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***** Review almost 2 years in: some good signs, but corporate procurement is still frustratingly helping to destroy value *****

I just thought I pick this one up again to check how the community now thinks about this topic and what you are observing in the market.

positive signs

Personally, I’ve seen some encouraging signs even in the UK, where customers are a bit more cautious about full time assignments and also from consultants, who realise they actually enjoy working with several customers at a time and recognise the huge boost for their learning curve from designing solutions in a variety of contexts and having the opportunity to learn in a team. I would say the market is slowly moving into the right direction.

agencies: will they ever learn?

I don’t see temp recruitment agencies change, though. Most of them stick to the full time model, most notably, because they don’t know enough about the task at hand to manage more “complex” assignment schedules. Good. That will hopefully speed up the end of most of them. Nothing better for a market than removing a big chunk of cost and time that doesn’t add value. Fingers crossed.

procurement: may the network economy come upon you

The most important ally of non-value adding middle-men are corporate procurement departments. Whilst IT and HR often know exactly, what they need, they are still forced by procurement to artificially channel the selected consultancy partner through a “preferred supplier”. That adds cost and red tape, but procurement says it simplifies processes, because it reduces the number of suppliers (Excuse me??? Do they still keep supplier data on beer mats in an old shoe box? A modern ERP system should be able to deal with a few extra suppliers for sure) and keep cost down, because the preferred suppliers give them a discount for the large volume (ROFL. Yes, they add a 20% margin and then take a quarter of that off for discount. Dear friends in procurement: you are still adding 15% cost that way. But hold on a minute: your bonus is paid for the 5% you “saved”, not an the 15% you added. Sad logic…)

Well, there’s hope: if CEOs start grasping the idea of the network economy and invest in tools like Ariba, they won’t (hopefully) accept a low number of suppliers and an end in itself any more.

What are you observing? Are customers more street wise than 2 years ago, when it gets to resourcing models and the value add of partners they pay for?

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Middle men and full time contractors in the SAP HR world: two concepts that seem more widely used by far in the UK and the US than in the German speaking countries. This struck me, when I moved to Britain 5 years ago, and I still feel both concepts are over-used and I’m afraid sometimes for no better reasons than lazyness or CYA tactics. So, I decided this is the time to share my thoughts and maybe provoke some discussion.

Before I start, I need to make two “confessions”:

– my own experience is primarily in SAP HCM (and some other HRIS incl. cloud). I appreciate that HCM by its nature (e.g. non-core business process, lot’s of mini-projects for legal changes like the typical 10day assignments recently triggered by UK RTI) may differ from other processes closer to the core of the business

– I or my business have benefited from the two concepts in the past. I advice clients accordingly, when full time is not required or when they could just as well work directly with a contractor, but I would not in every case walk away from business, if a client insists – it’s anybody’s choice to call this either inconsequent or good customer service.

I’m aware that this article will feel provocative to many readers. That’s what it’s meant to be. I know things are not black and white and that the concepts I found so alien 5 years ago are in many cases a good or even the best solution. However, I also observe, that they are all too often accepted without consideration, when direct engagements and traditional consultancy models would be more efficient and probably also more effective.

Full time culture

Why is it, I keep asking myself, that so many SAP HCM projects happen to just require an experienced professional to work on it for exactly 5 days a week over a given period of time? And in a complex set-up, even assuming a 6 months really project needs 125 days, how comes it’s always one person covering everything even though there seems to be an extremely high degree of specialisation amongst professionals trained in the world of big consultancies or big integrators? And if you need 250 days in half a year, how come it magically requires a 50% split between a “functional” specialist and a developer?

I might be more inclined to believe in these accidental perfect fits, had I ever hit the jackpot in the lottery. Alas, I haven’t, and so I’m very sceptical about it.

The number of days is adjusted to the requirement through the duration of the project!”, I here someone say? Well, this may be so in some cases. However, in the real world I see most projects coming with a fixed deadline already and a start date of “asap”, as they know they are late already and even more importantly: the duration of the project should not first and fore mostly determined by the availability of the consultant, but by the customer’s circumstances. Their employees need to be available for process design discussions, prototype reviews, training, tests, knowledge transfer, and whatever tasks in the project are given to them to learn and save money under the consultant’s guidance. In a typical HR project with not too much custom development, an experienced full time consultant would in many cases demand more resources from the customer than they can realistically put in, so the consultant ends up being idle or doing work the customer could do themselves (which, quite conveniently, also makes them more dependent on external resources in future – hony soit, qui mal y pense).

I’d recommend customers to look closely into how estimates are calculated. If you find you’d need a particular consultant for 3 days/week to implement your LSO project, and the same person happens to have the right skill set to act as support for other HR modules you already have in place, there’s nothing wrong with taking him or her on full time for that period, if it gives you a better deal. But it needs to be transparent and a conscious decision.

Customers should also think about what they expect from their consultants:

a) if they expect to receive advice on what to do and how to do things, it’s much more likely they need someone to come in for two days a week or even one day every other week for workshops and possibly solving the more difficult issues directly on the system. That’s a consultant. Just having someone sitting there doing stuff full time, is a temp employee. This is fine. You just need to be aware of what you can expect. Initially I was confused by the term “contractor” widely used for these people. I still think it sometimes betrays wrong priorities: is it about the contract first and helping the client or deliver a solution comes second? Although, of course, this notion would be completely unfair to apply to all “contractors”. The word just seems to be a nice artefact indicating the overall culture. By the way: Being able to help customers doing things themselves also requires some additional skills on top of those required to just do it (yes, there are also those consultants, who only tell you what to do, but not how to do it, without ever having had their own hands dirty. This doesn’t work for this type of engagements and these are the people, who got a sound approach into discredit in many managers’ books)

b) if you expect your consultant to advice you on alternative solutions, system driven process changes to improve efficiency, and effectiveness, risk, and feasibility: why do you think they know more about this than you do? “A broad experience!” . Right. That’s what I would have thought. But I certainly wouldn’t claim to have a broad experience, had I worked only with 5 or so clients in my SAP HCM career since 1996. I can’t claim to be smarter than the next SAP expert, but despite my aging grey cells I managed to remember a lot from having worked with anywhere between 50 and 100 organisations and it’s often the one or two day high intensity design workshops or problem solving assignments, where I learned most from. So, I’ve seen a lot working and not working and that’s what clients can benefit from – not my cleverness or even my good looks 😉

A note for consultants or contractors: working with a large variety of customers on a mix smaller and larger projects or support tasks is also the best way to develop fast. It not only increases your arsenal of technical and process level solutions, but also sharpens your analytical skills by forcing you to understand a new context fast and develops your communication skills by exposing you to a wide range of people and organisational cultures. It may look a bit scary not to always have 6-18 months fully booked ahead of you, but in my view it’s definitely worth it.

So, is full-time always bad? Definitely not! In larger projects with teams of 5 or more external resources in one solution area, say HR, many or most roles are probably shaped well for full time team members, whilst some specialists may be added for a few days as and when needed. And this is just one example amongst many. Again: I’m not trying to discredit full time consultants or contractors, just suggesting there may be cases, when putting some extra thought into the decision wouldn’t hurt.

I won’t try to explain, why the full time paradigm seems to be so much stronger in some countries than in others. Comparing the UK with Germany, a more entrepreneurial culture as well as the tax system seem to favour freelance work over employment, and individual freelance contractors will obviously find it more difficult than teams in small and medium consultancies to put together the right portfolio of part time assignments. But this is just scratching on the surface.

However, what I found in many countries, is that middlemen in any shape or form, most notably agencies with no or little knowledge of the subject, increase the propensity for having people full time on the project. It’s obvious: for them, full time is much easier. Get them into the client once and then all you’ve left to do is sending monthly invoices and counting the money. No juggling between various projects, which would also require some understanding of the work at hand. And this brings me to the second element of this article:

The non-value-adding middle man (or woman)

This is, where I really do despair sometimes.

You will why, understand, if you read this little story (simplified so as not to make any parties involved recognisable):

I once subcontracted as a project manager for a company, who described themselves as a Systems Integrator. They didn’t have any perm employees, except for some back office and a sales team. They would probably have been reasonably well positioned offering themselves as an outsourced sales department winning projects for others, but they wanted to do the projects themselves. So, I ended up with 2 off-shore FTEs with virtually no SAP experience and a team of 4 on-shore consultants, who had never met before. Only I and one other guy had a direct contract with the “SI” the other 3 on-shore consultants where recruited through an agent. The SI effectively charged GBP 950 per day for them, paid 550 to the agent, who paid 425 to the contractors. The agent did very well making about 30k per person for scanning through a few CVs (missing a few essential skills and having one of the guys not even turn up, so I was left with 2 jobs for the first 6 weeks) A funny note: each project team member was 1 or 2 degrees away from the HR person or account manager of the SI on Linkedin and would have turned up on page one with a reasonable search.

The SI contributed two elements apart from taking the client out for lunch to get further business: they dialled into the steering group meetings every other month and where difficult to reach to rubber stamp and decisions on resources or change requests. They also did – knowingly or not – steer things into a direction, where the client would still be very dependent on 3rd party services after the project. So, basically they just acted as a second middle man.

I appreciate this client would have needed one on-shore coordinator as their corporate IT was based several time zones away with very little knowledge of the UK, whilst local IT didn’t have any SAP HCM experience. An agent to help them with recruiting a team would definitely definitely be required – or alternatively a proper Systems Integrator with at least their own project management capabilities. But certainly not two middle-men doing nothing more then sell them the project and bring together a few individuals hoping they could become a team.

In a less layered set-up, I’m very confident that for similar rates the client could have had a more sustainable implementation with at least 30% less 3rd party resources (to begin with, I would have needed 50% less time as a PM, had I worked with the customer directly without having to manage the SI and training their off-shore team) and a better trained internal on-shore team after the project.

So, are middle-men / agencies etc. always bad? I don’t think so!

Again, all I’m suggesting is that customers as well as consultants / contractors take a close look at what each part of the value chain is bringing to the party. It is naïve to assume it doesn’t affect the quality of service you get for your money, if a big chunk of the fees is eaten away by middle-men, who don’t add real value.

Most agencies I’ve worked with may just be capabable to send you a dozen of CVs of candidates vaguely going into the right direction, but you still need to have a thorough understanding of the task at hand to make the right choice. Once the CVs and contact data have been provided, any further involvement of the agent in my experience just adds further admin layers without any benefits. So, rather than being charges 100 pounds or more per day and having a cumbersome communication chain, in many cases it would make more sense to pay a reasonable flat fee for a successful candidate and then hold the relationship directly. Some may argue that it’s easier to get bills from just one agent than from a dozen contractors. Well, I would seriously doubt the capabilities of my accounting or procurement teams, if this should make such a big difference. Billing and payment as such are highly automated and you still need to check each individual’s timesheet and eventually talk to the individual contractor, if the hours billed don’t look right – the agent would at best not be able to help with clarifications and at worst complicate the process.

However, I do see their value in providing a long list, maybe even short list, of candidates, and in some cases they are even skilled enough to really advice you on which candidate to pick for your project(s).

There definitely is value in using a system integrator or consultancy rather than individual contractors in many, probably most cases. There are many arguments for this – starting with replacements in times of illness or holiday and ending with having access to a broader set of skills and getting a team of people, who know how to work together to deploy your solution. However, you can’t assume that they all do, what they say on the tin. Some SIs are little more than recruitment agencies for contractors. If they don’t have any capabilities of their own beyond sales, then it’s actually a dangerous mixture. Whilst the client relies of the SI to know how to set up the project and define or verify the target design, the SI is just rushing to the job board or even another agency to find people to staff the project. In many cases, they would happily have the customer believe that this project team are their own staff, familiar with a proven set of methodologies and well known to the SI management. They may not explicitly say so, but I’ve heard the directive more than once “You must only use our email address and as long as the client doesn’t ask explicitly, don’t tell them you are not a perm member of our staff.”

So, you end up with an integrator, who is completely disintegrated and you can only hope they manage to find a good project manager to hold the whole thing together.

To justify the mark-up compared to freelance contractors consultancies or SIs need to be able to

– provide the resources you need at the pace you need them, which is not always one person full time – particularly in smaller projects

– bring in specialists for a day to complement the skills of the core team on the ground

– share knowledge internally – effectively and fast. If I had to hire a consultancy, I would definitely ask them about there knowledge sharing process

– have a culture that allows the consultant on the ground to pick up the phone and ask a colleague even in front of the customer

So, basically: whatever or whoever sits between the customer and the consultant / contractor in the value chain (taking a chunk of your money) need to justify how they are adding value.

And on a note for contractors: working independently might look attractive financially as well as in other aspects, but you need to be aware that an organisation paying you by the hour is much less likely to invest in your development than a consultancy you have a permanent employment contract with. Together with working for just one client over longer periods this can seriously limit your development, so you need to make sure you improve your skills through training, networking and opportunities to try things out in sandbox systems.

So, in conclusion:

Imo middle-men as well as full time engagements are justified in many cases. The fact that they are more prevalent in some countries than in others can be explained and is some cases also justified by various circumstances including a more risk-taking culture or the tax system. However, I still see too many cases, where either concept works against giving the customer the best value for their money in any given project and even against developing highly skilled SAP HCM consultants in the long run.

Funnily enough, just 2 days ago, when we recorded the latest SAP HCM Insights Podcast (with Luke Marson, Steve Bogner and Mark Ingram) we discussed that the move to hybrid and cloud models will change some of these things anyway. It will be much rarer for a typical cloud deployment, say Successfactors HCM, to require any full time resources on the project. Watch out for this latest recording, which will be online soon.

Disclosure:

As you may have guessed, I’m not completely impartial regarding this discussion. I work for iProCon Group as a consultant and their UK director and ever since co-founding the company in Germany 13 years ago, we limited full time assignments and using or acting as middle-men to a very low level. So, whilst acknowledging that it’s not a one-size-fits-all solution, it’s not surprising that I advocate for caution with those two concepts. There’s no doubt, I would personally benefit from all SAP HCM customers dropping middle-men and full time assignments tomorrow, so my view is necessarily biased and to be viewed as just one part of the big mosaic of opinions.

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14 Comments

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  1. Luke Marson

    Hi Sven,

    Excellent post and great thoughts on a topic. Some real home truths here for consultants, SIs, and customers alike. I am currently writing a blog topic on consulting in the Cloud era and in it I write about how the consulting model may change, which will remove these kind of practices. However, it depends on who (if anybody) is advising the client and what their interests are. Customers often don’t know better and rely on the “better” judgement of SIs, advisers, and other partners who sometimes only have an interest in financial gain. Recruitment agencies are not the sort of advisers that work in the interests of customers’ project needs.

    Quite often I have worked on projects where I have not been full-time, since it was not required. On the same projects I have also seen people who are full-time, who were not really required. But for someone who is a contractor it is difficult to turn down a full-time contract, irrespective of whether the contract provides enough work in the hours or provides value to the customer. If, as a contractor, you are interested in money then a 3-day contract is not going to be favorable and the focus will continue to be on sitting full-time at a client.

    I hope customers get to read this blog and are better informed about how they staff their projects.

    Best regards,

    Luke

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    1. Sven Ringling Post author

      Hi Luke,

      Thanks a lot for your comments. I absolutely agree that it’s very difficult for contractors to aim at part time projects.

      In the Germany based part of our team it is very unusual for someone to be on a project full time. Here in the UK, it’s not easy to sell less to customers (partially because they are hiding behind agents), and we are lucky to be able to fill the gaps in the schedule with part-time assignments anywhere on the continent – that makes it easier to aim for part time here as well without regretting it, when the next 15 opportunities are full time and you need to reject them. Confident that more of those customers who like a bespoke “cut” of consultancy will find their way to us 😉

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  2. Steve Bogner

    Great points Sven. I find that when clients know what they need, they look for more part-time contracting. Some times though they think it’s worth the cost to have someone on-site, available all the time to handle whatever comes up. And I struggle to recognize the value that the middle-men-firms provide in most (not all) client relationships.

    There are so many variables in all this; I think in the end we have to focus on what is best and right for our clients. Personally, putting my clients’ interests first has always worked out very well for me.

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    1. Luke Marson

      I think there are times when having a really good all-round HCM consultant can be value to have for those extra days. It doesn’t really add up for specialists, but for the jack-of-all trades it can be a good move.

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      1. Sven Ringling Post author

        I love all-round”ing”, though it’s becoming difficult with the wide scope you’re facing these days. And as an all-rounder you quickly get into full time with larger clients. For a 1000-people-one-country organisation it still looks to much to me except maybe for short periods. Blimey, they even made RTI a full time project over several months in some organisations 😯

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    2. Luke Marson

      I think there are times when having a really good all-round HCM consultant can be value to have for those extra days. It doesn’t really add up for specialists, but for the jack-of-all trades it can be a good move.

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    3. Sven Ringling Post author

      absolutely. You have to know, what you are best at and what your client needs. Part time works for some projects and for some not – same with people. I just want people to really think about it 🙂

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  3. Stephen Burr

    Excellent blog Sven. I hope you are well.

    I can’t recall the last time I worked full time on a project for a sustained period.  At key times though it can be necessary and/or useful.  One downside to this (for me personally) is keeping all the plates spinning on multiple projects … guess that is part of the job but of course there are times when multiple projects need “more” attention (and times when they all need less).  Mostly it works itself out with constant planning & re-planning!

    One thing you touched on, is the benefit of a client having full time access to a HCM consultant for learning but it can also be for consistency and understanding.  But again, that doesn’t have to mean full time.  I think also customers sometimes get a “comfort” factor from having a full time presence on projects – rightly or wrongly. 

    You didn’t make much reference to fixed price projects … something that appears to becoming more common. Is that your experience (UK and/or DE)?  If so, then this shifts the focus from man days & rates to deliverables and milestones.

    Most people seem to think that, in the future, there will be less “man days” required to implement (and support) customers … I don’t disagree. 

    So that begs the questions …

    • Will their be less SIs/consultancies? Less contractors and consultants? 
    • How will the big SI’s HCM consultancy practices be affected?
    • Will the IT resource market shrink? All? SAP/SFSF? HCM?
    • How will this alter the SAP/SFSF partner eco-system? Will it weaken it and allow other organisations to grow fuelled by better partnering opportunities?
    • Will it increase competition and push down day rates? Or make it a more specialised industry thereby retaining or increasing day rates?
    • Where will all these ex-contractors/consultants work? For end users? For software companies? (or doing something non-IT!)

    Now if I only knew all the answers … 😕

    Stephen

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    1. Luke Marson

      You may have read this, but others might find it interesting as it gives some “answers” to some of the questions.

      http://lukemarson.wordpress.com/2013/07/12/belgium-an-example-of-cloud-changing-the-sap-hcm-consulting-market/

      As far as I see it, there will definitely be some casualties in most markets. I believe the mid-level consultancies in each market are most at risk. The niche companies are nimble enough to change and often have lower rates; the big boys will always win work because of their brands, irrespective of the sort of prices that they charge.

      With this in mind, it is likely that the SuccessFactors partner ecosystem will shrink as some of the current partners cannot sustain enough business to survive. Other non-partners will be too far behind to make much business by that point and no doubt will have diversified.

      Rates are already diminishing in some markets where it is very competitive, but in others I am not seeing any changes. It will be interesting if this changes over time or not.

      Whatever happens, there will a tough transition for many and a lot of changes happening. It is exciting, but also – for some – quite scary.

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    2. Sven Ringling Post author

      Thanks for your comments, Stephen!

      I guess, if you knew all these answers, you’ only need to invest a bit accordingly and never have to work again – and that’s one IT professional off the market already to align with lower demand 😉

      My personal plan post-IT is to open a very small B&B in BC or Devon or The Lakes and become a fiction writer – alas, given my writing skills, I will have to make myself useful in the HRIS world for a couple of decades, before I can do that 🙂

      The typical market for enterprise software integration and support will definitely shrink. I would hope that some of these resources would be used for better change management (anybody cared to count the number of “lessons learned” slides at the end of customer case studies at conferences, which have “pay more attention to change management” as one of the points?). But this may be wishful thinking, because I feel that the combination of HRIS and change is, where I could add good value.

      A good question re fixed price projects. You should think they should become more common, but many customers have realised that with SIs knowing the technical side so much better and many of them having excellent legal teams for their contracts, they end up with a lower limit, but no upper one as they find they need to pay extra for so many things they thought are included or didn’t know they’d need.

      Personally, I believe independent advisors, who understand the technology and the process, but are no partners will become more important to help customers manage vendors and integrators and also support the process design. SAP customers have benefited a lot from consultants, who were not forced to comply to everything SAP said. Cloud vendors try to establish a very tight regime on those, who somehow contribute to the project. This will over time lead to dangerous intellectual in-breeding and an unhealthy shift of the balance of power towards the vendor. Independent advisors on the projects, even though they couldn’t touch the configuration, would help here.

      Be it as it may, the market will shrink and we will see whether the ever broader use of technology will create enough work for all those ERP consultants.

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  4. Jarret Pazahanick

    Excellent article Sven and a great and very important topic. It is amazing how many customers want all their contractors to go through a preferred vendor (often just pass through middle men) who in the US want $50 to $75 per hour which equates to 100/150K a year extra cost for the customer. The sad truth is more often than not it means customers don’t get the really good independent consultants (due to the layers) but are often paying MORE for a less qualified candidate.

    Since you hit on two of my pet peeves above I will throw out a 3rd and it is remote vs on-site consulting. Where is it proven that 100% On-site FT consulting will help deliver a better SAP HCM project. While I agree it is important to be on-site at key times during implementations and have the appropriate face time and relationship building with customers that does not mean being there M-F 100% on-site. I know a remote and PT (or FT when needed) model can work as I have been doing it for all my clients for the past 8 years.

    The good news is I believe that the consulting model within SuccessFactors should help change the behavior that you talk about and has been present WAY to long in the SAP and SAP HCM world.  Customers need to understand that the cloud deployment model is DIFFERENT than OnPremise so if their Software Integrator is trying to push the same model of a team of full time consultants coming site to do a SuccessFactors implementation there should be HUGE red flags and know there are cloud SI’s out there that have been living the new model for years.

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    1. Sven Ringling Post author

      Thank you for you comments, Jarret!

      good to hear you also see things changing  in the cloud. Recently discussed this with Luke Marson as well and he also confirmed the the SuccessFactors delivery model is much more agile than the traditional big SI interpretation of asap, which imho seems to be set up to rip-off customers via change requests.

      I like both developments very much! …hm – anyone looking for an HRIS veteran for cloud projects? 😉

      I also agree with you regarding on-site vs remote work. Remote work is definitely under-used, which adds cost, reduces agility and unnecessarily increases the carbon footprint.

      I’m lucky enough to have several very trustful relationships with several customers to allow for a good chunk of remote work in the mix.

      However, depending on the nature of the project and the culture of the customer, there is a limit to it. Funnily enough, there are instances, when I want to do less remote work than the customer asks for, because I feel I need to be on site to discuss change issues or simply drive things forward. But in most cases, there is a looong way to go until this limit is reached.

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