Disappointed Customers & Frustrated Consultants: An Observation

Yesterday, I was in NYC meeting with several large customers who have been using the "big guys" of IT consulting on large-scale projects. I also had a cup of coffee with a senior project executive of one of the "majors" who told me about the frustrations of trying to deliver the services their sales people sold. Here's what I concluded:

--Large customers are getting more sophisticated and are sometimes manipulating the account executives of competing firms to "race to the bottom" in terms of price. In some cases they are being less than forthright in estimated volumes, workloads, etc. Given the past history of some of these service providers, one might be tempted to call it a case of "what goes around, comes around..."

--Even with this new found leverage, clients are frustrated that these projects are not nearly as "seemless" as promised. User satisfaction is falling. I'm hearing that the Morgan Stanley debacle is just the tip of the iceberg.

--The consultants on the ground at various customer sites are increasingly frustrated trying to keep high quality staff engaged on projects, trying to actually deliver what sales promised in the face of fixed cost budgets, large internal bureaucracies and suffocating overhead costs.

It seems apparent that there is something seriously wrong with the enterprise outsourcing delivery model. Customers are demanding more services at lower cost (don't they always do that?), but the vendors appear to be offering prices that do not allow for profitable exectution. Like a drug user addicted to crack, they need larger and larger "hits" to feel the same effect. Unfortunately, the only options open will become death or rehab. Which will they choose?