Observation on how ERP / EPM / BI and Data focused consulting firms need to adapt in 2021

 

Based on the 30+ CPA and software consulting firms we support we have made some observations that are impacting ability the ability of firms to generate business and keep clients. 

While the economy and COVID have taken a toll, they are not the only sole reason why some firms are thriving, and others are starving.   We compared respected firms that are competitors and while both logically should be doing well or badly, the opposite is the case.

 

The reason the thriving firms are doing well is because they adapted to an evolved business model, while the not so successful firms stubbornly gripped to the old business model of just billing by the hour instead of a hybrid model.

Their own structural disfunction and denial of technical change cost them dearly.  This is ironic because while they are selling change and operational improvement to their clients, they themselves did not take their own advice.

The disruptive change is based on software utilities that dictate how implementations / upgrades get done and service offerings that provide consulting firms a path to be a managed services “Landlord” vs. a vulnerable managed services niche player. 

Software & Services that change how you bill and even if you even get the assignment in the first place:

Key thing to remember as you read this that there is a major distinction billable hours and margin. 

 

Billable hours are the raw material only and hopefully a large percentage of that rate leads to good margins, however too many consultants are very myopic about their billing rate because it is how their compensation plan works.   Billing is part of the math, but it is what you keep that counts.  Billing rates are only a big deal if you are a sole proprietor because for them, billing rates = margin.  

Successful firms that have Owners who apply Consultants to do the   work focus on margins.  Billable hours are sadly tied to costs associated with the staff they must pay to do the work.  

 

So, think like an Owner, think margin or you will likely stay poor.

 

The first thing to recognize and adapt to for 2021 is a utility that cuts into your billable hours yet increases your margins if you are clever.

 

For ERP / EPM / BI and Data focused consulting firms it all starts with the implementation or upgrade of some software product.  

It does not matter if its: MSFT, SAP, Oracle, Infor, Qlik, Tableau…two of the implementation steps are always the same.

There is a metadata stage which consumes an average of 12% of the project budget and the reconciliation stage between the legacy system and the new system, which consumes about 25% of the project budget in terms of time and money. 

Some consulting firms will try to weasel out of the reconciliation work and put it on the client because they want to pretend that this is not part of the deliverable, but regardless of who does the work, and the bad references weasels earn with clients, this is a true cost to the client and comprises 37% of the project budget.  

Our software automates both elements of the metadata and legacy to new system reconciliation.  

 

This cuts the time that can be billed project by up to 37% in terms of both time & cost.  

 

Do not worry, while a consulting firm cannot bill by the hour for these steps anymore, it is still a deliverable.  The amount you charge for a deliverable is much more flexible, and that benefits the consulting firm.

So, in simplistic terms the consulting firm would be wise to point their effort to keep as much as that 37% as additional margin based on the DELIVERABLE of both the metadata & system reconciliation.  

 

That 37% can also be used as a non-margin attacking discount because there is no labor to pay.  

 

Sometimes that operating difference means the difference between getting the work and losing it to a smart consulting firm that uses software instead of direct labor.  

 

Direct labor always does a worse job and costs more than using software tools!

 

The second thing to recognize and adapt to in 2021 impacts your effort to bill for analytics and reporting.

 

Our software tool gets 60 days of work done in as little as 3 days, regardless of platform you are working with.

We have yet to be at an ERP / EPM / BI and Data focused project that did not include reporting.  

 

Reporting is the “Face” by which most of the user community and leadership team who will ever consider hiring you back determine the success of the project.   

 

Reporting is also the place where you can up & cross sell a lot more consulting work as well as a platform by which you can dominate the other consulting & software vendors in the account – but only if you are wise instead of stubborn.

 

Many ERP / EPM / BI and database software companies are attempting to create a platform so that they can dominate their accounts. It is the natural order of things.  

 

In our model the Consulting firm becomes the platform instead of the software vendors.  When it comes to your alliances with ERP / EPM / BI and Data base vendors; its ok, “To get the T-shirt, but not the tattoo”.  

 

Your goal is to bill within the account for as long as possible and grow your influence.  You only get that level of control by controlling the most essential software tools the client needs to function.  ERP / EPM and BI vendors are like fashion. They do not last that long.  By controlling the essential layer of software, the client needs, you by default are retained.  

 

You cannot do that with an ERP / EPM / BI and database software vendor.  

 

We have a utility that lets your goals be achieved, while still providing the ERP / EPM / BI and database vendor some business.  

 

We tip the margin balance to you instead of the software vendors. 

 

Here is how we do that

 

We supply software that auto generates analytic cubes with: No ETL, No metadata, No hierarchy maintenance… and it creates MDX code by itself. https://www.answer-factory.com/quickapp   

 

The Oracle’s, IBM’s, MSFT’s, MicroStrategy’s, Qlik’s, Tableau’s …of the world do not have this capability. 

 

With us you can get two months of work done with this tool in a few days.  There is nothing wrong with you charging two months of billing for a valid deliverable. 

 

Your margins will be much higher because you are not wasting money on labor and neither is your client. 

 

Therefore, this changes business models for any company doing any kind of analytic cube or reporting work.  

 

This tool makes analytic reporting applications affordable to clients and based on the measurable impact of those analytic deliverables, expansion projects are much easier to sell. 

 

With our utility, you can leverage data from other existing ERP / EPM / BI and database products and put that data to use for the client without replacing their past software investment nor forcing them into a platform they need not purchase.

As you know, your first loyalty is to your client, so there is no need to waste their money on the replacement of software tools that already work.  

That money saved & not wasted on unnecessary software can then be channeled to You because your effort helps them reach their goals.

The third thing to adapt to for 2021 is that unless your managed services offering covers at least 70+ software products, you are doomed.

 

You may think you are an expert worthy of being retained as a special vendor but that is not how the market behaves in the long term.  

Clients may have retained you as a stop gap, but when they buy services like this, they want one vendor who can cover them like a blanket and at a better price than what you are offering.

 

If that logic does not excite you consider the vast amount of margin you are not earning on the client as an enterprise by not earning money on 70+ products you are currently incapable of supporting.  

There is nothing smart about being a myopic peasant instead of the landlord, you could be! 

Recurring revenue is why software companies sell for a multiple of annual sales instead of the approximately 1X ratios that consulting firms sell for.  

 

Therefore, you will always be in a state of extreme stress and have work longer & have less to sell to fund your dignified retirement unless you capture a recurring revenue model.  

 

Many consulting firms have endeavored on a managed services effort, but that model has left many consulting firms in a very vulnerable position because they only cover a few products and do not employ automation.  

 

We cover over 70 ERP / EPM / BI and Database products with a USA only FINRA certified crew that costs LESS than offshore options and 40% less than an FTE a client would hire.  

 

We offer this as a service to partners so they can:

  1. Prevent us AND our Partners from replacing them at their accounts. 

  2. Keep their competition out of their accounts. 

  3. Provide a fertile place to up & cross sell services.

  4. Earn margins every month based on annual contracts.

  5. Avoid the personal risk and execution risk of spending millions on staff & infrastructure that may or may not actually yield business. 

 

The key thing is to think like a Landlord.  

 

The more ERP’s / EPM’s / BI’s and data bases you support, the harder it is for a client to ever replace you and the more passive margin you earn! 

 

On top of that if we provide the managed service for multiple products, your sales team can then pitch solutions that get margins for you & match your goals as a Landlord. 

 

If you have annual contracts with clients for support, you now have an asset instead of just labor.  This enables you to sell that account when you are ready for a dignified retirement.

So now you know why some of your consulting competition are doing very well despite the economy and COVID.  

 

Our model is to partner in a channel model with other consulting firms.  Check us out at www.answer-factory.com and www.ayudatek.com for more details.  Keep in mind that we revenue share for as long as you control the account VS some pathetic one-time commission or a few dollars as an implementation partner.  

 

We look forward to working with you and understanding your current business challenges so that we can help you reach you goals. 

 

Please contact me so we can make a plan at:

Jim Burke

jburke@answer-factory.com |  609 750 8887 

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