Outsourcing

Are you a consultant or an advisor?

As many major accounting firms spin off their consulting divisions, a line in the sand is emerging between consulting and advising, writes Tom Rodenhauser. Read why he says that these days, you must have IT capability to be considered a consultant.

All the controversy surrounding auditor independence masks a fundamental truth. Even if every Big 5 accounting firm spins off its consulting division—either through sale or public offering—these same firms will still offer “consulting” services.

AICPA Chairman Robert K. Elliott, presenting before the SEC, notes that “the type of consulting that's done by accounting firms is largely in the area of improving information systems. And the vast majority of the work that's done by these accounting firms is actually in the service of information integrity and probing the quality of information available to managers of the enterprise, and then [looking at] the information that they can make available to shareholders.”

Faint praise for Big 5 consultants who position themselves as strategists. But it’s true. Most major consulting firms derive much of their revenue through systems implementation regardless of whether it was SAP three years ago or e-business today. To a lesser degree, most of the traditional consulting firms have followed suit. You must have a legitimate IT capability in order to be considered a consultant these days.

The reliance on systems work presents an interesting contrast for consultants who bill themselves as advisors. Like a doctor, an advisor diagnoses a company’s ailment and prescribes a treatment, though the treatments are usually handed off to pharmacists, therapists, and medical technicians (the worker bees in the medical food chain).

Most consultants at major firms spend less time on the diagnosis and more time installing a cure. Yet these same folks want to be afforded the Godlike status of doctors even though they primarily perform worker-bee tasks.

Yes, we’re dealing with semantics. But the argument is valid because of what will happen when (not if) the Big 5 divest themselves of consulting. In fact, every accounting firm will continue to provide advisory services that look suspiciously like consulting. E&Y accountants will still “advise” clients on M&A strategy even as CGE&Y “consults” with a client on a pending merger.

Most of the advertising we see merely exacerbates the situation. Is there any wonder why big-time consulting gets such a bad rap? Maybe everyone should come clean and admit that “consultant” and “advisor” do not mean the same thing these days.

Heard on the street
Andersen Consulting will divulge its new name by the end of November. Be assured that “consulting” will not appear anywhere in the title. The announcement made last week by their partners that they're slicing off a bit of the firm for public consumption shouldn't surprise anyone, either. The multi-billion dollar payoff will serve as compensation for the partners who slogged through the last 10 years…and as incentive for the newly elected partners.
Inside Consulting is written by Tom Rodenhauser as a free weekly supplement to The Rodenhauser Report. The report informs senior advisors and business executives of consulting trends and best practices. Subscription cost is $295 per year for 10 issues. Archived columns are at www.consultinginfo.com. Copyright 2000, Consulting Information Services, LLC. Reproduction is prohibited. Quotation with attribution is encouraged.
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