Consultants' Impact on Project Costs

Consultants necessarily add to the cost of any project, for the obvious reason that they must be paid. But companies may expect this spending to provide them with a better idea up front of what, exactly, the project will entail. Consultants should have the experience to lay out in advance how long the implementation will take, how much staff time it will consume, and how much it will cost. Those who hire these service providers -- particularly in the planning stage of the project -- should be the same companies that come in on time and on budget because they set their expectations based on expert guidance ... right? The survey results indicate that many readers are shaking their heads at that notion.

According to our research, implementation lasts about 50 percent longer for those who hire planning consultants than for those who don't. This is true at each level of spending on the software, and it's a trend that also emerges when companies are divided up according to their spending on implementation consultants. The median length of software rollout among companies that did not hire implementation consultants was three months; among companies that hired help with the rollout, the median length of the project was exactly twice that.

It might similarly seem that BPM software-implementation projects which rely heavily on third-party service providers would consume fewer staff resources; after all, the consultants should take on work that internal staff would otherwise have performed. However, in our survey, the opposite was very distinctly the case (see exhibit 2, below). Although the one survey respondent that paid more than $500,000 for software but hired no consulting help devoted vast staff resources to the project, the average project that involved planning consultants took up considerably more staff time than the average project in which planning and purchase were handled in house. The median level of finance staff time for an implementation in which the company hired planning consultants was 264 person-days; the median for companies that hired no planning consultants was half that: 132 days. IT teams saw a similar result. Companies that hired consultants during the planning/purchase process used a median of 132 days of IT staff time on the project; those that didn't used a median of 88 days. The accuracy of preimplementation staff-usage estimates wasn't improved by hiring consultants, either. Among organizations that did not hire planning consultants, only 2 percent invested substantially more finance staff time -- and 4 percent substantially more IT staff time -- in the project than they expected to. But among initiatives that involved over $500,000 in project-planning services, 50 percent took far more finance time, and 63 percent far more IT time, than plan.

Do implementations in which consultants are involved in the planning process also come in over budget? Again, the answer is counterintuitive, but the survey results are clear. Organizations that hire consultants during the planning and software purchase process are much more likely to underestimate the cost of the implementation project. Among survey respondents that relied on consulting help in planning the project, 38 percent spent more on the implementation than they expected to -- 17 percent went substantially over budget -- while only 3 percent spent substantially less on the implementation than they expected to. Conversely, among companies that did not hire consultants at all over the course of their software planning, purchase, and implementation, only 6 percent spent more than they planned to (just 2 percent substantially more), and a full 19 percent spent substantially less than they expected to (see exhibit 1 below).

At first glance, this data seems to suggest that BPM planning consultants routinely underestimate the length and cost of projects. Perhaps, instead, they see more opportunities for process improvements and software customization than would a company without consulting help -- and so encourage teams to take their implementation projects beyond their initial objectives, timelines, and budgets to accomplish gains that the internal implementation team didn't realize were possible. Of course, another explanation is that businesses tend to call in consultants primarily when they are undertaking a complex implementation, one that involves thorny data-integration problems and requires heavy-duty customization. In other words, the projects that consultants are hired to help with may be the same projects that would have run long, would have taken excessive staff resources, and would have come in over budget anyway.

This is a legitimate notion and one that likely played at least some role in our survey results. Unfortunately, it's also a theory that we can't test precisely based on our questionnaire. The one question we asked that may serve as an indicator of how much effort an implementation could be expected to take is how much customization the project entailed. One might expect that the projects for which companies required consulting help would be those in which the software was most customized for the buyer's specific needs. That doesn't seem to be the case.