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jonerpdemojam.jpg Jon has been tackling key SAP issues (like SAP certification and HANA) since 1995. Get the latest from his blogs, YouTube channel, and iTunes feed.

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Podcast: Changing The Future of SAP Consulting - Roundtable Print E-mail

podcastlogo_jonerp.gif"Special Edition - Beyond the 'Big Box' SAP Consulting Model - Roundtable on the Future of SAP Consulting with Three 'Disruptive Innovators'" (ERP Lounge #11)
Podcast Interview Date: August 20, 2010
Podcast: Listen Now!
[PC users: "right click" to download file]
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The SAP consulting market is primed for change. Staffing layers with questionable value place obstacles between enterprise buyers and the best SAP consultants. While "big box" consulting models still have their place, SAP customers want to see alternatives that allow them to source subject matter experts directly, even sourcing them "on demand" for short term engagements. Internet technology and SaaS-influenced approaches create a fertile ground for SAP staffing innovation.

To better understand the problems with the current SAP consulting model and the changes that are afoot, in this edition of The ERP Lounge, I invited three pioneers of new models to join me in a frank discussion.

The participants are:

Mark Koenig of
Monty Kalsi of
Simon Kirrage of

The result of our international teleconference was a 70 minute podcast that takes a hard look at the problems and offers up solutions that forge new ground for both consultants and SAP customers. The solutions are varied but have in common a new level of transparency, as well as new ways of building communities of collaboration that help companies to better evaluate consultants and give SAP consultants new ways of monetizing their network and knowledge.

The only rule I imposed on the guys was to save the "shameless plug" of their solutions to the end of the podcast. But since each of the solutions point to new ways forward, it was good to have the chance towards the end to learn about each one. I was struck by the frankness of the conversation, the collegiality of these three competitors, and the transparency of the margins they take. Anyone who has been in the SAP consulting market for a while knows that open discussion of margins is still a rarity. For those who are too busy to listen to the whole podcast, click on "read more" for detailed show notes and more on the participants.

Editor's note: this podcast builds on some of the themes in ERP Lounge podcast with Brian Trout on "Cutting Through the SAP Consulting Layers", so check that podcast out for more context on why "layering" exists in the SAP consulting market and the problems it causes.

Note: to comment on this podcast series, or send in a question for us to answer in the next one, be sure to join our ERP Lounge Group on Linkedin. If you want to subscribe to the series, get the The JonERP Master Blog and Podcast Feed. Or find Jon on his @jonerp Twitter feed. The ERP Lounge podcasts are also included in the JonERP iTunes podcast feed.   

:10 Jon's Intro - Three trends to frame the discussion:

- Customers and senior consultants frustrated with the staffing layers between them and looking for direct connection.
- large SIs are challenged to deliver value and to not oversell to customers in order to maintain costly overhead.
- SME and SaaS ERP consulting (including Business ByDesign) require a different SAP consulting model that is more virtual, and on-demand based.

The pioneers of new trends are always worthy of note. These firms are innovating before there is wide traction.

The guys introduce themselves:

Monty: cumulusIQ has created a Knowledge as a Service (KaaS) platform to deliver on-demand resources. We are targeting the SAP market currently. Companies have invested money and time implementing SAP - now customers are trying to get the most out of the solution and do more with less - we're trying to provide the same on-demand innovation on the knowledge and services side as SaaS players have done on the software side.

Mark: maintains an online membership of pre-vetted ERP consultants - SAP pros from across North America. Our "Reverse Auction" was created to combat some of the problems that the "big box" consulting model doesn't solve.

Simon: We've built a company called - we've been working win SAP since 1997, so we know the frustrations consultants have with the layers. We also know the frustrations of managers not being able to hire direct, Our site aims at taking away the layers of the agents, while improving the quality by giving consultants a chance to prove who they are to the hiring managers, and put them in touch directly.

5:44 Jon: Let's put some perspective on the "big box consulting model" - there's a time and place for the traditional model, we're not just throwing hand grenades over the wall. With that said, what are some of the problems with the conventional SAP consulting approach?

Yes, there's a time and a place for the big box model - I come from that model and there are good things to say. But you can't really fit the SAP consulting space into the big box model, it's far too specialized and wide reaching. Providing a help desk consultant and senior MM consultant are totally different. The real issue is the lack of transparency, and therefore the lack of true ability for individuals to provide a market rate to a client and win more business.

I completely agree with what Mark is saying about transparency, it's a very 90s model and it worked very well at that point. Internet technology has taken over but agents are working the same way as the 90s, Things have changed, but we're stuck in the 90s in this regard.

Monty: The industry is rife for a big change - the model worked a lot better in earlier years due to the amount of large scale projects. Now that the demand overall has shrunk and the need for specialized expertise has increased, it is a very different market today, I think in this market, both from the consultant side and the customer side, the need to have direct access to the right skills is paramount, and there is a big opportunity there.

Simon: in this economy, there is a squeeze on every budget, but companies want maximum value out of it. Is it fair that the consultants should be squeezed while the agency is taking the same commission?

We've found consultants far more reasonable and easy to deal with when they know that they are are getting paid a true market rate as opposed to getting squeezed while the agent is pocketing the extra margin. When we push the consultants' rates down, that can be tough, and unscrupulous agents, and there are some out there, can create a sour taste for consultants. When we talk transparency, 'this is our markup - it's this amount, and it's never going to change,' you can go home knowing exactly what we'll be making, and that's something that plays very well from a consultants side. The end client finds this more harmonious also because they have visibility - it's shocking it's never worked this way in the past.

Simon: A lot of our senior consultants have stopped working with agencies because they feel they are being robbed when there are several layers and they are all taking up to 20 percent, and they're right- they are being robbed.

12:30 Jon: Let's look at enterprise buyers - the end customer. The more they scrape beneath the surface, the more frustrating it all becomes. They couldn't get the consultant they wanted, they couldn't get through the layers.

Our talks with customers indicate: they are looking for really skilled consultants, they know they are paying top dollar and they want true expertise. What's happening is the agents and layers put pressure on market, and a result, people with so-so skills end up on project sites - the person who is hired is not skilled enough to command a high rate. But from the client side, there is push back: 'if I'm paying top dollar, I want consultants who are senior.' So there is an issue with relevance and quality of resources, and that's going to get more and more prominent in the years to come.

The other issue is the diversity of the skills base. More and more clients are engaging in cross functional SAP implementations. Originally you had an MM guy for 6 months, or a PP guy. Now you have projects where the need for that expertise may or may not be for the entire duration of the project. I may need this particular set of expertise for two weeks, or maybe for two hours. We had a client who wanted to hire a consultant for 12 hours. So it's not just obtaining the best expert, but access to a diverse set of expertise on one platform with minimal layers.

Mark: When an individual has a budget for $100 an hour, and traditionally they might get a $60 an hour person, they are really getting far less then they are paying for, and it's frustrating for the individual also, because they can't compete - they know that they are worth more money, but when you start adding layers it gets tough - even when some of those layers are justifiable. When companies pay $100, they want an $85 an hour resource, not a $60 an hour resource.

17:20 Jon:
I'm going to pick on the SIs a bit more here, and also a change I think I see in SAP projects as a whole. My issue with SIs is that there are times when they do add a lot of value, and they can provide a structured methodology and an industry-know how. But they are not in as much of a position to provide the 12 hour resource - they don't have the cost structure. When I was a recruiter, I passed the requirement along, and before you know it, you're going through five layers. These layers became problematic when the economy got tighter. In this case, they are sourcing a senior independent - but they are posing for a large integrator in their uniform, and the client doesn't know that this person is not with the large SI but is an independent. And after all these years, it hasn't really changed. What do you guys think?

Simon: I agree - it is a widespread issue and is not going away in the market after all these years. Consultants are not getting what they're worth and neither are the buyers.

Mark: The other shift in that methodology is that benches have almost evaporated in last 3-5 years. There's a ton of merit for SIs when they can serve a 10-20 billion organization and that company can pass off the risk to the SIs. That's fine and good when there is a bench of resources there. Now these large integrators are sourcing up to 70-80 percent of this work. When benches were deep, external resources weren't needed as much, but now after benches contracted, now anytime a new program is sold, they need to staff up, and it's become a far more prevalent issue.

Jon: The other point is that we're in a new era of customers taking more responsibility over their implementations, which reduces the need for outside methodology reliance. Michael Doane, Green book author, helps companies with Center of Excellence concepts, but they still need to be sourcing subject matter experts, whether it's the new GL, APO, or BI dash boarding.

Monty: We're also finding that the clients and the consultants are both looking for avenues to reach out to each other - whether it's General Ledger or IFRS or new recipe management functionality, wherever there are only a handful of experienced consultants - the market trend is showing that consultants are better off supporting many different clients virtually than going into one client for a long duration - because the needs are for shorter duration and widespread, the virtual model is evolving a lot more. That will put pressure on the business models for the large SI, which creates more activity in BPO and external maintenance and support, and the SIs need to reinvent themselves. The market is moving in the right direction.

25:10 Jon: Let's talk about impact of virtualization and software as a service, which ties into the Skyytek podcast I did on Business ByDesign. One of the memorable quotes is that they are looking to not only minimize offices but to go to no offices. Ray's talking about shorter term project, managing many projects from remote simultaneously. We're going to see more of that.

Monty: Yes, definitely. There are two trends that are accelerating: one is the software as a service model that is evolving. Traditionally, it was about the focus on SAP solutions, and we had a homogenous environment, but as we move to the cloud, and there is a greater degree of SaaS models, we're doing to see a diversified architecture, and solutions and service providers coming together. To be competitive as an SAP consultant, you will likely be combining SAP with a bit of Salesforce or NetSuite, etc.

Simon: I do think there will also be an on-premise demand for some of the upgrade work, there's going to be a split.

Mark: I think there will always be a perceived value of having a resource in a chair so that when you walk past them, you can see what it is you're paying for, whether it's necessary or not. We've always struggled with selling only remove consultants, though there is something to be said as projects get shorter and shorter, the travel and expense ratio picks up quite a bit over a three week timespan. It will be interesting to see how that perceived value changes, because surely remote will be more cost effective, people are more motivated to work remotely, the rates are more affordable.

30:00 Simon to Mark: We've seen companies get bitten by offshoring and nearshoring - will this impact that? Mark: It certainly could. We do see some companies still using offshoring methods, but some companies really got serious about outsourcing, and then within 18 months it was all back to shore. So there may be some fear of remote work, but I think there is going to need to be a shift in perceived value, and it may just come down to dollar and cents, the dollar may outweigh the psychological fear. If I'm a manager, I can save 30 percent if I let them work remotely, and he's only a Skype call away, the dollar may very well drive the psychological fear out of the equation. It will be really interesting to see what happens of the next few years, and many in the big box world aren't ready to capitalize on it.

32:00 Jon: I have a lot of listeners trying to understand the skills they need to be marketable in today's environment - each of you evaluate consultants - certification is one way based on the work I do with the Certification Five, you can look at depth of industry experience, soft skills, techno functional mix, soft skills, but what it comes down to is that there are exceptional consultant, good consultants, and mediocre consultants. How do you evaluate them?

Mark: it's difficult to say who's a great consultant. We're a toolset as a service where our clients can access our members 24/7 with our without our knowledge, but our minimum entry requirement is communication skills, it is paramount in today's age that consultants are able to have those soft skills you speak to. It's fairly easy to vet out technical skills and you can use industry depth or certifications. But with soft skills, it's very difficult to walk in day one and adapt to the culture. The two organizations couldn't be more different. You can have very different workplaces, and you need to be able to adapt to different leadership, project management, and budgeting style, and those skills are not easy to vet. You have to spend the time to make sure ea a particular individual can do that.

Simon: This is something at the heart of what we've been aiming it. We do it on a five point basis - there are references and ratings, and former clients can rate consultants, and that creates a point score for them which affects their search prioritization. We use three criteria: SAP certifications as one part of it that can be important in the marketplace, if they are verified, but we're also working with other firms to get clear on who has invested in themselves, the third point is the person behind it, the self-evaluation. When someone is looking to hire a consultant, they can also see who is behind the person. And professional education is the last point - we put those five points together and that determines the badge of excellence. The tech skills can be checked, but it's the whole person that carries the day and the five point check is part of it - the consultants bring in their own references.

Monty: Yes, communication is a key, and yes, tech expertise can be more of a commodity which may or may not tell the whole story, sometimes we've found more than anything it's the performance of the consultant on where they have worked in the past that plays a pivotal role. Often times, we call the previous clients and find out about the references. cumulusIQ has developed ad patent-pending quality system, what we call a skills cloud, that takes technical, soft, and overall communication skills and consultant build the skills clouds, and customers review and rate those skills as they collaborate on the platform. Those rating and skills will become more and more prominent as the consultants use the platform.

39:40 Shameless plug time - Each guest has a distinct way of tackling these problems.

Mark: Our Reverse Auction addresses some of the flaws in the 90s big box consulting model and also addresses unique aspects of SAP's specialized market. So we devised this solution, we take a fixed cost of 12.5% on the top of any of our placements. We devised a way to put together a real time scenario for organizations and consultants to connect directly. Everything was on the table. The Reverse Auction allows hiring managers to view all the interested consultants. I figured people could work out a fair solution on their own between manager and consultant and cut the agency layers out of it. Consultants are getting fair shake on the vast majority of the bill rate and knowing they are truly and honestly getting the fair market value for their skill set based on the competition for the role. It's been well received - we were wondering if we'd get backlash about the "reverse" scenario where it would drive down rates to the bottom. But we've found consultants are happy with the auction. They get access to unique jobs, companies get maximum value.

Simon: Like Mark, our solution focuses on transparency. We charge 10 percent on top of what4ever a consultant gets, it's always the same. Instead of reverse auctions, our consultants put a guide price in to give clients an idea of what's within their budget. Our focus is on the quality, and consultants who can prove they can actually add value, and really get some value realization for the client - those are the ones we want to see hired. So instead of just freelance consultants we've also partnered with larger consultancies like Capgemini. We let those consultants post those who are on benches and make them available for hire directly, and you hire direct through the site. To do that we had to remove all the agents, we don't have agents on the site. We hand check every consultant on the site to remove the layers. Out of that 10 percent we make, we're putting 50 percent back into our network. The effective rate we get is 5 percent on commission.

Monty: We have two models - one is our public cloud on - there we provide a subscription-based model where customers can connect with consultant on a Q/A support, with previously vetted consultants. That gives clients a chance to get to know the consultants are their expertise. At some point if they are interested in engaging with consultants in a virtual model, we can arrange them. Everything is fixed - we have a 15 percent margin, and we have a royalty system whereby every question answered on becomes a virtual knowledge base that is accessible to any clients who have similar problems. In a subscription model, we're trying to create a virtual knowledge base that is accessible to the community - any time the knowledge base is accessed, royalties are paid out to consultants. We also have a private cloud model for those who want to use our collaboration and knowledge sharing internally. In those cases, we implement internally and give internal SMEs access to our platform to connect with internal customers, using it as a knowledge repository and a way to collaborate internally. We're also looking for ways to tap into external community in case they don't have the subjects internally. It's available to anyone internally, and payout is 85% to the consultants.

49:50 Jon: guys I wanted to ask you - this is a topic that we covered in more detail in the "Cutting through the layers" ERP Lounge podcast, - the distinction between the perm hire model and the consulting or temporary model. The Internet had an impact on the direct procurement of resources. There was an HR process in place to hire someone directly, and lots of recruiters went out of business. But on the SAP staffing side, the Internet also empowered those who standardized with online submittals to the approved contract vendors on the project, and that's one of the main reasons why the innovations haven't happened, and those vendors have a stake in keeping things as they are. I call them "golf course relationships" when I'm in a cynical mood because I wonder what value they bring.

Mark: it's a daily obstacle to overcome. All of us target these large Fortune 1000 companies and it's mind-boggling to hear some of the responses, and when you say "golf course relationships," that's really what they are - "we have a vendor network in place." Sometimes I ask them, "does this vendor network preclude you from saving money? Is that why it's set up that way, to get you to spend more money?" Just because it once worked, doesn't mean there can't be a better way or a complimentary way. Sometimes we'll do a few placements and then address the vendor agreement. Sometimes we run the process in tandem alongside the existing network vendor network. After we do this, we've found they've become more competitive, and the organization has gotten more value out of their existing vendor network because of it.

Simon: From our point of view in Europe and Asia-Pac region, to be honest with you, these "golf course relationships" are an absolute curse. They don't seem be based on value or benefit to anybody. Breaking them down is just chipping away and chipping away.

Mark: One of driving factors for me is that you catch the right line manger and the right day and they've had a failed consultant walk out the door and the light bulb goes off - that they are not getting the value because of the layers, and then they become an internal champion.

Monty: We've faced similar resistance, but we've also found the opposite, once consultants started working with us, we've seen more and more consultants brought in through our network. Customers like the fact they don't have to go through and hire several resources through the SI. A lot of our customers tell us to bring on even more consultants because they see the value in a cloud of experts they can access when they need it.

56:40 Mark: I have a question for the other two - Monty and Simon, your royalty programs are fascinating to me, and Simon, your ratings structure is compelling. How did these things came about?

Simon: The royalty structure came about because we were looking for a fair rate for commissions, we were looking for the right approach. There has always been this fear that the agents are taking too much and are not giving enough. One of the things our community asked for, was, "you want to know who the good consultants, are, why don't you pay us?" So if you want to recommend someone and they get a position through you, or if you recommend a hiring manager, we'll give you 20 percent. And for our country managers, we'll give you an override as well. So that's how it came about. In certain cases, we've seen over a thousand consultants recommended. You only need a few of those referrals and it all starts picking up. As far as quality is concerned, that's something we've always felt really strongly about. We'd rather have fewer people of higher quality, that's why people, if they want to show up in search results, they have to provide references, and ratings, and prove their certifications, whatever they may be, and they have to be proven.

Mark: Jon, you and I spoke about this in the beginning of our relationship, about what sets pioneers like us apart. Any of us could post a resume on a large mainstream site saying we have fifteen years of SAP experience and get all kinds of inquiries. That's what we're trying to combat.

Monty: As for our royalty program, it's based on the knowledge base. The ideas is that consultants have expertise and knowledge. As a consultant myself, I spent 15 years on different projects, a lot of times we are re-using our expertise on project after project, so the idea was, if that knowledge can be captured in the cloud it can be sold and resold, and then we continuously pay those consultants for that knowledge as customers use it. It's being shared by customers on an ongoing basis. So it becomes an ongoing royalty for the consultants, and the good consultants are marketed heavily on our site, and sometimes it does lead also to on-site engagements.

1:04 Parting shots: where would you like to be in five years time? Simon: in five years time, I'd like ConsultantBox to be a respected and fair way for companies to find consultants. Monty: in five years, we want to be the go to place for on-demand SAP expertise. Mark: I hope in five years, I can say ERP-Consulting has opened eyes to consultant community and fortune 1000 that this is a better way for niche contingent staffing, one that provides max fair value to the consultant.

Note: to comment on this podcast series, or send in a question for us to answer in the next one, be sure to join our ERP Lounge Group on Linkedin. If you want to subscribe to the series, get the The JonERP Master Blog and Podcast Feed. Or find Jon on his @jonerp Twitter feed. The ERP Lounge podcasts are also included in the JonERP iTunes podcast feed.   

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