False Economies of Scale?
By Jon Wilson
Posted Sunday, November 28, 2004
When you buy consultancy services - such as internet consultancy - what exactly are you paying for?
When you pay for business services of any kind - particularly consultancy - you are paying for three different ingredients: materials, expertise and overheads.
The cost of materials is low with consultancy, and fairly static - the larger the supplier is, the more economically they will be able to source the materials from their own suppliers: a basic economy of scale and bulk-buying power.
The value of the expertise you receive is less quantifiable, and is more or less "the rest", once materials and overheads have been covered - it is the expertise, the "talent" that you are actually purchasing: the rest is usually the necessary, but inconsequential trappings that go with it.
The overheads are the most variable behind any service supplier. Alongside the talent you are paying for, you are also, naturally paying for some proportion of office rental or mortgage, equipment costs, air conditioning, transport, accountancy fees, computer software, receptionist and secretarial wages, advertising and a thousand other things.
By using a smaller supplier, the chances are that the percentage spent on overheads will be lower - meaning in effect that the percentage of your money spent on the talent is higher. All other things being equal - such as the total contract price - you get less actual talent and more administration for your buck.
The more money that goes towards overheads, the less money goes for the talent. It is as simple as that.
For your Web site to work effectively, and, let's face it, profitably, for your business, you generally need a few simple things, done well. You need good quality writing, an effective design and systems that suit your business, your customers and your Web site.
You don't necessarily need the flashiest, hottest, funkiest, sexiest gimmicks and gadgets.
Your designer doesn't need the funkiest letterheads and slickest stationery.
Your designer doesn't need the most prestigious city office, or an ultracool logo, or a Big Name high profile blue chip client list.
What they do need is professionalism, experience and an understanding of who you are and what your business wants.
When you go to a big name web studio, Internet developer or even "New Media" guru, what exactly are you paying for?
A quality design, proficient implementation and reliable support? Yes, partly, but also...
office expenses like rent, lighting, air-conditioners, watercoolers, coffee machines, computers.
support staff, such as the receptionist, office manager, secretary, accountant.
oh, and their office space, with lighting, air-conditioners, water coolers, coffee machines, computers.
Remember their big ad in the yellow pages? That impressive billboard outside, on the prime commuter route to the city? Yep, you've paid for a share of those too.
The company Christmas party? Yes, thank you very much for your contribution.
Oh and the designer? Copywriter? Editor? Consultant? They may not - and here's an often overlooked or even concealed fact - they may not even work there. These days they're very often outsourced.
Outsourced to small outfits, one man operations, sole traders and freelancers...
About the Author
Jon Wilson is an independent writer, consultant and developer, bringing high quality internet services within reach of small businesses in a time effective, cost effective manner.
