Dr. Dobb's Journal Fall 1998
With the business press reporting crucial shortages for skilled computer professionals, you may be wondering what steps you have to take to speed your way into the ranks of highly paid, in-demand computer consultants.
Actually, the term "computer consultant" describes three different career paths, and if you are to succeed as a consultant of any type, you'll have to appreciate the distinctions between them. The most common consulting career path is contract programming. When you see companies advertising for "consultants," they are usually looking for contractors. Another group of computer consultants consists of self-employed entrepreneurs who may offer programming, sell off-the-shelf systems, or do strategic planning and high-level systems design for clients. Finally, a third group of consultants are employees of large corporate consulting firms.
Most computer consultants are, in fact, contract programmers. These are temporary workers filling computer-related jobs for a set time period. While the terms under which contractors work are defined by a contract, the salient feature of this contract is that it is time -- not task -- defined. Contract programmers agree to work for a single client for a period of time, and during that time, they operate almost exactly like an employee of the client. Contractors are usually paid a set rate for each hour worked and usually do not receive benefits or vacation pay. Contractors may work as hourly W-2 employees without benefits, as independent contractors on a 1099 basis, or they may subcontract through their own corporations. In each case, the work they perform on the job is identical.
Contractors may work directly for a client they have found on their own, or they may find their contracts through placement firms. Contractors often refer to these companies as brokers or agencies, though the companies call themselves "consulting firms." The 1997 Real Rate Survey (see accompanying text box entitled "The Real Rate Survey") indicated that overall, 56 percent of 926 U.S. consultants of all types reporting contract rates found their contracts through these placement agencies. Sixty-seven percent of all C programmers and 75 percent of all Cobol programmers got their contracts through agencies.
Contractors perform at every level of responsibility on projects. Highly experienced contractors with previous leadership experience are often called on to lead projects when a company decides to implement a technology in which it has little experience. Contractors may do high-level design, coding, testing, end-user training, or documentation. They may fill in for staff who are on leave, or do routine maintenance on legacy systems.
While the working conditions of contract programmers are more like those of regular employees than of glamorous entrepreneurs, contract programmers earn high incomes. The median hourly rate reported by all 926 consultants whose rates were analyzed in the January 1998 Real Rate Survey Report was $60, with brokered consultants earning a median $52.50/hour and consultants working directly for clients earning a median $65/hour. The most common length of contract reported was six months, followed closely by 12 months, three months, and two years. Since long contracts are predominant, most contractors can easily work year round.
With contracting, skills are key. Rates are highest for people who can show paid experience with relatively rare technologies used in large-scale environments. These skills cannot be learned at home, and may require expensive vendor training courses. For example, the median rate reported by the 25 Lotus Notes contractors who contributed to the Real Rate Survey was $70/hour -- $10/hour higher than the overall rate. The 13 contractors working with PeopleSoft, a high-end HR package, reported earning the median rate of $120/hour.
The industry in which a contractor works matters too. The overall highest rates were paid to consultants working in the software industry and for financial firms, including Wall Street, with their median rates running more than $10 higher than those contractors working in insurance, aerospace, or banking.
If you want to become a highly paid contractor, your résumé must be packed with the names of the hot technology of the moment. Consulting firms and clients hire contractors after narrowly comparing the technical skills listed on their résumés with the skills required for the specific contract. If a requisition says, "Java, C++, UNIX, and Perl," your résumé better show paid experience with each or you won't get a chance to interview for a contract, even if you have 20 years of other rich and varied experience on your résumé.
Furthermore, it is wise to have several years of paid experience in the computer field before you begin. The Real Rate Survey data for 1997 showed that only 9 percent of contractors reporting contract rates to the survey had less than three years of paid experience, and those who did have less experience reported median rates almost 20 percent lower than the group as a whole. The highest contract rates are earned by those who work contracts at the team leader or architect level, so if you can, try to get this kind of experience before you head out into the contracting world.
To prepare yourself for a career as a contract consultant, find a salaried job in an industry that appeals to you and that will allow you to acquire paid experience using rare, hard-to-find but in-demand industrial strength software and hardware. You are most likely to acquire project design and leadership experience in this first job. Because it is industry experience and project cycle experience that add to your value as a consultant, if you follow this approach, in three to five years you'll be able to begin contracting with more security and at a much better rate than others who jumped into consulting with experience only in the run-of-the-mill programming skills shared by most recent college grads.
Once you've begun your contracting career, you must keep alert to new technologies appearing in the marketplace to stay employable. Whenever you have a choice, choose assignments that put you in the vicinity of newer technologies, rather than ones that may pay more but don't keep your skill set current.
Quite a different kind of consultant is the entrepreneurial consultant who supplies clients with complete business solutions. This may involve specifying and installing hardware and off-the-shelf software, or it may mean customizing a base software system to fit the specific needs of a client. What distinguishes these consultants from contractors is that their contracts are task-defined rather than time-defined. While these entrepreneurial consultants may bill their services on an hourly basis, the focus of the contract is the accomplishment of some task, and when the task is complete, the contract is over. These consultants usually work from their own premises, unlike contractors who work at the client's site and with the client's equipment. They work either as sole proprietors on a 1099 basis, or through their own corporations, but never as employees.
The Real Rate Survey data suggests that while the average rate earned by this type of consultant ($70/hour) is slightly higher than that of contractors, entrepreneurial consultant contract lengths tend to be far shorter, often lasting only a few hours, days, or weeks. So to succeed in this niche, you must build up a clientele who need enough of your services that you don't have to spend all of your time on unpaid marketing activities.
The most common error made by newcomers to this kind of consulting is to think they can build a viable business serving home computer users or very small mom-and-pop businesses. Unfortunately, very small businesses don't have the budgets to pay for more than a few hours of this kind of consulting help, so the entrepreneurial consultant can end up wasting time on marketing and traveling from client to client. The client base far more likely to sustain this kind of consulting career are mid-sized companies that are large enough to have significant existing investments in computer technology but small enough to know they need outside help, and aggressive, well-funded startups. The secret to success is minimizing marketing time by getting repeat business from satisfied customers and referrals through their contacts.
Another pitfall of this kind of work is that entrepreneurial consultants are often tempted to accept work on a fixed-bid basis, that is, to offer a set fee for an entire project. Unfortunately, even experienced consultants report that it is hard to estimate the length of projects; all too often, they become time sinks into which the consultant pours more and more labor as profits decrease and sometimes completely evaporate.
You can't find entrepreneurial consulting work through placement firms. So the only way to build this kind of consulting business is to pursue a course of assiduous marketing activities. Consultants who succeed in this niche are active in professional groups, and participate heavily in networking activities of all kinds where they can make contacts with potential clients.
You'll have to have outstanding sales skills to succeed here, and know how to qualify clients and how to close a sale. Unlike the contractor, whose focus is on technical skill, successful entrepreneurial consultants must stay focused relentlessly on business realities. The key to selling entrepreneurial consulting services is to show clients how your consulting work will improve their bottom lines.
My Real Rate Survey data suggests that the consultants who succeed at this type of consulting have at least five years of previous experience applying technology in a business environment; most have far more. They typically begin consulting after working in some salaried professional capacity with the kinds of people who later become their clients. They frequently are stronger on the business aspects of applied technology than in the details of the technology itself, and some have migrated into consulting after careers as power users in areas like accounting or engineering, rather than as programmers.
The last group of people who call themselves consultants are salaried employees of large consulting firms. These firms are divided into two broad groups. One group of firms specializes in project-based consulting for large corporate clients. This group includes the Big Six consulting firms like Ernst & Young and Andersen Consulting, and vendor firms like IBM Consulting and AT&T Solutions. It also includes small local entrepreneurial consulting companies that have grown to the point where they need employees to handle their workload. The larger consulting firms in this group are famous for charging their clients hourly rates of $200 and up.
These larger firms often hire graduates with information system or computer science degrees straight out of university, but as a new hire in one of these companies, you are unlikely to learn much about entrepreneurial consulting. That is because these companies send their highly experienced partners and executives to analyze client needs and sell projects. Inexperienced staffers are only brought in after the project is sold, when they are deployed to do the actual technical work.
Employees who are hired into these premium consulting firms upon graduation from college report that they work brutal hours and that the quality of the training they receive varies widely. Some get put on exciting projects that expose them to in-demand, cutting-edge technology. These consultants receive training that prepares them for successful contracting or entrepreneurial consulting in a few years time. But others working for these same firms find themselves working with limping legacy systems or other dead-end technologies, and get little or no training in any technical specialty that will be of use in their future careers. What all employees of these firms seem to agree on is that they burn out rapidly. Few remain with these firms longer than three years.
Smaller, local entrepreneurial consulting firms may offer their employees significant training in useful technologies. Employees in these firms may also get a lot closer to the marketing and sales side of the business, which can be good preparation for beginning their own entrepreneurial consulting careers. However, these smaller firms rarely, if ever, hire inexperienced personnel or recent college graduates, as it is too expensive for them to train these people from scratch.
Second-tier consulting firms try to portray themselves as being identical to those in the first-tier, but the second-tier firms do not do the kinds of project-oriented consulting that these other firms do. Instead, they merely supply clients with temporary programmers who fill temporary jobs on a time-defined basis. The work consultants do as employees of these firms is identical to that done by contract consultants, except that as salaried employees, they often earn far less for their work than the contractors who work by the hour do.
The salaries reported to the Real Salary Survey over the first quarter of 1998 suggest that whatever consulting firms may be billing their clients, their employees are earning relatively modest salaries. The median salary for the 76 employees who reported getting their jobs through consulting firms was $65,000. But this includes employees at all levels of responsibility. Those working as programmers reported a median salary of only $55,000. Furthermore, when we look at the salaries of the 12 consultants who had two or less years of experience in the field, the median salary drops to $42,000. These salaries are in the same range as the salaries found for salaried computer-related employees in all industries, so there is little financial incentive to become a salaried consultant.
Consulting firms persuade would-be consultants to work as employees rather than more highly paid hourly rate contractors by arguing that salaried employees have greater job security than hourly rate contractors, and that as salaried employees, they will receive benefits, valuable training, and paid time between assignments.
In reality, few salaried consultants report receiving any significant on-the-job training. Those that do generally work for smaller, locally owned consulting firms, not the large national placement firms with huge ad budgets and offices in many cities. Paid time off is also rare. Consulting firms only hire salaried employees whom they know they can keep busy. These firms must lay off employees once the cost of paying for their bench time begins to eat into the consulting firm's profits from their labor. So it is safe to say that if consulting firms are showing great eagerness to hire you as a salaried employee, you are probably just as likely to be able to find lucrative long-term contracts as an hourly rate contractor. If you can bill $60/hour for only nine months a year, you will still earn more than a salaried consultant earning $65,000 even after paying for your own insurance, retirement savings, and training.
But the job security that lures consultants into salaried consulting hides another pitfall. To keep their jobs, salaried consulting firm employees must accept any contract the firm assigns them, including those that involve using obscure or obsolescing technologies. These contracts, which may extend for years, can cause a consultant's skills to atrophy, seriously impacting his future employability. Consulting firm employees may also be forced into taking jobs that involve travel or long commutes.
Since these consultants earn so much less than contracting and entrepreneurial consultants, this type of consulting isn't a good way of breaking into the consulting field. The biggest problem with salaried consulting of all types is that consultants cannot control what assignments they take, and hence cannot control what skills and technology they learn. Since the key to building a successful long-term consulting career is to keep your résumé bristling with current skills and specialize in niches where skilled people are relatively hard to find, salaried consultants who lack control over the directions of their careers are at a huge disadvantage.
A better approach for the computer professional who would like to prepare for a career in consulting is to find a salaried job in a high-paying industry working for an employer known for running well-managed software projects where state-of-the-art technology is installed. There you will find mentors to help you develop technical and business expertise. Choose every subsequent job or contract assignment with an eye for improving your skills, and never lose sight of the fact that you are only as employable as your current skill set. Do this, and you may join the ranks of the thousands of successful computer consultants who have built a long-term dream career earning great money doing the work they love.
DDJ