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Full disclosure: I have had the distinct "privilege" on having worked with all aspects of large consulting firms, from working at Cap Gemini, to being a sub for a smaller company on a large gov't contract with Lockheed Martin, to actually competing (and winning) against the large companies with my own, small consulting company startup. In short, the above comment is spot on. Companies like Deloitte, Cap Gemini, PwC, etc. all make their margins purely on their reputation. Just like back in the 80s when the phrase "nobody ever got fired for buying IBM" became popular, I think from the mid-90s all the way through to even 2010s there has been a similar sentiment with large, multinational consulting companies. These consulting companies know they have a strong reputation for large scale, enterprise software projects, and so they will milk margins by charging high rates, upselling all sorts of additional features, and fulfilling projects with the lowest cost resources, whether it'd be outsourcing overseas, utilizing H1-B workers, or bringing in recent college grads. (Accenture is probably one of the most notorious for this -- not sure if they still do this now, but back in the early 2000s, they were known for bringing in college grads from all sorts of usually non-STEM majors, and they would put them through a 2-week bootcamp (er "Core Analyst Training") out in St. Charles, where more focus was on the partying and hooking up than anything else, but then shortly afterword, they'd be put on projects where they'd be expected to do technical design and even coding, while being billed out at $180+/hour) Now, in all fairness, for every highly publicized, disastrous rollout that one of these companies gets notoriety for, there are actually still dozens of much less public, relatively successful implementations that gets deployed without any issue or fanfare. But despite this, the costs for even the successful projects are still ridiculously high. As the main reason for their huge margins are primarily in their reputations, then as their reputations continue to erode from things like this news piece, clients will start to wonder if the large costs can continue to be justified. And I'm beginning to see this sentiment directly -- my small dozen-person consulting company has not only been able to compete directly against these larger companies, but we have started winning contracts against them as well. For the latest contract we won, we bid at about 20% of what one of the larger companies ended up coming in at -- they actually thought they were a shoe-in because they were the incumbent, having built out several other projects already for the client. But we ended up being selected not just because of our pricing, but because of our overall proposal, favorable terms and expertise on the domain. What's even more surprising is that even though we offered "bargain basement" pricing relative to theirs, it will still end up being the most profitable project we have had to-date -- it just makes it crazy to think what kind of profits/margins that they can make. |