CONSULTANTS: - Can't Live With 'Em, Can't Live Without 'Em.
Jerry Hale is giving the cold shoulder to the big consultancies that want to help him run his most important software projects. " I refuse to turn over the leadership of my ERP project to consultants," says Hale, vice president and CIO of Tennessee-based Eastman Chemical, which has 6000 users of SAP's R/3 ERP software. He felt burned by a consultant-led ERP project in the mid-90s that went over budget, over scope and far beyond the original project schedule. So when the time came to replace that system with a new one, Hale decided to use his own people to do the project along with a few handpicked consultants brought in to do small, specific tasks.
David Johns, senior vice president and CIO at Ohio-based Owens Corning, doesn't rely on consultants either. He and his IT staff now run Owens Corning's big software projects themselves, using consultants only for certain tasks.
Hale and Johns are not the only CIOs breaking with the way enterprise software projects were handled in the past - with armies of consultants from the so-called Big Five accounting firms. Many CIOs are now dividing these massive projects into smaller chunks, spreading them out over longer periods and either demanding more from, or doing without, the Big Five altogether.
CIOs are taking back control, in large part because they have no choice. These consultant-intensive megaprojects have a painful history of failure. In a Conference Board survey of ERP project managers released last year, 40 per cent of respondents said they failed to achieve their original business case even after being live for a year or more. More than 20 per cent shut down their projects before completion. For all companies, even the ones claiming success, costs were on average 25 per cent over budget and annual support costs went up by an average of 20 per cent over the supposedly inefficient jumble of legacy systems they replaced. Another survey, by consultancy Robbins-Gioia earlier this year, found that 51 per cent of companies were unhappy with the results of their ERP projects.
And now companies are beginning to see a replay of the ERP debacle with CRM. A recent survey by Fujitsu Consulting found that two-thirds of the companies that had installed CRM software failed to become any more " customer-centric" .
Though there are many reasons why projects fail, CIOs are now concluding that much of the fault lies with the pricing and delivery models of what used to be the Big Five accounting firms: Accenture (formerly part of Arthur Andersen), Deloitte Consulting, Ernst and Young (now Cap Gemini Ernst & Young), KPMG International and PwC Consulting. In a recent survey of IT and business leaders conducted by Peerstone Research in association with CIO (US), none of the Big Five rated better than a C in terms of the respondents' willingness to recommend them.
That is not good news for the Big Five. Their revenue growth has slowed in recent years (to 11 per cent, 8 per cent and 3 per cent growth for PwC Consulting, Deloitte Consulting and KPMG respectively in 2000), while IBM's IT consulting division, which trailed them all in 1999, now has nearly 50 per cent more consulting revenue than its nearest competitor, Cap Gemini Ernst & Young, according to Global IT Consulting Report. Cap Gemini Ernst & Young's growth came mostly from combining operations in 2000, according to the newsletter. Of the Big Five, only Accenture maintained the growth rate that the Big Five had come to expect in the 90s. Outsourcer EDS's consulting division, though much smaller than IBM's, is also gaining fast on the Big Five, according to the newsletter, growing by 72 per cent to $US650 million in IT consulting revenue. Their customers are happier too. IBM received an A-plus rating in recommendations in CIO's survey; EDS got a B-minus.
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