[thelittleone]

Had a similar experience running a consulting practice for a global software company. Our practice revenue was growing with profitably around 20% EBIT. Software sales where not growing as fast. As a result consulting was an increasing % of regional contribution income but at a lower margin. So my practice was lowering regional EBIT margin. We got told to slow down. I put an amazing guy in charge and resigned.

Millions of incremental profit... unwanted. Of course it's logical given shareholders, but remains strange all the same.

[xenadu02]

There's a large opportunity cost to that strategy. If you allow consulting to make up 80% of revenue by default the business will inevitably turn into a consulting business, not a software business.

Consulting can be a great way to bootstrap but you need to know when the tail is at risk of wagging the dog.

[chasd00]

money is money IMO. If the business turns into a consulting business because that's where the money is then so be it.

[rchaud]

during a business downturn, it can be hard to get consulting contracts as everyone is under pressure to cut costs. That's when having a viable software business can be helpful.

[chasd00]

i totally agree, i was being overly terse. To me, if something is working well then you should do more of it but, yes, you have to manage risk and see the whole picture. Like everything, it's a balance.

It's counter intuitive but in downturns consulting can tick up. The first place companies go to look to reduce cost is headcount but the work still has to get done. In come the consultants to implement a new system to increase efficiency and reduce headcount (it rarely turns out that way though). Also, I think it's easier to finance money for consultants than FTEs because of where the expense falls on the accounting books.