Episode 67 Transcript

Beyond Billable Hours: Rethinking IT Consulting Practices w/ Doug Baxter

    Banoo Behboodi: Hi everyone. Welcome to the Professional Services Pursuit, a podcast featuring expert advice and insights on the professional services industry. As always, I'm very thankful that you've made time to actually listen, and I'm happy to be with you. I am Bonoo, your co-host of the podcast, and today I'm joined by Doug Baxter all the way from Australia.

    Thank you, Doug.This is exciting.I'm very happy to have you on board. Doug is the founder of Consultant Academy, which helps IT practices and consultants grow their talent. His training helps teams replace years of learning on the job, reinventing the wheel, and figuring it out the hard way with a clear, simple, and improving consulting and pre-sales methodology. Doug, if you could get us started by telling us a little bit more about yourself, your background, and specifically, more about Consultant Academy and how it came about and what it does for its customers,

    Doug Baxter: Yeah. Happy to. I've spent most of the last 15 years working in IT professional services in a variety of roles, but primarily as a solution architect and solution specialist, which is the services equivalent of the sales engineer in a SaaS environment. Obviously, in IT services, we do projects primarily rather than products. IT consulting is a strange, strange beast.

    I'll explain a bit more about this as we go through the podcast. But basically, it came about because I recognized three simple facts that apply to most IT service companies. And if anyone is listening, who knows? Things are different than I would love to hear from them because I know I don't have a universal point of view.

    But the first point is that our critical business processes in IT professional services are simply sales and delivery.Obviously, there are other important things going on as well, but ultimately, those are the two things that we need to get as far as possible.I can't think of anything more important.

    Second, our consultants and pre - sales specialists—they're the people at the heart of those critical processes. They're doing them.They do this with others.Of course, they aren't alone. Sales, PMO, marketing, and so on. But our consultants win the work with their proposals, and they write statements of work to scope them, and then they deliver them.

    The third point is that when you look at this obvious criticality, you realize there's no formal training in pretty much every professional services company I've spoken with over the last year, which is quite a few.This seems astounding to me, and I feel it should be.I felt the pain as a solution architect and solution specialist.I had to figure stuff out for myself and make mistakes that would impact my organization or the customer.But, despite that, I'm fortunate to be able to say I've written hundreds of successful statements of work and proposals, and I've won millions of dollars in business.

    I know that I've got those skills, but I've had to pick them up over a long time.And I think it's possible to shorten that and to avoid making the mistakes that I've had to make and that other people make on a day- to - day basis.So that's why I started Consultant Academy

    Banoo Behboodi: I love it. I think the most effective business and consulting organizations are those where you've been; you've felt the pain, and now you're coming out with your experience trying to address a market and a need.

    With that in mind, considering again how Consultant Academy came about, were you identifying this gap, this opportunity, let's put it, with consulting organizations, if we had to frame what that looks like and what are all the common mistakes that are being made by these IT consulting firms? What would those be?

    Doug Baxter: There are a number of things we can look at. I think the first, and hopefully obvious, response is that there's a huge waste of talent and opportunity. And it's, I think, ironic that, on the one hand, we say consistently that people are our greatest asset. And yet, we don't invest in general. I've got to be careful here and say that in general, I know there are companies out there that may be doing this, but I think the few and far between.

    So there's that waste of talent and opportunity. But we've got more empirical evidence in the form of industry data from, for example, the Professional Services Benchmark Report from SPI Research, which is produced annually and has been for the last 16 years.And I think this is an absolute treasure trove of industry data analysis, and it gives us really good pointers—empirical pointers as to where things are going well or not well.

    For example, 2023 was a horrible year for a lot of organizations, the COVID rebound, and so on.But when I look at that, I see that for 80 % of professional services organizations, the average EBITDA for 2023 was 3 %.That's bad. When I see that professional services companies lose more than half their bids, that's bad.

    Maybe if you think about the thousands of hours of effort that are wasted, we're not going to win them all, of course, but we seem to have settled for less than half. I mean, that is the average and has been for years. And that's what SPI is telling us.When I look at how proposals and statements were written, I can see how that could be the case.

    I see that it takes 60 days for new hires to become effective because this is how we operate.This is our framework for consulting.This is our methodology for pre - sales.That's not good, either. So it's fairly evident, I think, to see where things are not going so well.

    But those figures that I just quoted are for 80 % of the survey respondents.There is a further 20 %, the high performers, as they're referred to in the report, who actually, despite the difficulties of 2023, have made gains and made improvements. This is because they've got their systems, their processes, and their talent all working cohesively together.

    Banoo Behboodi: I think part of your objective with your customers is to make them or help them operate at the 20% rate with optimal systems, processes, and people working together to do that. So, what are some of the recommendations? What are some of the corrective actions? It seems like there are generally lessons to be learned. I mean, how could you lose, as you said, over 50% of your bids and not learn from that process so that hopefully you're getting better and better at how you're proposing, what the market is receptive to, or some of those tricks that you have up your sleeve as you engage with your customers?

    Doug Baxter: I think, and this is my theory, having worked in the industry for quite a while and having spoken with a lot of leaders and practitioners in the industry, what I can say is that the obsession with billable utilization, which I call the insatiable beast, the insatiable beast of billable utilization, means that we're really scared to do anything that isn't billable and that anything that isn't billable is not valuable or secondary.

    I think this is a problem because there are things that we can and should do that will far outweigh, remunerate, and add greater value than the cost of the bill at the time that we might be giving up.Plus, of course, there are innovative and creative ways we can do things that minimize the impact on billable utilization.

    I'm not saying it's not important.I know that it's a foundational metric, but still, what it means is that we've got to keep our foot to the floor, and that means that we are reluctant to engage with change.It's funny. In IT PS, I think we are really risk- and change-averse, understandably.

    But you have to take a bit of time to change in order to reap the benefits that are there in terms of, for example, professional services automation software like Kantata produces or talent programs like I produce.It's all there. It's available, and these are the fundamental building blocks for that 20 % of that audience.

    We're not going to get there overnight, obviously, but there are steps we can take right now that would start moving us in those directions and improve on some of those metrics.

    Banoo Behboodi: You mentioned Kantata. We are the vertical-based PSA solution. We're stepping out of the typical operational enablement, like you looking at utilization, your margin, and revenue, which are critical for your operations to be successful. Two other factors that are just as important that have been overlooked in the past, like the sentiment of the customer and the sentiment of your colleagues, are your talent, with some of the capabilities we're introducing called Kantata Pulse with getting survey results and having that pull into your project. Just generally curious on where you see the industry going in terms of some of these, what I would say are not typical areas that people focus on, such as sentiment and pulling that into looking at your performance and gaining an outlook on how you can correct action or correct course.

    Doug Baxter: Well, maybe another example. If we look at win rates, for example, I mentioned earlier that we're losing more than half of our bids in general. 80% of us might know that we're losing those bids, but in many cases, we don't know why. We don't stop to analyze. We don't stop to review.

    Maybe if it's a big bid, for example, like a government tender, we might be invited to a briefing, and they might tell us what it was about our bid that didn't win.But other than that, we often don't have a systematic and systemic way of learning from our failures and understanding what the customer sentiment is toward the way we operate. And that just means that we keep making the same mistakes over and over again. As well as understanding why we weren't successful.We need to understand how and where to improve as well.

    Banoo Behboodi: Yeah. And how do you typically consult with your customers, understand the lessons learned, take corrective action, and make improvements to their process? What are the key success factors in creating a culture that allows you to capture those lessons learned and become a learning culture, continuously improving?

    Doug Baxter: I think it would be useful to have some automation in technology, which is driving this for us because we're all busy on a day-to-day basis, billable utilization, etc., foot to the floor, and this is why key reviews and analysis get overlooked. There's simply no time to do it.

    But if we were aided in that by, hey, you didn't win this bid, here's a prompt, here's some stuff you can do, to get together and potentially even using AI from a sentiment analysis point of view and from a collation of an understanding of the communication around that bid, I'm sure AI could bring out some insights, which we could then discuss.

    So we're not starting from scratch in trying to understand what happened to that. Potentially, AI will start to pick up patterns in terms of where we went wrong. You've lost six of these now; maybe it's time to look at the way that you do, I don't know, whatever it is—your executive summary, your scoping, your pricing, and so on.

    But at the moment, I think we are largely in the dark; we are reactive, and we just have to push forward.So I think systems will definitely help.AI will help, but it is a really good process.I think you can have all of those things, and if you don't have the process in place, then it won't really help.

    Banoo Behboodi: The AI piece is very important. It is a great capability now that brings a lot of power, but for it to be able to harness that power, you obviously need good data and a lot of it, and that ties into your technology piece. So take the step of making sure that you have technology supporting your processes. So that you can harness that data and then sort of step into that AI power that can give you a lot of insight into how you can improve things. What are some of the common denominators when you do fail—things like that that would help you take corrective action? Which makes sense.

    I was just curious about your thoughts about going back to the statistics you shared from an SPI survey around the number of bids that were lost.If we go and tackle that, how much do you think having standard service product offerings would cost? Because as service organizations, we don't always think in the context of productized offerings because it's not SaaS.It's a service offering. But I would have to think that some standardization in how you look at your offerings has to improve the efficiency of how you sell them.

    I was just curious about your thoughts on that.

    Doug Baxter: Obviously, we're in service. We're services, and we're not products. The idea of a product manager doesn't really exist. But we do have managed services, for example, which are as productized as we can probably get, at least when executed well. It's just that we don't really apply that elsewhere in our portfolio.

    So with managed services, I think we really have managed to productize that quite well.Some services, like, for example, cyber security, But in general, we just seem to prefer to do individual projects and move on to the next one.And there's a problem with that, really, because it leads to a disconnect. “Okay, we're done.See you later” kind of experience for the customer rather than we are your service provider.And I know we all say that we want to be your service provider and your partner, and we believe that.But our actions don't really support it. For example, an obvious thing that service companies could and should be doing is offering an advisory service, which could start very low in terms of effort, cost, investment, and money but still provide value to the customer in terms of their landscape. This is what's coming.These are the things that you need to do to prepare to get value out of that.And that can easily be bundled.I've seen that. I've actually designed it as a service in a previous role.And that kind of thing doesn't need to be expensive, but it really ingrains and connects you with the customer in a very long-lasting way, is easy to productize and roll out, and has a hugely valuable revenue stream as well.

    Banoo Behboodi: I love that because something like that, stuff like that, has to inevitably increase your success rates in actually closing whatever you propose coming out of a service like that that basically sets up, allows you to understand, and gets you paid for it. I mean, what else can you ask for? That's awesome. I love that.

    Going back to some real examples where you've had customers that have IT consultants that have come to you and have had these challenges and kind of what they've prioritized, how they've approached it, and where they've gone from there.

    Doug Baxter: What I'm seeing at the moment with companies that I'm working with is a gradual realization, and maybe it's a bit of an education piece, really, is that it's not hard to manage their talent pipeline in a proactive way, such that they introduce an element of succession planning, and what I mean by this is that at the moment, we tend to work in a very reactive way.

    We're dependent on a few key people. These are our pre-sales specialists. These are our great consultants, and we lean on them a lot. We do that because they've got the skills, and somehow they taught themselves those skills and have picked them up over the years.So we value that, and we lean on them and depend on them.

    But what it means is that when they move, which inevitably they will, our first reaction is not to go.Okay, senior consultant, you're up. You want it to be principal. Now there's an opening, and you have already been skilled through our approach to consulting, our consulting framework, and our pre - sales methodologies.It's not going to be a huge shift for you to be able to step up.

    You are ready.You are in succession and ready to take this on.Instead, what do we do? We pick up the phone or send an email to our friendly recruitment agency and say, Hey, we want to give you a 20 % fee and we want to wait 60 days to get a replacement, and when that 60 days is up, we want to wait another 60 days for them to become fully effective.

    Doug Baxter: And we'd like to pay a huge amount of money for this every time somebody leaves. Understanding that you can do something about that by introducing a standardized and consistent way of working through frameworks and methodologies, such as those provided by Consultant Academy, means that this is not going to hit you in the face like a boxing glove out of a cupboard.

    Every time someone's leave, you're preparing from the ground up for succession and people will thank you for it because part of the reason, the main reason I'm suggesting that people leave voluntarily is because it's to get promotion.They know that they're not going to get it here. They know that they're not going to get the career development that they need, unless it's technical certification training, of course.

    We do that because we value the certifications with partners like Microsoft, Amazon, Google, and so on.So they leave because that's really their best way to get the promotion and advancement they need. And that means that we're entirely reactive when they do.So that's the first realization.

    The other realization is that they can do this without compromising BAU, billable utilization, because when people think of learning and development, they think, oh, time out of the office or time out of the project.Not good, not good, warning signals.

    But there are ways to approach this.For example, hybrid learning and coaching, which is what I specialize in, is about having online content for people to work through and hybrid coaching in real time with me in a separate session.So you kind of get the best of both worlds.

    They work through the content in the time available to them, any bench time they may have, or even in their own time.It is an investment in their own personal career, and then we get together, go through it, and make sure that they've understood it. They get to ask questions. They get to argue the point if they want.

    We talk things through, and collectively, this is what I think organizations that I'm working with are starting to realize: yeah, we can do this. There's value in doing this, and we don't need to get in the way of BAU and billable utilization.

    Banoo Behboodi: Yeah. So I love it. Your organization helps solve problems or provides frameworks that enable IT consulting companies to have a succession plan framework and a talent development strategy. So first of all, I mean, it's almost like a vicious cycle if you don't have that, because if you don't have that, more people will leave. So your attrition is probably high. So you break into that vicious circle by providing some of these frameworks. Did I summarize that well?

    Doug Baxter: Yeah, perfectly. It is a vicious cycle, and it has to be broken out of, but it's possible to do that in the ways that I just described. I know that learning and development managers, talent managers, and HR are all struggling with the same problem: how to provide meaningful learning and development for their people. And it starts with new hires being able to say goodbye. This is our approach to consulting. This is our approach to pre-sales.

    Those people might have those skills, or you might have skills in those areas.You can probably assume that.But having a consistent approach, which everyone follows because it's good and it's been proven to be good, means that we're not reinventing the wheel in our own way. It means that we can drive consistency.

    We can get scale.We can get flexibility.We're not dependent on key people. And we have a way of showing them, look, we're investing in you.You've done these courses; you're now a pre - sales specialist.You're able to contribute more, and you will be a principal consultant because you now have those skills. If you don't have those skills, you can sit there for 5, 6, or 7 years and not be a principal, and eventually you leave because that's the only way you'll get to that position.

    Banoo Behboodi: Yeah. And I know we've talked a number of times about billable utilization. I think it's very important, in addition to billable utilization, to have some form of productive utilization target as well. I'm not saying that you would replace your billable utilization with productive utilization. And what I mean by that is, like, you look at billable utilization as time spent on projects that can be built out, but for that same customer, you may decide to make investments.

    Again, an individual should not be penalized for doing a good job with that investment in that customer because it's a company decision to do that or invest in an individual's development.Some of those items, which we think are critical for the overall performance of our company as well as our customer success, become part of the productive utilization measurement.

    As long as you have enough governance around what gets included, it seems like you have to be able to, in parallel to looking at billable utilization, look at something like productive utilization as well.

    Doug Baxter: Yeah, I think there are a whole load of metrics that we could look at, as well as billable utilization, which is really meaningful, and I mentioned some of them earlier. We know that; I don't actually know the extent to which we care to look at our success rate with bids because it's a bit of a painful situation, isn't it? Oh, we lost another one. We lost another one. We won that one. That's great.

    We can celebrate the wins, but understanding why we lost and how to improve is obviously critically important.But I don't really think that's an ongoing process.Cutting down onboarding time by 60 days is frankly crazy, isn't it? But that's the information in the report.

    It takes around 60 to 63 days for people to become effective.And that's after the 60 odd days that we've spent looking for them and recruiting them in the first place.So there's another metric we can be looking at. Can we drive down the onboarding time by being more effective and saying, This is how we do what we do?

    I think that the report of the SPI 2024 Professional Services Benchmark is an absolute goldmine of hard data and metrics, and if you were to start combing through that or even just reading the executive summary, to be honest, you'd start to see that there are a lot of things other than billable utilization on which we can focus on an effect in a positive way without impacting the holy grail of billable utilization.

    Banoo Behboodi: I love the conversation we've had. I just wanted to know if there were any last thoughts that you wanted to leave with the listeners.

    Doug Baxter: Last thoughts.

    Banoo Behboodi: Obviously, I'm going to get to my personal question in a second, but I just wanted to see if there's anything else that I may not have asked about that you want to leave with the listeners.

    Doug Baxter: Well, I just came back to the fact that we are a service business. We are a people-to-people business. People still buy from people, as of 2024. In 2026 or something, it may be different, but right now we buy from people. We are people business, and the people that are at the front line, our sales team, and our consultants, pre-sales consultants, are supposed to be working tightly integrated with sales.

    They should be an extension of the sales team.They should be working together to win bids more effectively.Our delivery consultants are the ones who are going to go out and deliver those projects.But project delivery is where pre - sales mistakes go to hide.So, from my point of view, the more you believe that you can buy skills, the more you can go to the market and buy skills for what you can't buy.

    You have to build that, and if you want to build that, you have to have a way to build those frameworks, methodologies, and so on.I think a ground - up approach, as you mentioned, to instilling and inculcating our way of doing things, whether it's consulting, pre-sales, or delivery, is really my core message.

    Banoo Behboodi: That's great. Thank you again; I appreciate it. But now the question I always look forward to is, whichever you want to take on, leave it up to you or both, either a book recommendation or a mentor who's been impactful in getting you to where you are and why.

    Doug Baxter: I'm actually going to dodge that question a little bit and choose a course, if I may, or series of courses.

    Banoo Behboodi: Sure.

    Doug Baxter: That I did over COVID. A series of self-development courses with an organization called Landmark. And it's a bit... I hope they don't mind me saying this. It's not for the faint-hearted. They promise a lot, but you've really got to dig deep, and what that gave me was the ability to be self-critical in a good way and self-aware.

    The way it helped me was that I realized that you've probably heard of the four stages of competency. You've got unconscious incompetence through conscious, unconscious competence.And it helps you realize that in many areas of life, I was in that unconscious incompetence stage, and they gave me the tools to be able to look at myself critically, honestly, and compassionately and go, Okay, well, I am there.

    And just by knowing that, I now know that I've moved myself into conscious incompetence in some areas, and I can do something about that. And I think that's a great tool to have.It is a great asset, not just in my personal life but in my professional life, and I think for all of us, self - awareness really is what I got from that.

    And that is the key to improvement.That's the starting point.

    Banoo Behboodi: I love that. Landmark, right? That's fantastic. Well, thank you so much for making the time to be with us, Doug. Have a great rest of your Thursday. I confirm it's Thursday there in Australia.

    Doug Baxter: It is Thursday, yes.

    Banoo Behboodi: As we record, thank you so much. I really appreciate your time with us.

    Doug Baxter: Yeah, it's been great talking with you, Banoo. I really enjoyed it. It was a great way to get my day started. Thank you!

    Banoo Behboodi: As always, everyone. Thank you for listening in. If you have any comments or feedback, if you have any topics that you'd like to recommend, or if you have any questions for Doug, please reach out to us at podcast@kantata.com, and we would love to answer them. I also believe that you can access the SPI report through the Kantata site, so please visit our site. And if you're interested in looking at the report, it's a fantastic source of information, as Doug mentioned. Thank you. So much, and have a great day.