by Randolph P. Johnston

Change and opportunity for IT consulting clearly abound in the current business climate. Regulatory changes, like the Sarbanes-Oxley Act, and the resulting strategic changes made by some CPA firms, have opened profitable opportunities for others.

Information technology consulting capabilities improve overall client service. And well-managed IT consulting practices make money. We are just getting ready to experience the Year 2000 rebound effect, as businesses now require updated technology to replace systems that were bought to be Y2K-compliant.

There are several services that CPA firms can offer in the IT consulting arena. First, the separation of audit and consulting caused by Sarbanes-Oxley permits small firms or regional consortiums to provide consulting services for other firms who want to retain the audit work. In reverse, if the other firms are retaining the IT consulting, your firm may be in a position to gain additional audit opportunities.

In either case, full-service Big Four or major regional firms now have conflicts of interest that have to be solved by someone. Why not you and your firm?

Other IT services that continue to be profitable include: strategic technology planning, business continuity, disaster recovery and business process mapping. More intricate services that provide a lot of client satisfaction and revenue opportunity include: paperless implementation, security assessments, spam and virus control, virtual private networking, remote access and server consolidations, wireless deployments and computer telephony selection and implementation.

Technology services already abundant within small firm write-up practices include managed QuickBooks practices, accounting software implementation, and work with nonprofit accounting and fundraising and other software applications.

Additionally, services in human resources, benefits management and payroll often have simple technology solutions that provide ongoing revenue to the firm while saving clients money.

The listed services exclude more sophisticated ones often provided by traditional resellers, such as server setup and configuration, workstation installation, patch management and cabling. Those services are definitely needed, but the amount of expertise required to provide them is higher, and the realization is lower.

As you think about service possibilities, how many would you like to see done properly in your own firm? Who in your market is currently providing these services? How much would you be willing to pay to an outside company if you knew the implementation was going to be successful? This opportunity exists even in secondary and tertiary markets.

Some accounting practices already offer IT consulting under other names such as business advisory services. For example, many firms with extensive write-up practices have evolved into advisors on low-end accounting software as their clients have purchased products like Quicken, QuickBooks and Peachtree to write their checks and do their books - and they begin relying on their CPAs for help with handling these packages.

When clients approach you with the mess they’ve created with these products, you will often take their files, clean them up, produce the financial statements, and perhaps pick up the needed tax data from these files. You are often doing this as an hourly service. Why not brand this as an IT consulting service with a marketable name like “QuickBooks Cleanup,” and move your firm to more profitability?

With QuickBooks, you can contract with your existing clients to provide management services along with write-up, reporting and clean-up services. As part of your service, why wouldn’t you plan to spend time with management discussing the results?

As you discuss results with them, your clients will begin to value your business advice more, and be less put off by the compliance or reporting approach. The discussion may also open the door to selling additional services.

You should choose your role for these services carefully. Many firms have had false starts by deciding to “get in the business,” hiring expertise, and then deciding they should not be in the business. Others have tried and failed because they didn’t choose the proper service to deliver, lacked internal expertise, or marketed their service poorly.

The biggest question for CPA firms considering IT consulting is whether to be a recommender or a reseller. Recommenders can take high-realization projects that include the analysis and selection process, and perhaps include implementation project management.

As a recommender, you can form alliances with existing experts in your marketplace, and learn the best of all of their techniques, making your expertise even more valuable. And you can execute the project on your own firm first, develop the work papers, procedures and strategies to manage future projects, and then go to another client that has a similar problem. By the time you have done three or four projects, you may begin to gain a reputation as an expert in the field.

As an alternative, you can consider becoming the reseller of one or more product lines in your area of expertise. For example, if you want to do IT consulting on paperless implementations, you may have one or more lines of software, scanners and other items that become part of your solution.

These items provide much greater revenue opportunities with minimal risks, since most products are ordered after the implementation engagement is signed. However, in today’s market, it can take from 12 to 18 months to gain enough expertise to offer real value.

The most obvious way to jump-start a practice is to acquire a practice that already has the expertise. The danger here is that the acquired practice’s culture may not be compatible with your firm. The advantage is getting expertise and a base of clients immediately.

Regardless of your strategy - recommender or reseller - consider long-term retainer contracts that keep you involved with client projects. Many of these key technologies require frequent intervention, so rather than nickel-and-dime clients to death with hourly billing, make an estimate of the services required and create a retainer engagement spread over a year.

You can time the payments as the client desires, which could be monthly, quarterly or annually, but these retainer engagements can help smooth cash flow for both the client and your firm. Further, client satisfaction will increase if you use your retainer base to provide additional services, and again, because you are frequently with the client, you will have the opportunity to provide more services. Limit the time included in the initial engagement and adjust the cost of these engagements annually based on actual time used.

What type of firms should consider IT consulting? If you currently have a firm growth strategy, are involved or would like to be involved with technologies that save businesses time and money, have some limited expertise in-house today, and can see an opportunity in your marketplace, you are a candidate.

The IT technologies mentioned above have good profitability, and should be long-term services. The primary costs of getting involved are time and a minimal hard-dollar investment initially. If your client base has a need that you can satisfy, you have a potential referral base for more of your services.

Besides contacting clients about this new service, you should plan to expand your marketing outside of your client base. You may not have to be aggressive, because your existing clients will be referring you as the experts in this area.

The opportunity is larger now than it’s been in the last three years, and demand will increase as the economy recovers. But, as today’s window of opportunity closes, the barrier to entry will increase, profitability can decrease, and competition will increase.

Why not establish your firm as a prominent IT consulting group while the window is still open?

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