Open Consulting:     A New Contracting Paradigm 

 

by Howard Fosdick ©   

 

 

When IT professionals hear that I’ve been a solo consultant for a decade, they often ask “How do you do it?”   They want a quick, simple answer to help them judge whether my approach might work for them.   But the answer throws them. 

 

I practice open consulting.  The term derives from the phrase “open source software” because of their close affinity.  Just as it is difficult for many to accept that open source principles have produced widely-used software, it is hard for many to understand that open consulting is a viable way of conducting business.

 

Open consulting is a set of attitudes and behaviors, a business philosophy, that results in conduct contrary to the practices of most IT contracting firms.  

 

For example, open consulting rejects traditional notions of competition.  Traditional consulting stresses the need to lock in clients, lock out competitors, and bill maximum hours at the top rate.  Work is a zero-sum competition.  Open consulting looks to value-added approaches.  The goal is to best serve the client.  While traditional firms try to “manage” their clients, open consultants believe that clients manage their contractors.  Optimizing client satisfaction leads to longer engagements and a successful business.

 

All contracting firms claim to do the best possible job for the client.  But how many of their contractors document their work, train the client’s employees to take over what they have developed, and transfer their skills?  Do they neatly package their work for the client?   In the traditional consulting mindset, this behavior means the client no longer needs the contract firm.  Traditionalists hoard knowledge.  Their goal is to extend the engagement by ensuring the client “can’t get rid of us.”

 

This behavior yields a short-term benefit but guarantees a greater long-term penalty.  Most clients recognize their dependency and move to eliminate it.

 

Clients view successful open consultants as serving their interest.  An assignment may end more quickly, but for subsequent work, the open consultant tops the list.  This is “value-based marketing.”  It’s the best way to ensure work on upcoming projects.

 

Open consulting is relationship-based in a way that traditional consulting only professes to be.  While traditional “contractor placement specialists” tell clients they’re building “long-term partnerships," the reality is that they are income-driven.  They judge their business strictly by monetary measures (rates times hours billed).  Success is measured on a short-term, quarterly basis.  This dislodges client satisfaction from top priority because it prevents the long-term perspective and the resulting mutuality that defines true partnerships.

 

Open consulting considers income the consequence of good business practice.  The focus is on the larger picture.   How do we enhance our value to this client?   What behaviors lead to a continued business relationship?  How can we go the “extra mile?”   This builds the long-lasting relationships that underlie a thriving business.   

 

The manner in which competing firms treat one another highlights the differences between the traditional and open consulting business models.  Traditional firms seek exclusive outsourcing agreements.   These guarantee them maximum head-count at the client site and ensure the client receives no advice other than their own.   In whose interest is this?  Firms go to great lengths to lock out competitors, encouraging their personnel to “shun” competing contractors at the client, limiting the client’s technical training, designing and coding “black box” solutions, dispensing knowledge in carefully-calibrated teaspoons.  Some firms pressure their contractors to gather marketing information on-site.  They intercept confidential communications from competing companies, like billing rates and resumes.    

 

Back at headquarters, contractor “placement specialists” alter the resume of any available candidate to fit open positions at the client.  They leverage their position on the client’s “approved vendor list” to shut out competitors or force them to submit to emasculating subcontracts.   The goal is to ensure that no competitor would accept the position by imposing onerous terms.   They insist that communications between their contractors and client management go through them, then they alter those communications by the prism of their own agenda.

 

Traditional contracting firms claim they’re doing their best for the client.  But these behaviors create a disparity between their interests and those of the client. 

 

The open business model aims for congruence between the agendas of contractor and client to maximize value-added.  Working with other contracting firms is one way towards this goal.  Ditto for training client personnel, documenting systems, and sharing information.  Knowledge becomes power when demonstrated, shared, and applied. 

 

Open consultants place their faith in the wisdom of the client.  They believe that providing the best value trumps competitive gamesmanship.

 

Competition so permeates traditional consulting that firms apply it against their own employees.  Firms withhold their client billing rate from their contractors to inflate the firm’s margins.  They present their contractors with impossibly one-sided “employee agreements,” often adjudicated in some remote state, to ensure that the individual is without recourse no matter how outlandish the contract firm’s behavior.  These attempts to manipulate and gain control mean yet another divergence between the interests of the contract firm and client.  Duped or unhappy contractors make poor placements.  Over time, only inexperienced or desperate workers accept such one-sided relationships.   How many abused contractors will abandon the client in mid-project?

 

The open consulting model recognizes that different pay scales apply to the roles management, placement personnel, and technicians.  Rates in the arrangement can be disclosed to all parties because they are based on market value instead of secretive manipulation.   Contracts between the firm and its contractors may be one-sided but need not contain legally-unenforceable or “offensive” provisions.   Legal intimidation is out.  Agreement is the goal.   This fosters the team spirit that works to the clients’ benefit.   IT professionals who have bought into the arrangements under which they work do the best work.  The “win-win” partnership out-performs the zero-sum “I win, you lose” relationship.  

 

Experience leads me to anticipate several reactions to this article.   Traditional contracting firms will proclaim they follow the practices mentioned here that are in the clients’ interest.  But they’ll also argue that the principles I’ve outlined are unrealistic, naïve, or unworkable.   This belies their claim to practicing them. 

 

Some express outright hostility to the concepts of open consulting.   Like Microsoft’s outbursts against open source software, this is not an argument against the principles of openness, it is an admission of their validity.  That open consulting so threatens the traditional business model as to provoke aggression is the ultimate proof of its success.

 

Among IT client managers, what is the reaction?   Productive teams and long-term relationships.  What a nice ending… after all, only the clients’ opinion counts.

 

 

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Howard Fosdick is an independent DBA contractor.   Open consulting kept him busy through the recession of 2001-2003.


                                  Contrasting Principles

 

 

      Traditional Consulting:

        Open Consulting:

 

 

A zero-sum competition

Win / win agreements

Look out for #1

Customer-focused

Success measured by income

(rates times hours billed)

Success measured by many parameters including income, project contribution and outcome, client feedback and referrals, skills acquisition & other factors

Slogan:  “Gimme!”

Slogan: “Give to get”

Competition

Coopetition

Trade secrets

Knowledge sharing

Pyramidal firm structure maximizes pay differentials through hoarded knowledge and manipulation of those at the base

Open pyramidal structure recognizes the differing values and pay scales of various roles and responsibilities.  

1980s-style “networking” to extract information from others

Information sharing.  Networking as a two-way street.

Loyalty to the contracting firm and its bottom line

Loyalty to the project team and successful project completion

Divergence between contract firm and client’s interests

Congruency of contractor and client interests

Trust in one’s ability to manipulate the client

Trust in the client’s ability to discern value

Marketing – lock out competion through preferred vendor lists, exclusive outsourcing agreements, multi-layered subcontracting, and direct sales techniques

Marketing – Value-based.  Also based on certification and professional accomplishment as ways to demonstrate expertise

Worldview - a dog-eat-dog world of brokers, owners, employers, employees, masters and wage slaves

Worldview - a network of knowledge workers and management enablers dynamically forging mutually-beneficial work arrangements to meet client goals

Product – black-box design, proprietary coding

Product – open, documented design and coding

Modus operandi - manipulate others by withholding information.  Faith in hierarchical  “dominance relationships”

Modus operandi - work cooperatively with others by information sharing.   Faith in “trust relationships”

Client Longevity – seek highest short-term dollar return.  Exclusionary & manipulative tactics to get long-term engagements.

Client Longevity – seek long-term relationships and trust the client to retain the contractors who best align with his goals

Strength means “playing hard-ball”

Strength is knowledge, solving client problems, networking, cooperation, and mutually-beneficial relationships

 

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