The consulting industry is built on a business model that is fundamentally broken.
Think about the incentives. If you take longer to do something, you make more money.
A fast consultant makes less money than a slow consultant. A bad consultant charges for reworks and makes more money than a consultant who did it right the first time.
We should pay consultants for value. Speed is value. Quality is value.
Fixed fee projects don’t work either.
The problem is the dependency on people you don’t control. Planning and scoping is very labor intensive. That’s why projects are split up in ways that don’t work.
Projects should be treated more like supply chains. If you don’t control part of the supply chain, you need clear gates with exit criteria and penalties.
People often say that data migration is the #1 cause of failure, yet it is often taken on by the customer. The bad consultants take over the work late in the project and bill more time. The good consultants guide the customer early, and they don’t let data migration fail. They don’t accept to fully delegate a critical part of the supply chain.
AI makes it possible to start billing for value. What needs to change is the unit. Fixed fee projects don’t work. But fixed fee deliverables can.
This wasn’t possible before because project management was already too hard and expensive. Now AI can do the clerical work and humans can make decisions. Project management becomes much easier. Customers can decide what they want to delegate, and consultants can charge more for the most valuable work.
Doing a workshop with an industry veteran solution architect should cost a lot even if it takes little time. Drafting a simple design should be cheap. Revisions caused by changing requirements should cost something (the penalty I was referring to) but revisions caused by bad design should be included.
Recently I heard of a different billing model. Success based billing. The idea is to measure and reward good outcomes. If you go live faster, the firm gets a bonus. If you get great business results following the implementation, the firm gets a bonus. If the project is late or over budget, you lose the bonus.
I love this idea. I wonder if companies would abuse it. The bonus structures should be defined carefully. I wonder how much firms would feel cheated if the customer makes decisions that impact the project results. Maybe those can be defined up front. A lot rests on the need to have a great relationship.
The part I like most is the governance benefits the customer would get if the incentives are designed relative to outcomes. A customer might say they need a new ERP because they want to produce twice as much. If they successfully produce twice as much within a predetermined timeframe, then the firm could be paid more based on that successful result. If the payment of the firm depends on the measurement of this result, you know it’ll be done well.
No model is perfect, but time based billing is horrible and must die.