Services Market
...h’s role in the Wine Box inquiry recently. It is unsurprising then that a law firm whose partner has recently been found guilty of professional misconduct relating to a conflict of interest for a business client secured a suppression order to prevent the firm’s name being released (Gregory, A5). While such issues may not be relevant to all businesses some will be adversely affected by negative publicity such as this and may seek alternative consulting services. For example, following a disastrous training programme implemented by management consultants BDA, Transalta received considerable bad publicity as staff turnover increased. A public apology was latter issued by the company to employees “who had been made to feel uncomfortable” (Stamps, 57). Similarly, the reaction to Saatchi & Saatchi’s ‘Auckland A’ promotional strategy was largely negative. Ethics is a related area in this sense. Commentators have pointed out that businesses may expect that when they are dealing with the IT branch of a consulting organisation, the code of ethics that governs the accounting branch may apply. This is not necessarily the case. ‘As a former IBM salesman put it, "We shouldn't confuse selling with installing" (James 112). Certainly, the IT field is often associated with dubious stories of large scale gifting of computing equipment to seal deals, illegal copying of licensed software and so forth. Customers who expect higher levels of ethical behaviour may therefore be disappointed by the service they receive and averse to any negative connotations that may result from such practices. Experience is another factor which can dissuade businesses from selecting a particular consulting firm – and potentially also persuading a business to switch consulting firms. Indeed, Dawes, Dowling and Patterson found that a lack of adequate relevant industry experience was the major reason for firms rejecting their second option consulting firm when going through a selection process (191). This is also evident in the IT consulting industry when firms experience dissatisfaction because the consultants working for them have inadequate expertise. “The failure of large IT projects usually involves huge cost overruns and can even end up driving a company out of business. In many cases, a primary cause of failure is a consulting firm that has boosted its bottom line by manning a project with novices. In other cases, the failure stems from consultants encouraging clients to keep adding expensive features and functions.” (James, 112). Market Changes and competition are another reason for business to switch consulting firms. The problems James notes with providing businesses with skilled consulting staff are not isolated incidents. In the consulting industry huge change has resulted from the e-commerce revolution and from forced changes in the structure of consulting firms. Large corporates such as KPMG have been forced to restructure as the US-based Securities Enforcement Commission (SEC) pushes for a delineation of auditors from the consultants who advise on company strategy. For many consulting firms with a consultancy division this has meant creating a separate entity for auditing activity. (Story, 16) Others have lost clients as they have had inadequate resources to cater to increased demand for IT oriented services. As a result, many consulting firms are looking to develop a “one-stop-consulting-shop” and hence a looking at mergers or selldowns to IT firms. PriceWaterhouseCoopers is one such example and there has been speculation of discussions with IBM and Microsoft. (Story, 16). Service encounters failures can also contribute to reasons for switching as stated by Keaveney (76). When employees are uncaring, impolite, unresponsive and un-knowledgeable - customers switch service providers. Essentially service with this kind of impersonality and lack of quality contradicts the basis of services and relationship marketing. For consulting firms such an approach can be particularly problematic. Consulting is typically a people intensive business. Businesses expect to have individual attention paid to them by their consulting supplier. Failure to provide the required level of attention and responsiveness to the needs of the business can result in the business contemplating switching consultants. Similar examples are clear in the mortgage broking market. “Far too many customers view their existing relationships with mortgage providers as impersonal and therefore lack strong feelings either way about their servicers. Specifically, they cite a provider's over-reliance on voice-response systems and electronic communication as signs of a servicer's [indifference.]”(Aloise &. Janensch, 19) It is clear that such a poor response quickly erodes any loyalty a customer may have to its service provider. In the IT industry lack of responsiveness to a problems is a common problem cited by businesses. Problems with the Incis project for the New Zealand Police force, the LandonLine project and the National Library Project, were not successfully resolved (Barton). Part of the issue in terms of customer dissatisfaction in these projects appeared to be unwillingness on the vendor’s part to correct problems. Commentators would suggest that this is not uncommon in the IT industry. ‘Madigan, co-author of Dangerous Company, points out the essentially illogical position of the consultant: "If you take your Mercedes to a dealer to be fixed and pay for it, you bring it back if it doesn't work, and [usually] the dealer keeps working on it for free until it's fixed. With IT consulting, if a system doesn't work, you keep taking it back to the shop, but you also keep paying."’ (James, 113). Clearly, making a customer pay for a problem to be remedied is not very good service recovery practice. This is likely to accelerate customer switching, however, again with IT consultancy, especially when systems have been customised businesses may feel locked into specific arrangements with consulting firms despite their apparent incompetence and failure to deliver at acceptable levels. Even with this consideration however, switching in the IT sector is high. A 1998 poll of US based Management Information System (MIS) managers conducted by Information Week revealed that 63 percent had ‘either terminated or rebid an IT service contract within the past year. The most commonly given reason-by a 3-to-1 margin-was the vendor's "poor service and performance”.’ (James, 110). Day and Barksdale examined the factors that contribute to client satisfaction and dissatisfaction in relation to how firms selected professional service providers. Their findings revealed a similarity to quality evaluation criteria suggesting that firms that are able to ensure service quality overall are on the right track to retaining customers and building increased satisfaction. They found that: the provider’s understanding of the client’s needs and interests, the provider’s relationship and communication skills, the providers conformance to contractual and administrative requirements and actual performance were the most important factors, (88). These dimensions can be seen as aggregated categories for some of the switching reasons already discussed – hence it is clear that the consulting industry falls within similar models for customer behaviour in a services setting. Indeed in an IT setting it is imperative that the customer and consultant share the same understanding of the project and its desired outcomes. IT firms often attempt to blame the client for delays. ‘[IT firms cite] demands for features that weren't covered in the original contract. Although it's true that clients often want expensive changes, it's unclear whether that exonerates the consultant from all responsibility Attorney Marzouk explains, "Consultants have a built-in incentive to say 'yes' because then they make more money. There's a disincentive to restrain the [customer].’ (James 111). Again, this is highly ineffective service recovery and highly poor policy on the part of the consulting firm. Edvardsson and Standvik point out that such examples of critical incident failure may not be the result of a direct interaction between the firm and the client but rather the outcome of poor policy. Another contributor to poor service and consequent dissatisfaction is rotation of staff. Businesses require some level of constancy in the consultants they deal with – this is often not provided. ‘IT consulting firms also would like their clients to believe that employees can be swapped in and out of a project because all of them have been trained on the methodologies to be used. Methodologies, however, are often ignored, especially when a project is staffed by inexperienced personnel. When you trace these problems though layers of management, there's usually some sub entity in the organization not doing the program reviews and the process steps.’ (James 112). Internal politics are another contributing factor to organisational switching in a consulting setting. As Harold Levine commented in relation to businesses relationships with advertising agencies: ‘…the agency CEO and the client must make a joint commitment to the relationship and set the standard for great advertising.’ (30). However, changes in personnel at the consulting firm or even the turnover within the organisation itself can result in the mutuality of vision for the project diminishing. Without the common commitment Levine promotes, projects such as this are in danger of going of disappointing. However, these issues are not just down to turnover in terms of a lack of common vision. New recruits to an organisation bring with them their own network of contacts. Switching may therefore result from key decision makers preferring to develop a relationship with a firm with which they have already had contact. Of course, voiding the relationship between the firm and the consultant may be more complex. Indeed there is, as already discussed, reasons for the organisation to already feel locked in, and in this sense switching in relation to preferred contacts within the industry may be limited to consulting areas where there is not an infrastructure commitment. Indeed, switching for these reasons for be more appropriate to advertising consultancy rather than IT where customisation etc. may already have resulted in a...