Consultancy services: who needs them?

Manufacturers face some important decisions regarding their IT and network infrastructures. Most will have established core technology some time ago, but the quest goes on to squeeze out higher performance, better value, tighter cost control and ROI. And that means further developing the IT and connectivity to support business objectives – but in an era of tight margins. Unless you have a large IT shop, you may well need external assistance – and there are two ways. One option is to bring in consultants with broad industry expertise both to help develop new systems and to cut out inefficiency, following best practice. The other is to outsource the IT and network infrastructure. However, both have come in for some heavy criticism in recent years. Consultants have been accused of not delivering on their promises within agreed budgets, and there are claims that outsourcing does not always yield the expected cost-effectiveness. Andy Chestnutt, managing director of Compass Management Consulting, agrees. He advises that you need to establish several things up front before engaging with consultants. Find out precisely what experience a consultant has. What past innovations can be referenced? What exactly is under contract to be delivered? He also suggests building an information base about what to expect. It can be a challenge, but making the effort is worth it: otherwise you stand to meet the guru once or twice and then it's the fresh MBAs advocating the latest theories. Likewise he agrees that outsourcing can deliver cost savings and efficiency, at least in the early part of a contract, but questions whether that's enough to indicate letting go of the strategic element as well. "It's essential to distinguish between commodity and value," says Chestnutt. "Outsourcing can work out if you just let go of the basics, but we advise keeping the high value part of IT in-house. Service providers may not like this split, but it's important to get the contract right." He cites the case of Compass client Electrolux: a new senior appointee had the task of consolidating the IT organisation there, and making it more cost-effective. The result was converting multiple IT departments into a single structure, thus raising effectiveness to better serve business objectives, according to Chestnutt. The merger of silos at Electrolux yielded the required cost savings. Meanwhile, sealing products maker James Walker uses consultancies for a number of purposes, according to Adrian Wakefield, business services director. He says consultants have been brought in both for extending the functionality of systems and for reducing costs, as well as for network optimisation and recommending IT for particular projects. Fast, effective transformation One, for example, involved the creation of an intranet. A consultant was brought in to provide a framework, taking into account management issues such as cost, security and how to develop a proper search engine. His report took 10 days and the outcome was an intranet with knowledge management and enterprise content management capability. James Walker also uses consultants as contractors to bridge important skills gaps, in addition to getting good project management and road mapping. Wakefield describes specific uses: firstly, the ability to tap expert skills for short-term advantage. In one instance, the company retained an Oracle technical consultant for 18 months – developing the expertise from scratch would have taken too much time and investment, he says. Then again, he harnesses consultants to cover gaps in technical ranks, in particular during times of change. What about companies outsourcing even more? There are signs that growth in the outsourcing market is plateauing, but there's also no doubt that additional services can deliver – and are delivering – cost savings and add capability that wasn't available. One example is CSC's contract with BAE Systems, which CSC says saved BAE £45 million in 2002 alone. Then there's faxes, printers and typewriters manufacturer Brother International Europe, the western sales and marketing arm of the manufacturer headquartered in Asia. The company opted to outsource its IT infrastructure to Atos Origin – not only for cost reduction, but for flexibility with its business-critical SAP implementation. It chose a utility computing service, treating IT as a single logical resource and releasing capacity to cope with peak periods. It works very well. "When a third party is running your systems for you, there is quite often a conflict between the hardware supplier and the hosting company when performance issues arise," observes Ian Metcalfe, senior manager, management information services at Brother. "This impacts on the customer while the two parties blame each other. With utility computing, I have just one supplier who is responsible and fully accountable." Better achievable service Metcalfe reckons the firm isn't necessarily looking for savings. "Outsourcing hasn't necessarily lowered my costs, but it has allowed me to provide a superior service level to my users at a lower cost than I could have done internally. In addition, it has given me a predictable cost that I can work with, as opposed to a variable that is difficult to control with a fixed income stream," he says. Flexibility is a key benefit and perhaps the most important for Brother. Capability to increase and decrease compute power, processors and disk space is now in place, and any concerns around under-utilised hardware have disappeared. "I can also boost my hardware performance at month ends, to ensure that users don't get poor performance while we are producing all the necessary reports," explains Metcalfe. "It allows me to try things out without a huge investment. Do I want to trial Business Warehouse? Great; turn on a new processor and disk space; give it a go for two months. If it isn't what the business is looking for, turn it off again." But there is one other key benefit available from consulting itself: getting stronger security for the IT and network infrastructure. All companies are open to spam, viruses, spyware and so on, and they need to be looked after virtually on a daily basis. Yet the fact remains that, however strong security is perceived to be, the weakest link could be a lost or stolen laptop. Jackie Groves, UK managing director at Utimaco Safeware, a producer of IT security solutions, says her company works with Tier One suppliers in the automotive and pharmaceutical sectors. "Securing mobile devices and wireless networks with encryption and authentication is essential to protect vital information," she observes. She reckons that most manufacturers don't have robust security here and notes another concern – incoming governance regulations and the requirements of the Data Protection Act. Tighten security SecureTest, a security testing consultancy, echoes this viewpoint. "Manufacturing needs to learn from the financial sector when it comes to security," says Ken Munro, managing director. "Industrial espionage is a factor, as well as more obvious threats, such as denial of service attacks." Wireless networks are not difficult to secure, he says, but many companies don't bother. Encrypting web systems is also easy, but again, often not applied. High time to think again about consultancy services, it seems. James Walker got its pervasive security policies partly through a consultancy. Wakefield reveals that the company took an asset management approach to the use of mobile devices, even to the level of projectors. Communication with the field sales force is now browser-based. Food for thought.