The underrated need for independent consultants

I was glad to see HfS release their own SAP Services Rankings, which Den reviewed for diginomica. HfS went about their rankings with their typical aplomb, cheekily claiming an 'independent, unbiased, unfettered and all-encompassing analysis'. I was chuffed to see innovation received a 35% weighting on the overall score.

Still, these types of rankings leave me uneasy. No single services firm, no matter how talented or customer centric, can compensate for the need for independent views that are not tied to the main services provider (often called the 'prime'). Jarret Pazahanick, himself an independent SAP consultant, went after that issue in his comment on Den's post:

I am a strong believer that customers that have a few truly independent voices on any large SAP initiative that is using a large SI can save a substantial amount of money as left unchecked the quality of consulting resources, project estimates and some other factors can become one sided in advantage to the consulting firm.

Skeptics will point out Jarret's position on the need for independents is in his own self-interest. That said, ERP projects continue to show up in the headlines with failures and lawsuits attached. More often than not, as was the case in the headline-grabbing Marin County project failure (settled out of court in January), you read about allegations of poorly equipped consultants or insufficient training.

The other thing that stands out from the 'problem project' stories is that there usually seems to be an unrealistic trust or dependence on one consulting provider. That led to my response to Jarret's comment:

You should never put blind faith in a services firm no matter how high they are ranked - by anyone. Three things that come to mind: 1. Assert direct control over each consultant supplied, 2. Get project audits with someone who does not have direct daily stake in project billings or extending the project lifespan, and 3. Have an expert independent consultant on the project who is willing to provide a different voice on a day to day basis. And don't marginalize that person politically.

A new post by Eric Kimberling of Panorama Consulting advising customers on How to Gain Independence from Your ERP Software Vendor only heightens my concerns. Eric's recommendations are sensible:

• Choose an independent advisor to provide input on vendor selection (disclaimer: Eric's firm is such a vendor)
• Once you've selected a vendor, negotiate optimal prices for services and seat licenses, before you sign the line which is dotted.
• After you have signed, continue to stay on top of third party options such as third party support and maintenance.

But then Kimberling writes:

It’s understandably much more difficult to “gain independence” after the ERP contract has been signed.

There's no way around some degree of lock in, but this notion of signing over your independence to your vendor, and in many cases, to a prime services partner delivering the implementation, is worrisome. It's vitally important for ERP customers to continue to assert their project autonomy after the contract is signed (for the record, Kimberling agrees).

The best way to do that is via the politically empowered presence of one (or several) independent consultants who are not only intimately familiar with industry requirements and product configuration but who are not afraid to speak their minds when projects veer in unwise (or bloated) directions.  Jarret and I hit on that topic in detail recently, but I chopped it out of the interview I published with him on diginomica for space reasons (the entire interview will soon be released as a podcast, link forthcoming).

Jarret believes good independent consultants are a challenge to the big SI on the project, but in a good way:

I've seen some cases where the SI has really taken advantage of customers. Having that independent voice can really keep the projects honest. I'll tell you that a lot of the firms do not want to have an independent voice there, because they're going to make a lot less revenue on the project.

Steve Phillips, 20 year ERP professional and author of the book Control Your ERP Destiny, agrees. In a 2012 post, Independent ERP Consultants: When are they the Best Choice? Steve details how independent consultants can positively impact ERP projects in seven areas: Business Needs Assessment, Senior Management Education, ERP Readiness Assessment, ERP Software Selection, Project Management, Best Industry Practices,  and Go-live Readiness Assessment.

Making the case for independents, Phillips is blunt:

In many cases, not using independent consultants at the appropriate time can lead to slanted or biased recommendations, or just plain bad advice. This is the scenario when your consultants make suggestions that are in their own (or partners’) best interest, not yours. I am often amazed at how many organizations fall into the trap of hiring consultants or vendors that cannot be truly independent (no matter what they tell you).

There's no denying that adding independent consultants creates a more politically charged project environment that has to be managed - an issue Phillips should have addressed in his post. But I'd argue those risks are worth taking on for the benefit that expertise can bring.

Jarret agrees that the politics have to be managed; you have to empower the independent consultant for success:

When big consulting firms come in, they don't want to have any voices that are not their voices on the project. After a while the estimates get higher, pieces of work cost more. You need to have some independent voices. You need to make sure you empower those independent voices as well. I've been in some situations where on occasion I've had to be outspoken. But you have to be given a role where you're going to be that's something that the customer wants. They have to want a role where they're going to keep their big SIs in line, to speak.

Verdict

To some degree, ERP customers have unintentionally made this issue tougher on themselves. The reason dates back to the mid-90s, when the ERP consulting market was a wild west. Projects frantically hired scarce resources, often without central control. Exploding budgets and chaotic resource management provoked the movement towards vendor management programs, where only a handful of vendors are typically authorized to staff projects.

There is logic to the centralized approach, but it can lead to difficulties bringing on independent consultants. Sometimes you can route such consultants through an approved vendor, but there is an inevitable rate squeeze when each vendor in between the independent consultant and the customer takes their cut.

The 'layers' between the customer and the independent consultant are the cause of much complaint and cause many deals to become financially untenable. It's shocking that almost 20 years since I first encountered the 'layers' problem, it really hasn't been solved, or even modestly improved. A podcast I released in 2009 dissecting the issue of layers in the SAP consulting market plays like it could have been recorded yesterday.

At minimum, an approach that retains central control but provides more contracting flexibility is needed. For example, customers could re-negotiate with one of their primes to take a modest 'pass through' override on independents ($10 an hour), for the privilege of retaining a prime relationship on the project.

The biggest weakness in my own position is I don't have a formal study to present linking the presence of independent consultants with better ERP project outcomes, nor do I know of such a study. It would be research worth undertaking, and it's something I plan to mention to user groups during the fall conference season. For now, the piles of anecdotal evidence from grizzled enterprise veterans will have to suffice.

As customers re-assert their hiring autonomy, there is plenty of upside. It's a rare month when I don't get approached on LinkedIn about a new web site for ERP customers that allows direct negotiation and hire of consultants. There is also a dire need for deeper innovation on enterprise services delivery (knowledge clouds, just-in-time virtual resources, etc) - a topic for another post.

But despite the disappointing lack of innovation on staffing delivery models, there are still plenty of options right now for customers who want to work directly with expert consultants, including 'skills exchange' web sites that allow for hiring through pass-through entities that can satisfy those pesky insurance and liability requirements. There's way more to gain than there is to lose.

Photo credit: Ready for Business © lassedesignen - Fotolia.com

Disclosure: SAP is a diginomica premier partner as of this writing. Jon and Jarret both serve as SAP Mentor volunteers.