Accountants and consultancy: too close for comfort?

There was a time when company directors went to management consultancies for help with the intricacies of systems selection and implementation because they offered an independent service and were not tied to any particular vendor. Nowadays that has all changed.

At the corporate level there can be few major management consultancies, or even systems integrators, for that matter, who have not leapt into bed with the enterprise system developers such as SAP, Oracle, PeopleSoft, Baan and others.

In-depth knowledge of these systems is vital for any firm advising on major change projects that involve new systems implementation. And further down the scale, firms of accountants are increasingly being targeted by the software industry as a valuable source of work. Some firms are even giving up their day jobs as auditors and tax advisers to get in on what they see as the altogether more lucrative world of IT consultancy.

But is all this change welcome? There are inevitably some who see the situation as distinctly unhealthy – people might think the growing links between vendors and consultants could compromise advisers’ independence, leading them to recommend software to clients merely because they happen to have expertise in the product rather than because it is the best for their particular needs.

There is also concern about payments between software suppliers and consultants, though these are hard to uncover and no one admits to receiving them.

Unsurprisingly, however, there is no shortage of purely anecdotal evidence.

The real concern, though, surrounds the close technical and product co-operation. Do these close ties really compromise consultants’ impartiality?

According to Patrick Whale, senior IT partner at KPMG, this is a simplistic view and also an incorrect one.

Whale says hostility to relationships between software suppliers and consultants fails to recognise the sea-change that has taken place in the industry over the last five to 10 years.

He says: “We used to use the word ‘independent’ proudly and live fiercely by it. Now we stand by the word ‘objectivity’. Critics have to ask how a firm of consultants can help to put in the major packages if they aren’t familiar with them. We would never recommend anything that’s unsuitable.

But what the links with developers give us is the ability to specialise by giving us training in a few major products. We would never have a problem recommending a product if it were right for the client even if it were not from a developer with whom we had a relationship.”

No one should underestimate the value the software industry places on these relationships.

According to Don Howren, vice president of strategic implementation and OEM partners at US software company Platinum, the tie-ups are the key to doing business in the UK.

He says: “We look at the consultancy community in different ways. But we have links with all the obvious players, the Big Six on a global basis, traditional systems integrators and the regional geographic players who have strong vertical market expertise. It is of fundamental importance to our organisation.”

The challenge for consultants is to acquire sufficient numbers of staff with technical expertise in the various software packages available.

Vendors, it is argued, bring their skillsets to the table so that the firms can train their consultants, learn about the strengths and weaknesses of the product and be better placed to make good decisions for their clients.

According to software analyst Dennis Keeling, however, consultants are involved far less in the selection process. “Many finance managers who are looking for a new accounting system have already done this before somewhere else. As a result they are more sophisticated buyers and do not use consultants for hand-holding to the same degree that they have in the past.”

Many software developers disagree with Keeling’s view, however. And the increasing effort which they are putting into forging links with consultants would tend to suggest that if anything they see the systems selection work as more, rather than less, important.

Platinum’s Howren adds: “Consultants are still very, very important at the selection stage. Some consultants are obviously more mature in their understanding of client/server systems, Internet technology and so on.

They’ve done it before and may have the advantage over less experienced practitioners. But the speed with which technology changes means that they will never truly have the latest view of it. It is the consultant’s job to understand all this and that’s why they are hired for systems selection advice work.”

So where does this leave the question of consultant/vendor relationships?

Is it acceptable after all for these close ties to form?

The answer is not going to be black and white. It depends very much on circumstances and on what’s in it for each party. As long as money isn’t changing hands, it comes down to an exchange of information. In the majority of cases the links between consultants and software suppliers are technical ones, where product literature and training material is passed to and fro to the benefit of both parties.

In a few cases, however, the relationship can become a financial one.

In practice this will be at the low end of the market where an off-the-shelf package costs just £100 or £200. The real money is to be made in service and training – charging for that as a value-added reseller is one thing, but receiving hidden commission as a supposedly independent adviser is something else. And that’s where the line of demarcation between what is acceptable and what is not may have to be drawn.

Howren says he does not believe any payments were ever made at the corporate level. “There are no financial aspects to any of the agreements between vendors and consultants. What I do as a software company is give the consultant CD-Roms packed with product details or, more importantly, access to product education and training. If the consultant is better skilled with our product they are better armed to advise their customer as to whether Platinum is a suitable product to look at.”

But according to Steve Farr, product marketing manager at Systems Union, consultants further down the scale may well decide to pocket some money on the back of a deal. He says: “Whether they take a margin is up to them. But what we do is provide information to consultants to help them do their job. In the search and selection phase we need them to know what Sun Systems can do and be informed about our projects and product development plans.”

Chris Leak, marketing director of Pegasus Software is more blunt: “We don’t pay anyone but I’ve heard of firms of accountants getting introductory fees from suppliers. It’s not exactly a brown envelope job but more of a structured commission. The end-user probably doesn’t even know about it.”

Leak accepts, however, that in some circumstances these payments could compromise the consultant’s impartiality. “I think this would raise the question of independence. It does beg the question as to how independent they can be. But most consultants and accountants are honourable people who wouldn’t put their clients in that sort of position.”

Leak says he knows of many accountancy firms that have moved from offering consultancy to full-blown reselling. “We’ve got several accountants on our books who sell software. They usually offer training and that’s where they earn their money. I don’t think the end-user suffers because resellers are making valid judgements on the company and the product they sell it,” he says.

At this level of the market, however, end-users are not just buying a product. By opting to take a package from a reseller they are buying into that company with a long-term commitment. Leak adds: “What the user is getting is five more years of certainty. The product is one part of it, but what they are getting is a support infrastructure that they can rely on.”

Deloitte & Touche is one of several accountancy firms which has begun selling software as part of its business offering. The firm announced in March that it would sell Great Plains Software’s Dynamics product.

The firm’s decision sets it apart from others who merely advise on software, but some potential clients may not see the difference.

And when it comes down to it how important is it whether the consultant is acting as an independent adviser or as a reseller? In either case they must be open about it. But whichever avenue they have taken to deliver the solution to would-be customers, they have a duty of care. IT projects are notorious for cost and timescale overruns. Any accountant foolish enough to recommend the wrong product could answer for it if the project goes belly-up as a result.

Major systems projects are so central to the long-term survival of many businesses that the risk to the consultant were they to go wrong is huge and, so the argument goes, means the advisers are hardly likely to tempt fate by opting for an unsuitable system simply because of a relationship with its developer. Most firms will take care to acquaint themselves with the level of risk involved in any new project.

According to Platinum’s Howren, however, a partnership between the software developer and the management consultant can itself help to minimise risk.

He explains: “There’s always a risk with any project that it could go wrong. As a vendor if we can help reduce that by putting in our expertise at any stage, we would do that. It is incumbent on us to do a good job to educate the consultants because no product is ever a perfect fit.

If the consultant knows enough about certain packages he can make the right decision about which product comes closest to meeting most of the requirements.”

There’s no doubt that the close ties which software developers have formed with consultancy firms are here to stay. Benefits from these agreements flow in both directions – and most vendors recognise that a consultant may form a relationship with one of them for just one project, and then may never do another piece of work with the same vendor.

This article first appeared in Financial Director Magazine in 1997. The issue of how much accountants earn in consultancy fees from audit clients is still much debated today. 

 

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