Doing the Math: Consulting versus Software

Consulting companies want to sell consulting services; software companies want to sell software. When software can be used to “replace” services, a consulting firm’s first instinct is usually to utilize its people rather than the software, because that maximizes utilization (and of course high utilization leads to a higher compensation). Sometimes, however, a consulting company and its client (and the software company) all benefit when the consulting company employs a software-centric solution.

At FlexField Express, we have been working both directly with end-user customers and with consulting partners who are in the process of considering whether to use our FlexField software in bids or on jobs that involve changing charts of accounts in Oracle e-Business Suites. As part of those conversations, we have been able to construct a realistic comparison of costs and benefits that a professional services company and its client are likely to encounter when they decide to change accounting flexfields, a highly complex and specialized task that is the sole functionality of our FlexField software.

A typical flexfield change project involves an orchestrated sequence of steps that vary only slightly whether the project is accomplished using consulting services alone or consulting in conjunction with software.

• Setting up a test environment and preparing it for a “change” project, which includes what we call “pre-steps” that resemble a company’s monthly closing cycle.
  
• Setting up the new accounting structure in the Oracle Applications.
  
• Mapping from the old chart of accounts to the new accounting flexfield. This is usually done on a spreadsheet.
  
• The actual changing of the flexfields.
  
• “Post-steps” such as rewriting interfaces, reports, and rules that were based on the old chart of accounts and flexfields.
  
• Testing and validation in the test instance to ensure the integrity of the result and user acceptance of the changes. At this point, with software, the users can look at the results and see if they are actually what they wanted, and if not, change the mappings and rerun the software with almost no time or effort.
  
• Planning for cutover on the production instance.
  
• Pre-steps and cutover into the production environment.
  
• Post-steps in the production environment (largely a matter of reusing the set of post-steps created from the test environment).

The FlexField software operates primarily to complete the single hardest and most complex step, that of actually changing the flexfields. With minor variations based on the optimization of the environment and the size of the instance, that step takes a few hours and is totally automated. The software also facilitates the mapping, with import tools and templates. Importantly, as already noted, if the resultant output is not exactly what the users want, they can modify the mapping and rerun the actual change with a few mouse clicks and no additional consulting effort.

At this point, we can compare what a consulting firm’s bid might be using consulting only and using software. There is only one stage of the process for which the estimate of consulting resources required will vary significantly – making the actual changes of the values. Based on data gathered from potential clients who have received bids from consultants and based on our own expertise, the step that covers the actual change of accounting flexfields will cost the client approximately $200,000 to change two charts of accounts (in separate sets of books, for example). Add next the following assumptions about the economics of consulting – a billable hour rate of $150/hour, a burdened cost rate (including benefits, taxes, and overhead) for consultants of the requisite skill level of $100/hour, and an 8 hour day, 160-hour month. Finally, use as a comparison a bid that utilizes the FlexField Express software license ($17,990 per flexfield) for changing two accounting flexfields and you get the following:

Changing Two Accounting FlexFields

It is important to note that the monetary savings to the customer of $50,000 is only one of four distinct benefits of using the software. The others may well be of greater value, they are: (1) reduced time (both substantially reduced time to completion and far quicker cutover); (2) certainty of data integrity and absolutely no errors; and (3) the ability to re-do the change with no additional cost or delay if the resulting chart of accounts is not exactly what the customer wants.

After reviewing the example, it is tempting to ask why end users would not purchase a software license on their own and then contract with a consulting firm only for the services that do not involve the key step of actually changing the flexfields in their system. A few end users will take that path, but there are several reasons why the end users will more often work through a consulting firm. For many of them, they have been told for so long that charts of accounts and accounting flexfields cannot be changed that marketing by the consulting firm may be the mode in which the idea takes root. More fundamentally, the impetus to change accounting flexfields is driven by a business decision to change an outdated or inefficient chart of accounts. The decisional process is focused on the business result rather than the method of achieving it, and for business users that method of implementing a decision of this sort most often takes the form of hiring a trusted consulting firm to bid and then complete the job. Finally, many clients realize early on that they lack some aspect of the technical capability, bandwidth, or project integration skills needed to be successful even if there is a software solution to the most difficult aspect of the project. The business users are the key players in the mapping, and the IT staff will have to get it done. In many firms they do not often work together and in virtually all firms both groups had full time jobs before the project came along.

The “math” adds up. By embedding the software into the consulting services, the consulting firm is able to add value to multiple links in the chain, decreasing the cost to the client, decreasing project time, ensuring an end result that is exactly what the client wants, and increasing profitability. In addition, because of the greatly reduced time, the consultant can now deploy the saved skilled resources to undertake billable work for another client during the same total duration and make additional money.

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