Decisions, Decisions

Lets not forget the non-monetary damages either: pain and suffering, if you will. Aside from the doom and gloom, you can run into a consultant that just gives you fits. Your time and attention is now spent managing that awful relationship. How do you characterize that? How do you put a dollar figure on that? Giera said. How?

Money Isnt Everything
We surveyed industry analysts and representatives of small, mid-tier, and Big 7 consulting firms to find out how insurers can forge better consulting partnerships. One things for sure: Locating a firm that offers technology consulting is not a big problem. Like a telemarketer during dinner, consultancies tend to be frequent petitioners to insurers IT decision-makers.

Chances are you already have a process in place to help you develop a short list of firms to approach for any RFP. Youre talking to consultants you use elsewhere in the enterprise, working the exhibit hall at conventions, and reading the trade rags, er, magazines. Youre talking to vendors and their customers to find out who consulted on system installations. Youre gleaning advice from contacts at insurance trade associations.

Before you go any further, lets establish one key premise: Consulting proposals should not be evaluated like bids for government contracts. As Don McLaurin, CEO of the National Association of Computer Consultant Businesses (NACCB), put it, There arent many businesses that choose their law firms or CPAs based on whos the lowest bidder, but many firms just take the low bid when it comes to technology consultants.

Procurement people will tell you that you can choose a firm based on a commodity approach, McLaurin said, but theyre not the ones who have the projects to complete. If youre looking for paper clips, you dont care which box you get, but if you send out an RFP looking for Java programmers, you should care if one has a drug problem and another doesnt.

Of course, its easier to take a commodity approach, because pricing, experience, and skill sets are all features that can be objectively compared, whereas subjective qualities that determine whether a firm is a good fit for both an insurers business model and corporate culture are less easy to assess. As a result, in the last couple of years, companies have spent a lot of money on IT and indiscriminately were choosing consultants based on availability, rather than true capabilities, Giera said.

In some ways, were our own biggest enemies, because most of the [consulting] firms have developed a strategic sourcing practice, putting discipline in your purchasing process, so a lot of subjective criteria gets thrown out, said Richard Marx, vice president and leader of the North America Insurance Practice at Cap Gemini Ernst & Young. [When] the selection is done by an IT group or, even worse, a vendor management group thats focused on price, versus having a business person with a vision trying to understand what an insurer is trying to accomplish, the consultant-client relationship frequently fails, he said.

The heavy lifting of the evaluative process therefore begins with checking references. Of course, everyone checks reference lists, right? Youd be surprised.

Reference Check
Fewer than 20 percent of people who ask for references actually call them, said Frances Karamouzis, research director at Gartner. Yet its proven in all our research to be the single biggest indicator for success. So be sure not only to solicit and use references, but to solicit them on the particular team that the firm proposes to assign to your project, not just for the business itself.

There are those who will argue that references have limited value because only the best customers and most successful projects are offered. The secret, however, is knowing how to conduct an interview. Ask the contacts open-ended questions, such as Tell me the strengths and weaknesses of the firm, or What did you have issues with? Karamouzis said. When you call a listed reference, consider talking to staff members who arent on the list. Even if theyre glowing references, one CIO calling another CIO off the record can lead to surprising information, she said.

If references check out, its time to get creative in your due diligence. The insurance industry is a close-knit industry, Marx said. With user conferences, industry groups, and people simply knowing people in other companies, you should work the entire network as well as the references provided. Search press releases at consultants Web sites for past announcements of big contracts, then follow up with those clients to see how the project turned out. And watch for news in the tech media on relationships that have gone south.

Dont be afraid to ask the consulting firm itself for examples of instances where things didnt work out according to plan, either. A willingness to reveal such information speaks directly to the integrity of the firm, and the resulting calls you make to those clients can be particularly valuable.

You may find that there were some problems, but they were overcome, or issues were important to that [client] that might not be to you, Karamouzis said. Youre not going to get a stellar reference, but when you talk to a company who had been living, breathing, and working with the service provider, there are a lot of things youll find out just by talking go them,

Then, Marx explained, I would go back to the consulting firm and say weve heard this, help us understand it. The firms answer and attitude can help you assess how it would respond to problems that arise during your project.

The Horses Mouth
Good interviewing also applies to dealing with prospective consultants themselves, particularly because theres no easy way to verify whats listed on their curriculum vitae, let alone an objective way to assess their cultures. While you can look for staff education, experience, and even specific certifications in languages and systems, theres simply no Better Business Bureau of consultants.

Questioning a firm on its capabilities can be difficult when you dont know the technology yourself. (Thats probably why youre hiring a consultant.) But if you have a clear vision of your technical objective, finding a firm that can clearly articulate the way to that destinationand provide examples of similar installationsis your best guarantee of success. In fact, Norman Comstock, OLAP solutions director at Austin-headquartered Daman Consulting, explained that simply articulating to consulting prospects what the end game is, and bringing both business users and IT into the decision making process, can help identify the skills that are necessary to complete the project but that are lacking in the insurers own staff.

And its likely your IT staff knows more than you give them credit for, said Karamouzis, who also recommends forming a team of both business and IT staff to question the firm. If a consultant comes in and says, Yeah, weve done this 15 times, you should have the business users drill down and ask questions about how the installations actually worked. And the tech people, even if they dont know the technology specifically, will be able to tell if the consultant understands the technology on their ability to explain it, she said. After all, knowledge transfer is one of the skills youre hiring the consultant for.

If you still doubt your ability to adequately question or assess a firm, consider bringing in a third partya consultant broker, analyst, or even another technology consultantto assist. For example, Gartner is happy to offer its own evaluative services to its clients looking to engage a consultant, as are most of its competitors in the research space. Giga has also recently developed standardized Vendor Evaluation Scorecards, an ongoing project that will first tackle top tier vendors, roll to tier two vendors in February, and should cover many niche consultants by the end of 2002.

Theres value in hiring a consultant to hire a consultant, said James Kaeder, principal of the Madison, Wisconsin-based Paradigm Consulting. If you dont know the questions to ask, they can be a tremendous asset. However, make it clear to the firm you bring in that they cant bid on the contract because, no matter how honest they are and how hard they try, theres always going to be some bias.

While theres no way to completely remove the risk from the process of choosing a consultant, smart use of available tools, resources, and information networks can help an insurer select the partner who is best for them. [Insurers] need to look at the whole picture, Marx said, but somewhere between what they hear from references and their own intelligence gathering, they just have to formulate an opinion and make a decision.

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Cap Gemini Ernst & Young: www.cgey.com
Daman Consulting: www.damanconsulting.com
Giga Information Group: www.giga.com
Gartner Group: www.gartner.com
National Association of Computer Consultant Businesses: www.naccb.org
Group Paradigm Consulting:
jkaeder@consultparadigm.com