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The case of the disappearing experts

 

With the ongoing slump in SAP opportunities (since the economic meltdown) many SAP consultants have been out of work for a long time now, many are returning to their previous professions for their trade to support themselves and their families financially.

Senior SAP consultants who offer a tremendous amount of experience and knowledge to their clients are leaving the industry, creating a massive knowledge gap.

There are many causes of the out flux of these experts:

 

  • With the recession causing fewer opportunities within companies, with their IT budget being slashed there has been a reduction in the overall number of positions available at any level.
  • SAP customers are usually reliant on a set ‘ preferred supplier list’ (PSL) to provide them with any freelance consultants they require – however agents who are offering these also are looking to maximize their profits. From their point of view, it is better to deliver a consultant who they can get more commission from – with PSL agreements, there is generally a cap to the commission rate that can be charged. However, if a consultant goes through 2 or even 3 agents to get to the end customer, that equates to 3 or 4 layers (tiers) of commission. With many of the SAP agents having the same “owners”,  they get their margins that way. That does not help the really professional consultants as they are naturally more expensive, they are struck off as ‘too expensive’, even though they would be within budget if there was only one single agent (layer) charging reasonable fees. 
  • Consulting house staff are being laid off while their employers have no suitable project work for them. Leaving consultants “on the bench” is a costly option, but sacking them leaves a void when a project is won as re-hiring and re-training is both expensive, unreliable and time consuming. ‘Renting’ these “on the bench” staff out on short term projects (as contractors) is a possibility, but still a very new solution to address this issue, however it does improve ROY and staff retention while also saving time and creating a “team spirit”. However, this solution is only viable with the removal of SAP agents – who would naturally head hunt from this unique pool of resources (if they were allowed access) which would be of no benefit to anybody. 
  • Expectation – with a reduced budget SAP customers and even consulting houses are “expecting” to have a reduced level of experience, so the fact that the clients are offered “less experienced consultants” is easily explained – however, without the agency “layers” or “tiers”, their budget actually would allow a far greater selection of consultants to choose from. Budgets for SAP projects are fundamentally no different to any other budget, in that if you spend the funds wisely, you can achieve some excellent value for money – but the key lay in ensuring that most of the budget goes to the consultant and not to layers of agents.
  • Senior SAP consultants have worked hard to get where they are and generally would expect to be able to rely on their previous employers to recall them for more work – but with many companies rigidly sticking to their PSL they are now unable to hire directly. Some still have this as an option, but these numbers are reducing monthly. This level of loyalty is to be commended, but at what cost? The aim is to produce the best SAP solution with the lowest possible cost in terms of both money and time, to achieve this, there is sometimes a need for flexibility, after all, many SAP consultants have agents that they will simply never work with (for one reason or another) which instantly reduces the selection available.
  • Perception – most customers believe that the rate they are charged, is the rate that the consultant is charging and the commissions are small – this returns to the above point, but should not be overlooked – “layers” can represent a staggering amount of budget, with consultants receiving no more than 40 or 50% of the hourly rate. This can not be seen as fair or reasonable, it leads to consultants being unhappy along with high staff turnover. Added to this, consultants will often perform to the level they are being paid for, if they “feel” they are being taken advantage of, they will simply not perform – a natural enough response, but not helpful in a project team.
  • Cheap labor from certain countries, there are now many countries who provide cheap labor costs. After the off shore practice was found to be largely unsuccessful, the SAP market has taken to hiring cheaper consultants – the quality of many, are improving and some individuals are simply excellent at their work. Knowing who you can rely upon, is still a very large problem in the industry today, but with companies watching budgets more than ever, the quality issue is almost a side note. Until there is the same realization as there was with the off shoring, that quality of delivery determines the quality of the final product (plumbers and builders etc are usually hired based on reputation and references). SAP consultants also need to prove their worth to allow a rational choice to be made when hiring them. There are many sites that offer references etc but there are not that many SAP dedicated solutions out there that offers references of any SAP consultant free of charge to anyone in the SAP industry (including the consultant’s personal references, experience and training).

 

Why would you hire without checking a persons reference, regardless of what job they will be doing?

 

Due to these factors, among others, more and more senior consultants are finding themselves out of work for long periods of time – stretching into years now.

The reality is that SAP itself, is pro-actively working to upgrade their products and even their own certification program to react to the market situation. Without working in the industry, there is only a finite amount of time before skill sets become obsolete and re-training is needed.

When that is combined with the above problems, consultants are asking themselves some very tough questions, which are leading them directly from the SAP market completely.

This is not a healthy situation, though fresh faces are always needed, there is always a great value in the experience earned through years of work, which can not be replaced by budgetary solutions alone.

SAP consultants need to stay up to date and in a world of pro-activity they need to react or leave the industry permanently. The days of direct search, select and contact have well and truly arrived, with recruiting moving from the old fashioned “call an agent” to the internet ready solution for instant, accurate and reliable results.

There are many excellent SAP consultants available on the market, however, with the growing out flux of specialists, it pays, now more than ever, to take your credibility into your own hands to ensure that your expertise is recognized, as offering the knowledge and experience that the industry can’t afford to lose.

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6 Comments

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  1. Mark Chalfen
    My experience is that lower level consultants would be facing a hard time to find work.

    Clients are always on the look out for top quality consultants, and they seem to be the consultants that have stayed employed during the recession.

    Whilst IT budgets might have been cut, they have not gone away, and clients are spending on specific projects with real ROI’s.

    With SAP growing its product line, there will be less “experts” in certain areas, as the products are brand new.

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    1. Vips Kirrage Post author
      Many SAP consultants, regardless of top or lower level are finding it hard to get work, however the lower level consultants have the ability to work with lower “rate expectations” than the top draw consultants, in some projects the rates have dropped to around 30€ (all inclusive) per hour – naturally enough as the top consultants offer a solution with far less “risk” to the customer, better understanding of SAP and the mapping of it to a business model and realise more value from SAP in a timely manner they would not expect to reduce to these prices – after flights and hotel, unless you are local it is hard to make more than a few Euros per hour for your work.

      Your point that clients always look for top consultants is correct in certain companies, there are companies who are hiring the best consultants and simply reducing the costs as far as possible to gain a better ROI – however there are many more customers who operate a “best available at a set budget” strategy, with senior consultants being replaced (one by one) with lower cost equivalents and all new hires having a “top level” cost to match the new consultants – we do not suggest that this is a good strategy but it is what is happening in many companies at the moment but the consultants who have been replaced are not to blame for this, many were offering a premium service at a reasonable cost.

      There are obviously many senior consultants who have stayed employed during the recession, however there are many more who have not – after being out of work for long periods of time they are now selecting other avenues of making an income (we know of many who have been declared bankrupt, lost their companies and their homes due to the decline) but we also know of many top consultants who have remained on project and worked straight through without a hitch – but these are far fewer in numbers than the consultants who have been out of work for long periods – it is no reflection on the skills of the top consultants that they have not found contracts, but a reflection on the market, the recession and the need to reduce budgets. SAP consultants who have not been in work should be aware that you are absolutely right, the SAP product line is continually growing, there will be a shortage of “experts” in certain areas and there is a need for top consultants to remain in SAP as a career. 

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      1. Mark Chalfen
        I dont think we are looking at the same market here.

        The consultancy I work for managed to grow over the last two years.

        In terms of work, I believe the market may have dropped around 10 – 20% during the peak of the recession but that does not equate to more consultants losing their jobs than staying in their jobs.

        My point around senior consultants staying in work was not based on their premium rate, but as there was more competition, the rate of senior consultants dropped for an 18 month window.

        However certain areas grew based in new technologies and functionality, and the rates in these areas actually rose.

        In short, I agree that basic SAP skills are a commodity, and as such where there more supply than demand prices will drop.

        However Senior consultants with balanced skill sets that are in demand will not have trouble finding work.

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        1. Vips Kirrage Post author
          Same market just different view points which is one of the things that puts the “community” in SCN

          As you say “the consultancy you work for managed to grow over the last two years” which is fantastic, however the experience of many other consultancies have been very different over the past 2 years. With many consultancies closing their SAP doors permanently as clients close down or down scale their projects to save money and prepare to make internal staff redundancies. These consulting houses have loaded staff into the SAP market space – these being a mixture of top consultants and single module people. These companies would position the market down turn at considerably more than 10 – 20%.

          Regarding your point that there are more consultants working than losing their jobs – clearly more consultants are working than losing their jobs – but that is obvious.

          Lastly senior consultants with balanced skills have ended up being “thrown out with the bath water” as consultancies went to the wall – it is perfectly true that all have not left the industry – but many have and many more are considering it – this conclusion is based on conversations with seniors on a day to day basis, not from a single industry, solution or even geographical market – similar reactions are coming from the US, Europe and the Asia Pac region. 

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  2. Vijay Vijayasankar
    When demand is low, companies drop prices or move on to sell products or services that are in demand at that time. Others just cut their costs, and ride out the business cycle.

    Same deal with consultants – just because we could charge a certain rate when market was good does not mean you can do it today. Core modules were new then – like SD, MM and even ABAP, and hence justified a premium for guys good at that. It is a commodity set of skills now – and hence won’t fetch the same rates. So consultants should adapt – learn new skills, get trained, reduce rates – basically do whatever it takes to get them hired.

    It is a complex situation with outsourcing. Over last decade or so, I have seen it improve considerably in quality. Offshore centers have terrific people too – and hence more and more skills will get commoditized now, and more quickly than before too. If there was no outsourcing of SAP skills, those companies will pass on higher costs to consumers and we will not like that. On the other hand we don’t want to lose jobs either due to offshoring. No easy answers there – just like manufacturing, it is a macro problem. I do believe it will reach an equilibrium in long term, but that doesn’t help us today unfortunately.

    Client facing skills still carry a premium, and so does multiple skills in one consultant. SAP consultants are smart – and we advise the best of companies on how they can improve. Can’t we find what we need to change too just as well?

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    1. Vips Kirrage Post author
      The supply/demand association is completely correct, as is the fact of re-skilling and staying “marketable” by carefully building a career and investing in yourself as a consultant. There was a long time when this was not required in SAP and, as you say, the modular knowledge was enough to ensure both continual work and premium pay. Those days are now behind us and I am not sure there is much argument about that – along with the growing use of offshore technical development.

      However the core consultants are not the only ones who are finding a problem with locating work, many of the client facing consultants are also struggling with locating roles, over recent years the number of roles has reduced (not least as the clients have become more self sufficient) but the number of consultants with multiple skills has steadily grown. Many modular consultants have naturally mutated into these individuals which has left the market with more consultants and less positions at that level, the recession has simply compounded the situation.

      The core module consultants have been among the hardest hit and a growing number of these are leaving the industry, taking their experience with them, this is never going to be a good situation as there is always a need for consultants with high skill levels – even if that is on a single module. However, when the multi skilled or client facing consultants start to exit the stage, it leaves a gap which will be hard to fix at short notice – these consultants are seen as seniors for a reason, they have worked hard for the position – though there is little to be done to stop them, it is a potential issue further down the tracks.

      Over the past 10 years, the IT market has had the off shoring and near shoring solutions growing in experience, (some of these had a very shaky start, as I recall) but now many of the consultants who work in these solutions can be outstanding, both in terms of cost and overall ROI. However, it is certainly worth considering that cloud computing has become far more refined over recent years and it is possible that the concept of a single centre, housing multiple consultants has, already become outdated – there are some excellent companies offering SAP experience at low cost from the cloud, where almost non-existent overheads, drop costs even further and provides some very sophisticated quality assurances for the consultants they provide. But, as you say, there is no quick answer to the “catch 22” problem of wanting jobs and low costs, that I am aware of.

      In short, when working in SAP “watch this space” seems to be the order of the day, with much happening, it is natural that certain individuals will follow the lead of the dinosaur, the important point is to maintain the level of quality consultants – it is easy to lose experienced individuals, it is quite another to replace experienced people.

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