Star techies: as computers become more indispensable, computer consulting becomes more profitable - What's Hot - includes related information on computer consulting fees

Entrepreneur, Jan, 1996 by Gayle Sato Stodder

EVERY DAY, computers become faster and more sophisticated. Unfortunately, computer users do not. Throughout the history of computing, these truths have remained painfully self-evident: Computer technology progresses at breakneck speed, while the people who use computers break their necks trying to keep up.

Perhaps that's why computer consultants continue to be in high demand, despite a relative flourishing of computer literacy among businesspeople. As computers have become more indispensable in the workplace, the need for high-tech expertise has only intensified. Consultants who can set up complex information systems, troubleshoot office networks, train business owners on Internet usage, or provide teams of programmers for short-term assignments (to name but a few consulting concepts) face a massive market.

According to the U.S. Department of Commerce, computer programming, data processing and other computer-related services brought in a whopping $114 billion in revenues in 1993, the last year for which figures are available. Between 1988 and 1993, computer-service revenues grew nearly 60 percent, up from just $67.7 billion in 1988.

Computer consulting is a competitive field, but it's also flexible. Successful consultants may operate as staffing services, which are similar to temporary help firms; as individual "guns for hire;" or as subcontractors to other firms. Start-up costs for a solo business can be downright meager: Consultants who work on-site for clients sometimes plug in without buying equipment or outfitting an office. Even when your aspirations are loftier, capital requirements are not especially intense. Talent, more than tooling, seems to determine business success.

SUFFICIENT MEMORY

In today's consulting marketplace, the primary talents you'll need are marketing savvy, business skills and access to cutting-edge technological abilities (yours or your staff's). In the old days, computer consultants could be generalists, coaching clients on the distinction between hard drives and floppies, or training them in the basics of word processing. Now, more businesspeople are computer literate and are handling the functions consultants used to handle. Consultants, in turn, are called on for more complicated workucustom programming, for example.

If higher skill thresholds put greater demands on consultants, they also put consultants in greater demand. John Hammerbeck, owner and president of The Systems Group Inc., a data processing, contracting and consulting firm in Dallas, says even large corporations have trouble keeping pace with progress. "It's impossible for one company to maintain the staff they need to deal with new projects and technologies," says Hammerbeck. "It's easier to bring consultants in than it is to keep all the qualified people they need on staff."

Providing qualified personnel is the core of every consulting business. But the ways firms maintain their talent varies widely.

The simplest consultancies involve solo subcontractors. Subcontractors work with established consultants, who provide contacts and contracts in exchange for a percentage of the subcontractor's fee.

Though it has its limitations, subcontracting can be a low-cost, low-risk way of going into business. "If your main goal is a steady flow of income, you can stick strictly to subcontracting," says Ricki Letowt, owner of Letowt Associates Inc. in Norwalk, Connecticut, who began consulting as a subcontractor in the early 1980s. For technical wizards who lack the marketing gene, subcontracting can be ideal.

For true entrepreneurial types, going independent may be a more rewarding choice. Like subcontractors, solo consultants do their own technical work. But they also handle the "business end" of running a businessuclient development, cash flow, strategic planning and so on.

Some solo operators find that one personuand one area of expertiseucan't cover it all. Letowt, for example, has clients who want computer networks set up. Since that's not her speciality, Letowt acts as a broker between other consultants and her clients, and receives a percentage of the revenuesuthereby maximizing her sales and her value as a client resource.

What if you're more business-oriented than technologically inclined? Then consider following Dominic Schilt's lead. In 1988, Schilt co-founded DHS & Associates Inc., a systems integration and information systems consulting firm in Rosemont, Illinois. Though Schilt knew enough about technology to understand his marketsuand even to take on a few early assignments himselfuhis plan was to build a team of consultants he could oversee and develop.

On this scale, says Schilt, "the most important thing is understanding the business of business. I have a good, strong business sense and a sales background, which has helped. I'm not certain that technical knowledge is as important, for example, as understanding cash flow."

THE RIGHT APPLICATION

Finding the right business format is a fundamental challenge for new consultants. Another is finding the right specialty. Thanks to the proliferation of technology, the range of potential specialties is enormous; network design, desktop publishing, and Internet training are just a few examples.