IT consultants face an uphill struggle to regain credibility after the catastrophic failure of recent high-profile projects.
Most telephone users have experienced the exasperating game of telephone pass-the-parcel at the hands of large bureaucracies. You call to query your bill, find out about new products or complain of poor service, and you're handed on from one department to the next until you wish you'd written a letter instead. Not at Mercury Communications, however. Thanks to a streamlined computer system, whoever picks up the phone takes responsibility for ensuring that your query is dealt with.
The £16-million programme took two years to put together. It includes three customer service centres with sailcloth room dividers, sculpted alcoves for impromptu business meetings and mix 'n' match desk configurations to facilitate team-working. Linking the workers in a seamless web of electronic communications is a state-of-the-art computer system that has cost about £6 million to develop. Its installation is the fruit of a close partnership with PA Consulting.
In 1992, all Mercury had was a vision of adopting best practice in the industry to streamline business processes and boost its customer appeal. It turned to Andersen Consulting, the world's largest IT consultancy, to help it identify best practice. 'Andersen's recommendations sound familiar now, but at the time they were quite radical,' says Jonathan Roberts, Mercury's IT project manager for the service centres. Andersen advised Mercury to empower individuals and to implement flatter management structures and flexible team-working.
Having reviewed the recommendations in the light of its own businesses expertise, Mercury decided that the key to best practice was a layer of IT to support customer service. This process of internal review is absolutely crucial when dealing with consultants' recommendations, says Roberts. 'Often people get consultants in to tell them what the problem is, but in practice you know your own business better than them.' Mercury found that most of its IT systems in areas such as faults, bills and sales, were arranged for its own internal benefit. Putting the customer first meant turning the systems on their heads and enabling any individual answering the phone to deal with any query. Mercury then wrote its own conditions of satisfaction for an IT system before appointing PA Consulting and moving on to procurement. Since then, the project has gone at 'awesome velocity' - progressing from screwing PCs together in January, to trials in March followed by full-scale operation in June.
Mercury is not unusual in using consultants. Indeed, the IT consultancy industry is estimated to be worth around £750 million a year in the UK alone. The hundreds of players range from industry giants to one-man-bands turning over less than £50,000 a year.
However, all is not well on the IT consultancy scene, according to a new survey by Business Intelligence which looked at the views of more than 200 major IT consultancy users. The survey found that only 2% were strongly impressed with the account management skills of their consultants, and just 4% praised the quality of consultants who worked on their projects. Big operators were singled out for criticism - 57% of respondents will be less likely to use the six largest consultancies in future. Consultancy budgets are coming under pressure in line with the rest of IT expenditure; IT experts charge anything from £300 to more than £2,000 a day for their services. Only around one in five of those surveyed plan to increase their spending on IT consultancy, and slightly more intend to decrease it.
The survey also has bad news for companies such as ICL, IBM and Oracle, which are trying to move into consultancy as a supplement to their traditional hardware and software markets - 30% of users don't welcome these players. The suspicion is that consultancy will be used as a back door through which suppliers can sell traditional products and services. In some cases cash payoffs are well-known. A former consultant admits, 'I've seen the brown envelopes.'
Part of the disillusion with IT consultancy has been caused by the catastrophic failure of several high-profile computer projects during the past couple of years. Wessex Regional Health Authority, for example, wasted £20 million on an IT system, and one estimate puts the overall NHS wastage on computing at £400 million a year. At the London Stock Exchange, the collapse of the Taurus system, designed to create a paperless trading environment, cost £250 million. The names of the consultancies involved reads like a Who's Who? of the industry. Not surprisingly, users are losing faith.
One problem is that consultants all too frequently tell clients what they already know. The joke about a computer consultant borrowing your watch to tell you the time may be hackneyed, but the message is still true. As John Handby, IT director at Glaxo Holdings, puts it: 'IT consultants are very variable. Some are very good but it is so easy for others just to reflect back at you.' The warning is repeated by Roberts. 'The greatest risk with consultants is that you end up teaching them your business.' Of course, this is exactly what some clients want. Their prime motive in hiring a consultant is to cover their backs. Not only do they want reassurance that their decision is correct, but they also want an objective, independent view to quote to their own bosses if their recommendations are challenged. As one IT director puts it: 'Internal people often feel that just as a prophet is never recognised in his own country, so senior management will listen more attentively to the advice of someone with an Andersen Consulting tag.'
However, it is a short step from here to the use of consultants to duck personal responsibility. Some managers take the extreme view that as long as they've employed consultants nobody can subsequently blame them if things go wrong. Using consultants becomes a substitute for actually managing.
Other headaches with consultants arise from the huge timescales involved - they are not usually around long enough to see projects through from conception to implementation. Mistakes are often made when experts have been called in to dream up a system which is then put in the hands of someone else to build.
All too often, projects don't even get implemented once the consultants have disappeared over the horizon. Internal staff who may have opposed the idea from the outset, find fresh reasons why it cannot go ahead. Guy Hains, IT director of Rover Group, avoids using consultants for major IT strategy because of the need for continuity. 'A major IT project, that is going to be of significant benefit to the business, takes two years to develop fully and to implement. We couldn't afford to pay consultants for that long.'
Another risk is that if you're paying for time and materials you can soon find yourself splashing out on lots of attractive extras. This is a particular hazard with IT consultants because they tend to be familiar with the latest technology. It is all too easy for them to suggest looking into a new technique or product enhancement. Before you know it, you can find you have commissioned another week's work. One of the biggest threats to consultancy comes from in-house IT staff according to the survey. It found that IT departments are beginning to do consultants out of their jobs by adopting the consultancy role themselves. This helps avoid the threat of redundancy at a time when many IT operations are being downsized or outsourced. IT staff with sufficient skill and adaptability, are able to shift their roles to provide advice to senior management on a wide range of issues from change management and business process re-engineering to IT strategy and performance measurement. Furthermore, they know the business better than outsiders, and can stay around during the implementation phase of important projects.
However, there are many positive roles for IT consultants - indeed, John Cross, BP's general manager for IT, rates one New York guru so highly that he has spent £3,000 a day flying him in for a major transformation project. 'If I have to spend a million dollars on his work, I will spend it,' says Cross. 'That shows you how price insensitive I have become when I am really clear about the ultimate value of what his contribution will be.'
As organisations reduce their IT workforces, it makes sense to buy the IT skills they need as and when they want them, without having to take on new staff. Consultants also have the advantage of a broad spectrum of knowledge about IT across industries, enabling them to transfer techniques that have been proven in one market to another where they may not have been tried.
Consultants are increasingly popular for their specialist or technical expertise. At Rover, for example, Hains uses them for 'rifle shot' roles when he needs advice on new hardware or software technology. This trend has enabled UK companies such as Birmingham-based ACT Business Systems to build up lucrative new businesses focused on niche markets and specialist technical disciplines.
So how can you ensure a trouble-free relationship with IT consultants? As with other products and services, the first step is to take care over assessing the consultancy's credentials. Find out whether it has completed similar assignments elsewhere and ask to speak to previous clients. Also, beware of ultra-smooth talkers - the consultancy should identify the risks in its response to your invitation to tender, as well as the benefits.
At Mercury, two-page briefing notes were sent to those interested in tendering, with the request that they submit a maximum of five pages in response. On the basis of this, four consultancies were short-listed and sent a request for a quotation. 'We deviated from the normal approach because often people try to trip suppliers up and trick them into revealing their weaknesses,' says Roberts. 'We took the opposite approach and told them very specifically what we wanted. We let them talk to users and didn't consciously hold anything back. We even told them how their quote would be measured.'
For example, Mercury was very specific about the experience of the project manager and said that it wanted to meet the individual in advance. It also stated that the key players would be expected to stick with the project from end to end, and that team members with less than two years' experience would not be well received. Even so, some bidders ignored the stated requirements. One consultancy fielded a potential project manager who not only had inadequate experience but who had worked until recently for Mercury so it knew the precise level of his ability. 'Consultants often become complacent in their responses because clients can be vague about what they want,' says Roberts.
Another essential ingredient he recommends for any consultancy deal is skills transfer. You've spent all that money, you're entitled to expect something in return. 'Our requirement was that we would be able to adopt and use their method and approach after they'd finished. We didn't want to have to buy their expertise indefinitely, but to be able to run with the products ourselves.'
Each of the acceptance criteria was weighted, so Mercury was able to decide the best very rapidly by multiplying scores against weightings and totting up the total. The winner, PA, was coincidentally rated best performer in the Business Intelligence survey.
As part of the skills transfer, Roberts got PA to produce a guide on how they put the system together, including an analysis of call volumes and transaction rates. 'Always look for how you can leverage your investment,' he says. 'Don't leave all your eggs in their basket.' And whatever method you adopt in selecting consultants, get them to share the risks as well as the rewards. They all say they do this anyway and talk a lot about mutual trust. 'But what most of them really mean is that they want to get paid even if they don't deliver.'
If you're going to be using a large number of third parties, select one as the prime contractor. 'Get them to run the others or else they'll all try to jockey for position creating a tremendous overhead for you keeping them all apart.' The prime contractor is strongly motivated to do what you want, and you have time to focus your energies on managing it.
The good news is that, as with the rest of the IT industry, consulting is becoming more and more competitive. For clients this should mean faster projects, lower bills, and systems that better meet the original requirements. The increasing specialisation of consultancy service suppliers also increases your choice. Whatever type of IT advice you need, someone out there is making it their business to supply it.