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As computers become more indispensable, computer consulting becomes more profitable.
January 1, 1996
URL: http://www.entrepreneur.com/article/28848

As computers become more indispensable, computer consulting becomes more profitable.

Every day, computers become faster and more sophisticated. Unfortunately, computer users do not. Throughout the history of computing, these truths have remained painfully self-evident: Computer technology progresses at breakneck speed, while the people who use computers break their necks trying to keep up.

Perhaps that's why computer consultants continue to be in high demand, despite a relative flourishing of computer literacy among businesspeople. As computers have become more indispensable in the workplace, the need for high-tech expertise has only intensified. Consultants who can set up complex information systems, troubleshoot office networks, train business owners on Internet usage, or provide teams of programmers for short-term assignments (to name but a few consulting concepts) face a massive market.

According to the U.S. Department of Commerce, computer programming, data processing and other computer-related services brought in a whopping $114 billion in revenues in 1993, the last year for which figures are available. Between 1988 and 1993, computer-service revenues grew nearly 60 percent, up from just $67.7 billion in 1988.

Computer consulting is a competitive field, but it's also flexible. Successful consultants may operate as staffing services, which are similar to temporary help firms; as individual "guns for hire;" or as subcontractors to other firms. Start-up costs for a solo business can be downright meager: Consultants who work on-site for clients sometimes plug in without buying equipment or outfitting an office. Even when your aspirations are loftier, capital requirements are not especially intense. Talent, more than tooling, seems to determine business success.


Gayle Sato Stodder covers entrepreneurship for various publications. She lives and works in Manhattan Beach, California.

Sufficient Memory

In today's consulting marketplace, the primary talents you'll need are marketing savvy, business skills and access to cutting-edge technological abilities (yours or your staff's). In the old days, computer consultants could be generalists, coaching clients on the distinction between hard drives and floppies, or training them in the basics of word processing. Now, more businesspeople are computer literate and are handling the functions consultants used to handle. Consultants, in turn, are called on for more complicated work-custom programming, for example.

If higher skill thresholds put greater demands on consultants, they also put consultants in greater demand. John Hammerbeck, owner and president of The Systems Group Inc., a data processing, contracting and consulting firm in Dallas, says even large corporations have trouble keeping pace with progress. "It's impossible for one company to maintain the staff they need to deal with new projects and technologies," says Hammerbeck. "It's easier to bring consultants in than it is to keep all the qualified people they need on staff."

Providing qualified personnel is the core of every consulting business. But the ways firms maintain their talent varies widely.

The simplest consultancies involve solo subcontractors. Subcontractors work with established consultants, who provide contacts and contracts in exchange for a percentage of the subcontractor's fee.

Though it has its limitations, subcontracting can be a low-cost, low-risk way of going into business. "If your main goal is a steady flow of income, you can stick strictly to subcontracting," says Ricki Letowt, owner of Letowt Associates Inc. in Norwalk, Connecticut, who began consulting as a subcontractor in the early 1980s. For technical wizards who lack the marketing gene, subcontracting can be ideal.

For true entrepreneurial types, going independent may be a more rewarding choice. Like subcontractors, solo consultants do their own technical work. But they also handle the "business end" of running a business-client development, cash flow, strategic planning and so on.

Some solo operators find that one person-and one area of expertise-can't cover it all. Letowt, for example, has clients who want computer networks set up. Since that's not her speciality, Letowt acts as a broker between other consultants and her clients, and receives a percentage of the revenues-thereby maximizing her sales and her value as a client resource.

What if you're more business-oriented than technologically inclined? Then consider following Dominic Schilt's lead. In 1988, Schilt co-founded DHS & Associates Inc., a systems integration and information systems consulting firm in Rosemont, Illinois. Though Schilt knew enough about technology to understand his markets-and even to take on a few early assignments himself-his plan was to build a team of consultants he could oversee and develop.

On this scale, says Schilt, "the most important thing is understanding the business of business. I have a good, strong business sense and a sales background, which has helped. I'm not certain that technical knowledge is as important, for example, as understanding cash flow."

The Right Application

Finding the right business format is a fundamental challenge for new consultants. Another is finding the right specialty. Thanks to the proliferation of technology, the range of potential specialties is enormous; network design, desktop publishing, and Internet training are just a few examples.

Established consultants make two unanimous observations. First, it's essential to stay on top of your specialty. Unless you provide the latest information and applications, your assistance isn't worth much. Second, be prepared to change with the market. Schilt, for instance, had to re-engineer his firm just a few years after start-up. "The case technology we had been focusing on was being replaced by client-server systems," Schilt explains. "We had to invest a significant amount of money to adapt to that change. It was a challenge, but one that allowed us to stay ahead of the market."

Reality Bytes

No matter what size or shape a consultancy takes, marketing plays a major role in its success. In this field, advertising in the Yellow Pages or the local paper simply won't bring in the business. Most successful consultants and consulting firms do aggressive face-to-face marketing.

Letowt credits networking with the success of her business. "My first year in business, I went to meetings of every organization I could think of," she says. "Anyone who came within 3 feet of me got a business card. You have to let everyone know what you do."

Assuming you're in the right market-with the right specialty, the right infrastructure and the right approach-even a new consultant stands a good chance of success in this field. That isn't because this is an easy business to master. Rather, it's an easy service to justify.

"Today, all companies want to gain a competitive edge," says Schilt. "To most people, that means technology." Staying on the leading edge of computerization is hard. Selling the leading edge isn't.

For More Information

The National Association of Computer Consultant Businesses (NACCB) is a trade association for information systems/engineering software consulting and contract programming firms. For information, call (910) 294-8878, or write to NACCB, P.O. Box 4266, Greensboro, NC 27404.

For information on the Independent Computer Consultants Association (ICCA), call (314) 892-1675, or write to ICCA, 11131 S. Town Square, Ste. F, St. Louis, MO 63123.

Contact Sources

DHS & Associates, 10255 W. Higgins Rd., #800, Rosemont, IL 60018, (708) 297-5600;

Khera Communications Inc., 2400 Research Blvd., #250, Rockville, MD 20850, (301) 258-8292;

Letowt Associates Inc., 22 Nostrum Rd., Norwalk, CT 06850-3118, (203) 838-5255;

The Systems Group Inc., 3030 LBJ Fwy., #910, Dallas, TX 75234, (214) 243-1020.