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MANAGING -- Their Pain, Your Gain

MANAGING -- Their Pain, Your Gain

Perhaps you've heard stories like these: a container company discovers that consultants have done almost no work on a critical IT project just weeks before its intended completion date. An auto parts distributor hires a consultant who, it turns out, doesn't understand the software needed to build its database. A transportation company fires consultants partway through a multimillion-dollar contract because of weak performance.

These are true consulting horror stories, and there are many more like them.

Fortunately, unlike the horrors you see in the movies, these tales offer solutions or at least strategies for preventing their recurrence. Here are 10 tactics to help you get the most out of consultants on your IT projects.

1 Check Timing and Priorities

The first step to a successful project is so basic it's easy to overlook: Make sure the project fits on the company's strategic agenda and won't compete for time, funds or staff with other projects. Otherwise both the consultants and the client staff assigned to the project will become frustrated, and costly consultants' hours will be wasted.

Dale Anderson, president of Pragmatek Consulting Group Ltd. in Minneapolis, has faced this challenge from both sides-during his decade as CIO at several companies and as a consultant at Arthur Andersen. In a classic example of competing agendas, consultants plan client training for a given week, but then someone from within the company comes in with another project and says they can't run training that week. "Wasting a week of consultants' time is expensive and [counterproductive]," says Anderson.

He recommends that the entire executive team, sponsored by the CIO or COO, map out the year's projects and make sure there are no overlaps. A project should go forward based on the affected business units' ability to absorb the change caused by the project. The change may be a new product line, organizational structure, location or computer system. "In any operational unit, it will take a month to get ready for the change, a month to do the change and a month to be comfortable with the change," Anderson says. Given that three-month rule of thumb, it may be wise to plan only one such project per quarter.

2 Check References and Experience

Finding a consulting firm with a good name is not enough to be safe these days.

"Go with someone who has a [known] history," advises David Concepcion.

Concepcion, who spent 10 years as IT operations manager of Miami-based container distributor New High Glass Co. Inc. before becoming a consultant himself in January 1998, tells of New High's learning experience. In the summer of 1997, Concepcion hired an accounting firm that was moving into broader consulting services, including IT, to work on an orders and accounting application. "We trusted them, but they got to a certain stage and threw their hands up and said, 'We've got to go outside for help.'" Concepcion himself had to find other consultants to finish the project.

A similar problem struck the U.S. Department of Agriculture's Food & Nutritional Services section, which supervises food stamp programs and other state-run social services. "We had one project where the winning bidder had developed several systems in other states for human services but had never developed one specifically for the food stamp program," says Kathy Tankersley, an IT senior computer specialist in the section's Boston office, who oversees consulting projects worth between $15 million and $200 million. Her agency didn't question the consultant's assumption that the business knowledge of people experienced in similar programs would be transferable. "Within nine months or so," Tankersley recalls, "they realized they were in too deep for [the skills] they had. They did try their best-they shuffled resources around and tried to bring in people who had experience from other sources dealing with the food stamp program. But it was not enough, and the contract was terminated due to lack of performance." The mistake, Tankersley says, lay in believing that specific business knowledge was not needed.

Marianne Hedin, a research manager at IT industry researcher International Data Corp. in Framingham, Massachusetts (a sister company to CIO Communications Inc.), says potential clients should beware of consultants who are promising too much. "Even some of the Big Five have made this error and had to either pull out, pay a penalty, or they got sued. As a client you have to look out for not being pulled in by enthusiasm that isn't properly backed up by past experience and case studies," she says. Ask for proof that consultants can deliver what they promise.

3 Handpick Team Members

Because consulting firms sell themselves as vast, self-managing repositories of knowledge, it is easy to let them choose their resources for you. While your company can't pick from the entire roster of consultants at a Big Five firm, it is possible to demand minimum levels of experience.

"Projects may seem standard upfront, but as you get into one, complications emerge, and when you get into complications you really need a seasoned consultant," says Hedin. Consulting firms are becoming more aware of this problem and have lately aimed at retaining more experienced professionals, she says. Hedin advises clients to ask explicitly about the consultants' level of experience on each type of project.

"We put into the contract that no one comes on to a project without the approval of the team members, generally based on personal interviews and résumés," says Frank Herczeg, vice president for finance and comptroller at Sea-Land Service Inc., a Charlotte, North Carolina-based transportation company. The condition serves as quality control from the beginning of the project through its completion, since there is bound to be turnover during a long project.

Price Waterhouse (PW; now Pricewaterhouse-Coopers) accepted those terms and was awarded Sea-Land's largest current IT project. "It's not typically the way PW does it, but the business and tech people [from both companies] formed a management team, and they work out any conflict" over team staffing and other issues, says Jim Watkins, Sea-Land's vice president for applications development and strategic planning.

At J.C. Whitney in Chicago, a catalog retailer of auto parts, currently in the midst of a multifaceted transition from old systems and processes to new ones, insistence on vetting consultants' team members comes from bitter experience.

"When I showed up at this company we had a consultant who was supposed to be building a database access application and I discovered this person did not know the utility tools he was going to use to build it," recalls Tom Murray, Whitney's vice president of IS. "It's becoming ever more of a problem: consultants showing up who don't have the qualifications to do the task."Now Whitney always builds into its contracts the right to qualify the people whom consultants place on project teams, Murray says. He acknowledges, however, that his company faces a problem if it hires IT consultants "when we don't understand the application or the technology and want the consultants to mentor us. Usually we can rely on references and the quality [reputation], but we've still discovered people definitely lacking in skills."4. Define Project ScopeOne of the most notorious and costly pitfalls of IT projects is their tendency to stretch beyond the limits of the original plan. To avoid this scope creep, clients need to accurately assess their current situation and do their homework before the consultants' work commences.

Customers have been known to accuse consultants of trying to keep a project alive in order to keep billing for time, but there is often a less sinister explanation for scope creep. And consultants say the problem frequently starts with the client.

Take the case of a fast-growing health-care company, WellPoint Health Networks Inc. of Woodland Hills, California, which early this year began outsourcing much of its IT operations to GTE. Vice President and CIO Leonard Hice, whose consulting company, Theco International, also of Woodland Hills, is a subcontractor on the five-year project, says that GTE based its staffing for the call center portion of the project on the client's own erroneous estimates.

"GTE asked how many calls they got per day and WellPoint said 8,000 to 9,000, and [GTE] staffed for that. But in reality they were getting 16,000 to 17,000," Hice says. Once this was discovered, GTE had to renegotiate projected person-hours for the job, he says.

According to IDC's Hedin, one way to keep to budget and other targets is to adopt the fixed time/fixed price contract (see "The Latest in Suits,"). Another alternative is value-based pricing, in which final payment depends on the final results. This requires both sides to agree at the outset what constitutes a successful outcome and to clearly delineate each side's responsibilities.

Whatever the billing method, an ill-defined project is the most likely to suffer from scope creep, so a key safeguard is to involve client staff in the development of the project. "We create a user-led team where IS participates heavily," says Murray. "Users must identify and document intentions and plans, and provide added-value understanding of the intricacies of the project."As simple a solution as open weekly meetings, including both consultants and client members of the project team, can help keep projects on track, Murray says. "I came into the company and this project had been underway for almost a year. The project was veering off track, but we caught it in time." To get it back on track, Murray began requiring a weekly meeting, usually lasting 15 minutes, but running all day if needed. At smaller companies such as J.C.

Whitney, the president or other senior management can drop in because they know when and where the team meets.

Some slippage in the scope of projects may be unavoidable, but companies can take a lesson from Hice's experience consulting to the U.S. Army Corps of Engineers on a project to build an operations database. The Corps began requesting bits of work in areas that Hice says were not in the original contract. These eventually added up, and the Army's project manager felt awkward about going to his superior to increase the budget. "Tell somebody they goofed to the tune of several million dollars and they get kind of sensitive on you," Hice observes. The moral, he says, is to scope out a project in fine detail at the start, and don't let a series of small requests balloon into major changes.

5 Build a Combined Project Team

Hiring consultants can buy you know-how, but smooth execution requires a team composed of both consultants and the client's staff and a consensus from the beginning that responsibility for success or failure will be shared. "Unless both the consultant and client have equal skin in the game, it's not going to work," says Sea-Land's Watkins. So even though Sea-Land and the consultants bring different knowledge to a project, they agree to share responsibility for the overall outcome. "The way we use the Big Five," he says, "is to ask where our skill gaps are on the project, and we have them build the team that fits.

But we don't hold them 100 percent accountable for the deliverables."Such best practices are learned at a high cost. Sea-Land's financial department's $80 million 1995 project to track orders through to its processing and payment (originally led by a Big Six consulting firm the company prefers not to name) had been underway for a year and a half when Sea-Land realized it wasn't getting the desired results. "It's not that enough wasn't done, but when you dug deeper it wasn't as good as we thought," Herczeg recalls. "We didn't have enough resources devoted on our end to see what they were producing.

"We had let the firm do its own thing, and were not really involved in managing [the project]. The changes we've made really came out of the analysis of how we could have done that one better." The company's new approach is, "If you don't have a Sea-Land project manager's name on the project along with the consultant's, then it won't work," adds Herczeg. For example, on an installation of Oracle databases currently underway in his department, Herczeg has assigned two finance managers along with one IT manager to work with the recently merged PricewaterhouseCoopers. And Sea-Land employees are assigned as full-time members of IT project teams. "Our project directors have to be 100 percent full time for the life of the project, usually two or three years," Herczeg says.

6 Maintain Oversight

Keep a steady watch on any IT consulting project. That bit of wisdom is unsurprising but absolutely essential. Many companies have suffered expensive and strategically disastrous setbacks by neglecting to do so.

New High Glass needed a consulting firm (in a separate project) to help it modify some off-the-shelf software it had purchased. It selected a small Florida firm that had been recommended to them. At a corporatewide meeting in mid-November, the consultants laid out the project plan and New High Glass gave the go-ahead. "They assigned a project leader from [the consultancy] and I would have thought that meant it was their responsibility to make sure they were on time [delivering the project]," Concepcion says.

The live date for the modified application was set for March 1, 1998. "In the first week of February, we saw they hadn't really done anything yet. They couldn't show anything to us," Concepcion recalls. Training on the new application, scheduled for mid-February, had to be done on the off-the-shelf version. "It was very frustrating to tell users that this screen here will eventually look like X and Y," he says. "By then we'd spent a quarter of a million dollars. By the live date we were supposed to have hours left over for a 'would be nice' phase to add operability suggested by users. It was one of those situations where you want to pull out your hair.

"Make sure there are milestones, that you have proof that work is being accomplished," Concepcion now says.

7 Assure High-Level Buy-In

For ambitious IT projects, a strong and balanced team is not enough to ensure success. Executive involvement lends clout to the client-company side and keeps top management apprised of key developments in the undertaking.

At Sea-Land, "On a large project we might have a vice president-level executive from the business sponsor and the IT side, then directors from both those sides for the day-to-day operation" of the team, says Herczeg. For Sea-Land's current $5 million Oracle financials implementation, which will include payables, procurement, inventory and fixed-asset tracking, Herczeg's boss, CFO Chuck Raymond, and Chief Transportation Officer Robert Grassie both sit on the project's steering committee, which meets once a month.

At J.C. Whitney, Murray has established an executive sign-off protocol tailored to the size of the project. "We're working on one major project this year, replacing our 25-year-old order management system, which will cost us $3.5 million, including about $1 million in consulting fees. The sign-off for that, since it's at the heart of our business, required the outside board of directors." Meanwhile, a $400,000 database project for the marketing department required approval of a marketing manager and the president. And an under-$50,000 project could be approved by the marketing manager alone.

8 Cultivate Partnership

The careful construction of an IT project and its team can only be cemented by an attitude of partnership and a commitment to communication.

"Working very closely with the client seems to be the biggest factor" in project success, Hice says. "We've had projects in the past in which communication got to be the top issue. If the customer says I need this done by that time, [the consultant] should be writing a note with a little red flag."Leadership of a project's design has to fall on the consultant's shoulders when a company lacks a clear idea of what it wants accomplished, Hice says. "Then it becomes time for the consultant to take the lead role and say, 'There are several approaches to this,' and let the client come back and say, 'This one will work better for us.'" The consultant can then lay out the plans for the project. But after that point, Hice and others say, it is far better for the client to take the lead.

"The most successful projects have been those where the consultant and client are two in a box; where, when the consultant is at the worksite, the employees don't even know it's a consultant," IDC's Hedin says.

9 Manage Change

Assume your company has designed and executed its IT project in great harmony with the consultant. Still, the newly installed IT may not fit the organization. Or better put, the organization may no longer fit the much-needed new IT. Work with the consultants during the project to monitor the technical and human systems as the work evolves.

"There's nothing worse than getting a call from someone who says, 'You installed a million dollar system and we're using 20 percent of it,'" says Anderson of Pragmatek. To avoid such embarrassments, companies should consider how and by whom the new IT will be used while the project is still underway.

Anderson's standard practice is "to make sure we're meeting with all the right people through the beginning, middle and end of a project.""We identified change management as being a critical component at the beginning, along with training and organizational development," says Sea-Land's Watkins. "We asked PW to analyze how the organization should look [when the financial project was finished] and how should the bank reconciliations be done and where. They're recommending changes that suggest the organization needs to be structured around processes such as order-to-cash, not functions such as cutting an invoice."The changes wrought by Sea-Land's IT project will therefore change reporting relationships and job descriptions. "The change management requires a major investment in time and resources," reports Watkins. "Our communications department is putting out information. We're training people we call change agents at two-day sessions being offered around the world." These employees then teach the rest of the company how to work differently.

10 Plan for Knowledge Transfer

Let's say the project is done, and the new system or application is up and running. Many companies still have good reason to hesitate when the consultants are finally ready to leave. Is anyone left behind who understands the work that has been done?Anderson believes planning for knowledge transfer should be done at the very start of a contract. "It is important to talk at the very beginning about how the client is going to sustain the momentum [when the project is over], how knowledge will be transferred to the client's staff."Hice has devised one way to leave a legacy: Clients should make sure that project plans include an automated tracking system or database to maintain a history of what's being done. On some projects, the creation of a project database on the client's mainframe is included in the contract. When the consultants leave, there is a digital record of the entire project that can be used for maintenance and planning.

The Last Word

In short, though there may be no escaping the need for IT consultants-if anything, you'll be using them more-there is no reason for despair if you follow one basic rule: Stay involved. Like your personal physician, your consultants can only know how to help if you communicate and share responsibility with them. If you do, your company should have few horror stories and many happy endings.

Senior Writer Gary Abramson can be reached via e-mail at gabramson@cio.com.

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