Due Diligence in Choosing Consultants

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Learn about new online markets for IT consulting services

See how the online sourcing process stacks up to traditional methods

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Chris Paul has tried just about every possible method for selecting an IT consultancy. For years, Paul used his company’s Big Five consultancy (until it stopped taking his projects because they were supposedly too small). He has pursued hot boutique companies recommended by colleagues (but these up-and-comers were too busy to take him on). He has approached second- and third-tier companies on his own (which resulted in an expensive failed project last year).

"I’ve done everything but call the Joe-bag-a-donuts company from the Yellow Pages," says Paul, who (no relation to the author) is senior vice president of management information systems at Oakwood Homes Corp., a $1.4 billion maker of manufactured housing units in Greensboro, N.C. So when a former associate called to ask if he would be interested in trying a new online exchange for consulting services called IQ4hire, Paul figured, what could it possibly hurt?

Most CIOs would agree the consultant sourcing process has gotten harder since e-business came roaring onto the scene. No more is the choice of a consultant dictated by your platform, as it was in the late 1980s and 1990s. Around the end of the 1980s, for instance, if you were developing a three-tier client/server architecture, Cambridge Technology Partners or Computer Sciences Corp. or IBM would top your list. Or, a few years later, if you were rolling out five SAP modules, PricewaterhouseCoopers, Andersen Consulting and Ernst & Young were clear options. It was much easier then because there were so few players. You cranked out a 400-page request for proposal, circulated it to the usual suspects and eventually picked one of those safe bets.

Today, the choices are not nearly so obvious. When it comes to e-business, no one has a lock on the market—no handful of elite organizations dominates the landscape as in the heyday of the Big Five (it was Big Six then). With the explosion in boutique consulting companies such as iXL, Proxicom, Razorfish, Sapient Corp., Scient Corp. and Xpedior, the playing field has gotten a lot more colorful—and confusing. And there are more players in all categories, not just e-business. It’s no wonder an IT executive like Paul would turn to an online exchange for help.

But in sourcing consulting projects, as in life, there is no way to shortcut the process of building relationships. IT consultants perform personal services, after all. You probably wouldn’t source a real estate agent, hair stylist or lawyer on an online exchange (although those types of marketplaces certainly exist)—the intimacy of those relationships defies the cold point-and-click world of online marketplaces. The same is true for IT consultants. You might be able to get your short list quicker by using an exchange, but you’ll still have to do the due diligence that goes along with hiring a partner for an important project.

Lord knows it’s tempting to cut corners. Time is so much shorter—few can deal with lengthy RFPs and multiyear projects anymore. "In the old days, you’d hire the Big Five for a two-year project, and out the back end popped results. It’s a much different world today. No matter who you hire, the milestones are more defined and the time frames are shorter," says Dave Boulanger, enterprise application integration service director for AMR Research, a Boston consultancy.

"The business cycles are so short, the business has moved on before we can even get a project finished," says Mike Amble, senior vice president of corporate technology for Dallas-based First American Real Estate Solutions and an IQ4hire beta tester. "It is so difficult to find really competent organizations. You hate to try out new people all the time."

Most CIOs want to choose not a one-off vendor but a partner, someone who can put the pieces together and help shoulder the risk of increasingly complex projects. With so much at stake, it’s hard to know where to start. "CIOs are looking for tools to help them be more effective. They want an assistant CIO," says Brian Sommer, CEO of IQ4hire, in Chicago. "They want to be able to tell the board why they’re using a particular consultant, and they want that information to come from an independent source." IQ4hire, which officially launched in July, offers provider references and reviews as well as tools for creating a request for services (RFS). In general, buyers pay a commission of 4 percent of the project cost for agreements consummated as a result of being posted on the exchange. (Sommer says some buyers may pay more or less than that.)

Consultants, meanwhile, want to be short-listed for big IT projects, rather than spend time on prep work that often doesn’t pan out. The online exchanges are a new channel for consultancies to reach clients they would otherwise not be able to access. "The marketplace for consultants is highly fragmented. This is a more effective way for them to sell," says Sommer. IQ4hire consultancy participants to date include IBM Global Services, Computer Sciences Corp. and Durham, N.C.-based Clarkston-Potomac Group. Consultancies also pay a commission of approximately 4 percent of the project cost for deals done on IQ4hire in addition to an annual subscription fee.

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