5 ms·

You have to understand consultancies in IT are just brokers. They buy in "inventory" of "profiles" at as low a cost as possible, and sell that inventory to thei

You have to understand consultancies in IT are just brokers. They buy in "inventory" of "profiles" at as low a cost as possible, and sell that inventory to their customers for as much as possible. So you've got your CS graduate which you recruit and pay $40/hr, slap a badge on them and rent them out for $120/hr. Once in a while you fall short and need to hire some freelancers for $60/hr. That's it. As your gov agency is capped on paying it's own recruits $25/hr for the position, very few will end up as 'native' gov workers, and the once that do will get poached swiftly by the consultancies. Now these juicy contracts are not sold piecemeal, but in huge bulk. Not 3 guys for 2 months for a project, but an umbrella contract for delivering 2.000 full time profiles over the next 2 years. Very few consultancies can credibly fulfill on such commitments making the market fairly small and not too competitive. The few that participate have no incentive to spoil the roost and derail the gravy train. No explicit collusion is required. It's an iterative prissoners dilemma situation where the few players all know each other and frequently switch sides.

abakker 2y ago
I think it is important to distinguish between Consulting, Staff Augmentation, and Managed Services. Many of the large integrators/consultancies do all of these options, but the objectives, contract sizes, and durations of the contracts are all expected to be different. Consulting - best though of projects, governance, and on-demand expertise. There are definitely junior resources in play, but the objective is to build on the IP of the consulting firm and to create a external channel for problem solving or delivery that is not dependent on or hampered by internal inertia. Staff Augmentation - a lot of time this is just billed hourly, and you really are looking at paying a premium for a non-committed spend - if FTEs are "reserved instances" then staff aug contracts are the opposite. You pay a premium for the lack of long-term commitment and to make this look like variable OpEx. my opinion is that this model is over used in most businesses. Managed Services - longer term commitments to deliver services. Generally the good advice is to contract on "what you want done" rather than the detailed "how you want it done", though that is more philosophical than practical. The expectation is that the service delivery will improve, and that those process improvements, automations, training, and provider IP/Tools will deliver decreasing unit prices for "resource units" over time. Thinking of consultancies as pure brokers is certainly a mental model you can use, but is not the most nuanced model. I think it tends to be better to acknowledge that there are structural reasons why all of these models are present in organizations and rather to think about how they should be governed. (disclaimer, my employer is an advisor on how to contract for these kinds of services. My work is not related to contracting, but research about this market)
- chenster 2y ago
  [flagged]
- rrr_oh_man 2y ago
  The people who care about these distinctions are mostly within those three groups. For the customers it's 'consulting'.
  - plasma_beam 2y ago
    I disagree - no one is calling large scale gov contractors such as Northrop Grumman, GDIT, CGI, CACI, many more etc. consultants - yet a lot of the IT work they do overlaps with the consultancies. “Contractors” has become the more common term over time.
  - sfifs 2y ago
    Not at all. I buy these services in a large Fortune 500. Consulting is the least used model for us.
    - backWurdz 2y ago
      [dead]
  - rrr_oh_man 2y ago
    Too later for an edit, but: The point of this whole scheme is trading OpEx for (on the books) CapEx.
  - deleted 2y ago
    [deleted]
  - scarface_74 2y ago
    That’s definitely not true. I’ve worked for companies on the consulting side for five years. We have two types of Statements of Work (SOWs) we get signed by the client. The first type and the only type I would ever get involved with are project based. The client has a business need but not the technical expertise. I come in right after sales and work with the business to tease out their requirements, get their sign off. We do the work and leave the project once the requirements are met. With this type of SOW, we (I) lead the project technically, the project management etc and once the work is handed off, we move on. It’s outcome based. The second type of contract is where the client has the technically expertise. But not the manpower. They then sign a contract with us to get $X number of people for $y hours with the expertise they need. The client controls what gets done and when. They handle the project management. This is your typical staff augmentation.
deleted 2y ago
[deleted]
JumpCrisscross 2y ago
> consultancies in IT are just brokers This is also a lot of PE. College graduates want to live in a city and work for a “reputable” company. The founder of the Baton Rouge chemical plant, meanwhile, doesn’t recruit in New York and Los Angeles. So he hires Deloitte or gets taken over by Bain who hires some graduate and takes 40% of their pay in exchange for letting them commute from a city during the week and say they work in PE on Raya.
- ping00 2y ago
  huh...til that Raya exists
- 8f2ab37a-ed6c 2y ago
  That made me chuckle, nicely written.
fallingknife 2y ago
Sounds like the richest and most powerful organization on Earth should start paying market salaries for its engineers. Not sure why that is so difficult.
- econ 2y ago
  Just work as hard as the pay Merritts. Works for me. Around 5 you get presence, at 100 you get superhuman performance.
DrNosferatu 2y ago
It’s the perfect brewing soup for kickbacks.

abakker 2y ago

I think it is important to distinguish between Consulting, Staff Augmentation, and Managed Services. Many of the large integrators/consultancies do all of these options, but the objectives, contract sizes, and durations of the contracts are all expected to be different. Consulting - best though of projects, governance, and on-demand expertise. There are definitely junior resources in play, but the objective is to build on the IP of the consulting firm and to create a external channel for problem solving or delivery that is not dependent on or hampered by internal inertia. Staff Augmentation - a lot of time this is just billed hourly, and you really are looking at paying a premium for a non-committed spend - if FTEs are "reserved instances" then staff aug contracts are the opposite. You pay a premium for the lack of long-term commitment and to make this look like variable OpEx. my opinion is that this model is over used in most businesses. Managed Services - longer term commitments to deliver services. Generally the good advice is to contract on "what you want done" rather than the detailed "how you want it done", though that is more philosophical than practical. The expectation is that the service delivery will improve, and that those process improvements, automations, training, and provider IP/Tools will deliver decreasing unit prices for "resource units" over time. Thinking of consultancies as pure brokers is certainly a mental model you can use, but is not the most nuanced model. I think it tends to be better to acknowledge that there are structural reasons why all of these models are present in organizations and rather to think about how they should be governed. (disclaimer, my employer is an advisor on how to contract for these kinds of services. My work is not related to contracting, but research about this market)

chenster 2y ago
[flagged]
rrr_oh_man 2y ago
The people who care about these distinctions are mostly within those three groups. For the customers it's 'consulting'.
- plasma_beam 2y ago
  I disagree - no one is calling large scale gov contractors such as Northrop Grumman, GDIT, CGI, CACI, many more etc. consultants - yet a lot of the IT work they do overlaps with the consultancies. “Contractors” has become the more common term over time.
- sfifs 2y ago
  Not at all. I buy these services in a large Fortune 500. Consulting is the least used model for us.
  - backWurdz 2y ago
    [dead]
- rrr_oh_man 2y ago
  Too later for an edit, but: The point of this whole scheme is trading OpEx for (on the books) CapEx.
- deleted 2y ago
  [deleted]
- scarface_74 2y ago
  That’s definitely not true. I’ve worked for companies on the consulting side for five years. We have two types of Statements of Work (SOWs) we get signed by the client. The first type and the only type I would ever get involved with are project based. The client has a business need but not the technical expertise. I come in right after sales and work with the business to tease out their requirements, get their sign off. We do the work and leave the project once the requirements are met. With this type of SOW, we (I) lead the project technically, the project management etc and once the work is handed off, we move on. It’s outcome based. The second type of contract is where the client has the technically expertise. But not the manpower. They then sign a contract with us to get $X number of people for $y hours with the expertise they need. The client controls what gets done and when. They handle the project management. This is your typical staff augmentation.

deleted 2y ago

[deleted]

JumpCrisscross 2y ago

> consultancies in IT are just brokers This is also a lot of PE. College graduates want to live in a city and work for a “reputable” company. The founder of the Baton Rouge chemical plant, meanwhile, doesn’t recruit in New York and Los Angeles. So he hires Deloitte or gets taken over by Bain who hires some graduate and takes 40% of their pay in exchange for letting them commute from a city during the week and say they work in PE on Raya.

ping00 2y ago
huh...til that Raya exists
8f2ab37a-ed6c 2y ago
That made me chuckle, nicely written.

fallingknife 2y ago

Sounds like the richest and most powerful organization on Earth should start paying market salaries for its engineers. Not sure why that is so difficult.

econ 2y ago
Just work as hard as the pay Merritts. Works for me. Around 5 you get presence, at 100 you get superhuman performance.

DrNosferatu 2y ago

It’s the perfect brewing soup for kickbacks.