IT consultancy companies should learn from used car dealers!

June 6, 2012 at 1:49 pm | Posted in Agile, Ramblings | Leave a comment

Let’s suppose that your old car one day suddenly stops working and it is beyond repair. So now you are in the market for a new (or second-hand) car. You have a mental model of what you are looking for: it should be roomy enough for your family and 2 dogs, it should be safe and of course your new car should have sufficient power. Together with your wife you decide that you want a MPV. So you walk into the nearest car dealership. To your surprise it is a rather nondescript building and when you enter it the showroom is completely empty. Luckily enough there is this friendly car sales guy and you start to talk to him: “Hi, we are looking for a new car and …”. Before you can finish your sentence he raises his hand to stop you, smiles at you and walks back to the counter. He returns with a key and hands it over to you. “Here is the key of your car. If you just follow me, I will show it.” Completely flabbergasted you and your wife are led into a parking lot behind the building and he points to a Mazda MX-5 Miata. You start to protest and try to explain that your 3 children and 2 dogs are not going to fit into a convertible, but he ignores your protests. “I’m sorry Sir, as you can see this is the only car we have got. And I think it is just right for you. Good luck!”

Now the above scenario might sound a bit absurd, but this is what I see a lot in IT consulting: your current project has come to an end and in some magic gathering that often goes by the name “Project Allocation Meeting” or “Resource Meeting” the sales guys and girls at a typical IT company have decided that the very first project that comes along miraculously is the perfect fit for you. And you can already start tomorrow. Sounds familiar with that single car that is for sale in an otherwise empty dealership?

Lets first have a look at the criteria for a good project allocation process:

1. Limited waste because of non-billable hours. The business model for IT consulting is rather straightforward: revenue equals the number of billable hours multiplied by the hourly rate of a consultant, summed over all consultants. Both parameters are not very scalable, so it is tempting to maximize the number of billable hours by leaving no gaps between projects.
2. The right fit: projects should be challenging enough so that a consultant can develop his skills. Working below his level is going to make him leave the company eventually. Working far above his level will only result in a burn-out. In general: the assignment should be a good fit in the career path of the consultant. That will make him move valuable to customers so you can ask higher rates later.
3. Physical location: a project at a nearby customer will limit traveling time and will result in overall happiness. Long traveling times will make it unlikely that the consultant is going to put in some extra hours for either the customer or his own company.
4. Other criteria like for example: does the customer’s culture fit with that of the consultant. Putting a consultant who thrives on freedom into a limited or formal organization like an insurance company is not going to make him very happy.

You will notice that the first point is a rather short-term optimization. The next three points are going to have way more impact on an IT consulting company but the effects are not immediately noticeable. Therefore an IT company will have to make a careful trade-off between optimization for billable hours (which is easy, a straightforward computer algorithm can do this for you!) and long-term sustainability and profit. This is quite difficult and one of the reasons that most consulting companies behave like this weird car dealership I introduced at the start of this blogpost. That brings me to the conclusion.

So we can choose the company we like to work for, the place we want to live, or our own car. And yet in IT consulting others are deciding what assignments best fit us. What I would like to propose is a very simple project allocation process with a minimum amount of overhead: All project information is always visible to every consultant. Very similar to a car dealer that has many cars on display. So you can pick the right car or in this case: the right project for you. That comes with the freedom of waiting for a better opportunity and passing a project. Of course that also comes with the responsibility for balancing the number of non-billable hours. That could be done by putting a cap on that number or by introducing some kind of rewarding mechanism.

Most important is that an IT consultant can perfectly well make these trade-offs himself. Self organization and responsibility at the lowest possible level instead of old Soviet style planning!