IT Consulting Companies and the Mythology of Job Creators

Executive Summary

  • How the consulting business undermines the concept and the mythology of “job creators”
  • IT consulting companies and the contribution to income inequality.
  • Underhanded strategies by consulting companies to get sales at any cost
  • How low can consulting companies go?

IT Consulting Companies as Proof Against the Mythology of “Job Creators “

They are amazingly similar, part of the Mitt Romney crowd that think that they are the ones that actually add value to society, when in fact they really primarily do two things; live off of the labor of others and exploit labor. In fact, the consulting business is an excellent repudiation of the concept of the “job creators.” This is a phrase, which is often used by corrupt conservatives, and is repeated ad nauseum by Fox News.

The Concept

The basic concept is that  the entities that “create jobs” are businesses. However, when a consulting company either hires a permanent employee or someone like me as a sub-contractor, they are not hiring to fill an internal need, but hiring to fill the need at another company. Therefore, the consulting company cannot be the job creator. They are the job or demand intermediary. And, very quickly, if another company, say IBM were to win the contract from Accenture, then the Accenture would be the hiring company. But again, all that has happened is demand has switched to flow through a new intermediary.

Lets chart about how the demand for consulting services originates  Here is another example, I once interviewed with a company for a demand planning project. I competed against Plan4Demand. I told the company that it was not possible to turn on statistical forecasting in SAP DP in 3 months, and I believe that Plan4Demand either said it was possible, or from my experience seeing their PP/DS webinar, essentially sugar coated what could be done in DP, and mentioned none or few of the downsides in the application. This may have been the decisive factor that helped them get the business. Therefore Plan4Demand staffed the project, instead of a recruiter I worked though. A few months later I was contacted by Plan4Demand about whether I would be interested in working for them….full time of course, so they could pull the majority of the billing rate into their coffers. It should be noted that even in situations where I would work as a contractor to Plan4Demand, they would still take roughly ½ the billing rate that the client paid, contribute nothing to my ability to implement the project (in fact probably detract from it as they had given inaccurate information to the client to get the business – placing the responsibility for meeting the false promises). This payment is what economists refer to as a rent. In fact one can easily simply replace several words in a quotation from the independent economist Michael Hudson. Here is the original quotation which refers to the charging of interest on the part of banks which work under a fractional reserve system (i.e. they can loan out roughly $100 for every $1 to $2 they have on reserve:

Interest payment much like a tax – a charge without a corresponding cost of production, paying for the privilege of creating bank credit electronically in today’s world. It is predatory rather than productive, adding a price without reflecting an intrinsic cost-value. It is a form of economic rent – although not one that Ricardo discussed when he limited the concept of landlords rather than to the banking sector.

The same paragraph works for consulting companies with just a few adjustments in orange text:

Payments to consulting companies above the monies paid to the consultants (which are quite significant) much like a tax – a charge without a corresponding cost of production, paying for the privilege of the matching buyers and seller in today’s world. It is predatory rather than productive, adding a price without reflecting an intrinsic cost-value. It is a form of economic rent – although not one that Ricardo discussed when he limited the concept of landlords rather than to the consulting sector.

Underhanded Strategies by Consulting Companies to Get Sales At Any Cost

Plan4Demand may take some intellectual property off of the internet and present it as their own, as they did on a PP/DS webinar with an unsourced graphic from SCM Focus, lie about how an application is generally implemented in order to motivate an implementation on the basis of a false assumptions, or they may write a comical and fallacious white paper on a topic they know nothing such as with white papers by Booz Allen Hamilton.

They may take material from a published book on an inventory approach but then tell the consultant not to tell the client that the method came from a published work, as Andersen Consulting instructed me when I found a method that could have been used at Pfizer. They may “adjust” the resume of their resource, as Andersen Consulting did with mine when I first came out of graduate school – to phony up some experience I did not have. They may accept a consulting selection project, but then insert themselves into the process by making the client feel that there was really only one choice, to go with the consulting company for the implementation that was supposed to only oversee the bidding selection – as Deloitte Consulting instructed me to do with a contact that I made in SAP training.

The management for Plan4Demand/Accenture/Deloitte/etc.. then goes out and buys themselves a new Audi A4, and then casts a vote for Mitt Romney and goes home and tells their family and friends about how they create all these jobs.

How Low Can Consulting Companies Go?

After 16 years working in, with and around consulting companies, my opinion of them could scarcely be lower. (And this includes SAP America, which lies along with the best of them). It’s possible that my opinion could decline more, for instance, I could come to find out that IBM is engaging in human trafficking – which at this point would not surprise me, and I think many IBM partners would probably be up for. They are deeply misrepresented in the popular press as legitimate businesses or thought leaders when they are neither. They are not about true thought leadership or innovation, but about copying the ideas of others and selling selling selling. The same things I have witnessed have been witnessed by countless others, yet the criticisms of them have been scant. There is truly very little reason for them to exist. They add very little value and primarily function as outsourced HR departments for the eventual client. They reduce the quality of IT dollars spent because they constantly lie about the potential of the SAP and other software they implement to clients, who make investment decisions based upon this fact. As a general principle, I would estimate that only roughly 30% of the dollars spent on IT projects actually end up as a value added system for the company. The rest is frittered away on bad projects and bad software. The efficiency would never be 100%, but the existence of consulting companies dramatically increases the failure rate of projects, and beyond that the bad decision-making of what projects, what software to implement, etc. before the project even begins.

Income Inequality and Consulting Companies

They also increase income inequality generally. Consultants receive roughly 1/3 of their billing rate. That is an enormous overhead for the minor contribution of selling consulting services, providing business cards, health insurance and a laptop. This means that the majority of the rate flows to Mitt Romney types (don’t forget, according to Mitt, he inherited nothing – because he gave all of his and his wife’s inheritance away to charity and made his $200 million fortune from exclusively hard work.) The management at consulting companies also does not train their consultants aside from providing style tips or recommendations related to increasing their corruption. This is because the management at consulting companies is about extracting from their consultants, not making them better, and certainly not making them honest.