, e-mail.

Staff computers

Source not critical, but need policies, software, and hardware for regular data backups.

May need to set hardware acquisition policies, provide server space for backups, establish backup policies.

Practice management software

May not need it.

Probably necessary in medium-sized firms, definitely in multi-office or large firms.

Contract management software

May not need it unless volume of clients is high, or complexity of contracts demands management.

Almost certainly need it.

Financial management software

Inexpensive options likely more than sufficient.

Enterprise-wide software probably necessary in multi-location firms.

Office suite software

Firm may or may not need a volume license agreement.

Software needs demand analysis and negotiation of a multiseat license agreement.

Handheld devices

Probably not worth managing unless compatibility and connectivity is an issue.

Compatibility and connectivity with other hardware and applications will make policies and procurement an issue.

Cell phones

Choose from available provider options.

Many more options depending on your location and number of phones to be procured.

Pagers and fax machines

Use if clients demand or if you prefer.

Issues with integration into electronic document distribution, voice networks. Sunset technology.

Laptops

Low need for standardization, customization.

Enterprise-wide issues and benefits from standardization, volume purchases and leases, connectivity.

Using Information Technology in IT Consulting

Technology

Small Office

Medium or Large Office

Web sites

Primarily information tools to support practices in many cases.

Enterprise-wide tools to enable remote access to office resources, intranet.

Document templates

Require some setup and simple programming to achieve standardization. Relatively low maintenance.

Medium-complex task requiring programming, deployment, and training to achieve standardization and usage throughout practice.

Home office

Take home the laptop.

Server-side programming and policies to enable authentication and authorization for secure access to firmwide resources and firm’s intranet.

Closing Perspective Being an IT consultant doesn’t require you to have all the latest and greatest technology all the time. You may not have technology as advanced as what you implement for your client base, and that may be just fine in the circumstances. Technology should tend to serve the business, rather than the business orienting itself to the technology. It’s true for the clients you have, and it’s true in your business as well. The middle ground is in choosing generic packages, such as project management and financial software, that aren’t designed specifically with you in mind, but allow you to configure and customize them to the degree that you need to. There are some benefits, in a medium-sized and large organization, to standardization and volume purchasing of handheld devices, cell phones, and laptop computers. In a small firm’s environment, assuming all the devices work on your network, those advantages are marginal. Corporate packages on cell phones, however, can offer some significant advantages if you shop carefully and know what you need.

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21 Human Resources and Career Management

E

mployees are the most important asset in IT consulting organizations. Keeping them motivated, skilled, and focused is crucial to the bottom line of the organization. This chapter examines approaches for maintaining the well-being of employees through the primary responsibilities of the human resources (HR) department, the performance review cycle, and career management.

HR Responsibilities The HR function must exist in all IT consulting organizations that have more than a few seasoned employees, and it must continue to scale with the size of the organization. Companies with fewer than 50 consultants may be supported by a single HR representative. Organizations with up to 100 consultants can be supported by perhaps two representatives. Anything beyond this requires the full-time services of an HR manager and an HR department that have the primary responsibilities described in this section.

Recruitment Consulting companies need to be constantly on the lookout for talented new recruits to staff new engagements, provide specific business or technical skills within the organization, or replace staff who move on. It is the job of the HR department to coordinate several activities in order to attract potential new recruits to the organization for interviews. The ultimate recruitment goal is to locate and hire the right prospects to satisfy the firm’s staffing requirements. There are several approaches and avenues for doing this, including those that follow. 417

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Universities/colleges These offer a good opportunity to find talented, high-energy resources for a low cost. Provide a support system for the students. Consider co-op or just out of school programs.




Corporate web site Accept resumes from your corporate web site in response to specific career postings or for generic positions within the company. For this, build a good resume review process because a lot of unqualified responses may come your way.




Career web sites Place ads on third-party career web sites, or review resumes posted on them. A simple “career” search on the Internet will turn up many such sites.




Referrals Use all personal networks, including employees, business partners, vendors, and some clients, to find qualified candidates. Yes, clients sometimes recognize that an employee may benefit from working with your firm and are occasionally willing to let them go. Never actively recruit from clients or business partners without their permission. You need to build a compensation scheme (e.g., cash, gift certificate, or token gift) to reward the contacts making the referrals.




Help wanted ads Place ads in leading newspapers and magazines. The response rates tend to be high, and the resumes require careful analysis to find the most qualified candidates.




Career fairs Consider being a sponsor at a career fair that will attract crowds of professionals. You’ll get a lot of resumes at a low cost per resume.




Employment agencies This is perhaps the most targeted of the recruitment approaches. You pay a referral fee to an employment agency if they find candidates that your organization ultimately hires.




Hiring from competitors Dedicate one of your recruiters to get information about employees working for competitors. Then build a program to hire key resources away.

When evaluating a recruitment approach, consider the cost to get the employee, effort to find the employee, and time urgency. Be sure that each staff position has a clearly written job description. Many consulting organizations have one individual focused on recruiting consultants.

Human Resources and Career Management

Office Morale Productivity differences between consultants with high morale and those with low morale are staggering in terms of quantity and quality. Practitioners, including management, are often swept up in tactical revenue generation activities and forget to participate in moralebuilding activities. Office morale can be influenced by tangible items such as monetary gifts, awards, and recognition for a job well done. It can also be influenced by processes, culture, and the state of the environment, which are harder to detect and qualify. It is useful for the HR group to coordinate approaches to maintaining morale, provide ideas to others in the organization, and keep morale issues in front of senior management. Some programs and considerations for improving employee morale are discussed in this section.

Compensation Some employees view compensation as an indication of how valuable they are to the organization. While it is true that compensation will not automatically improve morale for a sustained period of time (although in the short term it can be effective!), low compensation can have a dramatically negative impact.

On-the-Spot Financial Payments Consider supporting a program in which engagement managers and leaders are empowered to award up to a maximum amount of money (say $250) to a consultant on their team who has done something extraordinary for a client. HR should track this to ensure that the program does not get out of control.

Gifts or Spot Prizes Gifts to show appreciation to an employee who has worked especially hard also go a long way. Thoughtfulness and appropriateness are the criteria, not expense. Does the employee like shows, movies, concerts, or football games? Do you know what type of music he or she likes? A couple of tickets, CDs, or DVDs make thoughtful gifts. Also consider doing this for the subcontractor who has gone beyond the call of duty.

Awards HR may want to sponsor an award program on a quarterly or semiquarterly basis. Pick a number of categories and let peers nominate the winners. Most of the categories should be serious, but consider

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including one or two that are tongue in cheek. Announce the winners at an office party to celebrate that and other accomplishments. Some categories could include the following:


Employee with the best attendance




Employee with the most satisfied client




Employee with the most difficult client




Most helpful employee




Employee who made the most impact




Best Diplomat




Employee getting the least sleep




Employee making the biggest intellectual property contribution




Employee making a special contribution

After-Work Socials Consultants may work side by side throughout a day—every day—but they still don’t really get to know each other. Furthermore, consultants working for the same organization may not even get to see each other if they are working for different clients. These consultants are at risk for getting closer to the client staff than they are to their own company. This can make them a strong retention risk. After-work socials are a great way to bring the entire organization together, perhaps once a month, to facilitate team building, collaboration, and company branding. The after-work socials could be organized at different restaurants or bars around the city. If there are offices in different cities, it is useful for them to plan their socials for the same evening. Food, drinks, and the occasional speech, at the cost of the company, usually accompany these evenings. HR should establish the code of behavior for the evenings and ensure that no one drinks too much and drives.

Corporate Meetings While the after-work social functions allow the extended team to have a party together, there is only so much information that can be shared in a room filled with pool tables, loud music, and large television screens. Many consulting organizations set aside some portion of one day a month for a corporate meeting. This is a good time to discuss the state of the practice, future challenges, and highlights of key engagements. An occasional guest speaker(s) adds variety to the meeting.

Human Resources and Career Management

Special Events HR should keep track of special events in employees’ personal lives, like birthdays, baby births, marriages, anniversaries, and graduations, and acknowledge them first thing in the morning of the relevant day.

Giveaways Giving away stationery, pens, folders, flashlights, shirts, and caps with the corporate logo improves employee morale and gives them a sense of belonging to the organization. Clients and prospects also appreciate giveaways.

Intangibles In addition to the tangible items, other environmental and cultural factors can have a powerful impact on employee morale. Senior management must nurture a culture that builds the values important to the organization. Should employees be treated as professionals? How will management react when times get tough? How will management react to employees who underachieve for any number of reasons? What behavior is recognized and rewarded? Do employees have to ask for recognition before receiving it? Are results more important than friendships? How will the company invest in the employees?

Guidance/Counseling The HR department can act as an impartial guidance counselor and information source for employees of the firm. HR is positioned to collect information and negotiate deals in any area that is important to the employee, such as:


Health information In addition to health plans that most organizations would offer, consider the requirements of consultants working in other countries for extended periods of time.




Conflict resolution Be prepared to deal with issues between employees, clients and employees, and third parties.




Employee rewards Keep an eye on employee rewards to ensure their fairness and competitiveness. Look for ways to improve or enhance the programs. Measure their impact to show their value to executive management.

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Career guidance Ensure that managers have an incentive, tools, and processes to build the careers of the employees.




Employee retention Work with management to retain employees who are offered positions in other companies.

The HR department can also take the lead in conducting employee surveys, gathering statistics (e.g., retention, terminations, attrition rates), and collecting employee feedback and suggestions.

Fairness, Balance, and Policies The HR department, by definition, is positioned to measure and ensure fairness across the organization in terms of the following: pay scale, benefits, training, vacation days, sabbaticals, perks, promotions, flexible hours, and other subjective measures. HR needs to help define, write, and distribute policies in all employee-related areas to the organization as a whole. This can include things like confidentiality, out-of-town travel bonuses, per-diem expense limits, expense guidelines, office equipment guidelines, and meal allowances.

Compliance There are many legal precedents and procedures that affect corporations. The HR department can act as the custodian of these policies and ensure that the relevant information is shared as needed within the organization. Legal and accounting advice should be sought to build these policies. Some areas to consider include the following:


Sexual harassment policies.




Gender and nondiscrimination policies.




Tax assistance and planning.




Visa programs to work in other jurisdictions or countries.




Hiring standards of different jurisdictions. Government regulations vary in the country of operation. For example, some jurisdictions require you to include certain affirmative action or equal opportunity wording in employment ads. Each country, state, or county has different requirements that must be considered.




Legal requirements for how to treat employees in terms of working conditions, working hours, and overtime policies.

Human Resources and Career Management

Compensation, Benefits, and Promotions The HR group will continually collect market intelligence to determine compensation bands, benefit packages, and promotion frequencies. They then work with senior management to determine where the corporate policy wants to target the employee statistics. Should the employees’ pay scales be higher, on the high end, midpoint, or lower than the industry average? What is the target percentage point? This information can be used to prepare a salary grid that shows position grades, salary ranges, and target percentiles. Other compensation programs, such as commissions, referral bonuses, and overtime rewards are also part of this mandate. HR should continually review the benefits packages available to employees, perhaps even building up several different options for different fee points. These days, employees are moving toward a benefits menu that allows them to customize the package to their unique needs. Clear guidelines for employee promotions must be maintained by HR. This includes position titles, what is required in that position (e.g., competencies), levels within the position, major performance objectives, and how to exceed expectations. Employees’ perception of promotions affects morale. If promotions are not objectively applied, or even a hint of favoritism is felt, morale suffers.

Employee Transitions Perhaps one of the most difficult activities in a consulting organization, or any organization for that matter, involves terminating an employee. There are many reasons why this may be necessary, including employee performance. As a third party to such a decision involving members of management and an employee, HR can help ensure that there is minimal disruption to both parties given the difficult circumstances. HR provides management with the tools to make a fair and legally sound decision in the jurisdiction they are operating in. Different countries have dramatically different expectations of a company before they are allowed to transition an employee out of the organization. HR may ask questions such as:


Was the employee given an opportunity to improve his or her performance?




Were the roles and responsibilities clearly defined in writing?




Is this going to be a total surprise to the employee?

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Is there a paper and e-mail trail to justify this decision?




What have we learned from this experience?

HR should also work with the employee to understand his or her concerns and feelings. There will be a lot of questions to answer. The employee may also require outplacement services or other assistance that the company may be in a position to offer. It is in everyone’s interest that the employee’s career gets back to normal as fast as possible. The employee will inevitably feel betrayed, hurt, angry, and confused by the forced change in lifestyle. Here are some of the activities that need to be managed by HR:


Help to ensure a smooth transition for the employee.




Potentially sit with the manager and employee during the termination meeting.




Proactively answer any questions that the employee may have about the process and how things got to where they are.




Help to build a fair and equitable severance package for the employee.




Ensure that all confidential materials, access codes, passes, and company equipment are returned promptly.




Send a note to corporate facilities to shut down the employee’s access to the network (on the intranet and the extranet). Revoke access to the building.




Work with the employee to get an official release form that officially ends the relationship. Ideally, the employee will sign this upon receiving the severance check. HR needs to ensure that the employee’s legal rights are protected during this period. Coordinate activities to escort the employee off premises if deemed appropriate.




Conduct an exit interview with the employee to get his or her feedback. Share this with the relevant resources in the organization if it is not privileged information.




Get any legal advice necessary to ensure a smooth transition.

Human Resources and Career Management

Consultant Review Cycles Consulting companies are famous for implementing different types of employee evaluation models. The one you choose for your organization will determine not only the way employees behave in a team and with clients, but also how well they perform and the amount of loyalty they show to the firm. Figure 21-1 shows several regular cycles that are necessary to evaluate, guide, and compensate consultants and other employees for their contributions to the firm as well as to improve their value over time. These reviews can follow any timeline selected by the company, including checkpoints on a monthly, quarterly, semiannual, or annual basis. Mentoring and coaching activities should be tied to the performance cycle.

Performance Review Performance reviews can create a lot of anxiety for both the reviewer and the person being reviewed (reviewee). Reviewees often feel a lack of control and are aware that their well-being, compensation, and satisfaction are on the line, at least in the short term. They may be able to temper the results of the review, but for the most part they feel that their position is more passive than active. Reviewers may also be filled with anxiety because they have to make a decision “in writing.”They may have to give positive feedback, which they may hate doing. On the other hand, they may have to give negative feedback, which they could hate doing as well. The basic objective of a performance review cycle is to compare how an employee is performing with respect to their job function and expectations. Additional compensation may or may not result from this evaluation, depending on the performance, corporate policies, and profitability of the company at that particular time. Another objective of the performance review cycle is to identify areas of improvement as

Figure 21.1

Consultant review cycles

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well as how the employee can improve. Goals for the next review period should also be identified here. This section examines the infrastructure and high-level process required to conduct regular performance review cycles. Every consultant in a consulting organization needs to be assigned to a manager who conducts a formal evaluation, assigns a grade, and helps to guide the employee’s career.

The Rating System Most consultants want to be rated as stars. After all, they are hardworking, knowledgeable, and are normally charged out to clients at very high fees. The problem is that everyone can’t be given a star rating, or the system would become meaningless. A star rating is also relative. Great baseball players will demolish average baseball players, but put them in the pros, and all of a sudden the definition of how good you have to be to be the star changes. There is a star even among a group of stars. The primary objective of a rating system is to provide clarity to employees on how well they performed and what they need to do better. After all is said and done, a rating system simply consists of a letter or a word that provides this information. But to set this up, you must do several things: define the rating system, describe each level, and define how someone fits into the category. Since the 12 key metrics are crucial to the organization, these can be used to identify what needs to be done at a specific level to get a specific rating. You may determine that you want to implement a rating system with six different ratings. You may also choose to assign a number and a description to each level. Table 21-1 shows an example of this, as well as a sample distribution that is targeted for the organization.

Table 21.1 Employee Performance Ratings Numeric or Alpha Rating

Description

Alternative Description

Rating Distribution

1 or A

Excellent

Exceeds all level requirements

5-10%

2 or B

Good

Exceeds some level requirements

10-20%

3 or C

Meeting

Meets level requirements

40-65%

4 or D

Below

Below level requirements

5-15%

5 or E

Well below

Far below level requirements

0-5%

6 or F

New role

New to role

Open

Human Resources and Career Management

The rating distribution can serve as a guideline without strict enforcement. Conversely, some organizations use the distributions as very strict guidelines, forcing peer-to-peer comparisons that look at attributes and performance at a detailed level. Notice that in the example shown in Table 21-1, at least 5 percent of the team would need to be given a D, even if the maximum distribution was achieved in the higher categories (e.g., 65 + 20 + 10 = 95%). This can force some unpleasant conversations and competitive behaviors that will dictate the type of company you will build in the end. Figure 21-2 uses the relevant 12 key metrics and the rating guide in Table 21-1 to identify performance objectives at each level. A form like this one needs to be developed for every position being reviewed in the organization. For example, an employee in position X is expected to

Figure 21.2

Sample consultant ratings for position X

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meet all the criteria in column B to get that rating. If some of the criteria are met, while others are not, the rating generally moves to the lower score. HR may also identify a few of these that are the most important for the position.

Competency Models Competency models are commonly used in consulting organizations to describe the attributes that consultants should exhibit at different points in their careers. Here is a starting list, which you can customize by adding, modifying, or dropping attributes that are particularly relevant to your organization and business: Adapts to new and unusual circumstances.




Adaptability




Communication Has good verbal and written communication skills.




Business awareness the core business.




Learning Demonstrates a willingness to learn and apply new ideas.




Complex thinking Thinks through complex and difficult scenarios and concepts.




Creative thinking




Customer focus Tries to exceed the customer’s expectations in all cases; very customer friendly approach.




Influence




Comfort with ambiguity are not clearly defined.




Leadership Demonstrates skills to lead teams and builds teams to create outstanding results.




Listening skills




Professionalism to clients.

Understands the impact of decisions on

Searches for original ideas.

Influences other members of the team. Works effectively in situations that

Listens and responds well to others. Comes across as polished and professional

Human Resources and Career Management




Self-confidence Comes across as self-confident without appearing arrogant.




Teamwork




Results




Relationships Builds and leverages both personal and business relationships effectively.




Organization skills Demonstrates a strong ability to deal with chaos and produce order.




Conflict Knows how to deal with conflict within the team, organization, or with the client.




Problem solving Demonstrates an ability to understand and solve different problems.




Dedication Demonstrates a strong level of dedication in everything they do.

Works well with other team members.

Focuses and produces outstanding results for clients.

Personal Plans Each member of the organization should develop a personal plan at the start of a reporting period, as shown in Figure 21-3. The contents of the personal plan are signed by both the consultants and their manager and filed in either hard-copy or electronic form.

Figure 21.3

Performance review cycle

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The consultant’s personal plan is used during the review period to evaluate how the consultant performed per expectations. Here are some suggestions for elements of a personal plan:


Key client objectives for the period




Key practice objectives for the period




Key professional objectives for the period




Key personal objectives for the period




Assistance required during the period

Mentoring and Coaching Mentoring is the process by which a senior practitioner is officially assigned to work with a consultant for a specific period of time. The mentor and the consultant determine the short- and long-term goals for the consultant and then update the personal plan to show how those will be achieved. This has been shown to be an effective tool for improving consultant performance and should be considered by consulting organizations. Coaching is a similar but less formal relationship that is limited to an engagement. A coach and engagement manager can work with every practitioner on the engagement to refine their personal plans and ensure that both parties achieve what they want to from the experience. These same parties can also produce an engagement evaluation that would go back to the consultant review process discussed in the previous section.

Career Management Consultants will often hear that they are responsible for their own careers. This may sound a bit hard-nosed, but the reality in most professional services firms is that all the practitioners are busy charging clients or looking for clients to charge. In between, they need to keep their skills up-to-date, build their own teams, network for the future, and watch their own careers—to say nothing about their family-related activities! Many of the people working in consulting organizations have very little time to think about anything outside these activities unless they have planned for that time. Does this mean that as a consultant you are entirely on your own? No. Although career support will not be “pushed”for you, you are able

Human Resources and Career Management

to “pull” it and influence it. Senior management generally wants to find and promote talent. This raises their chargeable rates, and positions them to become future leaders. Consultants can and should do several things to help their careers, as follows:


Select the right engagements There are always some engagements that are more important to the company, higher profile, or that offer a strong learning experience. Consultants sometimes need to learn to find ways (e.g., making themselves known to the project managers) of getting themselves onto some of the gem engagements if their organization does not give them this choice.




Get close to clients Strong relationships with clients are critical to your success in consulting. They can result in more sold business and good references for additional business.




Participate in mentoring/coaching Get a rising star to agree to be your ongoing manager or coach.




Add to the intellectual property of the organization Find ways to build reusable materials or frameworks that can be used elsewhere in the organization.




Take the spotlight Become really proficient in several areas, and then agree to public speaking engagements, or write articles for publication.




Build personal networks Continue to build relationships that will help you to broaden your horizons.




Volunteer Become active in charitable events to help the community and to meet other like-minded professionals.

Closing Perspective The lion’s share of the revenue for most consulting organizations is based on the simple formula of average billable rate multiplied by the number of chargeable hours to a client, offset by specific adjustments for all the practitioners in the firm. Anything that can be done to improve the value and motivation of consulting firm employees will be immediately reflected in the bottom line. The human resources department needs the visible support of executive management to perform all of its functions effectively. This includes an independent budget, measurement metrics, and clear goals.

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Index References to figures are in italics.

80-20 rule, 100, 334

A access, pre-engagement activities, 145 account development, 69–70 asking for a decision, 78 budgets, 79, 91–96 channels, 79 discovering client’s needs, 73–75 engagement terms, 77 getting from first meeting to a client relationship, 73 integration with product sales, 89–90 plan and resource kit, 90–91 pricing models, 78, 79–82 proposing solutions, 75–76 resolving issues, 76–77 response templates, 78, 83–84 structure of, 70–73 tools, 78–79 See also clients; pipeline account pipeline. See pipeline accountability, 118–121 accounts payable, 31, 359–363 accounts receivable, 7, 12–13, 30–31, 359–363 challenges, 13 and credit, 389–392 essential rule, 13 impact of pre-engagement activities, 144 key drivers, 13 measurement, 13 monitoring and collections, 391–392 achievement, talking and learning about, 326–327 administrators, 154 advertising, 63–64 See also marketing application service providers, 404 architect/designer, 149, 154 architecture/design phase, 227–228 application architecture, 229, 230 business rules, 231 data architecture, 229–231 environments, 233 models and flows, 232–233

storyboards and mock-ups, 231 system management, 233 technical architecture, 228–229 assessing tactical and strategic considerations, 343–347

B backlog, 7, 17–19 back-out and contingency process, 257 backups, 402–403 banking, 367–368 benchmarks, 23–24 best practices, 165 billing, 6, 11–12 challenges, 12 combined invoicing, 274–275 considerations, 206 determining billable locations, 206–207 determining billable time, 206 essential rule, 12 final invoicing and payment, 260 key drivers, 12 measurement, 12 process, 161–162 when to bill, 358–359 See also fees bonuses, 31 briefing meetings, 87–88 budgets account development, 79, 91–96 risk, 286–287 total, 273 business analysts, 153 business development, 10 business expert, 149 business rules, 231

C capital cost allowance, 375 capturing time, 207–208 careers advancing others’, 330–331 enrichment, 386–388 management, 430–431 See also human resources

433

434

case studies, 67, 113–114

case studies, 67, 113–114 cell phones, 411–412 certification, 331–332 challenges, 4–5 change request process, 192–194, 195 channels account development, 79 leverage and account, 92–93 market, 65–66 chargebacks, 81–82 chattel, 368 client contact report background research, 125 client decision-making analysis, 126–127 client needs analysis, 126 precontact planning, 125–126 client relationship executive, 148 clients, 5 challenges, 9 channels to the client’s mind, 64–66 connecting with prospective, 60 discovering client’s needs, 73–75 engagement lifecycle, 37–39 essential rule, 9 guidelines, 8–9 internal and external relationships with, 26–27 key drivers, 9 managing client expectations within client norms, 332–333 measurement, 9 opinions about you, 327–328 referrals from, 93 refining your client list, 348–349 satisfaction, 6, 8–9, 260, 261, 328–329 survey form, 34 See also account development; pipeline coaching, 430 code, 236 commitment, risk, 288 commodities, projects as, 79–80 communication risk, 290–291 strategy, 225–226, 257 competency models, 428–429 competition, 331–334 competitive market reality, 4 consultants on the beach/bench, 9 downtime, 9 employee fitness, 5 hierarchy, 41–42 review cycles, 425–430 See also human resources; staffing; utilization

contact information, 163–165 contract management, 133–134 contractors, 150 controls expense, 388–395 financial, 200–205 management, 194–200 positive and negative impacts of, 191–192 resource, 205–208 scope, 192–194 conversion process, 257 corporate culture, 51–52 corporate dashboard, 293–294 corporate road map, 347–350 costs, 7, 13–15 challenges, 14 of doing nothing, 130–131 essential rule, 15 fixed costs and overhead, 5 impact of pre-engagement activities, 144–145 key drivers, 14 measurement, 15 strategies and impact, 14 See also profitability creative people, 154 credit, 389–392 credit instruments, 367 crises, 382 critical success factors (CSFs), 345 culture, 51–52

D database administrators, 154 debts, bad, 390–391 decision cycle, 104–106 decision-making process changing roles, 124 client contact report, 125–127 closing, 135–136 contract management, 133–134 decision-maker’s role, 123–124 evaluating risks and rewards, 128–133 face-to-face vs. org-to-org, 119 factors influencing client decisions, 328 finding decision-makers, 124–128 gatekeeper’s role, 121–122 getting the deal done, 134–136 influencer’s role, 123 issues and objections, 134–135 making information out of data, 127–128 organizational behavior, 118–124

evolution of the practice

roles and information flow, 120 user’s role, 122 decommissioning, 257 defining IT consulting roles, 40–43 delegating, 383 deliverables, 78, 259 risk, 291 dependencies, risk, 290 deployment approach, 257 deployment checklist, 258 deployment phase, 256–258 deployment plan, 237–239 describing an IT consulting practice, 25–28 desktop support, 154 developers, 154 development phase, 233–234 code, 236 deployment plan, 237–239 integration test results, 237 just-in-time training, 236 specifications, 234–236 test cases, 237 unit test results, 237 directors, 155 discounts, 7, 15–16 See also fees documentation, 165, 257 organizational structure, 385–386 dot-com companies, consulting firms servicing, 26 downtime, 9 due process, 118–121

E e-mail, 381, 409–410 employee fitness, 5 employee insurance, 373 employee performance, 407–408 employee satisfaction, 261 employee transitions, 423–424 end-games, 342 engagement architecture/design phase, 227–233 description of phases, 216 development phase, 233–239 impact on key metrics, 213–214, 215 major phases and deliverables, 214–239 methodology, 209–213 planning phase, 217–227 running, 210 engagement closing, 242 deployment phase, 256–258 impact on key metrics, 242–244 testing phase, 245–256

engagement lifecycle, 37–39, 167–169 getting sign-offs, 179–181 impact of engagement activities on key metrics, 169–170 key discussion areas, 176 maintaining controls and techniques, 188 number of meetings and consensus needed, 174 participants and touch-points, 173 planning the kickoff meeting, 176–179 post-engagement activities, 39–40 pre-engagement phase, 170–172 preparing for official kickoff meeting, 172–176 priority of discussions/workshops, 174 relationship of engagements to projects, 169 starting, 172–181 engagement office account/sales team, 267 controller, 268 engagement director, 148 engagement manager, 268 engagement team, 268–269 executive/senior manager, 266–267 extending, 263–270 organization, 266 shared resource pool, 269–270 structure, 265 engagement operations accounting, 161–162 global travel, 160–161 human resources, 162–163 IT infrastructure, 159 engagement plan risk, 290 and schedules, 200 engagements, multiple challenges of, 270–275 combined invoicing, 274–275 combined status reports, 272–274 extending the engagement office, 263–270 selling, 275–277 environment preparation, 256 evaluating your practice, 21–22 evolution of the practice assessing tactical and strategic considerations, 343–347 building a corporate road map, 347–350 core values and guiding principles, 341 critical success factors (CSFs), 345

435

expenses, 31, 81–82

436

dealing with negative situations, 346–347 end-games, 342 growth strategy, 343–344 mission statement, 340–341 refining your client list, 348–349 refining your services, 347–348 vision and goals, 340–342 expenses, 31, 81–82 billed to clients, 202–204 billed to the consulting organization, 204 controls, 200–204, 388–395 fully loaded, 189–190 incurred by the consultant, 204 pre-engagement activities, 144 sample form, 203 team-level, 204–205 types and codes, 202 See also costs

F facilities, 226–227 fax machines, 412 fees agreeing on a currency, 80–81 average billing rate, 6, 11–12 bonuses and penalties, 356 calculating your hourly rate, 80 contingency, 355 cost plus, 357 determining, 357–358 equity, 356 expenses and chargebacks, 81–82 fee brackets, 354 fixed, 354 in legal documents, 306–307 percentage fees, 354–355 rate pressures, 5 retainer, 356 straightforward time and expenses, 354 value to client fees, 355–356 See also billing; discounts; profitability financial management activities banking, 367–368 client-consultant fee arrangements, 353–357 dealing with suppliers, 364–366 impact on key metrics, 351–353 insurance, 368–373 revenue recognition, 377

taxation, 374–376 See also accounts payable; accounts receivable; billing; fees financial operations, 30–31 financial software, 408–409 focus areas, 5–6

G goals, 340–342 growth strategy, 343–344 guiding principles, 341

H handheld devices, 411 help desk, 257 hierarchy, 41–42 home office support, 413 human resources, 30, 162–163, 407–408 after-work socials, 420 awards, 419–420 compensation, benefits and promotions, 419, 423 compliance, 422 consultant review cycles, 425–430 corporate meetings, 420 employee transitions, 423–424 fairness, balance and policies, 422 gifts or spot prizes, 419 giveaways, 421 guidance/counseling, 421–422 intangibles, 421 mentoring and coaching, 430 morale, 419–421 on-the-spot financial payments, 419 recruitment, 417–418 responsibilities, 417–424 special events, 421 See also careers

I information/data repository, 320–322 infrastructure, 31–32 insurance, 368–373 all risks, 371 business interruption, 371 employees, 373 fidelity, 371 fire and theft, 370–371 inventory or stock, 371 liability, 372 miscellaneous, 372

metrics for a successful practice, 6–20

rent, 371 review, 369–370 vehicle, 372 what to insure against, 370–372 integration with product sales, 89–90 intellectual property, 44–45, 305–306 internal allocations, 363 internal consulting, 150 internal operations, 151 International Organization for Standardization, 317–318 Internet, 409–410 research and account development, 95–96 investments, 395 invoicing. See billing ISO, 317–318 issue logs, 196–197, 198 IT consulting organizations defining IT consulting roles, 40–43 defining the IT consulting practice lifecycle, 28–40 describing an IT consulting practice, 25–28 examples of, 27–28 IT infrastructure, 159

J job descriptions, 385–386

K kickoff meeting, 172–179

L laptops, 412–413 launch, 257 Law of Success, 324 leadership, 44–45 legal documents additional resources, 308–309 amendments, 302 body, 303–307 counterparts, 308 currency, 302 defaults and disputes, 307–308 definitions, 302–303 difficulty of, 299 entire agreement, 302 examples of, 298 expectations, 299–300 fees and accounting, 306–307

form and style of, 300–307 governing law, 301 headings, 301 intellectual property, 305–306 parties, 300 preamble and table of contents, 301 in pre-engagement phase, 151 samples, 183–184 severability, 301–302 standards and warranties, 305 legal support, 396–397 legislation, risk, 290 leverage, 8, 19–20 liability, 372 licensing, 331–332 lifecycle, 28–40 12 key metrics and the practice lifecycle, 43–44 engagement, 37–39 marketing and sales, 35–37 post-engagement activities, 39–40 practice operations, 29–32 risk mitigation and quality assurance, 32–33 lines of credit, 367, 368 loans, 367, 368 local factors, 87

M management kit, 226 management meetings, 200 marketing activities, 55 advertising and PR, 63–64 analysis overview, 56–58 case study, 67 competitive market reality, 4 defining a market, 55–56 kit, 59–61 market channel, 65–66 message, 59 plan, 56–59 project planning, 66–67 role of, 54–55 strategy, 35–36 writing and speaking tips, 61–64 mentoring, 430 methodology, standard, 209–213 metrics for a successful practice, 6–20 evaluation of, 21–22 impact of closing an engagement on, 242–244

437

mission statement, 340–341

438

impact of engagement activities on, 169–170 impact of financial management activities on, 351–353 impact of quality on, 312–314 impact of running an engagement on, 213–214, 215 and the practice lifecycle, 43–44 mission statement, 340–341 mock-ups, 231 modelers, 154 models and flows, 232–233 morale, 330–331, 419–421 mortgages, 368

N negative situations, dealing with, 346–347 niche, 51–52 knowledge, 355–356

O offshore workers, 150–151 on the beach/bench, 9 open-door abuse, 382 operating loans, 368 operations, 257 risk, 292 support, 154 organization charts, 223 organizational behavior, 118–124 organizational structure documentation, 385–386 options, 384–385 overhead. See costs

P pagers, 412 paradigms, 49–50 payroll, 31 performance reviews, 425–430 cycle, 429 personal plans, 429–430 pipeline, 7, 16–17, 99–108, 334 account list pipeline in the IT consulting business, 101 activity before a decision-maker takes action, 106 amount of time spent on developing new projects, 110 average value of projects, 110–111 case study, 113–114 challenges, 16

decision and engagement, 112–113 decision cycle, 104–106 defining future projects, 103–104 essential rule, 16 how projects go in and out, 108–109 key drivers, 16 knowing what drives projects, 106–108 managing, 111–113 measurement, 16 and processing, 111–112 project reservoir, 102–103 referrals, 60, 93–95, 104 wellhead, 111 See also clients planning phase business requirements, 217–218 communication strategy, 225–226 engagement plan, 219–222 facilities, 226–227 management kit, 226 organization chart, 223 quality plan, 222–223 risk review, 227 technical requirements, 218–219 testing strategy, 223–225 post-engagement activities, 242, 259–261 client satisfaction, 260, 261 deliverables, 259 employee satisfaction, 261 final invoicing and payment, 260 postmortem (sunset review), 260 sign-offs, 259 warranty period, 259–260 postmortem, 260 post-production support, risk, 289 practice operations, 29–32 pre-engagement activities and accounts receivable, 144 architect/designer, 149 best practices, 165 building a flexible organization, 152–153 business expert, 149 checklist for, 145–166 client relationship executive, 148 confirming engagement objectives, 156–157 contact information, 163–165 and costs, 144–145 defining the kickoff organization, 147–149 directors, 155 documentation, 165 due diligence on the client, 156

risk

engagement director, 148 engagement schedules, 157–158 engagement-specific roles and responsibilities, 153–155 executing the engagement, 155 groups, 146 impact of, 139–145 knowledge transfer to client, 158 miscellaneous considerations, 165–166 organizational considerations, 147–155 planning the engagement, 149–155 resourcing strategy, 150–152 securing client availability, 158 sign-offs, 158 sponsors, 155 steering committee, 148, 155 and utilization, 143–144 premises, 31–32 pricing models, 78, 79–82 See also fees priorities delegating, 383 time-sinks, 381–382 and to-do lists, 380–381 process definition, 320 Product Life Cycle (PLC), 53 production test, 258 professional sources, 60–61 profitability, 6, 187–191 thin profit wedge, 188 project coordinators, 153 project manager (PM)/leader, 153 project reservoir, 102–103 projects average value of, 110–111 knowing what drives projects, 106–108 new, 52–54 relationship of engagements to, 169 prospect list, 59 public relations (PR), 63–64 See also marketing

Q qualification, 90 quality assurance, 32–33, 154 assurance plan, 319–320 assurance strategy, 314–322 certified quality programs, 316–318 considerations, 312 home-grown quality programs, 318–322 impact on key metrics, 312–314 information/data repository, 320–322

ISO, 317–318 process definition, 320 risk, 288–289 tools, 320–322 query responses, 83–84

R rates. See fees ratings, 426–428 real estate, pre-engagement activities and, 144 recruitment, 417–418 reference projects, 78 reference sites, 82–83 referrals, 60, 93–95, 104, 333–334 refining your client list, 348–349 refining your services, 347–348 research and development, 52–54 resources, 6, 10–11 planning, 5 strategy, 150–152, 205–206 See also human resources; staffing; utilization response templates, 78, 83–84 return on investment (ROI), 129 revenue recognition, 377 strategies for increasing, 190–191 RFIs, and account development, 95 RFPs and account development, 95 briefing meetings, 87–88 choosing to bid, 86–87 declining to bid, 85–86 local factor, 87 process, 85 response process, 89 responses, 84–89 risk budget, 286–287 checklist, 285–292 commitment, 288 communication, 290–291 cost of doing nothing, 130–131 deliverables, 291 dependencies, 290 doing something else with the resources, 132–133 engagement plan, 290 engagement risk assessment, 283–292 examples of risk assessment, 294–295 and exposure, 8, 20 identification of specific risks, 280 legislation, 290

439

roles, defining, 40–43

440

mitigation, 32–33, 279–296 operations, 292 post-production support, 289 post-proposal risk assessment, 281–283 post-proposal risk mitigation strategy, 283 practice-based risk assessment, 292–294 pre-bid risk assessment, 280–281 project opportunity risk, 130–133 of pursuing a specific engagement, 131–132 quality, 288–289 review, 227 and rewards, 128–133 risk indicator, 279 shortcuts, 291 sign-off process, 289 team and resource availability, 287 technology, 287–288 testing, 287 third parties, 292 three-point assessment, 279–292 timeline, 285–286 roles, defining, 40–43

S sales hit ratio, 7, 19 strategy, 36–37 samples, 82–83 business requirements template, 218 consultant ratings, 427 corporate dashboard, 293 deliverables, 78 deployment checklist, 258 engagement charter, 183 expense form, 203 invoices, 162 issue logs, 198 legal documents, 183–184 organization charts, 184–185, 223 proposal, 182 sign-off form, 181 specifications, 235 status meeting agendas, 199 status reports, 197 technical requirements template, 220 templates, 181–185 test case, 255 thank-you note, 180

schedules, 157–158, 200 service lines, 49–50 defining, 50–51 shortcuts, risk, 291 sign-offs, 158, 179–181, 259, 289 skills obsolescence, 4 software, 406–409 financial packages, 408–409 functionality needs, 405–406 human resources and employee performance, 407–408 integrated, 404 stationery and document templates, 407 speaking tips, 61–64 specifications, 234–236 sponsors, 155 spontaneous visits, 382 staffing employee fitness, 5 hierarchy, 41–42 resource planning, 5 See also human resources; utilization status meetings, 197–200 status reports, 194–196, 197 budget spent and projected, 274 combined, 272–274 comments, 274 engagement name, start date, and end date, 274 engagement status, 273 manager, 274 overall status indicator, 272–273 period ending, 273 total budget, 273 totals, 274 in UAT, 274 steering committee, 148, 155 storyboards, 231 strategic partners, referrals from, 94 subcontractors, referrals from, 95 success celebrating, 324–328 critical success factors (CSFs), 345 reinforcing, 325–326 sunset review, 260 suppliers cost-related issues, 365–366 dealing with, 364–366 design standarwds, 366 legal and warranty considerations, 366 paying, 363

writing tips, 61–64

referrals from, 93–94 selection of, 394–395 shipping, 366 sources, 392–394 supplies, pre-engagement activities, 145 support framework, 5–6

T targets, 23–24 taxation, 374–376 capital cost allowance, 375 credits, 375 deferrals, 375–376 payments, 375 tax strategies, 376 team and resource availability, risk, 287 team satisfaction and loyalty, 330–331 technology application service providers, 404 backups, 402–403 business essentials, 400–404 cell phones, 411–412 e-mail, 409–410 evolution, 4 financial packages, 408–409 finding the appropriate level, 400, 401 handheld devices, 411 home office support, 413 human resources and employee performance, 407–408 integrated software, 404 Internet, 409–410 laptops, 412–413 managing for growth, 403–404 mobile tools, 411–413 pagers and fax machines, 412 risk, 287–288 software and office tools, 406–409 software functionality needs, 405–406 stationery and document templates, 407 summary, 414–415 your Web site, 410 telephone calls, 382 templates business requirements, 218 post-proposal risk mitigation, 284 preferred client list, 348 response, 78, 83–84 samples, 181–185

software, 407 technical requirements, 220 test case, 255 testing common concerns, 255–256 generic process, 251–254 integration test results, 237 misconceptions, 246 phase, 245–256 production test, 258 risk, 287 strategy, 223–225 test cases, 237, 254–255 testers, 154 timelines and durations, 249–251 types of, 247–249 unit test results, 237 The Art of War, 117 The Tank in Attack, 117 third parties, risk, 292 time capturing, 207–208 time-sinks, 381–382 See also billing timeline, risk, 285–286 training, 10 just-in-time, 236 user, 256 travel, 160–161 types of consulting organizations, 27–28

U UAT, 274 utilization, 6, 9–10 billable, 206–208 impact of pre-engagement activities, 143–144

V value, 44–45 to client fees, 355–356 values, 341 vendors, 151 vision, 340–342

W warranty period, 259–260 Web sites, 410 writing tips, 61–64

441

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