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

“This is a very useful guide for consultants to provide them with a com-prehensive and practical understanding of what consulting is all about.” —Adel Melek, Partner, Deloitte & Touche b

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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

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“From pre-engagement to post-engagement activities, this book provides

key metrics, practical approaches, and real-world examples for

success-fully 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

suc-cessfully 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

com-prehensive and practical understanding of what consulting is all about.”

—Adel Melek, Partner, Deloitte & Touche

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High-Value IT Consulting:

12 Keys to a Thriving Practice

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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

inde-pendent 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

infor-mation 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

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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

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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

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.

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.

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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

Consulting Practice 3

Chapter 2 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

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Part IV Running an IT Consulting Group or Practice

Chapter 19 Day-to-Day Management of an

Chapter 20 Using Information Technology in

IT Consulting 399Chapter 21 Human Resources and

Career Management 417

Index 433

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

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Acknowledgments xvii

Introduction xix

The Downloadable Online Forms xxi

Part I IT Consulting Best Practices Chapter 1 Evaluate the Current Health of Your Consulting Practice 3

Defining the 12 Key Metrics for a Successful Consulting Practice 6

Evaluate How Your Practice Is Doing 21

Establish a Benchmark for Your Practice 23

Closing Perspective 24

Chapter 2 Road Map for Building a High-Performance IT Consulting Practice 25

Describing an IT Consulting Practice 25

Defining the IT Consulting Practice Lifecycle 28

Defining IT Consulting Roles 40

12 Key Metrics and the Practice Lifecycle 43

Leadership, Value, and Intellectual Property 44

Part II Selling Client Businesses and Engagements Chapter 3 Implementing a Marketing Strategy 49

Service Lines and Paradigms 49

Getting Started 50

The Niche and the Culture 51

Research and Development and New Projects 52

The Role of Marketing 54

People with a Common Need 55

The Marketing Plan 56

The Marketing “Kit” 59

Writing and Talking Tips 61

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

The Channels to the Client’s Mind 64

Project Planning with a Human Face 66

Chapter 4 Account Development Strategy 69

Yes, I Do Account Development 69

The Structure of Account Development 70

Crossing the Validation Bridge 73

Discover the Client’s Needs 73

Propose a Solution 75

Resolve Issues 76

The Engagement Terms 77

The Decision 78

Account Development Tools 78

Pricing Models 79

Samples and Reference Sites 82

Response Templates 83

RFP Responses 84

Integration with Product Sales 89

The Account Development Plan and Resource Kit 90

Budgeting for Account Development 91

Chapter 5 The Client Account Pipeline and the Decision-Making Process 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

Chapter 6 The Client Decision-Making Process 117

Organizational Behavior 118

The Art of Finding Decision-Makers 124

Is the Client Worth the Effort and Risk? 128

Contract Management 133

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Getting the Deal Done 134

Part III Delivering Client Engagements Successfully Chapter 7 Pre-Engagement Activities 141

Impact of Pre-Engagement Activities 141

Checklist for Pre-Engagement Activities 145

Chapter 8 Starting an Engagement 167

The Engagement Lifecycle 167

Impact of Engagement Activities on Key Metrics 169

What You Should Have from the Previous Phases 170

Sample Templates 181

Chapter 9 Maintaining Engagement Controls 187

The Thin Wedge of Profitability 187

Controls 191

Chapter 10 Running an Engagement 209

The Quest for a Standard Methodology 209

Impact of Running an Engagement on the 12 Key Metrics 213

Major Phases and Deliverables for Running an Engagement 214

Chapter 11 Testing, Deploying, and Closing an Engagement 241

Impacts on the 12 Key Metrics 242

Testing Phase 245

Deployment Phase 256

Post-Engagement Activities 259

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

Chapter 12 Working Multiple Engagements

for a Client 263

Extending the Engagement Office 263

Challenges of Multiple Engagements 270

Selling Multiple Engagements 275

Chapter 13 Risk Mitigation 279

Three-Point Risk Assessment for Engagements 279

Practice-Based Risk Assessment 292

Examples of Risk Assessment 294

Chapter 14 Legal Considerations in IT Consulting 297

Legal Documents Are Part of IT Consulting 298

Form and Style of Agreements 300

Defaults and Disputes 307

Counterparts 308

Additional Resources 308

Chapter 15 Quality Considerations 311

Why Quality? 311

Quality Assurance Strategy 314

Chapter 16 Celebration, Communication, and Other Considerations 323

Never Crowded at the Top 323

Celebrating Success 324

Client Satisfaction 328

Team Satisfaction and Loyalty 330

Keeping the Practice Competitive 331

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Part IV Running an IT Consulting Group or Practice

Chapter 17 The Evolving Practice 339

What Are Your Business Vision and Goals? 340

Assessment: Tactical and Strategic Considerations 343

Building a Corporate Road Map 347

Chapter 18 Financial Management: The Bottom Line 351

Impact of Financial Management Activities 351

Keeping a Running Score with Financials 353

Dealing with Suppliers 364

The Bank: What to Do, What to Expect 367

Insurance in IT Consulting 368

Taxation for IT Consultants 374

Revenue Recognition 377

Chapter 19 Day-to-Day Management of an IT Consulting Business 379

Priorities and Discipline 380

Organizational Structure and Documentation 384

Expense Controls 388

Investments 395

Legal Support 396

Chapter 20 Using Information Technology in IT Consulting 399

Keeping Technology Focused on Your Business 399

The Business Essentials 400

Software and Office Tools 406

E-mail and the Internet 409

Mobile Tools for the Professional Staff 411

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Home Office Support 413

Putting It All Together 414

Chapter 21 Human Resources and Career Management 417

HR Responsibilities 417

Consultant Review Cycles 425

Career Management 430

Index 433

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

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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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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

mis-takes 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

al-together 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

pil-lars 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,

train-ing 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

organi-zations, and prospective consultants It is intended to help

practitio-ners 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 consideringthe 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-engage-ment activities; engagepre-engage-ment lifecycle; post-engagepre-engage-ment 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

orga-nization 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 PracticeChapter 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 StrategyChapter 4 Account Development Strategy

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

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Chapter 5 The Client Account Pipeline and Decision-Making

ProcessChapter 6 The Client Decision-Making Process

Part III: Delivering Client Engagements Successfully

Part III examines techniques for effective delivery of engagements,

estab-lishing 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

en-gagements 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:

Risk mitigation and quality assurance

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Part I

IT Consulting Best Practices

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Evaluate the Current Health of Your Consulting Practice

An 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

re-quires balancing a dozen key metrics that sometimes contradict or

com-pete 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

custom-ers, 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

func-tions The consulting organization must establish a market presence,

in-vest 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

be-come 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,

em-ployees, 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

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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

busi-ness Having consultants work longer days will impact morale Hiring

additional employees will affect fixed costs and put additional strain

Competitive market reality The barriers to entry in the ITconsulting industry are relatively low A consulting businesscan get started with just a single paying client and a service

This creates a lot of competitors, some of which do not have anexpensive infrastructure to maintain and are willing to undercut

or provide services for free Coupled with the normal businesscycles of the economy, this competition can cut into consultingrevenue streams at anytime

Technology evolution Within a single decade, we’ve seen therise of different technologies and techniques that changed theway 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-managedteams, change management, and web services are just someexamples of hot areas that have emerged in the last decade

Even nontechnical revolutions, such as re-engineering, have aprofound impact on IT consulting organizations by eventuallychanging the way technology is deployed to meet the evolvingdemands of the business Consulting companies are alwaysbeing forced to upgrade and become experts in the latest hotarea before anyone else

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

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Fixed costs and overhead The revenue streams of most

consulting organizations are not constant There are ups anddowns based on market conditions Clients usually do not awardprojects 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 sellingopportunities and the revenue stream Employee demandsfor improved benefits and higher compensation in goodtimes applies the upward rate pressure A tight labor market,high demand skill sets (can be old or new technologies), andretention bonuses are other upward drivers Too much supply

or a client’s unwillingness to invest in consulting servicesapply downward rate pressure

Resource planning Staffing the organization to the right

level is problematic Large projects can end suddenly, releasingmany workers from a billable engagement

Any of these challenges can destroy a company’s well-being

over-night 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

sec-tion 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 theservices that they are purchasing at the price they are paying Thisresults in customer satisfaction, which then leads to customerloyalty Customer loyalty allows for a predictable consultingrevenue stream because engagement opportunities are increased

Employee fitness Employees, who are also called practitioners,

resources, or consultants, are the primary product of theconsulting organization As such, their number, morale,commitment, and skill level are vital to the organization’s success

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Profitability The bottom line is a combination of manyfactors, including charge-out fees, employee utilization, fixedcosts, and margins Profitability over time sustains the ITconsulting 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

pro-vide 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

Figure 1.1 Three-pillar support framework for consulting organizations

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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 costsinclude office rent, utilities, cleaning, and telecommunications

Variable costs include entertainment, transportation, andcertain 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 relevantpursuit data

Backlog The amount of work that has already been sold

and is waiting for completion Every consulting organizationshould try to build a backlog that will keep the group busyduring 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 weresought

Figure 1.2 12 key metrics for IT consulting practices

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Leverage Number of junior (less expensive) resources onengagements versus senior (more expensive) resources

Risk/exposure Description or indication of the risks/exposuresthat can greatly impact the practice For example, what should

be done in response to a new regulation, which could affect anexisting 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

essen-tial 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

oppor-tunities They can also provide a personal reference for other

depart-ments 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 ing organization has with the client organization Although the rela-

consult-tionship may arguably be influenced before any meetings have occurred

(e.g., your reputation can precede you), once your firm is awarded

busi-ness, the relationship often starts from a level playing field Every

inter-action from then on should be engineered to grow this relationship

Clients want to be the focus of any consulting organization thatthey are considering for retention This means that consulting organi-

zations must be ready to demonstrate their knowledge and buy in to

the corporate identity, culture, and strategy Many consulting

organi-zations end up failing miserably by attempting to make the client

change their culture

Consulting organizations should also consider adopting guidelinesunder 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

be-tween 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

re-sort 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,

mea-surement, 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

activi-ties Most consulting organizations are interested in billable (or

exter-nally 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

con-sidered 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

Down-time 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

thresh-old, every increase in billable utilization adds directly to the bottom

line Some of the factors that can impact utilization include:

Billable utilization Chargeable hours worked by employees

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 onthe organization’s profitability Employees who have a highnonbillable utilization may be motivated and valuable;

however, when they are nonbillable, they are considered anoverhead to the organization Even a few employees in thiscategory can have a staggering impact on the bottom line

Training Ongoing training is a vital investment for everyconsulting organization Many organizations have a minimumnumber of training hours allocated for every employee andthe practice as a whole

Business development The sale of consulting services oftenrequires the involvement of consultants This time can becategorized as pursuit or business development activities

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

mea-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

orga-nizations 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 affectsits 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

con-flict with each other, making it difficult to balance the overall impact

One thing is clearlow morale hurts the bottom line of any

organiza-tion If unhappy, employees will leave the organization or, at a

mini-mum, 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

sur-round 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

me-dian point then strengthens the team While this approach has several

problems, one thing is certainvoluntary turnover of strong

employ-ees is not good for the business or the bottom line

Key Drivers Career management, ability to impact the organization, and ability

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

ev-ery consulting organization should have and revise regularly This is

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their price list Spending, investment, and revenue decisions all hinge

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

busi-ness 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

try-ing 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

col-lection of fees The following approaches could help improve

collect-ing 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 andethically 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

com-pleted 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

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

pre-dictable from month to month Fixed costs are sometimes referred to as

overhead Some examples of fixed costs are office rent and supplies,

ben-efits, 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 couldhave 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

ex-ample, the following techniques have been used to control

busi-ness-related expenses in various organizations; the related impact is

described in the second column:

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.

mea-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

An-other 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

em-powers specific resources to offer discounts during pricing

negotia-tions For example, some organizations allow business development

managers or project managers to offer a discount at their own

discre-tion 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

salespeo-ple He enthusiastically took a test drive, looked through the

market-ing 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

in-volved 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

dis-count, 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

mea-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

op-portunity amount, amount of current pursuit, probability of close,

pur-suit team, and a description of relevant activity against the opportunity

It is important to assign an accurate value to the “probability ofclose” 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

or-ganizations assign a numeric probability in increments of 10 or 20

per-cent points For example, 0 perper-cent probability can be a placeholder;

10 percent may indicate a new referral; 20 percent may indicate an

un-qualified opportunity; 30 percent may indicate a un-qualified

opportu-nity; 40 percent may indicate that the client has requested a proposal;

50 percent may indicate that initial meetings have successfully

oc-curred; 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

indi-cate 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

dedi-cated sales team is an expensive proposition, the team can seek out good

revenue opportunities However, selling consulting services usually

re-quires a consultant’s participation; they are the product that is being

“leased”or “sold”and the client generally wants to see them before

clos-ing the deal In addition to a dedicated sales staff, senior members of a

consulting organization are generally involved in sales activities

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

Tiêu đề	High-Value IT Consulting: 12 Keys to a Thriving Practice
Tác giả	Sanjiv Purba, Bob Delaney
Trường học	Ryerson University
Chuyên ngành	Information Technology and Consulting
Thể loại	Book
Năm xuất bản	Unknown
Thành phố	Toronto

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Số trang	465
Dung lượng	11,93 MB