Services Safari

Business Engine & PlanView

                   Consolidation in Project Mgmt Space

Last month, Planview, an Austin, Texas based provider of Project Portfolio Management software, acquired most of the assets of Business Engine (see: http://www.planview.com/company/news/press_releases/news_pressreleases_070213.aspx ). I've met executives of both firms over the years and here are my comments.

• Business Engine was a company with exceptional penetration into the Financial Services space. Their founder was instrumental in securing software licenses with major Wall Street financial powerhouses in the late 1990s and early 2000. Those customers should add great credentials to Planview's existing customer base.
• Business Engine had a few tough years in the first half of this decade. Their second CEO died unexpectedly and tragically. Then, one of their employees was caught snooping through a competitor's sales system. A lengthy and public trial ensued.
• Business Engine had a collaboration system called BEN that was significant in capability and scope. It was impressive.
• Planview is a low-key firm with solid products. It will likely find the Business Engine solutions at least as capable as their own. That's a good thing.

Going forward, I would encourage Planview to:

• make the most of this deal as soon as possible and as loudly as possible. The project management software space has been very quiet lately and this new combination could bode big things. Seize this PR opportunity and use it to educate the marketplace that a new standard for project solutions has arrived.
• consider doing one more acquisition - a PSA (professional services automation) vendor. This functionality would round out the product line and give them an extraordinarily complete suite for internal service organizations (e.g., IT groups), professional service organizations (e.g., consultancies) and project managers.
• draw a clear bead on ERP vendors and make sure that the software buying world knows just how big the difference is between the limited ERP solutions in the services automation (or project management) space and what Planview can offer.
• ensure that users of Microsoft Project know that they can and should get something more valuable for their firm. MSFT Project is a solid tool and it should co-exist in any vendor's Project Portfolio Management solution. However, there's an awful lot more that project teams and service firms need to successfully run their firms. Make sure the leaders of these firms know this.

Good luck with this deal Planview. Let's see you re-energize this space.

Onshore Survival Strategies

                         Consolidation in the Consulting World

Strategies for Onshore Firms to Survive Ever Larger Indian Consultancies

There's been some recent press concerning the organic and inorganic (i.e., merger and acquisition fueled) growth of Indian service firms. Much of this has centered on what these firms must do to maximize the post-merger/post-acquisition synergies that they hope to achieve. While that's helpful for these firms, what are onshore providers to do other than wait for the bell to toll?

First, let's understand the current crop of onshore consultancies. I divide them into four groups:

• True, high value, high touch firms that offer unique perspectives/expertise in specialized areas. These are companies like Stern Stewart in the EVA space. They create unique intellectual property, promote their individual superstars in books and conferences and they zealously advance their expertise. These firms often possess an inverted pyramid of expertise with very few junior personnel in their ranks.
• Undifferentiated systems integrators that are chock full of 'B' and 'C' performers who often work with the intellectual property that others (i.e., software vendors) developed. The 'value-add' these firms possess is usually limited to the availability of on-site personnel who have prior experience with the products they're installing.
• Low cost integrators that have access to even lower cost resources offshore. Nowadays, most integrators have a captive or partner firm in a low cost country to reduce their average billing rate. This 'strategy', if you want me to call it that, is not differentiating. It's a cost control method and that's it. These firms survive on lower margins and local buyer knowledge. That's it.
• Local firms with local market knowledge (not vertical knowledge). These firms are expensive and provide short-term project work for companies wanting a short, in-town expert. Here, buyers get a technical expert and can afford them on small efforts.

Several of these firms will face ever stiffer competition as offshore firms, predominately Indian based firms, will continue to make further inroads into North American and European clients. These fast growing offshore firms have been making inroads into four areas:

• They're rapidly adding more traditional consulting and strategy solutions (not systems integration) to their workforce and offerings. These companies are moving up market as they need to diversify their offerings and because they are losing their low-cost advantage.
• They're building greater and greater vertical industry depth. This is occurring due to their growing scale, organizing into vertical sub-groups and acquisitions of vertically relevant firms.
• They're hiring large numbers of senior consulting executives to become account executives at major accounts here in North America. Cognizant has been especially successful at this.
• They're expanding down market to mid-sized firms. These clients can help feed the Indian workforce with assignments as easily as large clients can.

Domestic firms are in for a bruising. However, one type of firm, the big multi-national consultancy (MNC) could really get hurt. The MNC's often have a disproportionate number of workers still located in high cost countries. Too many still haven't changed their sales and compensation practices to get more work done by lower cost resources. If your sales executives are rewarded for closing large, expensive deals instead of keeping dozens of lower cost people chargeable, you're headed for trouble.

Domestic consulting firms without significant intellectual property or other differentiation are very susceptible to offshore competitors. So, too, are firms lacking in deep vertical knowledge. If you're local and available, that's not going to be enough anymore. Get focused now!

To survive (and prosper), take a page out of Michael Treacy's book " The Discipline of Market Leaders" (http://www.amazon.com/Discipline-Market-Leaders-Customers-Dominate/dp/0201407191/ref=pd_bbs_sr_1/103-4423196-6031053?ie=UTF8&s=books&qid=1175135078&sr=1-1). Make your consultancy into either a Customer Intimate, Product Innovative or Low Cost Leader.

If you think you're an innovator, there's a 98% chance you're wrong on that point. Most consultants are fast followers not innovators. I only know of a handful (yes, a handful) of truly innovative consultancies. If your firm cannot command higher (much higher) than market rates for its people, then you're not an innovator.

If you still don't have a pervasive offshore component to each and everyone of your offerings, you're not a low cost leader. A key word is 'leader', lots of retailers had low cost prices but were they as low cost and efficient as Wal-Mart? Where are the Woolco, Zayre's, Turnstile, .... of yesteryear?

If you think you're customer intimate, re-examine that presumption. One huge company CIO I spoke with pointed out a floor full of EDS employees and said that the EDS rep thinks he has the client relationship 'sewed up'. The same sentiment was shared by a Big 4 partner of another firm who also had a lot of staff on site. And, amazingly enough, another integrator thought they 'owned' the same client relationship. "Ownership" is subjective but it rarely is as deep as executives think it is.

Consultancies really need to re-examine who they are, what their core competencies should be and how to successfully defend against larger, offshore firms. I'd be happy to spend an hour with any executive who wants to explore their situation. Good luck! 

When Audit & Consulting Don't Mesh

                        Call Yourself Independent or Objective?

                          Most "Consultants" Are Anything But

Audit and Consulting services in the same client can create conflicts of interest. This was at the heart of the Enron/Andersen meltdown. Auditors have a fiduciary responsibility to provide independent, unbiased and objective advice and counsel. Moreover, they should be representing the owners (not management) of the clients they audit. They should avoid "even the appearance of impropriety" even if it means that they must upset management or surrender the client work altogether.

Consulting work has a different set of rules. I used to think consultants provided impartial advice and counsel. However, there came a day when a senior consulting partner said to me that "we sell solutions not independent advice and counsel". That comment was quite disconcerting to me at the time but I quickly came to realize that consulting services were changing.

The change was driven by systems integration work and the explosion of package software in the 1990s. Prior to that time, consultants did perform a lot of 'consulting' to clients. They worked for CXOs and did a lot of strategy, planning, merger/acquisition and other non-systems work. The explosion in market demand for package systems work caused an explosion in demand for people to install software.

Consulting firms morphed into systems integrators and, in essence, switched from offering independent advice and counsel to selling things. "Things" were combinations of software, services and hardware. Some "things" were pre-configured. Some were already available in the integrator's design-build-run centers. Over time, these highly productized offerings evolved into application maintenance outsourcing, business process outsourcing and more. Because these 'things' required significant investments in time, capital and training, integrators had to choose which technologies that they would integrate. By default, they ceased to recommend a wide array of options to clients as they could not afford to support a wide array of choices.

The term 'consultant' is an overused and misused word today. Most people wearing this title really aren't entitled to call themselves consultants as they're really package software installers, technicians, process designers or other non-strategic, non-consultative roles. They're certainly not offering independent advice and counsel.

No, independence left the barn long ago.

You're not independent if:

• your firm has an alliance or partnership relationship with some software firms but not all firms
• your firm has an economic relationship (e.g., software discounts, co-marketing funding, etc.) with a select number of vendors
• your firm developed specialized add-on solutions that work with one product but not others
• your offerings are tied to specific vendor's products

You're also not independent if:

• you place your firm's economic interests ahead of your client's. For example, if you know that a client should defer a project or choose a different solution but your firm would not win that work or would have to idle a bunch of integrators, then you're not independent or objective.
• you only present solutions that your firm offers. If your firm has three solutions and that's all you offer the client, then you're not independent or objective.
• you only present solutions that you, yourself, are familiar with. It's embarrassing to hear a 'consultant' argue that the solution they're extolling is the best when we all can see that they know nothing of other products/solutions.
• your compensation is dependent on maintaining or enlarging the fees billed to a client and not based on the measure of client satisfaction and doing the right thing for the client.
• you make decisions based first on their economic impact on you or your firm. Whether this decision is right for the shareholders of your client is a distant other consideration, if at all.
• you are responsible for one of the solutions your firm sells.

Sales people are zealous advocates for themselves first, their employer second and maybe a client third. Sales people and consultants are two different animals and don't ever forget that. Some 'consulting' executives really get the Sales and Consulting roles confused and that's where problems will arise.

This independence issue is not a new one and it's still playing out in the Audit world. There's a brief piece in the NY Times ( http://www.nytimes.com/2007/03/27/business/27audits.html?_r=1&oref=slogin ) that states that a Federal regulator has censured E&Y and ordered them to pay a $1.6 million fine. A few years ago, E&Y faced a similar censure due to their audit relationship with a consulting client (PeopleSoft).

Independence and objectivity should be the hallmarks of consulting. Maybe, these don't belong in systems integration, BPO and other solutions work but the confusion within and outside of 'consulting' firms as to their roles and responsibilities towards clients still exist. We need to separate who's a consultant and who's an integrator just as we need to separate auditors from integrators.

Who Do You Hire?

                           Better Practices in Recruiting

                         Two Trends That Aren't Winners

There have been some interesting pieces out lately re: how and who one hires. Both have implications for service professionals and warrant some discussion.

In a piece titled "A Counterintuitive Human Capital Strategy" in CEO magazine (www.chiefexecutive.net March 2007), Alan Guarino makes the case that hiring the best and brightest can actually hold back a company. Companies that focus on a candidate's academic prowess, attendance at elite schools, etc. may not be picking winners.

Guarino relates how companies like Google are re-examining hiring practices and looking at bringing more "South Polers" into their fold. He offers up many examples of great business and other leaders who were South Polers/academic underachievers.

For a different hiring angle, look at all the discussion re: Hire Fast, Fire Fast (In fact, type in "Hire Fast Fire Fast" in www.google.com and see how much is being written on this). Proponents of this HR practice believe it is better to get anyone in a position (and potentially can them later) rather than leave the post vacant. Others argue that patience will reward you with a better team, less disruptions, etc. My opinion: Employers with such a callous disregard for employees will suffer in the marketplace as they develop a reputation for being a high turnover, boiler room operation. For most firms, it's too expensive to recruit, orient and train personnel and then pay to extricate them within weeks or months of hiring. I agree. Even those who say that Hire Fast/Fire Fast is great for Sales organizations is actually saying that they don't know who or how to hire the right people for these roles. As a fellow human being, I find it inhumane or unconscionable to knowingly hire people you believe to be a poor fit with your firm. You will fire them in short order and you won't care what disruptions you are making in their lives. 

I've interviewed well over 1000 people over the years. I've done campus hiring, experienced hire interviewing, executive hiring and more. Here's what I've learned and it's not as straight-forward as some of the more simpler methods some folks advocate.

• Superficial screening yields average results. Using criteria like GPA, past job titles, etc. won't necessarily get you an employee who will out-perform others if that's your key selection criteria. Slavish attention to a small handful of selection criteria will force you to throw out some jewels but you'll never know it.
• Past performance can be a real indicator of future problems. Yes, I know that people can change but few firms can afford to take risks with people who have a history of changing employers every 9-18 months. Maybe their references failed to flag any concerns for you but job hoppers often are problematic. From my experience, many of these movers are either: very inflexible and can't adapt to frequent changes in their job environment or they are the sort of person who is most jazzed about their job when their interviewing for it (not doing it).
• Unprepared interviewers are not discerning interviewers. In fact, when an interviewer is ill-prepared for a candidate, they tend to spend too much time making small talk, asking irrelevant questions and failing to discover any real insights into the candidate.
• Know what you're looking for. If you've never discussed what sort of culture your firm has with your peers, then how will all of you determine whether a candidate fits in your company. Do some homework before recruiting. I found out that a significant portion of my attrition was due to the firm hiring too many liberal arts majors. If I stuck with folks with business majors, particularly finance or accounting, retention went from 23 months on average to over 4 1/2 years.

The best firms:

• Interview candidates on many levels. They look at how hungry the candidate is and how willing they are to change and grow to get and keep this job. I interviewed a candidate once whose grades and choice of college weren't exactly up to my employer's standards. Nonetheless, I learned that she was the youngest child of a new immigrant family. She was the only one of eight children to graduate high school and the only one to go to college. I could go on but you get my drift. She was a driven, focused person who was determined to get out of the barrio. I fought to get her hired as I knew we were her best ticket out of a tough way of life. I knew she would do anything, learn anything, etc. to stay with us. Take the time to learn a candidate and you'll make much smarter hiring decisions.
• Develop a point of view before the interview. Before I see each candidate, I have read the resume and filled in a four-part form. In one part, I have a list of questions that I've created based on the resume and several educated guesses about this candidate. In another part, I create a list of assumptions about this candidate. Here I list my suspicions (e.g., Is this a job hopper? Will this person leave in record time? Will this person fit into our culture? Is this a bookworm with no personality? Is this a jock who lacks book smarts? Will this person leave the firm prematurely to pursue an advanced degree like an MBA?). I complete the third and fourth parts during or after the interview. In the third part, I document specific data points offered up by the candidate. In the fourth part, I document my conclusions.
• Assess the character and qualifications of the candidate. I can't emphasize enough how important it is to get both of these right. How? First, use a few situational questions (e.g., "I noticed you ran Accounts Payable for XYZ company. Tell me how you handled a supplier whose payments were being held up due to a processing error or product quality issue?") to see if this person really did what they claimed in their resume and to see how they handle tough situations. As to assessing technical qualifications, don't be afraid to ask these questions. Many employers feel they'll insult the candidate by doing so. Bull! Ask them. I've uncovered frauds doing this. I can't believe how many people massively overstate their abilities to prospective employers.
• Have multiple interviewers see the same candidate. Not only do many others see these candidates but each interviewer has a different role and a different area to probe. The most sophisticated employers use a team of senior and junior people to assess how well this person fits in with all levels of personnel. These firms often schedule one interview session over a long meal to get the candidate to let down their hair.

Six Sigma & BPO

                              Wither Six Sigma?

There's been a lot written lately about a Six Sigma and whether those companies who use are using it will get the benefits they hoped for. One firm, QualPro, Inc. (http://www.qualproinc.com/) has been touting their solution, Multi-Variable Testing, as an alternative to Six Sigma and their name figures prominently in many of these pieces.

Many outsourcers, particularly business process outsourcers (BPO), use Six Sigma to tune, perfect and improve outsourced business processes. Frankly, they need to use some methodology to tune these processes for optimal results. Nothing I've seen suggests that Six Sigma is bad for this role.

Furthermore, services firms have a ways to go when it comes to adopting other best practices from manufacturers and others firms. Manufacturers evolved mightily over the last 3-4 decades and adopted many new ways of doing business in that time frame. Manufacturers used offshore/contract manufacturers decades before most service firms dreamed of using offshore labor. Manufacturers have had to improve their internal operations because their margins have been under fire and more constrained than most service firms could imagine. Six Sigma and other quality control/continuous process improvement techniques like it have helped manufacturers reduce scrap, lower defect rates, reduce warranty claims, lower reverse logistics costs, etc. When a product is exactly what it's supposed to be 99.999% of the time, a lot of other costs fall away.

Service firms didn't use to embrace such mechanisms as TQM as new assignments (e.g., consulting studies) seldom had enough repeat work to warrant more than a basic methodology. Methodologies have always been more of a guideline with many options that individual project managers choose to accept or decline. Most methodologies help project managers identify steps to complete a task first and foremost. While improving project outcomes is also a goal of methodologies, it occurs more or less as a consequence of identifying all the necessary work steps and doing them in a specific sequence.

Total Quality Improvement techniques work well when tasks are routine and repeated. These quality tools are well-suited for BPO actions as the workers are constantly performing routine tasks (e.g., payment processing, journal entries, invoice matching, etc.).

No matter what the technique, any discipline that improves BPO outcomes should be embraced. Let's look a bit longer term, though.

Initially, when some BPO providers get started, they take over a client's processes and run them as-is. Rarely would this represent an optimal process design. This is the initial entry point for a quality improvement technique like Six Sigma. If this technique gets these processes to behave more reliably and at lower cost great.

Longer term, this will not be enough. BPO providers have to tie process designs to performance benchmarks (like those produced by firms like Hackett Group division of AnswerThink).Process designs have to deliver world-class (think first quartile) performance.  At this level of performance, processes are low cost and high quality.

Next, BPO firms will need to offer tailoring capabilities so that clients can have vertical industry relevance and competitive advantage. No tool or method will solve this. What's needed here are deep industry and market-facing knowledge. At this level of performance, processes are low cost, high quality and market relevant.

Any quality improvement technique is relevant at each of these levels. What the market for services is telling us today is that low cost is not enough. Labor arbitrage is so last Tuesday now. Customers/Clients need and want more. Quality outcomes are desirable and this drives demand for quality/continuous improvement techniques.

Bottom line: Attacking Six Sigma is focusing one's attention on the wrong 'problem'. Six Sigma has its place, certainly in service firms, and the real problem is people using it for the wrong reason or wrong solution. As a profession, service executives should look at all sorts of quality, productivity and economic enhancement tools and determine which of these could help clients. I'll bet that there are several of your offerings that could use spiffing up. Which ones will you enhance first?