Services Safari

EDS - Overtime Dispute

                                Money Will Settle This

Last month, six former/current EDS employees filed a class-action lawsuit seeking overtime pay (see: http://www.examiner.com/a-1224633~EDS_technical_service_workers_sue_for_overtime_pay.html ). This type of suit occurs frequently and hinges on whether or not specific workers were correctly or incorrectly identified as 'exempt' under Fair Labor Standards Act (FSLA) regulations.

Not surprisingly, specialized websites have sprung up to identify other potential claimants/plaintiffs (see: http://www.edsovertime.com/ ). CRN, Computer Reseller News, has also covered this story.

FSLA suits are usually solved with money. Some goes to the litigants and some goes to lawyers. If found in violation of FSLA regulations, the offending employer makes adjustments to their payroll system going forward, recalculates owed back pay and makes restitution.

Is this a BIG story? Probably not. It's interesting and very solvable. It's only scandalous if long-term patterns of deceit/fraud are uncovered. If it's a legitimate difference of opinion in interpreting regulations, fraud is much harder to prove. Without fraud, the fines will likely be scant. 

Quote of the Day

I Wouldn't Want to Work With This Fellow...

"Trusting him to help the ordinary shareholders is like trusting Dracula to run a blood bank"

source: Fortune "Putting the Squeeze on Heinz" (www.fortune.com)

Where Are The Leaders?

                  Starting a Services Career?

The 9/18/2006 BusinessWeek (www.businessweek.com) has a cover story on the "Best Places to Launch a Career". They published a top 50 list as part of the story. Let's look at where some of the larger professional service firms landed:

•   3 - Deloitte & Touche
• 12 - Ernst & Young
• 15 - KPMG
• 17 - Bain & Co.
• 20 - Accenture
• 34 - Grant Thornton
• 40 - Booz Allen Hamilton
• 42 - Cap Gemini

I thought it was interesting that:

• Accounting firms ranked higher overall. They did especially well on this review.
• Systems Integrators were either not present or ranked much lower.
• Several government entities (e.g., CIA, Peace Corps) were ranked as better places to start one's career than systems integrators!

It would appear that outsourcing, higher staffing pyramids, reduced staff training and reduced job security have made some of these companies less attractive to new hires than in previous years. I think it's time we see some of these firms and the industries they compete in address these challenges as new hires are the lifeblood of these companies.

Understanding Today's Services Marketplace

I'm in Austin, Texas this week and have spent some time at the QuickArrow user conference. QuickArrow is a Professional Services Automation (PSA) vendor that has been experiencing solid growth in recent years.

                                   Big "A-Ha" Highlights

In meeting with industry experts, QuickArrow management, speakers, etc., I have made the following observations:

• The marketplace for PSA software continues to expand beyond traditional service providers (i.e., consulting, Legal, Accounting, etc.) and is branching into some interesting spaces (e.g., Oil & Gas firms, Mapping companies). The diversity of clients and prospects here was eye-opening.
• Project and Program management disciplines are still big needs in many companies.
• Transparency in service firm operations is why companies initially buy PSA solutions; however, a new vision for the space is needed as customers will have this problem (mostly) solved in a few years.
• Regulatory problems (e.g., SarbOx) and revenue recognition issues still give service firm executives the shakes. As I recently posted, the documentation requirements of BPO operations are an even bigger concern area.
• Service executives are really hungry for operations and other statistics that can be used to better benchmark their operations. However, several participants and speakers bemoaned the industry's appalling lack of consistency in capturing and reporting data.

On that last point, I spoke with Scott Fletcher who is undertaking a deep dive benchmarking effort on service firms. He's part of the PSVillage advisory group (www.psvillage.com) and would welcome more firms joining this effort.

More on Consulting Travel Costs

            Additional Comments on Consulting Travel Costs

I got some interesting comments on last week's piece on consulting and software vendor travel cost.

Here are a couple of additional thoughts to ponder:

• I was genuinely surprised to see how some small firms spent considerably more than large firms. Their costs clearly seem out-of-line.
• Some of the high-end management consultancies were very generous with their travel and T&E costs. Apparently, I must not be taking my clients to the same class of restaurant or ordering the same caliber of wine.
• Accounting firms were in the Top 100 but given their size, their travel costs may be acceptable

One writer questioned whether systems integrators were flying in too many out of town personnel, particularly when local talent exists. That's a valid issue and one all service buyers should address with their providers. The more specialized the skills and/or more senior the requested skills need to be, service buyers must expect more travel.

Another useful statistic would have been the percentage of reimbursable travel. Travel expenses for internal meetings is not value-added to clients and some of this clearly could be replaced with collaboration technology. Travel for training can be managed and with computer-based-training, can be reduced. Travel costs associated with Marketing activities should be carefully managed by these service firms; however, some of the responsibility for this is prospect driven. How is that? Take a current prospect of mine. This F500 firm has asked my team to present to them 3 times now. They've had 1-2 of us out on several other occasions, too. Were they not local, we would have never put up with this. I no longer will. They need to make a decision and get on with it.

Transparency is always identified as good for management and shareholders. More transparency into travel costs of service providers is helpful in contract discussions and in the operations of these firms. If you're a service provider, how well are you managing T&E? Could you improve?

Becoming a Talent Magnet

       Can Service Firms Be Talent Magnets?

In the back of this week's BusinessWeek (www.businessweek.com, 9/11/2006), Suzy and Jack Welch (of GE fame) discuss "How to Be a Talent Magnet". Their counsel to firms that want to become 'preferred employers' is summarized into six steps. Before they do that, they caution readers that it may take decades to become a preferred employer and only a couple of weeks or a year to lose that status. I agree.

Their first step is for employers to demonstrate a real commitment to continuous learning. This jewel is confounding a lot of service firms today as they are looking for every possible way to reduce costs and improve margins. Sadly, many are slashing training budgets to get that short-term lift management needs to meet Wall Street's expectations. Employees can forgive an employer for postponing training from time to time. But, when employees have an expectation of additional training and find it no longer present, their faith and loyalty with this employer are shot. Don't expect any referrals from this employee anymore. Do expect this employee to look elsewhere.

I'm aware of a couple professional services firms in such bad shape that they can barely keep the work they have. Being a talent magnet may not be a priority for them now but when (or if) they get their firm righted again, they will have a talent vacuum they cannot fill. Talent identification and attraction are core competencies of service firms and cannot be disregarded when times get tough.

The Welch's also advise companies to develop meritocracies, celebrate risk takers and keep hiring standards tight. I agree wholeheartedly with all of these points.

During the golden age of consulting, I saw the effect that Arthur Andersen's training facilities and programs on recruits and employees alike. Great training has great magnetism.

Today's service world is quite different though. More service firms are publicly traded and training budgets are heavily scrutinized. Service firms are trying to roll-out global service delivery models and many in-country personnel may find their training opportunities shrinking as persons in lower cost countries get a disproportionate share of the training spend. More service firms are seeking just-in-time employees (a.k.a., contractors, temporary workers, 1099s, etc.) to avoid the long-term pastoral and training costs associated with full-time employees.

Not all change is positive. Employers can't have it both ways. You can't become a talent magnet if you treat service workers as transitory beings. If you don't respect people enough to help them develop over time, then why should you expect them to stay or to help you recruit others into a firm with little upside.

I've worked in three kinds of firms. One was clearly a talent magnet (Accenture). Another was a talent disaster. The CEO promised the moon to everyone and reneged on it all and then some. He offered no training, no chance to build one's brand, no long-term future and no promotion opportunity. Too bad, I and 50+ others weren't hip to his deviousness until after we joined. Now, I'm a sole proprietor. I actually budget several career and training trips annually. I invest in myself as I know it will be a good investment for my business, too.

Recently, a friend of mine asked me to help him identify candidates for his service firm. That's going to be real hard to do as this fellow, like so many small business persons, is hard pressed to spend money developing employees. He'd rather some other firm develop the talent and then he'll hire them away. Unfortunately, he thinks 1) he should be able to hire away these folks for the same pay they get today and 2) he won't need to train them further once they're on his payroll. He's wrong on both accounts. He won't invest in talent at any level and he's surprised when I tell him that 'A' players go where they are most appreciated.

Yes, everyone needs to be a talent magnet and a talent manager. If you see employees as an expense item, I can't help you. You need to look at them as assets that can deliver even more revenue and profits with some additional training. When you do, watch them refer even more great talent into your firm.

Consulting Addiction

             When Consultants Are Part of the Problem

InfoWorld this week (8/26/2006, www.infoworld.com) has as its cover story a piece titled "Escaping Services Addiction". Besides the cover story, there's also a short op-ed piece in the Editor's Letter section, too.

The gist of the feature story is a 12-step process that businesses can use to extricate themselves from parasitic consultants. The author finds fault with both service providers and the companies who use them. The advice offered is not surprising or overly detailed. It's a sensationalized topic that I believe could have gone a lot deeper.

Tynan (the author) is quoted as saying "These folks, who I like to think of as recovering Big 4 consultants, confirmed all of the horror stories. There's a reason so many consultants show up and seemingly never leave. They get paid to find problems - and there are always new problems. It's not that consulting services, even the big ones, are bad. It's just that IT can easily grow too dependent on then, until they become a crutch."

I don't disagree with the piece but I would like to add to it. I believe that consultants that put their own business priorities (e.g., let's empty the bench) ahead of a client's, do so at their own risk. Short-term thinking hurts any business including service firms. I am particularly appalled at the behavior of several small-to-mid market resellers of accounting solutions as their people appear to be incapable of completing an installation and wrapping up a project. They see software as the intro for an annuity of service work with no end in sight. Their lack of professionalism and ethics is appalling. Equally culpable in this are the vendors, whose products these snakes resell.

It's a shame people have to write articles like the one in InfoWorld. But, these pieces wouldn't be needed if more consultants were more professional.            

                                                                         

M is different - but how different?

Medium organisations are different from small or large ones. How, asks Jyoti Banerjee in this guest column from KiteBlue? Check out this table from M Institute.

I recently wrote a guest column for Vinnie Mirchandani's blog on medium-sized organisations. I call them M organisations.

Although Vinnie's blog has a global audience, and my research is UK-based, it was interesting to receive comments and emails about the applicability of the UK findings to other countries. It seems that the match in ideas between the US and UK extends well beyond foreign policy (OK I admit it, its not a match - the UK slavishly copies US policy...). When it comes to M organisations, the challenges and obstacles faced by business leaders in the UK seem to map pretty well to those experienced in the US.

There isn't a lot of research that distinguishes M organisations from others. Most of the time, M is rather invisible, masked by the the SME (Small and Medium Enterprise) label that conjoins small and medium organisations. But a valid question to ask is how they differ from organisations of other scales. This is particularly important in the IT context, as most enterprise IT and services providers are pretty poor at understanding M organisations, or at selling to them.

As part of an ongoing study I am involved with at M Institute, we have tabulated the differences between the three sizes of organisation. Check out this list and tell me what you think.

Differences Table

Small business	Medium business	Large business
Owner-managed	Owner-directed	Professional management
Micro-management of employees	Empowerment of employees	Freedom to act within corporate guidelines
Informal processes	Formal processes	Formal structures and processes
Short-term planning horizon	Longer-term planning horizon	Short-term results / long-term planning horizon
Low external input	External input from professionals	Governance structure separate from management
Equity held by founder / family	Wider equity base	Diversified equity base
Small customer base	Diversified customer base	Diversified markets with diversified customers
Limited personnel development opportunities	Culture enables employee / management development	Multiple career development paths
Low borrowing requirement – government support possible	Borrowing needed long-term / funding available shorter term	Wide pool of funding sources

Source: M Institute

Clearly, not every business will fit these arbitrary buckets. What we are looking for is behavioural performance. If the weight of answers for a particular business leans towards a particular category, then we should see the business from the perspective of that category - whatever its actual size may be.

Posted by Jyoti Banerjee. This column draws on an article with the same name on the KiteBlue site.

Vendor Service Deals Fall Short

               Is Quality Service Disappearing?

This week I was with the top executives of a F500 firm. I listened in on a discussion regarding strategies for negotiating contracts for both new ERP software and a systems integrator. Before the meeting could get underway, these executives were still buzzing about the meeting they'd just completed with one of the finalist software vendors. That vendor said, in effect, that if the client wants a higher level of satisfaction with their services people/work, then the vendor would add a 10-15% premium to the services component of their proposal.

That's right. The original proposal apparently wouldn't provide the client with a satisfactory experience.

If you bought an automobile and the dealer withholds a non-value added option like 'clearcoating', of course you can decline it and not loose sleep over it. However, if the dealer withholds something like an engine, then what are you buying?

Selling services without any regard for whether the client is satisfied or not is just unprofessional. It is ethically challenged, too.

From the vendor perspective, I have some insight as to why this trend is occurring. Software vendors have usually offered service staff in point-excellence roles and not as self-contained teams with overall project implementation responsibility. Further, these services are sold by a sales person who has no connection to the delivery process and a very distant connection to the on-going account management. These sales people don't care about the  long-term client relationship as they've gotten their commission and have moved onto the next software prospect. As services becomes more important in software companies, sales people are promising more, putting more service people on projects but not stepping up to the program and client management needs these initiatives require. The leaders of these service groups are discovering that they must add more program management time to projects but since Sales isn't baking enough time into their proposals, Services must eat this extra effort or let client satisfaction suffer.

Clients are not creating this scenario, software vendors are. Vendors need to update the way they estimate and manage projects. Both of these disciplines, by the way, often lag those of systems integrators. If vendors are taking on integrator work, they need to step up to the requirements of the job. They need to get the program management religion.

Clients have an expectation, a reasonable expectation, of receiving satisfactory work. Vendors must construct the means to do so.  Providing services with no expectation of or responsibility for client satisfaction is unconscionable.

A Superb Interview

Excellent Synopsis of Hagel & Brown - Only Sustainable Advantage

Follow this link (http://knowledge.wharton.upenn.edu/article.cfm?articleid=1220 ) to read a great short interview with the authors of The Only Sustainable Advantage. John Seely Brown and John Hagel III are interviewed by Kevin Werbach (of Supernova fame and formerly with Esther Dyson's Release 1.0 publication). Incidentally, Kevin's a brilliant fellow. I met him once at Esther's offices. His blog is at: http://werbach.com/blog/ .

This book gets huge discussion time in strategic planning circles as it clearly lays out the new responsibilities of organizations and their top leaders. I especially like the time spent understanding permeable organizations and the need for companies to manage/master the 'edges' of their ecosystems.

If you won't read the book, at least read this interview. Those who do will better understand what clients are facing, what they need and the strategic dialogue of tomorrow's businesses.