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Is Consulting Riskier than Corporate IT?

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Continuing his series on technology consulting, Aaron Erickson, author of The Nomadic Developer, considers the relevance of a bit of conventional wisdom: During an economic downturn, is taking a job as a salaried technology consultant too risky?
From the author of

The Bench. The Beach. "Consultant in transition." Scary terms to consultants who work for technology consulting firms—whether small 10-person shops or large, multinational consultancies with over 100,000 employees. If you take up a career in technology consulting, the period of time when you're drawing a salary but not directly generating revenue can be scary. This is especially true during an economic downturn—as we're experiencing in the U.S. now.

Is technology consulting really riskier than "normal" corporate IT jobs during a recession? In this article, I make the case that technology consulting is actually less risky than IT jobs you would typically have in most bricks-and-mortar companies.

The Corporate Bench

When thinking about risk, remember that most people in IT—that is, those who work for the technology group of a company that doesn't sell information technology to customers—probably feel insecure about their jobs right now. If you work in IT at a company that's losing lots of money, such as General Motors—or, for that matter, companies that simply aren't making money as fast as Wall Street wants—chances are that you're worried. A CEO can make a stock go up by announcing a layoff to cut a "cost center," and that's enough to cause occasional sleeplessness for all but the calmest people (or those endowed with trust funds).

How do you know if you're "on the bench" when you work in corporate IT? An early indicator of layoffs might be that you get moved from projects with a high and obvious return on investment to a "safer" task such as maintenance of older systems. The company will say that it's only making small investments and not big moves as it rides out the storm—often investing only in projects or tasks designed to keep the lights on. Not only are you in a cost center, but your cost center is most likely doing what the company considers to be low-impact work. Being in a cost center doing low-impact work that doesn't add a lot of value relative to its cost is what I call the "Corporate Bench."

Cost Centers, Recessions, and IT

When Wall Street comes demanding cuts, the company probably isn't going to cut the sales force, the office of the CEO, or (unless times are truly desperate) new product development.

When you're on the bench in consulting, you know it. The question about whether you're adding value is crystal clear: Are you billing? In corporate IT, on the other hand, the answer is far less clear. Most companies talk about their IT staff as assets, but (especially in an economic downturn) that's feel-good talk designed to keep up morale. The fact is that your salary falls on the expense side of the ledger, not the asset side.

At best, many CFOs see the IT function as a risky discretionary investment with an unreliable rate of return. Others view IT as a profit-sucking black hole where good profits go in and big, high-maintenance messes come out. Can we really blame those CFOs who have watched ill-conceived projects drain the company coffers with no return? I can't really blame them for wanting to at least offshore the whole thing. I have actually heard more than one CFO state that if he's going to get mediocre results, he would rather offshore it and at least get uninspired work for less money.

In corporate IT, even the good performers get thrown out with the bad when the CFO comes swinging a giant axe at the IT department.

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