Consultants
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I came across an interesting article in Windows IT Pro magazine at TechEd about hiring consultants. Unfortunately the article is a subscriber one that costs $$, but if you kept the free issue from TechEd, it's on page 81 and 82 🙂
The gist of the article is trying to find ways to hire effective consultants. It has good advice, some of which I've seen in a few other articles (Follow these three rules when choosing tech consultants and Rules for Managing Consultants). Face it, hiring consultants is hard and not something I enjoy doing. Nor Andy and I feel bad for him being in the situation of having to use some.
The interesting thing that I saw, however, was the last item that dealt with bringing a consultant in house. Now that's something you want to be careful of anyway because the type of person that decides to be a consultant, working for lots of different companies, is fundamentally a different type of person that you want to retain as an employee. Always be wary of converting someone unless there is some event that made them decide to not be a consultant anymore.
The part that caught my eye, however, 4 paragraphs later, had to do with the conversion salary. It basically listed a conversion factor of consultants should be less costly than an equivalent FTE X 3. You have to include benefits, but basically a US$60,000 employee equates to a max consulting rate of $117/hour. That's with a 30% benefits rate. Keep in mind that's max, but still that's quite the rate.
So I'm curious. How many of you bill, or have your company bill, rates that are 3 times what you'd pay an in house person? How many of you get about 1/3 of your bill rate? Or more importantly, how many of you think that a consultant is worth 3 times an FTE?
There are times and places to use consultants, but in general I've billed and worked and hired consultants as slightly more than twice an FTE. And that's the max!
To me, this sounds more like a consultant giving free advice to potential employers. Except nothing's free. Never, ever, ever, nothing in this world is free. Even Grandma's cookies cost a hug or kiss.
To me this is more like ammunition to bill more to your clients. After all, it's in print 🙂
Steve Jones
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Steve, basically consultants are hired for three reasons. First, they have expertise in an areas where you do not have in-house talent and not enough work for a FTE.. Secondly, you want verification from an independent source who will not be influenced by the good-old-boy network. The third reason is closely related to the second. You want someone to blame for the changes absolving the good-old-boy network of responsibility.
In all cases 3 X FTE is cheap. My rates generally run between 2 and 3 times FTE depending on the length of the contract. You can have it good, fast or cheap pick any two.
Mike
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I also see consultants just hired as bodies. Sometimes just to take on some work that you might not be sure if you want to hire someone full time or it's possibly temporary work.
I agree that good people at 3X is probably cheap. But the chef problem abounds. A talented person hires 10 people to work for him as consultants and the quality of talent declines with each person as the consulting business grows. I've seen people with less than a year or of experience billed out at $200 as consultants. They have often not had expertise in anything.
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Being in the consulting side you have to consider that the Consultants business is also affected by a lot of irregularities and by a higher tax burden that the FTEs . I believe that 3X is an OK figure, I have seen places in which 5X is possible depending on the undertaking at hand. Meaning:
Longer term -rate usually is less
Short Term with high pace (including nights) - rates go up steeply.
Just my $0.02
* Noel -
I think it's important to draw a distinction between a freelance consultant and one who works for a vendor as well. For instance, if you purchase an application and want it setup you might hire an FTE for $60k (as in your example), or you might hire an independent consultant for $75-$100 per hour. However, if you get a consultant from the application vendor (who theoretically should be the most experienced possible with resources no other consultant/employee would have such as a direct link to engineering) then you should expect to pay $175-$300 per hour.
Is it worth the extra cost for consulting? I think so in many circumstances, but then again I'm a consultant so there's my bias. However, I think that under most conditions I can easily churn out 3x the productivity of a good FTE doing the same work due to my experience. Perhaps the more important thing though is that I'm much less likely to take a wrong turn down a dead-end in terms of development. That not only saves me hours, but it could save an entire project team many weeks of re-work due to mistakes or wrong assumptions.
Another benefit mentioned earlier is a direct line to engineering. If an FTE hits a bug or issue, maybe it'll get reported and fixed, but it could take months for a release. If a consultant hits the same issue, it could be fixed by the end of the day. That's not every bug naturally, but those connections count when the project is on a tight timeline.
Consultants vary greatly from person to person though even within a single consulting company/dept. Get a good one an the extra cost is well spent. Get a bad one and its money wasted. Perhaps what is needed by clients the most is a mechanism to better guage the consultants they have.
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"Sometimes just to take on some work that you might not be sure if you want to hire someone full time or it's possibly temporary work.
IMHO tempoary employees (those hired for a sudden increase in work or to deal with a short term project < 1 year) are not consultants. While these individuals may be experts they are seldom involved with issues that have a major impact on the organization as a whole. For example you might hire programmers to develope a new application. (Tempoary employees). If you are planning a major change in your IT infrastructure you might want to hire a consutlant to help design the overall system and develop change programs that will insure that the new technology is adopted by the organization.
"I've seen people with less than a year or of experience billed out at $200 as consultants." $200 per hour or $200 per day? If I'am paying $8000 a week he had better be real good.
On the other hand $200 a day equates to a $50,000 a year FTE.Mike
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Either way.. where do I sign
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That's $200 an hour
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Ok I defenitly signed the papers, where do I send them now
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$200 an hour may be just a tad high for someone with 1 year experience.
Remi mail the papers to me and I will hand carry them. -
I'm lineant... 100$/hour is fine for the trial period
. - I couldn't resist a small rant after reading a recent SQL Server editorial on consultants. I must agree with the author - hiring the right consultant is hard. Since 1972, I've been alternating between hands on technical development and IT management consulting for both Big Six and boutique consultancies. I've consulted with clients from Washington to Kathmandu. Here's how it looks from the other side of the desk....Sure, hiring a consultant is more expensive per day than an employee but remember you're also paying for the consulting firm's Human Resources services in recruiting and screening the candidate, financing payroll, benefits and liability insurance etc. The consultant also has to eat between assignments and you are paying for part of that downtime so that the resource can be immediately available for your important assignment. (How long does it take to hire an employee in your company?) It is not unusual for a consultant to spend a month (without revenue) between assignments. Try going without your pay check for a few months each year and you'll see why this is important to the cost model.It's not so bad when you need an extra VB programmer or DBA within a very well defined assignment. You are contracting an individual for a common skill. Rates tend to be pretty competitive and various rate surveys can be found on the Internet (see Monster, for example). There is lots of talent out there and it's a buyer's market. Paying twice the cost of an employee for this type of consulting service is the top end of this market and is normally paid only for very short term assignments. You are paying a premium because many of the overhead costs (remember that downtime) are the same for a short assignment as a long one.Depending on how your organization does contracting, you can usually save money on this type of individual consultant by hiring from smaller local firms or independents. They tend to have lower overheads and lower rates. However, you must have confidence that the firm can find you a suitable resource.The situation is more complicated when the assignment is less well defined. I have clients ask me to help them with "a problem" or to introduce to a new IT strategy to their organization. Often the problem is not well defined or the "strategy" is at the vision stage. The client is looking for industry best practices upon which to base their solution. The typical employee is well-versed in the local environment and perhaps the problem but often has tunnel vision regarding available solutions. This is were the consultant (or consultancy) who "has worked for many companies" can pay big dividends. It's not so much a consultant "being worth 3X times an FTE" as the consultant being a different type of resource than an employee.When contracting for this type of assignment you are not only hiring the skills of the individual consultant but also (hopefully) a knowledge base of solutions and best practices used in other organizations. That knowledge base requires time and money to build and maintain. Often the information is not widely available. In some cases (e.g. annual surveys to establish trends) the ONLY source for the information may be a specialized consultancy. This is one place where the really big fees come into play. Steve's previous editorial expressed astonishment at paying 3X the employee salary but I've seen many cases where the client has paid substantially more for an IT consultant and felt that they got good value for their money.As with most things in the market, it's a question of supply and demand.Ric Kersey
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