Comment by tptacek | Hacker News Reader

Comment by tptacek | Hacker News Reader

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Yes, that was an inartfully constructed sentence. No, consultancies are not like "rent-a-centers". The fallacy here is that the fundamental unit of commerce here is "talent/hour". Here's a sampling of all the things that have value in these transactions:

* An hour of talent

* A committed hour of talent a week from now

* A committed hour of talent a year from now

* Any number of commited hours of talent from the same person

* An hour of talent on 1 month's notice

* An hour of talent on 1 day's notice

* An hour of talent from a problem domain specialist

* An hour of talent from someone intimately familiar with your company's business processes

* Hours of talent rotated through a small group of people to keep them fresh, at less than 3x the cost of a single person

* Total scheduling flexibility over talent/hours

* A candidate for internal career development (management, architecture, etc)

* An A-player who poses no political threat to the company's org chart

Some of these are benefits of full-time employees and some of them are benefits of contractors. Some are benefits of staff-aug contracts and some are benefits of project-based consulting and some are benefits of transactional one-shot consulting/advisory gigs. It's naive to suggest that only a raw hour of exercised talent is worth money.

I deal with consultant price negotiations all the time and quite frankly it's one of the hardest challenges that consulting companies face. I think I might have lost you with my rent-a-center analogy; my point actually was to say that they aren't like rent-a-centers. In the case of a consultancy assessing the value of these transactions is extremely difficult do as a customer and more importantly as the owner of a newly established consultancy owner. Not to mentioned some of those transactions hold more value (and thus price/hr) to different sets of customers. This is really where the unfortunate math behind a starting a consultancy lies. At maturity (i.e. when you have consistent client pipeline) these are much easier to decipher.

EDIT: I just realized I did actually say "let's pretend a consultancy is a rent-a-center". I should have probably worded that differently - hence the confusion.

You and I are both firing on all rhetorical cylinders today, aren't we? :)

FYI, I find the conversation fruitful! The criticism is much appreciated, and readers will do well to hear your counter arguments.

I very much agree with your points, especially that "billable hours" is not the point, that expediency or rarity of talent can easily be more important.

A fuller, more accurate treatment of the concept has to include that. Perhaps it's still useful for folks to (sometimes!) think about optimizing the person/hour, since that is of course an important part of the equation, and optimizing it does help.

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