April 14, 1997 Fortune Magazine
AT&T: CONSULTANT JUNKIE
A billion down the drain?
Ronald B. Lieber
M>ention AT&T in a room full of management consultants, and they all break into sloppy grins, with bits of drool oozing out of the edges of their mouths. Why the Pavlovian response? In a rare instance of candor on the subject of consultant spending, AT&T freely admits that it laid out close to $1 billion for their services in 1996 alone. "Deep down, most companies don't want people to know that they're spending hundreds of millions of dollars on what amounts to intellectual outsourcing," says Tom Rodenhauser, managing editor of Consultants News.
So why would Ma Bell disclose its status as king of the consultant junkies? As any 12-step veteran knows, the first step in kicking any addiction is admitting that you even have a problem. "Consultants shouldn't be driving the strategy of AT&T," CEO-to-be John Walter said in a recent speech. "We looked around the business, and wherever we saw consultants driving the strategy, we let them go." By redirecting all those millions, perhaps he can cheer up his beleaguered shareholders.
Going cold turkey is tough, though, so AT&T managers can still farm out computer systems work and some research tasks. But any new request for strategic help has to go to the top, and given Walter's statements on the subject, you'd have to have a downsizing wish to even ask.
This may spell trouble for strategy shops that have come to rely on the Ma Bell gravy train. In Dangerous Company, a book about the consulting business that's coming out this summer, authors James O'Shea and Charles Madigan note that AT&T paid Michael Porter's Monitor Co. $58 million in 1993, which amounted to over half the firm's total U.S. revenues, according to Consultants News. Monitor insists that it's much more diversified now and gets just 25% of its revenues from the entire telecom industry. Now watch those silly grins disappear. |
