If I were to ask a diverse group of IT consultants whether they should do business with companies that directly compete with their existing clients, I’d expect their responses to fall into three categories:
- Of course not!
- Nothing wrong with it.
- It depends.
While one of the first two answers might be correct 100% of the time for some consultants, that depends on the kind of consulting engagements they contract. Thus, I’m firmly in the third camp. Whether you can serve both sides of a business rivalry depends on the intensity of their competition, how important secrecy is to that competition, and how central your services are to their business.
Let’s address the last point first. Only the truly paranoid businessperson would complain that the electric company provides their competitor with the same service that is so important to running any business. Even though electricity is crucial, it isn’t what makes one company better than another. It gets a little grayer with a software vendor, but most people agree that it’s perfectly OK for that vendor to sell an off-the-shelf product to companies who compete with one another. Now suppose that vendor makes custom modifications to the software per the requirements of one of those clients — can they make the same or similar modifications to the system run by their competitor? Consultants generally represent a step closer in the relationship: we see how the client runs their business from a semi-insider perspective. However, if you’re providing IT services to a company that doesn’t specialize in IT, then you’re more like the electric company. If, on the other hand, you’re providing software design and development services to a software company, then your knowledge may be too central to their business to be compatible with working for their competition.
The degree to which clients compete may also play a role. Some competitors are more like colleagues, and they’re willing to help each other out. Correct me if I’m wrong, but I believe that most medical practices sincerely wish the best for other medical practices, and wouldn’t hesitate to share knowledge and resources with them when practical. Believe it or not, there are even software companies who take a more cooperative approach towards their competitors. That usually happens when there’s more business available than either party needs, and they face similar challenges that they can better overcome if they work together. On the other hand, some markets are so competitive that even a smile seems like giving away too much (unless it’s the smug, ironic kind).
Even when the competition is stiff, you might still be able to work for the two competitors if you don’t have any secrets to keep. As we move through the 21st century, more and more profitable companies are making their money on top of open-source software. If your job as a consultant is limited to that information which is published for all the world to see, then your client shouldn’t object if you provide similar services to their competitor. On the other hand, if your client asks you to sign a Non-Disclosure Agreement (NDA), then you’d better steer clear of their competition unless they specifically ask you to engage with them. You might argue that it’s theoretically possible to honor your NDA while working for the competition, but I don’t think that really works. Even if you can partition your own brain that way, your client is unlikely to trust that arrangement — and trust is what the consultant/client relationship is all about.
I’ve outlined three dimensions to the question of whether you can consult for competitors, but every client and every situation is different. In my business, I run into a lot of gray areas. For example, I’ve worked for three software companies in the banking software industry, but my contributions had nothing to do with banking applications per se, so it wasn’t a problem. On the other hand, in at least one of those cases I think my other relationships prevented the client from taking me into the inner sanctum of their application. Thus, the answer depends on how you and your client perceive your relationship, as well as where you both intend to take it. When in doubt, ask them.
“Hey, I have a possible opportunity to do business with XYZ, Inc. I wanted to let you know before I pursue it, to make sure it wouldn’t cause any conflict in our relationship.” Even if your client strenuously objects, you might still take the business — but at least you know where you’ll sit with your existing client, and they won’t be able to accuse you of going behind their back.