Outsourcing

Conflicts of interest between IT consulting clients

Chip Camden recounts a situation in which he discovered he was working for clients that were direct competitors. He shares the valuable lesson he learned from the experience.

When you do the kind of consulting work that cuts across different kinds of businesses or vertical software markets, you don't always pay close attention to what sort of business your clients are involved in -- but you should.

Years ago, I struck a mother lode of a niche after Synergy/DE became available for Windows. Many software vendors who used that language began porting their applications to Windows, and even though Synergy/DE achieved a very high level of cross-platform portability, these vendors needed a lot of help making their applications more "Windowsish" (as demanded by their users, for better or worse). I added 10 clients to my list that year.

One day as I was chatting with a long-term client who is also a good personal friend, he asked me how business was going. I replied that it was gangbusters -- I was taking on new clients every month. "Oh... who?" he asked. I rattled off several names (which you should never do, by the way), and one of them caught his attention. They were a direct competitor. I had no idea.

"What kind of work did you do for them?" he asked.

"Basically the same sort of stuff I did for... uh... you," I stammered.

It took quite a bit of explaining to convince my client that because this work was not application-specific, nor was it anything unusual or particularly inventive, that it didn't represent a breach of confidentiality. I had shared no details of one client's application with the other. I had done similar work for many different kinds of applications. It was really no different than the fact that they were both clients of the same language vendor. He was satisfied with my explanation, and we remain good friends to this day.

But I do believe that event placed a limit on our consulting relationship thereafter. I never got involved with the details of their application, only general design principles and frameworks. Knowing that their competitor was on my client list (even though I never did any further work for that other client) may have prevented them from involving me more deeply in their specific projects. I regret that because they're a great company and they've gone on to be highly successful. I would have liked to have had a greater hand in that success.

I learned an important lesson: Even when you don't need to know your client's business in order to help them, learn as much as you can anyway. Besides making your contribution more valuable, it also prevents inadvertently stepping into conflicts of interest. Before you accept an engagement, make sure you know that your new client isn't a competitor of an existing one (unless you're ready to cut your existing client loose), or that your contributions are generic enough that it's really okay for you to work for both. If in doubt, ask your existing client. And by all means, disclose your existing relationship to your new client.

I was reminded of this lesson when I recently accepted a new engagement involving the development and promotion of a new programming language. One of my long-term clients is a programming language vendor, and they've shared many secrets with me under NDA, right down to the last line of their source code. So before I accepted, I disclosed my relationship with that client and asked enough questions of my prospect to insure that they weren't competing for the same kinds of applications. It turns out that there's almost no overlap; if anything, these two languages might want to interoperate one day. So I felt free to accept -- but should I find out differently as I get into it, I would bow out right away.

Have you ever had to deal with a client who was upset because they considered one of your other clients to be a competitor? If so, how did you handle it?

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About

Chip Camden has been programming since 1978, and he's still not done. An independent consultant since 1991, Chip specializes in software development tools, languages, and migration to new technology. Besides writing for TechRepublic's IT Consultant b...

11 comments
reisen55
reisen55

You write a good reason to put a chinese wall clause into consulting agreements. I would NEVER trade any data ... but I do have one interesting area to consider. I support two optical houses in Orange County, NY - one large and one small. Definate competitors but no data ever traded. However should one office fall victim to a fire or natural disaster, proper Business Continuity Planning and Disaster planning would strongly suggest that both offices be aware of each other so that one, or the other, could co-locate for a brief spell. Strange bedfellows but when your office is a charred, smoking ruin - it is an effective strategy. And good business too.

PMPsicle
PMPsicle

I'm surprised this even is on your radar, Chip. I do a lot of management consulting. And every one of my clients wants me to have experience in their industry (if not in their company). In fact, I seldom get hired if I don't. How could I get experience in the industry if not with my clients' competition? I regularly sign NDAs ... most of them totally inane since those clients regularly communicate with their own competitors and everyone knows what everyone else is doing. I do make it clear to my clients that I consider myself bound by an NDA regardless of their needs. I don't know if it's because I refuse to discuss competitors with them or because we're just more relaxed up here. I do know that I've got a reputation of not saying who I work with or telling tales out of school. Sometimes, people refuse to deal with me (usually young headhunters), most just shake their heads, shrug their shoulders and go on. As I say, I'm surprised that your clients care. Perhaps you need to publish your code of ethics. Or perhaps, your response has led the client to believe you're only good for supporting their IT staff in their use of the language. Personally, I would have been tempted to reply with a serious discussion of consulting ethics. Basically, "I can't discuss the details of what I do for them without permission, just as I can't discuss what I do for you without permission. If it is really important to you then I can go get that permission. Although I can't promise they will give it, of course. Is it important?". Glen Ford, PMP http://www.trainingnow.ca

santeewelding
santeewelding

"In order to help us, we have to let you in on The Secret, and then kill you. "Give us a break on cost and you live."

Fregeus
Fregeus

...infrastructure consulting? TCB

Sterling chip Camden
Sterling chip Camden

... you just don't want to get caught in the crossfire. Has it ever happened to you?

Sterling chip Camden
Sterling chip Camden

Both of these clients were software vendors, who competed directly in the same vertical market. That made my contributions to each product a little more suspect of conflict. It wasn't, but for instance if I had been working on an algorithm that was specific to that vertical, I couldn't share that between the two clients.

Sterling chip Camden
Sterling chip Camden

As I intimated, when your services are generic enough, you can work for competitors. For instance, nobody's going to get on Microsoft for having two (or more) customers who are competing with each other. They can even get away with competing against their own customers sometimes, because they're into such a wide array of activities. Infrastructure could be similar. Everyone needs it, and what you provide probably wouldn't be considered a trade secret. You're like the power company. On the other hand, if you ever had the opportunity to become more deeply involved in their business, then they'd probably look with an evil eye on any relationship you have with their competition. So you might be precluding those opportunities without realizing it -- assuming, of course, that you'd want that kind of engagement. Then there are those paranoid competitive clients who will insist that you never work in any capacity for any of their competitors. I tend to stay away from those guys any way.

ssharkins
ssharkins

Chip, I agree and disagree. First, I agree that you shouldn't share your client list with other clients -- even ones that you share a personal relationship. I disagree that you can't work for competitors -- even if knowing their business seems to be a conflict of interest. We're professionals. We don't run from one client to another telling tales. The fact that they have similar IT needs is the only information that's actually shared, and then, it's only shared with us, not with the competing clients. Knowing their business helps us do a good job for them -- it doesn't help their competitor, who happens to also be our client, get a leg up. I don't see the problem. Considering that so many IT consultants specialize, I don't see how they can get around working for competitors. The only way working for competitors is a problem is if you steal something business specific and apply it to the other client -- in the IT scheme of things, I can't even think of an example where this might happen. IT is the technology, not the business. Don't want to get flamed, but I would have no problem working for competitors. Now, if your client brings you in as a business analyst and you're privy to their latest and greatest marketing scheme or product, which hasn't hit the market yet -- that's different -- but IT technology... I don't see the problem.

PMPsicle
PMPsicle

I kinda figured that given what you do. Even so, not sharing that kind of information is somewhat integral to being a consultant. My clients also tend to be in the same business and same section of the business. Different strokes for different folks. And we've all run into the client who is convinced they are inventing a major earth shaking advance that absolutely must be kept secret. Even though it's actually just common practice.

Sterling chip Camden
Sterling chip Camden

In my line of consulting, it is their business -- they are software developers, and I'm working directly on their product. So, you're right -- it's different if you're just providing a "utility" service.

Sterling chip Camden
Sterling chip Camden

... or not really that big of an improvement. I've seen it often. It comes down to the individual client, and how guarded they are. Of course, like anything it can be negotiated, and you always have the option to walk away from it if it's too restrictive. In this particular case, I would have liked to be more deeply involved with this client, but I think I precluded it by having a relationship with their competitor.

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