What This Article Covers
- How Do the Major Consulting Companies Work?
- How has SAP Remotely Controlled them to Recommend their Products Regardless of the Fit with the Business Requirements?
- What is an “Advisory Function” and How are the Major Consulting Companies Unable to Offer Objective Advice?
Background into The Relationship Between SAP and the Major Consulting Companies
The major consulting companies have a very binary way of dealing with software vendors. If the company is colossal like SAP or Oracle, the company does pretty much what they want. If the vendor proposes something, the major consulting company repeats the marketing message uncritically. Many people talk about SAP software or imply that the software is why SAP is so lucky. However, SAP’s ability to gain market share in areas where has no useful product (BW, PP/DS, XI/PI, SPP, etc..) demonstrates that like Microsoft, it’s not the actual product that has put SAP where it is today. One of the most important and probably the one most responsible for its success has been its relationship with the major consulting companies. SAP does not attempt to implement its software, but merely has some specialist consultants that work on SAP projects in very few number.
This maximizes the income for the major consulting companies, and this means that the major consulting companies tell clients that SAP is the best software for their needs. Actually, SAP is the best software for the major consulting company’s needs. The answer is clear; there is no vendor who can make as much money for a consulting company as SAP or Oracle. Therefore, they get the consulting company’s recommendation. SAP developed this strategy decades ago, and it has been remarkably successful at getting them recommended in accounts. This strategy is so critical to SAP that if SAP were to reverse this strategy and begin to implement their software, they would no longer be recommended by the major consulting firms. More on how SAP corrupted the advisory function of the major consulting companies can be read about at this post.
Best of Breed Application
The major consulting company’s relationship with best of breed vendors is just the opposite. The problem as a client with bringing in Deloitte or IBM (aka Infosys part Deux) to implement even a best of breed solution is that you will end up paying for Deloitte consultants that the vendor is then required to train and have on the project. Secondly, no best of breed service parts planning providers requires or wants Deloitte, IBM or any other consulting firm for that matter to implement their solution. They all maintain consulting practices, and they can implement far better independently. The main things a consultant can do is perform a software selection, and other activities during the project such as business process work, training and integration to ERP applications. However, neither Deloitte nor the other major consulting firms will be satisfied with this role. Vendors would always prefer a direction relationship with clients rather than being controlled by some corrupt major consulting firm.
When I worked for i2 Technologies, I was brought into the office of my project sponsor. I was asked if i2 resources could do the job of Price Waterhouse consultants as they wanted to roll many of them off for performance reasons. I replied, “without a doubt.” Interestingly, I later found out that I was supposed to inform Price Waterhouse because they were the prime contractor and i2’s contract was with Price Waterhouse, not the actual client. In Price Waterhouse’s view, I did not even work for the customer but used to work for Price Waterhouse. They declared that because of this, they would retaliate against i2 in software selections unless I was removed from the project. Price Waterhouse thought this was a perfectly professional way to behave. My experience in dealing with Price Waterhouse, as with other firms of this type was that it was much like the shows I have seen on the Mafia, but without the violence. Clients see setting up consulting companies as the prime contractor as a convenience. That way they only pay one company and sign on contract instead of multiple contracts. However, the consulting companies don’t see it that way. If you subcontract to a consulting company, your recommendations, work and behavior are to serve the consulting company, not the last client, even if the customer is paying for all the work.
Major consulting companies do not offer advice based on the actual analysis. Their analysis is what is the best for their bottom line. All the major consulting firms, Deloitte, Accenture, IBM, Cap Gemini, KPMG, Infosys, work the same way. This extends to the audit business as well, where a fee can be paid for any opinion that you like. If this means recommending a solution that does not meet with requirements, or that is a beta, they will do so. Major consulting companies have no independence from SAP because SAP maximizes their profits. However, they are ostensibly advisory firms as well.
The problem is that no company that attempts to serve an advisory function can also have a goal of maximizing profits. This is because to do so means putting their interests above the interests of your client. This will cause the advice given to be less than worthless. This has been extensively demonstrated in the finance sector, with firms like Goldman Sachs creating, recommending and selling dangerous products to their “clients,” knowing internally that the product is bad, and then taking the opposite position against the investment, which eventually tanks. Goldman Sachs has defended this practice when sued that their clients should have known better. This seems to stretch the definition of “customer.” When the major rating firms were found to be giving AAA ratings to toxic assets, in Congress they declared that their ratings are merely their opinions, and “do not reflect its suitability as an investment.”
As with Goldman Sachs and the major rating agencies, the major consulting companies pretends to serve as an advisor to clients but are putting themselves in front of their customers. For some reason, this is less discussed and written about than financial sector corruption.