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7 dirty consultant tricks (and how to avoid them)

Dan Tynan | April 12, 2011
Scope change, empty suits, kickbacks -- beware IT consultants looking to turn your IT project into their cash cow.

The fix: First, carefully screen the consulting firm to make sure you're not hiring a scoundrel, says Sherman. Then make sure that ownership of any intellectual property or domains created by the consultant is clearly spelled out in the contract and demand copies of all documentation, including log-ins and licensing information.

 

Dirty consultant trick No. 5: Kickbacks and double-dipping

Is your consultant strongly recommending a product or service from a third party? They may be getting a cut of any deal or incentives on the back end -- a nice second or third income on top of what you're already paying.

"Always make sure that you know how the consultant is getting paid so you understand their incentives," says Jeffrey Bolden, managing partner for Blue Lotus SIDC. "A consultant can be making money via billable hours as well as making commissions on products or bringing in other vendors. We avoid that conflict of interest by providing our clients with hardware or software at our cost, and bill just for the time of the engagement."

For example, a consulting firm may recommend an outsourced solution that will save your company money, but not nearly as much as if you contracted with the outsourcer directly, says Chris Smith, partner at strategy consulting firm ARRYVE. The consultants pocket the difference, and the client is never the wiser.

"The reality is that many big IT consulting firms are getting 100 to 300 percent margins on the outsourced resources they are providing," he says. "Sure, the client is getting cost savings, but this is probably one of the bigger areas where IT consulting firms are extracting money out of their clients."

The fix: Since you're unlikely to find out how big a cut your consulting firm is getting from the outsourcer, says Smith, your best bet is to ask for competitive bids, then negotiate a better price with the firm you want to go with.

 

Dirty consultant trick No. 6: Selling you the latest and greatest

You need a shovel, they'll sell you an earth mover. Want to manage your contacts? They'll convince you an enterprise-level turnkey CRM system is the way to go. Why? Because nobody makes money selling shovels and contact managers.

"My personal 'favorite' dirty trick is IT consultants who sell the client on a complex customized solution that takes months of time to implement when the latest out-of-the-box product would cover 80 percent of the functionality and 110 percent of what the client actually needs," says Mark Mueller-Eberstein, CEO of Adgetec, a consulting, coaching, and mentoring company. "With the current speed of technical innovation, most 'customized' solutions are outdated the time they are implemented anyway."

 

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