2002 opens the age of uncertainty (continued from page 14)

More cuts ahead

Look for layoffs and deferred compensation furloughs this month.  Deferred packages will be used to hold onto talent with a stipend and benefits until consultants get a better sense of when business will pick up, says Dean McMann.

"The biggest dilemma is how low do you get and when's the upturn going to come," says Ted Martin, Martin Partners.  "IT consulting has been hit the hardest" by layoffs and pay cuts, he adds.  In some instances, firms are reducing base pay 40% to 60%.

Another executive recruiter cites recently placing a partner-level consultant for $400,000 annual salary, down $200,000 from his prior job.  Across the board salaries are down with rare exception, say recruiters.  Journeymen consultants are being offered 20% less than their prior job.

Few should expect a broad rebound when the economy picks up.  The pressure on compensation is a reflection of heightened competition, particularly from publicly held providers of IT solutions.

Software providers stand to increase their service revenues as clients turn to them increasingly to implement, integrate, and service software.  Simon Walls, vp strategy, PeopleSoft, says that the company began 2001 with 60 consultants specializing in CRM.  The headcount of CRM consultants more than doubled to 150 by the end of the year.  And he expects to have more than 300 by the end of this year.  In 2001, PeopleSoft's services revenues, including consulting fees, topped $1 billion.

Typically, Walls says, customers bring in PeopleSoft consultants to implement the firm's new PeopleSoft 8 software after they have suffered through one of the many failed CRM installations, or when they become convinced that PeopleSoft consultants best understand the product and how to implement it.

Change the only certainty

That the IT consulting industry finds itself confronting a time of  uncertainty is not surprising, say Sprinkle.  "It's

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