Partner. Contractor. Consultant. What’s the Difference?

So, a consultant, a partner, and a contractor walk into a bar -no, it’s not like that. A contractor would walk into the bar for you (because that’s what he/she is paid to do), a consultant would tell you how to walk into the bar and charge you for their subject matter expertise, and a partner would walk into the bar, negotiate a better price for the beer, keep half of the savings, and share the rest with you. A good partner would likely stay and drink the beer with you. This may be unpopular to say, but you should probably fire your consultant. 

Here’s why:

The term “partner” is probably the most overused term in business today, with “solution” being a close second (a pencil is a pencil, it’s not a writing solution). Be especially careful of someone that refers to themselves, or their company as a solution partner - it’s like playing buzzword bingo! There are some great examples of real partners in the technology business. Two examples I will use today are Great America Financial Services and Supplies Network.

Great America’s main business is equipment leasing, but they also manage much of the billing, collection, and transactional work, and they provide great ancillary services that help technology companies grow. Until I see otherwise, I’d think long and hard about doing business with anyone else. Great America removes costs from your business, and increases your profitability. They can manage these processes much better than you can yourself - 30 years and over 1 billion dollars in annual revenue create the economies of scale make it so.

Supplies Network drives the infrastructure costs out of your MPS business. For years, I disagreed with their model. I thought dealers should be able to do this themselves. How hard can it be to derive the right cost per page, or ship supplies to a customer when they run out, right? Wrong. Once again, investments in infrastructure and economies of scale mean they can do this for you, extract a good profit and still pass on savings to you.

Those two companies are great examples of a partner. Consultants are a whole different kettle of fish. The Internet has turned consultants into endangered species. Seriously, your ability to research any topic, go on forums to find out “do’s and don’ts”, and follow companies that have implemented best practices, has seriously undercut the value of outside consultants. Am I being unfair to consultants? Yes. I was a consultant at various times in my career. I was not always effective for the companies I worked for. It’s likely that if you’ve hired consultants over the years, the relationship ended up more often in acrimonious divorce, instead of a happy marriage. Here’s what I learned from my mistakes. Hopefully these tips can help you.

  1. Build a business case. Is this project going to increase revenue or decrease costs? How much, and by when?
  2. Have a tight scope of work. What exactly are they doing? Building a program? Researching a market? Implementing software? Resist changing the scope mid-project. If the consultant is worthwhile they will welcome this approach.
  3. Have a timeline for when they leave. If the project takes longer than three months, it’s a good idea to revisit the scope of work. If the consultant signs on to a timeline, they own it. If they are worthwhile they will resist an unrealistic timeline or an undefined scope of work.
  4. Give them authority. Chances are the consultant will suck up your time and your employees time. Employees resist authority that comes from outside of the organizational chart. Employees also resist change. How much time does the consultant require from each employee?

At the end of the day, if a business case is built and a project is given the green light, you should strongly consider hiring an employee, or a contractor instead of a consultant. At some point you will be at a decision point where the project is either scrapped (its not a good idea, not a good time) or you proceed. When you proceed you may need to have your own internal expertise, or find a partner that can help you execute your project. A consultant is never a permanent solution. It may even signal that you are not committed to an initiative.

The new model of providers in the B2B space is to be a solution provider (just kidding -see what I did there?) Providing a company with products, or software alone does not work. One example in our industry is the Shopify e-commerce platform. They provide a platform, but they also encourage developers to use their SDK to build niche applications on top of their environment. They allow applications to be sold through their ecosystem. Shopify has created an Expert program where those with extensive experience can help others develop and launch their site. This model is popular with Salesforce for CRM, SAP uses it for ERP.

And the next time someone offers to take you out for a beer, ask them if they are a consultant, a contractor or a partner.