• WisBusiness

Wednesday, March 18, 2009

The demise of the local IT consultant


By Tom Burzinzki
There was a time, from roughly 1985 to just after 2000, when it seemed that everyone I knew was starting up an IT consulting company somewhere in Wisconsin.

The typical startup scenario went something like this. A couple of guys -- and it was almost always guys -- who'd worked together for a few years as computer programmers or in sales and marketing for some large bank, insurance company, or manufacturer would decide -- sometimes after "planning sessions" involving beer and popcorn -- that they had finally had it with "working for the man."

Determined to free themselves from whatever management tyranny was crushing their souls, these budding entrepreneurs would decide then and there to strike off on their own and become independent IT consultants.

Bartender, Jagermeisters all around!

Motivated by visions of unlimited riches, career independence, and a well-funded retirement by age 50, these novice capitalists would organize themselves as an S-corporation with a company name derived by combining their names or initials with the word technology, strategy, or computer - as in "T&B Technologies" or "Smith and Jones Computer Consultants."

After buying 2,000 business cards at InstyPrint emblazoned with impressive sounding titles such as Chief Technology Officer or Business Development Executive, they'd spend their weekends and nights calling anyone and everyone they knew in IT who might hire them. Of course, they'd keep their day jobs until they found their first client or two so they could stay on their employer's benefit plan.

Back then, people with limited business acumen, and some with even less personality, could make a very good living running a small IT consulting firm -- assuming they were reasonably competent in some area of technology, had a decent network of potential clients (that is, friends willing to hire them), and a price point 25 percent or so below the rate charged by the national IT consulting firms.

Given the chronic shortage of skilled IT people in the state at the time, many fledgling consulting companies often ended up working for their previous employers.

I know of one case where a five-member IT development team, after being laid off following the stock market crash of 1987, formed an IT consultancy which then managed to get hired back by the same company that had previously laid them off when the company found to its chagrin that it couldn't maintain a critical billing system without the knowledge stuck in these people's heads.

I'd love to have sat in on the contract discussion these folks had with their former employer.

At the drop of a hat, these "Bill Gates wannabes" would happily regale you with tales of what a wonderful time they were having running their own company. How, while you had to put up with subjective performance reviews, Byzantine office politics, and a 3.1 percent annual salary bump (maybe!), they had just made enough money (in just 6 months, mind you!) to not only live really well but to also put some money down on a ski condo at Keystone -- which, by the way, they were writing off as a tax deduction. Wink-wink!!!

At a time when "going off-shore" meant taking a vacation in Hawaii and not outsourcing your entire IT function to a company in Bangalore, India, the owners of these small IT consulting companies could make some serious money helping Wisconsin companies put a computer on every desk, build applications to run on this new thing called the Internet, and address the mountain of recoding needed to clean up the Y2K bugs hidden in their computer applications.

Dozens, if not hundreds, of one- to 15-person IT companies were springing up all over -- like mushrooms after a summer rain. Some companies grew large enough to have multiple offices and hundreds of consultants working around the state -- and in a few cases, nationally.

During this boom time, it was not uncommon for the IT consultants at a company to outnumber the regular full-time IT employees.

Without this available supply of usually high-quality and reasonably priced IT consultants -- most of whom had IT degrees from Wisconsin colleges or technical schools -- many Wisconsin companies would have had a difficult, if not impossible, time installing all of the business automation software, Y2K fixes, and Internet infrastructure needed to succeed in a 21st century digital world.

Of course, the world has changed, and changed a lot, since those glory days of the late 20th century. The bursting of the dotcom bubble in 2001, along with the completion of the Y2K software retrofits, swept away many small, single-focus IT consulting firms. (For a while in 2002 and 2003, it was not uncommon, when advertising for a project manager, to receive résumés from former "CIOs" and "CEOs" of out-of-business IT consulting firms.)

Although some forward-thinking local firms have sustained (and even expanded) revenue over the past few years – mostly by focusing on less commoditized IT services such as IT strategy development, program and project management, business intelligence, Web 2.0 deployments, and business/IT collaboration – too many local firms continue to pursue the no longer viable commoditized pure staffing business model that relies on placing "butts in seats" instead of providing strategic, high-value IT services to clients.

As enterprises around the state shift their IT resource business to off-shore or out-of-state IT staffing companies (now being employed by enterprises of almost any size) and as companies continue to reduce consulting placement opportunities by an expanded use of restrictive vendor-managed staffing programs, we are likely to see a further reduction in, if not a total elimination of, the pure staffing IT consultancy in the next year or two. The current freeze on IT budgets due to the deepening recession will only accelerate their demise.

-- Burzinski is a an IT executive and senior consultant specializing in business intelligence and IT/business alignment. In his 25-year career he has worked for several Fortune 500 companies headquartered in Wisconsin. Burzinski and his family live in Green Bay.

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