IT is what IT is…or is IT? The IT consulting industry is unique in many ways. Chief among them is the fact that virtually every contract is cancellable at will by the client. As they should be, in my opinion. Though some may disagree…IT is what IT is and not likely to change.
Despite the freedom to cancel contracts on a whim, nearly all clients take their contracts to term except when dealing with the occasional performance issue. In those cases, the supplying firm is typically given an opportunity to backfill the under-performer. All in all, IT’s worked pretty well over the years, though there is room for improvement. But, before making any recommendations, let’s set the context.
Now, back to those cancellable contracts…There is almost always a difference between what clients have approved in their budgets and what they truly believe their needs are. For example, the budget may call for 3 months of a consultant’s time, but the hiring manager knows the project will take at least 6 months to complete. Despite being under a cancellable- at-will contract, most clients prohibit their managers from contracting for services exceeding budgetary approval. Sounds reasonable, right? Not so fast.The shorter the term of the contract, the more time/energy the consultant (and their employer) will spend finding their next gig. So, clients who bring in a consultant under a 3 month contract with “high likelihood of extension” risk losing that consultant halfway through the project. Once consultants enter the 90 day window, as the free agents they truly are, they will begin seeking their next engagement. And, this natural tendency occurs regardless of their employment type –salaried, hourly or sub-contractor. They’re all free agents today. Few IT consulting firms exercise meaningfully more control over their employees then they do their sub-contractors.
How can we improve this situation for all parties? Clients should simply contract for what they believe they’ll truly need, and then work on getting any budgetary shortfall covered before exhausting what is approved. On those rare occasions when approval is not received, they terminate the contract, as is their right. As the owner of an IT consulting firm, I would far rather deal with the occasional problems caused by this approach versus the constant ones caused by the status quo.
This simple solution has profoundly positive ramifications for all three parties. The client secures the services they think they truly need, while locking in the rate and greatly reducing the consultant’s flight risk. Since short term contracts are most attractive to the unemployed, a longer contract term allows the consulting firm to cast a much wider candidate net. And, perhaps most importantly, the consultant can focus on the job at hand instead of worrying about the next gig…a true Win-Win-Win situation.Consulting contractual conundrum? I think we just solved IT.