Baby Come Back! A Rebuttal Against Forgoing Consulting Companies For Internal Consultants In Digital Transformation.

Photo: John Rowley- Getty Images

Forbes recently published an article by Steve Andriole entitled “Stand Aside McKinsey, Accenture & Cap Gemini – The Case For Internal Consulting For Digital Transformation." While the title is self-explanatory,  the case needs to be further examined before companies consider firing their consultant and hiring their own internal teams.

Examining the author’s background, it is clear that he has impressive credentials in technology, far more than this author. However, it is not convincing that his understanding of the consulting industry is on the same level as his technology expertise. The argument that assigning Digital Transformation initiatives to a team of internal consultants can accelerate success is well crafted, but is based on some questionable assumptions on consultants and the consulting industry as a whole. 

In this article, those assumptions will be analyzed and rebuttals will be presented to convince the reader that external Management Consultants should remain a consideration to improve the chances of a company’s digital transformation success.

“Gartner reminds us that 75% of all ERP projects fail...Most everyone in the industry knows that software projects fail far more than they succeed.”

There’s no denying that most ERP or Strategic Planning implementations have a high failure rate, but why do they fail? More often than not, this is because of poor planning, lack of commitment, repeated delays, insufficient resources (financial or personal), or inflexibility, many of which are outside the consultant’s control. Consultants are only as good as the tools, information, data, and client team they are assigned to work with. Put simply, poor inputs yield poor outputs. Consultants should not be blamed for the overall failure of a project if they are merely hired to be a small part of it. However, the more consultants own in the transformation process the more appropriate is to blame them for any failures that could result. In an ideal situation though, a strong company team with outside consultants hired to fill in the skills and labor gaps to ensure proper execution would drastically improve the chances of success. 

“Yes, they (consultants) sometimes have special knowledge – but not always: sometimes the client knows as much — or more — than the consultant.” 

Of course, a client knows more about their business, and in some cases, they may know more about digital transformation. That’s not a bad thing, and most consultants would welcome the opportunity to work with a more sophisticated client team because there's more to learn from each other, and assumptions are challenged more effectively. More importantly, to note though, is that consultants aren’t hired purely for their knowledge. They are also hired for their experience, expertise, skills, labor, or outsider’s perspective, all of which bring value to help increase the chances of success in a digital transformation engagement. 

“There’s also the cost. External consultants cost a small fortune to engage.”

The cost of hiring consulting firms is not always expensive when compared to the cost of failure. Consultants are able to charge what they do because they bring substantial experience or expertise, usually have a track record of success, and consulting clients are more than willing to pay for it. Consulting is a $250 Billion industry, with ~$50 Billion of that being purely in IT/Implementation, which suggests there are many businesses that can and will invest in consulting services to improve their chances of a successful transformation. The question begs to be answered: if consultants have such a high failure rate, then why do clients continue to hire them? 

Additionally, the cost of hiring a full-time team with hiring costs, training costs, payroll taxes, and possibly severance costs can be dramatically more than consultants in the same project time span. Not to mention, the time to hire a full-time employee can be much longer than finding and hiring an external consultant, because of the long-term commitment to hiring an employee. 

“External consultants simply cannot know these things (a company’s language, ways of working, culture, and politics) unless they move in and stay for a long while.“

This statement is not always the case. While it is true that consultants that move in and stay for longer may have a better understanding of these details, many consultants are completely capable of becoming familiar with them within a week of working with a client, this consultant included. Furthermore, there's an argument to be made that if a company cannot impart these details to an external consultant that they may not have a firm understanding themselves. 

“What if they (companies) developed a team of in-house consultants to help them identify, model, and solve their technology problems?”

This can be done, but its success assumes employees have the time to execute on a digital transformation in addition to their daily responsibilities, and they often don’t. Digital transformation isn’t something that’s done on the periphery. It requires a dedicated team to run it full time and support employees to ensure tasks are completed on time. According to HBR, this is one of the main reasons strategy implementations fail because leaders are too internally focused. Having an external consultant whose full-time job is to oversee and execute on a transformation and provide an outsider’s perspective, will eliminate distractions, facilitate creativity & innovation, and almost certainly improve the chances of success.

“There are lots of ways to formally structure and organize this team and lots of ways to recruit, grow, and reward internal consultants.”

It would be interesting to examine some examples of this structure in detail, but none were provided. The big question to ask here is how many projects can a team of internal consultants run simultaneously, assuming that is their only responsibility? Again, distractions will dramatically increase chances of failure, and overloading a full-time employee with additional responsibilities will do just that. 

Let's examine from another angle. For example, let's assume instead of assigning digital transformation duties to a current employee, a new internal team is hired to do so. What happens if those full-time internal consultants run out of projects? Do they get paid to be idle or fill in elsewhere? It is not so simple to just move people around in an organization where there’s work, especially when you consider employment contracts, skills gaps, experience, etc. that need to be considered in the process. There is much more flexibility when utilizing external consultants because they can be brought on and rolled off projects as needed. This leads us to the subject of cost. Again, the cost of hiring multiple teams of full-time internal consultants is much higher than a team of temporary external consultants whose contract can again be ended early with a lot less effort, paperwork, and legal ramifications. 

In closing, companies are certainly capable of hiring their own internal consulting teams to facilitate a digital transformation, and many do. This decision, however, is highly dependent on the company itself, its size, its strategy, its capabilities, its team, it's timing and its budget. Generally speaking, only the largest companies with substantial budgets and multiple projects running simultaneously do have their own internal consulting teams, but some continue to hire external consultants, independents or firm-affiliated, to fill in the talent gaps of their internal teams. For those major corporations, having internal consulting teams makes financial sense because the budget and needs for continuous projects are there, but it is not for the vast majority of companies. No company’s situation is exactly alike, but suffice to say that ceteris paribus, an internal consulting team is not superior to an external consulting team for a digital transformation initiative. The truth is, it depends on the company’s unique circumstances, and both options should remain a consideration.