Plug and Pay
In the Wild West of high-tech consulting, the programmers and resellers who furnish products and know-how might be geniuses--or they might be snake-oil salesmen (who mow lawns on the side). And you're about to put your company in their hands?
Chances are, you've heard an information-systems horror story or two. They're not in short supply. A computer installation goes badly or some software is a nightmare, and a hapless company is thrown into chaos. Office automation is seldom a matter of writing a check (a big check, even) and turning on a perfect system. And if you think bad things happen only to computer illiterates, think again.
Consider the experience of a technical-services business in the Southwest that embarked on a major system upgrade. For legal reasons, the company must remain anonymous. Let's call it the Phalanx Corp. In 1994, Phalanx had sales of about $15 million and some 100 employees, and as it grew more sophisticated its old computer system no longer sufficed.
The president, however, was an engineer, and given his expertise, he knew the kind of hardware and software required to carry Phalanx to the next level. He opted for a Unix-based system running on a database and language called Progress. For the operating platform, he purchased an IBM RS/6000 minicomputer. That left one critical piece missing: programming code that could merge the company's three lines of business into a single operation for accounting and various reports. With no canned solutions on the market, the code had to be custom-written, a common situation.
Phalanx selected a small Florida-based firm for the job, budgeted at about $150,000. It appeared to be a sound decision. The Floridians were already working on a nearly identical program for a big plumbing-supplies business in Denver. When the president and the CEO of Phalanx visited that site in the course of their due diligence, the work was incomplete, but it certainly appeared feasible. With business cards, letterhead stationery, and a listing in Progress Software's directory of vendors, the Florida company seemed legitimate, and it kicked quickly into gear. Three programmers literally moved into the Phalanx facility and took rooms in a local hotel. With high hopes, the customer gave them keys to the office and a company car, expecting the work to take maybe six months.
A year later, in 1995, the programmers were still there, and the project was in shambles. "They never even got close," recalls Phalanx's CEO, "never even had a prototype."
Alarmed, the folks at Phalanx brought in a specialist in the Progress language, a Harvard-trained consultant named Arthur Fink, to confirm their sense that the program was a disaster; they knew it was, in business terms. "We asked him if it was worth salvaging," the CEO says, "and he decided it wasn't. It was garbage. We actually pulled the whole thing out and threw it away and started over from scratch with another contractor. It was a total waste."
The incident wasn't Arthur Fink's first exposure to a computer debacle, but he found it especially striking. "How could this very bright engineer get taken so badly?" he wonders. "He's the kind of fellow who would be my model client--crisp and clear and system-oriented. The company itself is technically very savvy. But he brought in these guys who wrote a program that was late and sloppy, lacked adequate features, and was pieced together from a number of different packages that worked in radically different ways.
"What they found out," Fink adds, "was that they were dealing not with a reputable vendor but with a bunch of kids who ran a lawn-mowing business when they weren't able to foist their software on people."
The annals of office automation are littered with examples like that, for good reason. It's a buyer-beware business, big-time--the Wild West of high tech. The consultants, programmers, and resellers who furnish products and know-how--including the countless independent operators who focus on small and midsize companies--might be superb, or they might be bozos. It's hard to tell. There are no formal accreditation procedures in the industry--no examinations to take, no licenses to be obtained. Technology moves too fast for that.
Consequently, it's all but impossible to screen out incompetent "consultants," who merrily leave behind a trail of botched jobs, busted budgets, and unhappy company owners. "About half my work is cleaning up messes somebody else created," says consultant Gordon MacDonald of Shawnee, Kans. "That's held true for 20 years. These other folks aren't necessarily malicious or evil. They're just nave about what they can deliver."
Even so, it wouldn't be fair to blame every fiasco on inept consultants. Customers can be almost as guilty. According to technology lawyer Frederic Wilf of Berwyn, Pa., many horror stories involve companies trying to automate on the cheap or ones that fail to thoroughly plan the project or that poorly articulate their goals. Consultants aren't miracle workers. They probably know zero about your business, and unless you go the extra mile in detailing your system requirements, problems are all but inevitable, despite even the best of intentions. It's like that famous line from Cool Hand Luke, Wilf says: "What we've got here is a failure to communicate."
A small entrepreneurial company, for example, happens to know someone--"Joe"--who is in the computer field. "They ask Joe to do some work for them," Wilf explains. "Joe might not be qualified, but he tries his best and he gives a discount because, after all, these guys are friends. Usually, they don't bother with a written agreement or even talk much, frankly, about what needs to be done. It turns out to be a disaster for all concerned, and they end up in court yelling at each other. I see this all the time."
In scenarios like this, the problems can often be traced back to something called the "guru effect." When a company goes to buy a copy machine or a health plan, managers might perform all manner of analysis, but given the prevailing ignorance about high tech, they hardly know what questions to ask about computer systems. There's an adage in the computer consulting business: In the land of the blind, the one-eyed man is king. When a consultant walks in the door, he enjoys a hushed aura of awe and respect--the holy man is here.
"All you have to do is rattle off a few technical terms, and the customers look at you like deer caught in the headlights," one consultant says. "If you know more about computers than they do, they think you know everything about computers. Nobody knows everything about computers." There are all kinds of subspecialties these days, and a consultant who might be outstanding in one area can be hopelessly lost in another. It's like asking a knee specialist to do a heart transplant. What customers need is not computer expertise, just skepticism. "You don't have to know how an engine works to buy a car," the consultant says, "but you need the gumption to control the buying process. You can't be intimidated."
So powerful is the guru effect, however, that even sophisticated companies with strong negotiating skills can get burned. Not long ago the partners of a Los Angeles law firm met a consultant who promised to bring them "up to speed" on computers. "He was trying to convince us that all the lawyers needed PCs," recalls a former associate at the firm. "He said we could be the first guys on the block to distribute laptops to our clients, so they could be networked into our system, with passwords to their files, and we could be really high tech and paperless."
The "guru" put a $200,000 price tag on the project. Some of the senior managers found his ideas so innovative that they decided to make the firm a proving ground for a complete package, which they and the consultant could jointly market to other law firms.
As the deal unfolded the lawyers spent numerous hours studying the proposal, designing a plan to fit the strategy, and deciding how to finance the job. It looked so promising that the firm invested tens of thousands of dollars in the consultant's small company. In the end, for unknown reasons, he never delivered the goods. And only later did the lawyers learn that everything in the package was available--off-the-shelf--for about $100,000 and could have been installed with minimal help. "This happens all the time," says the former associate.
For any given computer problem, there exists a solution. This stuff isn't magic, but it is complex and demanding. It sometimes happens that outside contractors, hungry for income, overstate their expertise and fast find themselves out of their depth, floundering and creating an aftermath of misery. We're not talking outright fraud, just false confidence by the consultant that he or she can manage the task. Witness the crisis that beset Motherwear, a catalog business, after a sales-driven software developer installed a calamitous program.
A $4.8-million company based in Northampton, Mass., Motherwear had outgrown its mail-order software, which handled everything from merchandising and credit-card sales to invoicing, shipping, and inventory control. After searching for a beefed-up replacement, CEO Prakash Laufer contracted with a small midwestern company we'll call Avion Systems (not its real name).
"Their people seemed friendly and knowledgeable," Laufer recalls, "and when they did a presentation at a catalog conference, I thought they were on the cutting edge. They came in to run a demo for us with their president and chief programmer and said their system could do everything we needed. I was impressed." In December 1995 he signed Avion aboard for a $35,000 project, hoping to have the system running by the beginning of March for his spring season. In early February, Avion sent a few programmers to Motherwear's location for the installation.
They left after eight days. The troubles began soon after. "We had major problems in every area of the company," Laufer says. The new "system" left Motherwear barely able to process credit-card orders--its lifeblood--and returns. It couldn't track customers; in some cases they were billed five times for the same thing or never billed at all. For several months the company could not ship packages by air. It had no accurate reports on what stock was in inventory, what had been shipped, or what items needed replenishing.
"Our people were literally crying and freaking out," Laufer recalls. "Customers were yelling at our call-center operators because their returns were a month late, and the call center couldn't give any answers, because it couldn't access their files. People had to run around to manually enter orders, which took us two or three times longer than before. That meant callers were on hold for a long time, and they'd hang up and not call back."
Ironically, the Avion software had substantial reporting features, so Motherwear could calculate the damage from canceled orders--about $300,000, according to financial manager Holly Smith -Bove. "But you don't know how many of the people you angered will never order again," she says. Payroll costs, moreover, shot up by $100,000. "It was taking us so much longer to process orders that we had to bring in more people," Laufer says. "And we also had heavy turnover. Employees got upset because customers were taking out their frustration on them."
Two months after the initial installation, and only after Motherwear brought in a lawyer, Avion finally sent in a second team, but most of the problems remained until Laufer hired a competent programmer to untangle the mess. That work cost him $50,000 last year and $40,000 this year. "We're finally getting the system we want, but it's been very expensive," he says. "What we learned was 'Buyer beware.' These guys were convincing salesmen, but obviously, they couldn't back it up."
Don't get the wrong impression--there are plenty of good, honest consultants and programmers out there. The key to successful office automation is identifying the right one for the job and then giving the project the same focus and attention you'd give any core business operation. Consultants emphasize that the key is defining the problem to be solved and planning out the system in painstaking detail.
"There's a rule that professionals go by," says Gordon MacDonald, "which is that for every hour you spend planning--meaning not touching a computer--you save five hours in implementation. Before anybody gets to write software, you should have mock-ups of all the screens the program is going to produce, with the menus and options. You should have a flow chart explaining how the program is going to proceed, in plain English, so the nontechnical people can see how it will react to specific situations. And there should be a clear statement as to what the program will and won't do. The kiss of death is when a programmer spends an hour with an end user and then sits down to write."
A formal contract is another essential. Stipulate if practicable that the work will proceed in stages, so quality can be assessed incrementally, before everything is cast in code. The contract also should set up payment terms and a procedure to settle disputes, which almost invariably arise--if the customer wants more features added late in the game, say, or argues that something is not performing as advertised and so withholds final payment.
An established mechanism to resolve complaints--arbitration perhaps--can prevent a nasty little surprise that programmers sometimes pop on unwary clients: so-called time bombs or time locks. If the customer hasn't paid in full by a certain point, usually soon after the project-completion date, the bomb "explodes" and erases or otherwise disables the program. "If it's a mission-critical piece of software, it quite possibly shuts the company down," says Kirby Glad, a consultant in Orem, Utah, who routinely embeds time locks in software and defends them as the only leverage he has over balky or unreasonable clients.
Finally, urges veteran consultant Arthur Fink, never buy a computer system without taking a test-drive. He offers as an example what an insurance company looking for a package to handle accounts, policies, and claims--the works--did. "They said to each competing vendor, 'We want to actually try you out, and you'll have to work with our staff so we can spend a few hours loading some real data, processing real claims in real accounts.' And they didn't want vendors at the keyboards showing the way," Fink says. "They wanted their own people at the controls. They looked at three packages, and two of them fell right off the board--lots of problems. The third one got mixed reviews. They realized that at a deep level it was a good package with some flaws that could be corrected. They decided to go forward with that, and it's been a success."
So don't abandon hope. The whole point of systems, remember, is to make your life a little easier.
The Fine Art of Finding a Consultant
The quality of the consultant you select might well determine the speed and success of your computerization project, so choose wisely. A few pointers:
- Remember that good consultants aren't always geographically bound; they'll travel, and frequently they can work on your system by modem.
- The best referral system is word of mouth. Ask local executives whom they have used. You've probably found a good consultant if he or she is so busy it's hard to schedule a first meeting. Trade associations also can be useful in recommending consultants experienced in your industry. That's a big advantage because you won't have to train them on business-specific issues.
- Don't assume consultants are good just because they've been in business awhile. A bad one can screw up one job after another and make a living at that.
- It goes without saying that you should check references carefully. And don't just call former customers. If possible, visit them to inspect the consultant's "work product," especially how it performs for nontechnical users. It's important to look at the solutions the consultant has installed. If they almost always use the same hardware or software, chances are, you're dealing with a value-added reseller (VAR), not an independent consultant. VARs aren't necessarily bad, but they profit by selling specific products, which might not be optimum or the most economical for your needs.
- When interviewing consultants, pretend you're hiring an employee. You probably cannot judge the person's level of expertise, but you know a jerk when you see one. People skills matter because consultants deal with you and your staff as they learn how the company works so they can customize the system. You don't want a condescending, lingo-spouting chiphead who will alienate everybody in sight. Get a normal communicator, to whom you might say, "How 'bout them Cubs?"
- Ask about professional affiliations. Membership in the Independent Computer Consultants Association, for example, means the individual subscribes to a code of ethics. It also indicates a dedication to professional development. Then call those groups to verify that the person is in good standing.
Writing the Contract
The best insurance against a problematic computerization project is a strong written contract. Lawyers recommend that it include at least the following:
- The basics--the who, what, when, and where to make the contract legally enforceable.
- A detailed description of the scope and nature of the work. If possible, set a deadline.
- A provision for progress reports or development updates. Think about breaking the project into phases for payment purposes, with milestones that enable you to monitor quality before everything is cast in code.
- A compensation schedule specifying the consultant's hourly rate or flat fee, along with terms and conditions of payment. Reserve part of the total amount until the job is finished and everything is working to your satisfaction.
- A confidentiality provision making it clear that any proprietary information the consultant sees, such as customer lists and financial records, will remain confidential.
- Copyright language.
- A provision for free upgrades for a specified period of time if the project involves software that is later improved or modified.
- Designation of decision makers.
- A warranty, stating that the work shall be free from defects in workmanship and materials, and shall conform to the project's specifications. A one-year warranty is reasonable, but some vendors try to start at 90 days.
- A flat prohibition against secret code, usually a "time bomb" or time lock, that could disable your system.
- A provision for operators' manuals and training, if needed, before final payment is made. Also, specify the cost of follow-on training and service.
A Field Guide to Computer Consultants
How to Know Your Nerd
Nowhere is the term consultant more ambiguous than in the computer field. You're talking about countless thousands of people serving an industry of vast complexity. How could there not be confusion? But for a company looking for outside expertise in office automation, it helps to think in terms of four broad categories:
- Independent consultants. In their purest form, independents are objective advisers. They identify the best solution for clients, regardless of which vendor supplies it. Many independents fly solo, while others work in companies with up to 100 people or more. Primarily, they serve small and midsize companies. Some independents specialize in specific industries--health care, say, or trucking. Others are generalists. In their own right, independents might be software programmers, networking experts, or hardware specialists--or occasionally, all three. They often begin with a "needs analysis" to help a customer design and fine-tune a computerization project. Once a strategy is set, the consultant either does the work himself or herself or recommends vendors who can. He or she might also help solicit bids, handle contract negotiations, and manage the overall operation, acting temporarily as a client's information-technology department.
Independents by definition have no vendor affiliations, and staying current on technology can consume half their time. "We have to be familiar with all the available packages," says Steve Epner, president of BSW Consulting Inc., in St. Louis, and founder of the Independent Computer Consultants Association. "We try to put our clients in a position where they can't be wrong."
These folks don't work cheap. Sometimes they bid on jobs on a flat-fee basis, but they prefer hourly rates, and experienced consultants command between $80 and $200 an hour, depending on their skill level and the local economics. "Usually, a company will interview a few people and compare rates," says Debbi L. Handler, a consultant in Sausalito, Calif., and vice-president of the Independent Computer Consultants Association. "If you're the first interview, you're the one that knocks the guy out of his chair when he hears that you bill $150 an hour."
Consultant Gordon MacDonald in Shawnee, Kans., insists the rates are justified. "Most clients get into trouble because they don't want to pay my rate to start with--$125 to $195 an hour--but they will pay somebody $50 an hour," he says. "The problem is, the $50 person is probably a rookie or a part-timer, and when they blow a job, the company ends up calling me in, anyway."
- Value-added resellers. Close cousins to independent consultants in some respects, so-called VARs are authorized reps for software and hardware vendors. They get a piece of the action when they sell a product in their channel; hence they have a distinct bias. Ethical VARs disclose their vendor relationships, but the less scrupulous sometimes masquerade as independents. The upshot? An unwary customer might purchase product A, whereas product B might be a better fit and cheaper to boot.
VARs generate two income streams: hourly consulting fees, and commissions and discounts. Ricki Letowt, president of Letowt Associates Inc., in Norwalk, Conn., for example, carries one product, an accounting package called SBT, which is not commercially available. She buys it directly from the publisher, including the source code, which allows her to customize the program to suit clients' needs. "The value I add, aside from configuring, installing, and training, is modifying the software to help a business run smoother," she says. "With a shrink-wrapped package like Peachtree, you have to adapt your business to fit the way the program runs."
Letowt makes money on the margin, buying SBT at a discount and "reselling" it to customers at full price. Software VARs, she says, typically enjoy discounts ranging from 25% to 50%, based on volume. The cost differential contributes almost a quarter of her income.
Given intense competition among computer manufacturers, hardware VARs get lower price breaks. Leonard Shostak, who runs L&D Computer Consulting Corp., in Garden City, N.Y., is a "solution partner" for IBM, NEC, Hewlett-Packard, Novell, and other computer manufacturers. "With hardware, you buy from a distributor, like MicroAge, and your discount reflects your purchasing volume," he says. With HP products, for example, his margin ranges from 2% to 35% below street prices. The biggest competition for hardware VARs: mail-order operations like Dell, Gateway 2000, and PC Connection, as well as unauthorized resellers.
- High-tech-temporary staffing agencies. Thousands of people who consider themselves independent consultants work as temps, farmed out by "body shops" for projects or assignments typically running six months to a year or more. The National Association of Computer Consultant Businesses (NACCB), the trade group for this sector, lists 310 members, but it says roughly 3,000 companies are operating in the field.
For employers, high-tech temps provide staffing flexibility and the specific skills needed at the right time. "We work like Kelly Girls or Manpower, but the rates are much higher, the contracts are much longer, and the ability to match the right individual to clients' needs is harder," says Joel Adams, chairman of the NACCB and founder of Devon Consulting, in Wayne, Pa. Adams currently has 220 consultants out on contract--programmers, database experts, systems analysts, software engineers. They pull down $40 an hour on average, although some make $80; rates vary by skill and are higher in a place like Silicon Valley. "These people know what they're worth in the marketplace, and they are scarce resources," Adams says. "They could find steady work tomorrow, but they prefer to be hired guns, moving from job to job." Brokers like Adams make money by charging clients a billing-rate multiple, usually 1.3 to 1.5 times the wage paid to the consultant.
- Giant consulting firms. This is the gold coast of computer consulting, in both cost and prestige. Some of the names are familiar--Electronic Data Systems, IBM, Boeing Information Services, and the Big Six accounting firms. Andersen Consulting, a business unit of Andersen Worldwide, by itself has 45,000 people in 47 countries and last year posted revenues of $2.9 billion in the Americas and $5.3 billion worldwide. The 11,400 member companies in the Information Technology Association of America (ITAA), which represents this top tier, are engaged in everything from business-process reengineering to custom software development and systems integration.
These services are expensive; hourly rates are in the $200-to-$350 range. Is the cost worth it? Maybe. "If a management team requires the imprimatur of a big name, they're probably well served by someone like a Big Six firm that has installed a standard practice many times," says independent consultant Steve Epner. "That gives you confidence that you'll reach the end of the path successfully with a working system."
But fellow independent Gordon MacDonald is more skeptical. "What the end user doesn't understand is that you're not hiring Andersen Consulting, say, but the two people they send over to your shop. At first you meet the partners and the gurus; then you get the kids just out of school to do the work. What counts is the skills of those individuals. It comes down to basic economics. Most consultants make and keep more money than most employees. So if someone who works for Andersen is very good, they tend to migrate to the outside consulting world."
Bob Cohen, communications director for the ITAA, defends his members, dismissing MacDonald's critique as competitive spin. "This business is all about customer relationships," he says. "Nobody wants to damage them by not properly staffing their projects."
Jay Finegan (email@example.com) is a senior writer at Inc.
Looking for some outside expertise to help with office automation? A worthwhile starting point is the Independent Computer Consultants Association (ICCA), a St. Louisbased trade group with 1,500 geographically diverse members, most of whom have at least 10 years of experience. Most members will do an initial consultation free of charge. To identify an ICCA member in your area, or to find one with the specific skills you require, tap into the organization's Web site ( www.icca.org). It contains a complete membership listing, with links to each consultant's home page or E-mail address. By and large, those home pages provide all the contact information you'll need, plus a complete rundown on the members' areas of expertise. The ICCA's phone number is 314-892-1675 or 800-774-4222.
The same group runs the Computer Consultants Forum on CompuServe. Post any computer-related question in the forum's comments section, and you'll get informed answers, usually within 24 hours. There's no charge to join the forum. When you start up CompuServe, click on the traffic light at the top, follow the directions, and enter the word consult. When the forum's Web site pops up, follow the instructions for posing questions. Not a CompuServe user? No problem. Call 800-848-8199 and request a free start-up kit. The first 10 hours are free, which will probably give you enough time to get the computer advice you need, at least initially, and there's no obligation to keep the service.
Another major trade organization, the Information Technology Association of America (ITAA), runs a lively Web site ( www.itaa.org). The group's 400 direct and 11,000 affiliate members, all involved in information technology, are listed alphabetically, and most entries include home-page links. Additionally, the site features numerous articles about industry trends and issues. The ITAA's phone number is 703-522-5055.
Maybe you need a high-tech temp to augment your in-house expertise for a computer project. The National Association of Computer Consultant Businesses (NACCB), which has 310 members in the temporary-staffing industry, posts information at its Web site ( www.naccb.resourcecenter.com). There you'll find a membership roster, with home-page links, and the group's code of workplace standards. Bear in mind, though, that you can't use the NACCB to find a consultant unless you are an NACCB member. The NACCB's phone number is 800-313-1920.
STEVE EPNER, BSW Consulting, 1050 N. Lindbergh Blvd., St. Louis, MO 63132; 314-991-8505 70
ARTHUR FINK, 190 Danforth St., Portland, ME 04102; 207-774-3465; firstname.lastname@example.org 70
DEBBI L. HANDLER, Data Access Solutions, 35 Rodeo Ave., Suite 1, Sausalito, CA 94965; 415-331-9993; email@example.com 70
LETOWT ASSOCIATES, Ricki Letowt, 22 Nostrum Rd., Norwalk, CT 06850 70
GORDON MACDONALD, GMDS, 12914 W. 76th Terr., Shawnee, KS 66216; 913-888-8164 70
MOTHERWEAR, Prakash Laufer, 320 Riverside Dr., Northampton, MA 01060; 800-950-2500 70
FREDERIC M. WILF, Saul, Ewing, Remick & Saul, 1055 Westlakes Dr., Suite 150, Berwyn, PA 19312; 610-251-5082; firstname.lastname@example.org 70
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