In How IBM Conned My Execs Out Of Millions, Tristan Yates tells a sordid tale of “exec-level FUD sales techniques and the $325/hr subcontractor labor bait and switch”:
Last year, I worked as part of a project management office for one of the biggest defense contractors in the world. I was a contractor myself, getting paid by the hour to help them with project planning, forecasting, status, and other PMO and IT advisory functions. So when IBM conned them out of millions of dollars, I was sitting right in the front row.
A great line:
The second consultant’s job was more sinister. He was a thought leader.
Here’s where the hammer falls:
At this point, IBM Global Services consultants flooded our conference rooms. Overnight, we ended up with twenty consultants. When I asked how much these consultants were costing us, I was told $250/hr. This information proved to be incorrect – they were actually charging us $325/hr.What were we getting for $325/hr? People hired off of Monster and Careerbuilder. Seriously.
Management was under the assumption that we would be getting real implementation experts from IBM. In fact, we were getting employees from a subcontractor. We paid IBM $325/hr, and they paid their subcontractor about $165/hr. The subcontractor then paid its people salaries of $90,000 to $110,000/yr, the market average, which equates to about $75/hr when benefits are included. We were paying a markup of about 333%.
[...]
We had expected IBM to stay for about three months, which all by itself would have blown our budget, given their $325/hr bill rate. But they were in our company for more than seven months, burning through more than a quarter million dollars a week. And Global Services wasn’t the entirety of the IBM damage. We still had licensing and support fees for Websphere, Websphere Portal, Websphere Content Management, Tivoli Access Manager, and DB2.