Agency Response - margins

[KTINY -at- AOL -dot- COM]

Greetings,

It has been an interesting experience to see how the original slamming post
has acquired a life of its own.  My thanks to those who have responded with
supportive postings (both publicly and privately).  As the discussion has
moved to margins (based on the comments of Mr. Yanowitz) the entire
conversation has been framed by a single experience from over three years
ago. The comment regarding agency margins is bogus and badly dated.  Margins
in the NY metro and Boston metro area do not support 50% as a standard
mark-up.  It rarely happens at KTI.  In those situations where we do request
and gain a higher than normal mark-up, we are generally promising something
more than just a final deliverable.

Over the past couple of years proposals to our clients have identified the
results that our deliverables are expected to have on the organization. These
results can take the form of cycle time improvements, quality improvements,
increases in customer satisfaction or financial performance.  (Isn't this
what it is all about anyway?)  In these instances we are
promising a different result than those promised by most writers (quality
documents or help systems, usability, etc.).  In addition, much of our
business has moved towards project-based engagements where KTI is directly
responsible for the timeliness and quality of our solutions. NOT the
consultant.

In my fifteen years in this industry I have never seen a consultant forced to
sign a contract under duress. Consultants have every right to request and
demand a rate that they consider fair and reasonable. The rates we pay our
consjultants have increased by almost 20% over the past year.  And our
margins have decreased over that same period of time.

We are pround to be providing a means of income to over 150 consultants.  The
projects that they are assigned involve leading-edge technologies that
support their ongoing skill set development.  Relationships between
consultants and consulting firms needs to be a win-win-win.  The consultant
needs to be satisfied with the rate they are receiving, the consulting firm
needs to realize an acceptable margin for the assignment and any associated
risks and operational logistics, and ultimately, the client needs to be
satisfied with the service overall.

I have experienced the uncollectable receivables, the scenarios where the
client is not totally satisfied and we (KTI) refund a certain percentage of
the cost of the project, and the bank costs associated with paying our
consultants long before we receive payment from our clients.  Somehow 50%
doesn't sound all that unreasonable.

To the consultants out there, demand the rate that you feel is appropriate
and just.  You always have the opportunity to say NO or market your services
directly.

Any other consulting firms care to chime in?

I hope that this timely information supports the conversation.

Ross Squire
Knowledge Transfer International
212-355-8080


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