Winning With IT Consultants

Let the buyer beware in this $50 billion consulting market

Like cops and taxicabs, good information-technology consultants somehow seem never to be around when you need them. Especially these days. As companies overhaul their computer operations to meet new business challenges, high-powered technology expertise is in demand more than ever. "There's so much business to go around that in a lot of cases consultants are turning down [work]," observes Nicole France, senior analyst of G2R Inc., a Mountain View, Calif.-based IT research firm. "Unfortunately, there are also some consultants who don't say 'no.' They're taking on too much." "It's definitely a seller's market today," adds Lisa Gandy Wargo, editor of Global IT Consulting Report, an Atlanta-based newsletter that tracks this market. As a measure of demand, the top 50 IT consultancy firms grew at a rate of 27% in 1997; the total market last year hit $47 billion, says Global IT Consulting Report. Among the top five firms, Andersen Consulting did almost $3.5 billion in IT-related work globally in 1997; Computer Sciences Corp. $2 billion; Ernst & Young $1.6 billion; Deloitte & Touche Consulting Group $1.15 billion, and KPMG Peat Marwick $1.15 billion. Much of the growth has been spurred by the pressing need to make widespread Y2K fixes. Manufacturers also are using consultants and integrators to implement enterprise-resource-planning (ERP) projects with a vengeance, replacing older systems with integrated software packages that tie the entire enterprise together. Such projects are enormously complex, time consuming (implementation times run from six months to more than two years), and extraordinarily expensive. Consider, for instance, that Coca-Cola Co. and Gillette Co. are shelling out in the neighborhood of $250 million each for their respective ERP initiatives. In addition to Y2K and ERP initiatives, corporations also are engaging consultants to deal with issues such as outsourcing and new technologies, including data warehousing and knowledge management. And, ironically, the boom times in the IT consulting business -- and the substantial financial rewards of the profession -- have added to the demand as more and more IT staffers defect to the consulting ranks. "We're getting a natural migration of all the best IT people to the consulting firms," says Tim Bourgeois, director of research services at Kennedy Information, a management consulting research firm in Fitzwilliam, N.H. "As a result, there are a lot of weak IT departments out there that need the help of IT consulting firms to get stuff done." With all the complex, far-reaching changes that are underway in the IT sector, even solid well-run IT departments are relying more and more on outside professionals. "Very clearly, no company can have all the breadth and depth that's needed today, so you can always find a consultant who has expertise in a given area and bring them in to help," says Bill Howard, CIO of Inland Steel Industries Inc., Chicago.

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