"Consulting rates have probably fallen ten to twenty-five percent in the last 18 months," says Jack Tomb, vice president of business development at Delta Consulting, an SAP systems integrator in Chadds Ford, Penn.
With many companies postponing or downsizing enterprise software projects, consulting firms are laying off employees -- or disappearing altogether. IBM Global Services recently swallowed up Price Waterhouse Coopers, laying off more than 30,000 workers in the process, and Anderson Consulting has shut its doors in the wake of its involvement with Enron.
Kenexa used to charge consulting rates slightly lower than the Big Five, says Clark. Now, he says, "we're seeing their bids come in under ours. There is definitely a price war going on."
Rates are falling, at least in part, because there is less work to go around. "Capital budgets are frozen," says Deborah Driskill, vice president of sales and marketing at CDG & Associates, a Peoplesoft systems integrator in Carrollton, Texas. When companies are spending money on IT projects, she says, "they are very value conscious, and justifying their investments carefully."
That is leading companies to do more work in-house, and spend less on outside consultants. While IT budgets overall are up slightly this year over 2001, according to a survey of IT executives conducted by Forrester Research, nearly forty percent of companies will spend less this year on outside consulting services.
Systems integrators are responding by becoming more efficient. By carefully adhering to best practices, and working closely with its' customers, CDG has been able to cut the time required to do an upgrade to Peoplesoft version 8 from 26 weeks to 20 weeks or less. "That translates into hard dollar savings," says Driskill, "which we are able to pass on to the client."
Many companies are also scrutinizing expenses more carefully, and turning more to local consultants. "Customers are looking more to local resources and are less willing to fly someone in from across the country for an implementation," says Delta Consulting's Tomb. "Eighteen months ago, they didn't care where you got the consultants, as long as they had the skill set to do the work."