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Tuesday, November 07, 2006

Consultants & Pricing Discipline

Pricing is always a tough call to make. Different service providers have different approach towards pricing depending on various factors like sector, vertical, geography,technology,customer etc. A recent case involving Accenture made significant impact to its share prices as well. The power of influence of commerical team in different organizations vary quite dramtically. Some finance departments inside organizations are focussed in doing their accounts, some are more strategic and can provide point analysis for various pricing scenarios and recommend a best course of action. As an organization grows, several of the so called contextual decisions may hurt them in the medium to long term. Indian headquartered firms also take different approach to pricing. The buyers also take different approaches towards engaging outsourcing at a broad level and engaging consultants for specific opportunities. They have to take a disciplined approach as well. Is the case different for the numerous boutique consulting firms? No says this Forbes article. Many consultants simply underestimate how much a business will cost to run and warns against new entrants trying to charge less as an entry strategy. It makes it hard to up the fees later and so suggests that new entrants can look at making the first engagement free of cost and demonstrate value before finalizing on a pricing structure for future. Its interesting to see the various patterns of billing practiced by consultants of different industries : information-technology consultants will charge by the hour, while more high-level consultants like strategic planners or management coaches will charge per project. Lawyers, accountants and wealth managers tend to nab those retainers. As for how much to charge, strategy consultants usually command the steepest fees, followed by operations-management, human-resources and IT gurus. Most consultants are cagey about their fees, so studying the competition is a bit tricky but here’s the most sensible advice : No matter what price you charge, be sure to give customers what they paid for. Look at the interesting set of slides on how to price your consulting services.

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