Comparing ERP apples and oranges – Consultant vs contractor

One hand holding up an apple and one hand holding up an orange side by side | Contractor vs consultant

One of the biggest decisions organizations face with an ERP implementation is choosing between a consultant or hiring a contractor for the project – here Christine Horton weighs up the pros and cons of both.

By now we know that transforming enterprise-wide software and systems means many variables to consider. ERP implementations can be complex and, without expert insights, there is potential for business risks in the form of wasted investment, delays or even failure.
One of the biggest decisions faced from the outset is choosing between partnering with a consultant or hiring a contractor for the job. Just this decision alone can play a major role in the success of an ERP implementation.

So here we weigh up the pros and cons of both in the consultant versus contractor debate – and in reality, the case for using contractors versus consultants for your ERP implementation may not be as clear-cut as you might imagine.

One of these things is not like the other

So, before eyeing up your options, let’s establish the difference between a consultant and a contractor and why it’s important to distinguish them.

Put simply, a consultant provides professional and expert advice to businesses that lack the required in-house knowledge and expertise for a specific project. The service provided is usually linked to a defined outcome with agreed milestones or deliverables and the supervision of the people involved is the responsibility of the consultancy business (or shared with the client).

Contractors, meanwhile, are employed by a business to perform a given task or project. The contractor is under the client’s direct supervision. As a result, the client is responsible for managing the contractor’s work risks, including quality assurance, timeliness of delivery and general performance management.

Clients will generally pay for a set amount of time from their contractor – usually six to nine months on one project. But while considered temporary workers, contractors can often come to be viewed as employees within the organization and, in the UK for instance, operate within the IR35 tax scheme.

“A consultant is often used interchangeably to mean the same thing as a contractor, and contractors vary from those that provide their skills and those that deliver pre-agreed services,” explains Dave Chaplin, a former IT contractor and now CEO of contracting authority ContractorCalculator.

In defining the key difference between consultants and contractors, Chaplin says: “The central question is whether the hirer wants to hire a skilled person they chose for a fixed period of time, who is then allocated work and controlled and supervised – namely a contract ‘of service’. Or does the hirer want an outcome-based contract, which is a contract ‘for services’, where the deliverables are contractually agreed up front, and the hirer is agnostic about who delivers those services, provided the work is completed?”

What are you looking for?

Steve Ingram, Deloitte’s director of SAP Solutions and head of KIT, sums it up: whether you choose a contractor, or a consultant depends on the work needed and skills required.

“Hire consultants for pieces of work that require a team to deliver something discrete that needs either an external view or skills or capabilities that you do not possess internally. If it can be done by an individual, then you could equally choose a contractor,” he says.

Ingram maintains that consultants are hired when businesses want to assign responsibility or accountability to a third party for a piece of work.

“It is difficult to pass that responsibility to an individual contractor,” he continues. “Consultants usually bring methodology and standardized deliverables, managed within a clear quality framework – you would never expect that from a contractor.”

However, he notes that contractors will usually bring vast experience from many assignments – which means they can offer suggestions as to how others have solved the problem. “Individual consultants rarely have that experience, but their firm provides a network where they can find it,” he says.

Sorting the sweet from the sour

Moreover, Stuart Higgins, partner at management and tech consultancy, BearingPoint, believes there is a role for both parties in any ERP implementation.

“Contractors typically have deep knowledge and understanding of specific ERP solutions. They tend to specialize in, for example, SAP or IFS, and might be best deployed in configuration or in writing bespoke code based upon, for example, ABAP skills. However, contractors do not tend to be focused on optimized business outcomes, only on delivering their particular assignment to specification. They also tend not to have an up-to-date perspective on the latest developments within the major ERP providers, as they simply do not have the depth of relationship with the providers and their development pipeline that major consultancy partners have. So, where the desired deliverable can be tightly specified and the solution tested for compliance to spec, then contractors will provide the lowest cost solution for the business.”

Getting their teeth into a project

Higgins also points out that contractors often bring fresh perspectives to a project. As external resources, they may introduce new ideas, methodologies or approaches that the internal team may not have considered. Their diverse experiences working with different organizations and industries can help identify opportunities for improvement and innovation, leading to enhanced outcomes and solutions.

But there is, of course, a counterargument: “Consultancies, being dedicated to the project’s success, are more likely to prioritize the organization’s interests than contractors. Contractors may have conflicting interests, in particular because their self-employed status can mean they are naturally motivated to bill more hours,” says Higgins.

“Additionally, if they are simultaneously working on multiple projects or seeking additional opportunities, there can be a misalignment of interests that can lead to compromised decision-making, biased recommendations and a lack of transparency, which can negatively impact the project’s outcomes.”

Neil Davidson is group vice president at Deltek, which produces software for project-based businesses. He believes it is important to work with seasoned consultants to mitigate the risk of delays, alterations and failure, through their years of experience and expertise in change management.

Contractors often bring fresh perspectives to a project. As external resources, they may introduce new ideas, methodologies or approaches.

“Even if the project is going off track, consultants can see the bigger picture and draw on their knowledge to develop a contingency plan that ensures the project gets back on the right journey,” he says.

“Independent consultants can look at a project objectively, without biases skewing them towards one particular ERP system – so you know their advice is impartial. This means consultants will be able to assist in the evaluation of different systems and work with you on identifying the best fit for your business. They can help to align internal incentives and with expertise in managing major projects, can provide guidance on areas that require complex discussions such as data management, change management and operating models.”

Green or brownfield ERP implementations make a difference

Elsewhere, Mark Thomas, group corporate sales director at Ellis Recruitment Group says that as a recruiter, it’s natural to rain praise on the contractor. “But in truth, it would be disingenuous to claim that either was more valued than the other,” he says.

Thomas says that end-users implementing new ERP “greenfield sites” are heavily SI-dependent, having most likely been introduced via the ERP software vendor and completing pre-implementation activity with that SI. They will most likely have little internal competency and will need to rely heavily on their SI’s bench of skilled consultants to get the product implemented and live. Those consultants will usually be fixed, cost-wise into the overall project budgets and often deployed at the discretion of the SI based on the project plan.

However, he says: “In this scenario, contractors should not be overlooked, and many results-focused SIs will introduce a trusted agency that can provide the contractors with project management, change management and data migration, among other things.

“[On the other hand] end-users maintaining or upgrading an existing ERP ‘BAU or brownfield’ will most likely be less reliant on an SI having lived with the ERP over a period and built an internal skill competency. In this scenario, we tend to see this type of end-user relying more on contractors supplied via trusted agencies to manage the peaks and troughs of ongoing project requirements.

“The use of contractors in this scenario is absolutely the right thing when you consider the competitive day rate cost of a contractor compared to the day rate cost of an SI’s consultant (when sold separately), which is typically between 30–60 percent cheaper and coupled with the specialist nature of contractors versus the wider (and less specialist) skills of an SI’s consultant.”

A misconception that contractors are cheaper?

Indeed, one of the biggest barriers to organizations using consultants is cost – especially in the current economic climate, when the consultancy fee could be perceived as too high for some businesses. This is because, as Thomas notes, consultants’ day rates are usually higher than looking to engage a contractor for a period of time.

But it’s not as simple as that, argues Joanne Harrison, sales director at ERP training consultancy Optimum. She says it’s a misconception that contractors will be cheaper than using consultants if you look beyond the initial day rates, as there are hidden costs that can come with hiring a contractor.

“Contractors usually demand a six-12 month contract, so are less flexible. ERP projects are always subject to change and timelines frequently shift, and there is often downtime when the system isn’t ready,” she says.

“Here, a consultancy is likely to be more cost-effective over the duration of a project as you only pay for the days you need. There is minimal downtime as an agreed amount of time will be negotiated before the beginning of any given project. This allows them to work the hours required by the client in order to meet their deadlines. And with a consultancy you can offboard your team and reboard when ready.”

Harrison also says hiring contractors can result in varied quality, especially when they don’t follow the same methodology. “This results in the outputs not being consistent. Consultants, meanwhile, follow the same methodology and templates so all outputs produced look the same. This can be the difference between getting the project done well and just getting the project done.”

With a consultancy, you can offboard your team and reboard when ready.

Room for both? Of course there is

Davidson maintains that to get the most from your investment, it’s important to give consultants a diligent briefing beforehand so they can see the full picture, as they may not be familiar with the specific challenges and requirements of your business.

“It’s essential to be aligned with the consultant when you’re in those early conversations, that way you’ll have someone who fully understands the company’s specific needs and can provide measurable project progress to necessary stakeholders.”

With both sides weighing in on the contractors versus consultants debate, there are pros and cons tied to each. But clearly, there is room for both within the ERP landscape, so take your pick.