July 20th, 2006

Something Erik Said

Posted by Paul Murphy @ 3:12 am

Categories: General, Unanswered questions

Tags:

Here’s an out of context snippet from a talk back contribution by Erik Engbrecht

People have a very, very hard time distiguishing between "work" and "productivity." Many absolutely refuse to acknowledge the difference.

This has always bothered me. In particular, virtually every IT consulting client I’ve ever worked for has insisted on billings denominated in hours by task - and thereby created strong incentives to failure and delay.

Think about this: the firm invests in a couple of full time sales people (aka partners) whose overheads are then spread across the projects they sell. Add in proposal drafting and technical development by juniors and the typical sale carries a "nut" in the $50K range if it’s reasonably simple, much more if there are specialized hoops to jump through in the proposal process or the project requires some serious pre-engagement planning.

Now what happens as the typical $200,000 project starts to go off the rails is that billings increase while the selling costs for those increases are paid by the client - because almost all of the paperwork and meetings involved are all fully chargeable. As a result gradual project failure is a firm-wide recipe for increased revenues unaccompanied by change in selling expense - and a reputation for on time, on budget, delivery becomes quietly career limiting.

That’s understandable from the seller’s perspective, but what’s bafflingly absurd is that clients not only go along with this, but absolutely and emphatically insist on it - usually to the point that you cannot sell them a fixed price contract without treating that fixed price as a kind of provisional cap on quotidien billings.

You can understand why client IT management might feel this way - it lets them treat fairly senior technical people as temporary employees and, more importantly, having the big name consultants tied up in paperwork and budget issues rather than project delivery justifies the pretence that all the executive needed was more staff - not more expertise.

What I can’t understand, however, is why senior management never seems to question project billings until bankruptcy threatens or the lawsuits start flying -they have a clear fiduciary responsibility to focus on the result but they generally don’t. Instead they’re derelict, prefering not to be seen as interfering with IT or embarrassing "Bob" until, of course, it’s far too late.

So why? I think it’s because they can’t tell productivity from work, a good geek from a poseur, or a completed project from a failure. As a result they see less of the risks they understand; the risks, that is, of auditors muttering about inadequate controls and inappropiate governnance, in a per diem contract with undefined goals than in a fixed price contract whose output they neither understand nor value.