Having served as an IT Consultant for the past 20+ years, I have always been on the side of the party trying to win a client's business. In that role, I have had to convince many would-be clients to hire my company and my team. This is not always an easy task, but I have learned from experience what is important to clients and what isn't. I've also learned that there is no single best IT consultancy firm out there. To find the ideal IT partner, you have to look for a company that fits the unique needs of your organization or your project.

Business, Technology, and User Experience

When you're looking at potential IT partners, one of the first things your company should consider is how well they understand your business. Many IT consultancies have industry-vertical practice areas, with people who are skilled in the processes of the specific industry, along with knowledge of industry-best practices. Others may not have vertical practices but have employees with the necessary knowledge.

Either type may be a suitable fit, depending on the size and scope of your IT project. If your project requires some industry knowledge in order to adapt an IT solution to the processes within a functional area of your business — say, human resource management — then having people familiar with your industry may be sufficient. However, if you plan to conduct a business process reengineering project, it may be helpful to hire a company that has a vertical practice focused on your industry and can offer the brain power and wide range of skills needed to gather requirements in multiple functional areas within your organization.

Understanding technology is another key skill to look for. Here again, some consulting firms offer practice areas focused on specific technologies, while others have a pool of employees with varied experiences. There are myriad ways in which a consulting firm may segment its talent pool by technology. Some offer general pools such as .NET and Java practice areas. Others offer groups segmented by functional IT solutions such as warehouse management systems, customer relationship management, or sales force automation. Still others may offer teams focused on even more specific technology solutions such as BEA's WebLogic versus IBM's WebSphere. Keep in mind that the size of the organization often determines whether there are specific practices set up or not. An absence of practice areas, regardless of how teams are organized, is not a sign that a consultancy can't provide the resources you need.

With the green-screen days long over, the user's experience with a computer screen is among the top criteria for the ultimate success of a project. Having someone versed in digital architecture is just as important as having a technical architect in the initial business requirements gathering and design of a software system. The flow of data, the color schemes, the appropriate use of the online real estate and ease of use are equally important to choosing the right architecture platform or database design.

I am not referring to the old "spinning globe" cliché. Rather, I refer to the software product being intuitive — letting the user easily navigate the flow of the system without thinking (almost like autopilot). In the words of Adler Sullivan, who designed the Auditorium, Stock Exchange, and Prudential Buildings in Chicago, "form follows function." In an IT context, this means that you cannot segregate the business, engineering, and interaction needs of a software solution if it is to work properly. The right convergence of the three is what makes for a great product, be it a building or a software application system.

Where most IT consulting firms fail to deliver is when the project team they put together for their client does not include the right mix of people. Your IT partner must have the ability to provide a team that can help to bridge the gap between your business requirements and technology while creating a positive and rewarding user experience. Developing a strategy for which there is no feasible technology solution (in terms of timing and costs) is a recipe for failure. On the other hand, if you rely on people who are technology savvy, you may end up implementing technology for the sake of technology and not necessarily solving the business problems. And naturally, the best-built software product that is difficult or counter intuitive to use will end up being abandoned.

In addition to using an IT consultancy, you may opt to hire the professional services group of a software company, if in fact their employees can implement your desired solution more effectively. Often in these instances, either the software company will bring in a person from another consulting firm, or there is one in-house already. If this is the case, you still need to bring together the three components of a successful IT project: business, technology, and user experience.

Location, Location, Location

There are a wide variety of IT partners to choose from — regardless of where you are located. In fact, in many instances, it may be necessary to implement a solution across different geographies (e.g., for a global ERP rollout). In such instances, it is prudent to choose a partner with a local presence in at least several of the geographies.

For example, if you plan a rollout of a major ERP system across your offices in the U.S., Asia, and Europe, your IT partner should have a local presence in each of those areas. This does not mean that if your office is in London and your IT partners are in Paris, they are a bad choice. Keeping local presence continent specific is often good enough. However, during the requirements-gathering phase of a project, it is critical to have people who know the language and culture of the specific geography in question. In some cases, consulting firms may use local partners if they don't have a presence themselves. If this is the case, you need to make sure you evaluate their local partners to make sure they fit your needs as well. It is the makeup of the overall team that matters.

If your project is small and local, then a local firm may be just fine. Firms that offer virtual resources often come with a higher price tag in order to help cover business expenses associated with travel and lodging. From my point of view, regardless of the size of the project, it is preferable to work with a firm that has a local presence, even if some resources are shipped from other locations. Not only do you get more face time during the project, but at the conclusion of it, you will still have the resources nearby for support or to answer questions.

With the increased popularity of offshore resources, it is important to consider a company that either has its own offshore development center or is partnered with one. Even if you don't believe that you need offshore help for your current IT project, future projects may warrant such a need. Furthermore, using offshore resources is not always done to save money. Offshore resources are also used to enhance the overall team's skills. For instance, a hard-to-find or bleeding-edge skill in the U.S. may be readily available in India. If your IT partner has access to such skills, you won't miss out on the best of the best (For more on offshoring, see "Offshoring IT: Should You Take the Plunge?" September 2004, article 19049 at iSeriesNetwork.com.)

Vendor Neutrality

In all the years that I have been a consultant, I have firmly believed that an IT partner should be vendor neutral, and I have remained so myself. Many IT consultancies partner with software vendors, more or less positioning their consultants to recommend only that partner's products. I take strong issue with that, as I believe an IT partner is one who "partners" with its client, not with other vendors. Vendor neutrality is important if you are faced with making a software selection, for instance. You want your IT partner to recommend the software solution that most closely fits your needs, not one that helps them in some way.

IT consulting firms partner with software vendors in two main ways. The first is where the consulting firm and the vendor have a revenue-sharing relationship. There is a referral bonus paid when the consultancy influences the purchase of the software.

Another type of relationship is a co-marketing agreement. In this instance, the software vendor and consulting firm do not have an exchange of fees; rather, they work together in marketing one another. Although some may still take issue with this type of alliance, I actually find it very beneficial to the end customer. Generally speaking, by partnering with a software company such as Microsoft or IBM, the IT consulting firm gains privileges above and beyond those firms that are not partners. These privileges may include access to beta releases of software, participation in beta software testing, free or subsidized training, access to labs where prototypes can be built, and even access to highly skilled people who can aid the consultant with software details he or she may not be savvy about.

To make sure that your IT partner's alliances are not unduly influencing your consultants into recommending solutions that aren't best for you, you should look for a no-fee exchanged relationship. Furthermore, your IT partner should have several co-marketing agreements with best-of-breed vendors for the same solution. For example, in the area of business intelligence, your IT partners should have two or three top vendors as alliance partners rather than only one. This ensures that they aren't always "pushing" the one partner they know. You should also look for a vendor that offers alliance partners whose products are in fact suitable for your industry or company size. For instance, if you're a small company, your IT partner's alliance relationship with SAP and Oracle may not be of much help to you.

Business Health

Business health can be evaluated using many different criteria. Let's examine several of the key factors to consider in determining the long-term viability of a potential IT consulting firm.

Financial performance is always a natural way to measure how well a company has performed. Whether the partners you are considering are public or privately held, it is wise to ask for their financial statements. Although some private companies hesitate to share such information, others won't if you sign a nondisclosure agreement. Ask your CFO to review the financial statements of your would-be partner for the past five years, if possible. Beyond the five-year period, you can ask the company to provide you with general growth numbers. Key data to look for includes overall revenues, as well as gross and net profit margins.

It is also important to know whether the company has any short- or long-term debt. Remember that if the firm you are considering provides only services, profit margins should be higher than if it also sells software and hardware. Generally speaking, the margins for the sales of services are much greater than those of software and hardware sales. Back in the heyday of IT services, gross margins of 45 to 50 percent were not unheard of. Today, however, reasonable gross margins for a pure professional services firm should stand around 30 to 35 percent. And think about it: You want your IT partner to be profitable.

You should also ask a potential IT partner to provide you with historical information regarding the number of customers and employees over the life of the company. What you want to look for is steady growth. Naturally, you should give allowance for the past few years when most IT services firms have had to downsize due to the decline in the business.

If you see growth during those years, it may be due to a merger or acquisition (M&A). Companies grow either organically or through M&As. Organic growth takes much more time but is sometimes a safer approach. M&As, on the other hand, are quite effective in adding headcount, customers, geographic presence, or niche expertise.

The key to successful growth through M&A is how well integrated the newcomers are into an existing culture. Too many M&As that occur in too little time often do not allow sufficient time for the mind- and culture-setting activities that are required for a successful union. Don't be fooled by larger companies that tell you they have an M&A team. Although the team is there to merge the two organizations, they often focus on financials and services, not necessarily on indoctrinating the acquired company's employees into the culture and process of the acquiring organization. What often ends up happening is two different ways of doing the same thing for a parallel period. Over time, processes and cultures do meld together, but that's the key: time.

Another key measurement of business health is a review of the company's management team. You want to look for a strong team of experienced individuals making the business decisions that can make or break a company. Many times, IT consulting firms are started by a technical person. Not that there's anything wrong with that. But true propeller heads can grow a company only to a point, beyond which they are better off hiring someone who knows how to grow and run a business. The best-known case of this point is Bill Gates from Microsoft. Most people consider Bill brilliant, and he is. However, he was and is a techno-geek. He is the chief architect of his own company rather than the COO.

A well-run IT firm should have strong employees who keep an eye on IT business trends, making adjustments to their organization to thrive, not survive. For instance, the management team of a company that is focused solely on iSeries would recognize that many iSeries shops that use RPG are also using Java and other development tools. Retooling and restaffing their existing pool to ensure the right blend of talent is available is a key to higher utilization rates, winning projects, and doing well.

Finally, for a complete examination of your potential partner's business health, you should inquire about and meet the entire management team, including the president, the COO, vice presidents, and practice leaders. You should also ask for the resumes or bios of each member of the management team to determine length of service and prior history. I believe in the adage, "It all starts from the top." The management serves as the role model for the rest of the organization. If they are strong, they will hire good employees.

Portfolio

An important factor in determining the right IT partner for you is the portfolio of projects and resources. In terms of projects, you want to make sure that the company has successfully completed (not just won) several projects similar in size and scope to yours. Just because they may have done an Exchange-to-Domino conversion for another client with 30 users does not necessarily qualify them to do the same for a global company with 2,000 users. When they talk about having done the same thing for other companies, make sure you ask for details, including project budgets, timelines, number of resources allocated, and the names of companies for whom they have done this (if they are allowed to share the names).

As far as project teams are concerned, you want to make sure that the right blend of talent (in terms of skills) and experience (in your industry or application) are brought to the table. During my time on the consultant side, clients have always asked for resumes of the project team. I always hesitated to provide resumes because inevitably it would end up looking like bait and switch. This is because consulting firms assign their employees to projects more or less on a first come/first serve basis. They have to. They cannot afford to hold someone on the bench while waiting for a client to make a decision.

Although most firms will reserve a specific consultant for a project for a reasonable amount of time (no more than two weeks), it is unreasonable to expect a specific resource commitment until such time that you have made your commitment. The best way to handle this is to ask to see sample resumes to give you an idea of the types of staff the consulting firm will bring to the table. Once you are ready to commit to a start date, you can ask for specific team members' resumes. I highly recommend a personal interview, even if via the phone, with key team members.

Project teams can be made up of numerous constituencies, including multiple consulting firms, representatives from a software company, client resources, independents, and offshore personnel. One thing you should always do is to include a member of your own company as the lead or key member of the project team. Even if the consulting partner is providing the project manager, you should assign a project sponsor — a person who actively participates in the project and team meetings and who serves as a focal point for all of the consultants' activities. If your IT partner plans to use offshore resources, make sure that it provides you with the documentation that outlines its methodology for offshore development, its processes, and specific arrangements. Adding offshore resources to the project mix can have huge benefits, but it also introduces risks. These risks can be mitigated with the proper approach.

Warranty

Most of the contracts that my clients signed did not have an express warranty period for my work. Neither did the proposals. It always amazed me that clients went on blind faith that the consultants they hired would stand behind their work (as they should). Don't misunderstand. All good companies do stand behind their work and will correct problems. However, leaving the warranty period undefined only leads to bad business and even worse relationships. With so many publicized (and even more unmentioned) projects, this is an area where clients have been demanding more definition, and rightfully so.

I have seen contracts that provide a 30-day warranty for all work done. That is not nearly enough time. True, most bugs are flushed out during testing and the first few weeks of usage. But it is the pesky bugs that come out later that are more difficult to pin down. They tend to occur less frequently, making them more difficult to duplicate, track down, and fix. A fair period of warranty against bugs should be 90 days.

If you leave the warranty period undefined, you may need to ask your consultants to fix a problem that surfaces months later. Although most good IT partners will honor their clients' requests, the person who actually developed your solution may be long gone, requiring someone new to relearn the details before being able to make corrections. This costs the consulting company more money and you more time to get resolution to a problem. Because it is beneficial to have the same team that developed your solution fix its problems, it is important for you to fully test the deliverables within a reasonable amount of time.

Beyond the program bugs, how do you ask for a warranty of the final deliverables? How can you be sure that what you have in mind is what you end up with? (I now refer to the big picture, not the bugs.) This is where the lines become gray and difficult to enforce — unless your business requirements are very clearly defined, documented, and signed.

One mistake that many companies make is signing off on the initial business requirements but then not acknowledging the ongoing changes that occur in every project life cycle. Remember, no project can ever be defined with 100 percent accuracy up front. Often, as users get into the details, new ideas and changes occur. It's the inevitable natural evolution of every project. The key is to make sure that any changes, no matter how insignificant or small, are outlined in a scope change document that includes a statement regarding the expected financial and time impacts on the overall project. Both parties should sign this document. If your IT partner does not provide it, you should demand it.

Several years ago, I served as a subject matter expert in a lawsuit brought against a software company by an investment firm. The company had purchased software from the vendor and contracted for the implementation and customization of the modules to fit its needs. Two years and one million dollars later (the project was originally estimated to be complete in two to three months and cost under $100,000), the project was still incomplete and deemed a failure. The investment firm was left with no choice but to toss the hefty investment and start anew with a new solution.

In this case, the IT partner had failed the client. It failed to produce a project plan beyond the initial one. (The plan was never updated to reflect changes.) It produced intermittent and inconsistent status reports and paraded resource after resource over the life of the project, without proper transitioning. In fact, for six months, following the departure of the vendor-provided project manager, there was no project management provided, leaving a long line of consultants to sort through and pick up the pieces as the previous ones left. Lesson learned: You should be actively managing your IT partner and make sure that the appropriate documentation and communication is provided without fail.

Intellectual Capital

The generally accepted practice of intellectual capital rights to software resides with the company that develops the code or solution. However, this needs clearer definition in the legal contracts that are generally signed up front.

Software companies own the intellectual capital for the code they have written, and therefore they retain the rights to resell it to others. But what happens to the modifications and enhancements? This is something that should be negotiated before a working relationship begins. You will find that if your IT partner is a software company, it prefers to retain intellectual capital rights to anything new it develops, even on your penny. It is like using your funds to do research and development.

For most clients, this poses an issue. Although a software package is designed to meet the general business requirements of most companies when used in "vanilla" capacity, modifications and enhancements are made to fit specific and often proprietary business needs. This makes the new material confidential under most definitions of the word. The unique way in which you process something might be your competitive edge. Why would you want the vendor to resell that to your competition?

Most IT professional services firms voluntarily give the intellectual capital rights of any software they develop on your time to you. But not all do. They are providing the service to you, so you should demand to maintain all rights to anything they develop. From time to time, they may bring a module or framework to you that they have previously developed. A lot of firms use these prebuilt solutions as means to more quickly produce the end product for their clients with less cost.

There's nothing wrong with using prebuilt code or frameworks. In fact, it is a positive thing all around. It is reasonable, however, for clients to allow the professional services firm to retain all rights to the original framework, allowing them to reuse it for other clients, so long as any changes they make specifically for you are not duplicated.

One final thing to keep in mind in this area: With so much of our software being developed offshore, we must take care in defining rights to intellectual capital that will hold up internationally. This is difficult to achieve, but it's not impossible in all cases. Some countries have banded together and agreed to uphold U.S. copyright rights and laws in this area. But many haven't. If you plan to use offshore resources to develop your software solutions, this is an area that requires very close attention and legal documentation, using counsel that is well versed in international laws.

Flexible Pricing Models

Each IT partner comes with its own pricing models. The most common models are time and material, not to exceed, and fixed bid. Each pricing model offers it own advantages and disadvantages. In choosing a pricing model for a given project, you should consider the type and needs of the project. Your IT partner should offer the flexibility of choosing different pricing models for different projects.

The time and material approach has been used successfully for many years. For small or large projects, this model can work well under the right conditions and supervision. There are times companies just want extra bodies, and they hire a consultant or two on a time and material basis. Their selection is based on specific skill sets, and the consultants are paid for the hours they put in. The time and material model requires trust and a good working relationship. It is often used when it is difficult for the hiring company to define its needs in terms of a finite project.

If it is possible to have a defined project, you can ask your IT partner to provide you with an estimate. This estimate is just that, and you should not view it as a fixed price. If you want a fixed price, then ask for it. A mistake that my own consulting team often made was to provide the client with an estimate of a single price, rather than a price range. From the perspective of a hiring company, seeing a single number is often associated with a fixed price, but a low-to-high range is easier to view as a true estimate.

One of the advantages of the time and material pricing model is flexibility for both parties. It allows you to make changes in scope without necessarily having to go back to management and ask for a budget increase. In the case of a fixed bid, that is often the way things work. However, it is absolutely essential to ask your IT partner to provide a detailed breakdown of costs by phase and by activity. In addition, weekly status reports should include the budget versus actual numbers for each given activity to avoid cost overruns and last minute surprises. If you don't follow through on an estimated project, you may end up like the case I had to defend. In those cases, plan on both parties losing.

In a not to exceed pricing model, the IT partner provides an estimate and bill for its services on an hourly basis with a cap. Although this model offers benefits to the hiring company, it is often of no interest to the consulting firm. If the project is under the estimated figure, the client company benefits. If the estimate goes over, it loses nothing since it pays the cap. The consulting company gets no special incentive if it's under the cap, but it loses if it goes over. Remember, if you are looking for an IT partner, then both parties should have the right incentive for their end of the deal. It should be a win-win.

A fixed bid project offers the advantage of giving the hiring company peace of mind that the project budget has been set and legally agreed to. But alas, it is often not the way things work out. A fixed-bid estimate, if put together correctly and with the proper amount of detail, can indeed work well. For one thing, it allows you to allocate the total project budget up front (some companies like to do this to allocate the proper funds in their annual budgets). As changes and enhancements are identified, using proper change control documents, additional funds can be appropriated.

Unfortunately, a poorly estimated fixed-bid project often leads to disaster. Imagine when the IT partner gets close to expending 80 percent of the budget with only 50 percent of the work completed. What do you think happens? Many consulting companies begin to take shortcuts to bring the project within acceptable profit margins. This means they may use lesser-skilled people or poorly designed or developed functionality. More often than not, a few other areas suffer. Training becomes second rate, documentation is left unfinished or even undone, and testing and quality assurance rank lower in the priorities.

All this leads to poor work. Although you can legally hold your IT partner to delivering what it promised, almost inevitably both sides end up losing when a fixed bid is poorly prepared or managed. The IT firm loses in that it cannot finish a project with enough (or sometimes any) profits; this causes a morale problem among team members who are aware of the budget overruns, further exacerbating the situation. And the hiring firm loses in the sense that forcing its IT partner to deliver at gunpoint cannot possibly lead to the most desirable results.

Two successful strategies I have seen used in managing fixed bids are

Fix-bid projects by phase. In this scenario, ask the IT partner to fix bid phase I (usually the requirements definition), while providing cost estimates for the remaining phases. At the conclusion of phase I, the IT partner should then be able to more accurately estimate the subsequent phases. I can tell you that no matter how much experience someone has, it is very difficult to accurately estimate (the foundation for a fix bid) a large project from start to finish. And naturally, consultants have to add on a percentage to cover their potential downside, unnecessarily inflating the price of the project for you.

Incentives. Provide an incentive for early or underbudget completion of the project by phase. This approach is often used for highway projects (although they still take forever!), and it can be used successfully for IT projects. The key here is for the consulting company to share its windfall with the team members so that they have incentive to perform well.

No pricing model is foolproof. Each project and its associated budget must be monitored at all times. Regardless of the pricing model you choose, the project manager must ensure that the budget allocated for each task, activity, and phase is always in line with the actual numbers. Any variations must be addressed immediately. If they're due to change requests, then it is justified. If they're due to poor project estimation, it can also be addressed appropriately to make sure both parties will ultimately be happy and prosperous in the end. For a project to have its most success, both parties must have skin in the game.

A Single Throat to Choke

One of my favorite statements over the years has been to tell clients that in working with consultants they should always ask for "a single throat to choke." Often, consulting firms introduce a slew of people to their potential clients, each with a title fancier than the next. But what role does each person play? Who is responsible for what? This is not the sort of thing that is written in a contract or proposal.

Therefore, you should insist on knowing who your single point of contact is. Accountability for different aspects of a project remains with different people. That's quite okay. However, it is a good idea to have an organizational chart for each project. In the chart, you want names of specific individuals who are accountable for the project delivery, project management, and accounting and issue escalation. You also want to make sure that any documents of agreement that require signatures from the IT partner's company are signed off by an authorized agent. Your "single throat to choke" must also be someone who has some form of financial incentive or responsibility toward the success of the project and/or the company they work for. Although you may never have to choke it, it's nice to know the throat is out there.

Evaluating Your Suitors

Ultimately, choosing the best IT consultancy for you requires that you evaluate your suitors using many different criteria. You must also evaluate your own needs to determine the best match. Remember that in every type of relationship, both sides are on their best behavior during the sales process. Before you commit to anything, make sure that when the honeymoon is over, the two of you will stay together through thick and thin.

Nahid Jilovec has been in information systems consulting for more than 23 years in a wide range of industries, with a focus on e-commerce. A prolific author and award-winning speaker on e-commerce topics, Nahid has published four books. Her latest book, EDI, UCCnet, and RFID: Synchronizing the Supply Chain, is available at iSeriesNetwork.com/ebooks. You can e-mail Nahid at nahid_jilovec@hotmail.com.