TRENDS

Client Choice topic

March 2, 2006
US IT Services Pricing Trends
Consulting And Systems Integration Billing Rates
by Christine Ferrusi Ross
with Olivia Ester and Leigh Powers

EXECUT I V E S U M MA RY
Consulting rates have started to climb very slightly, but rates for senior talent are rising at a faster rate.
This is due to high demand for strategic projects that require small teams of partner-level consultants
and few junior associates. There are also signicant dierences based on project: While implementation
and integration rates are at, SAP implementation rates are rising.

RESEARCH CATALYST
Clients selected this topic for Client Choice research.

CONSULTING AND INTEGRATION RATES ARE RISING

Consulting and integration rates have started to increase in the United States (see Figure 1).1 And the
upward trend should continue: Forresters latest study of IT spending shows that clients expect to spend
about 14% more on consulting in 2006 than they did in 2005.2 However, this small increase in average
billing rates hides signicant variation within the consulting industry. Pricing varies dramatically for
dierent areas, such as:

High-end consulting. Rates for business-oriented advice are rising. Work in this category includes
business process change, enterprise risk management, and human capital management. However,
project sizes are not increasing; on average, they are still relatively small and contained. It is
important to note that these areas are on the boundary between IT and management consulting.
Forrester does not see a signicant increase in the demand for traditional management consulting.

IT consulting. IT consulting rates have held steady, perhaps even dropped a little in 2005. But
Forrester expects those rates to rise in correspondence with an increased demand for architecture
planning/design and other projects related to IT strategy.

Application development. Rates for application development and packaged applications

implementation are stable, neither increasing nor decreasing. This is likely due to the signicant
impact of oshore on this market.3 SAP is the one exception here. We see rates rising in this area,
somewhere in the neighborhood of 5% to 15%, depending on the module, skill set, etc.

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Trends | US IT Services Pricing Trends 2

Figure 1 Average US Billing Rates For Consulting And Systems Integration

Hourly rate
Percentage multiplied by
of project percentage of eort
Per hour eort on engagement
Partner $350 5% $18
Senior manager $275 10% $28
Senior consultant $200 20% $40
Junior consultant $150 30% $45
Analyst/developer $100 35% $35
Blended hourly rate $166
(numbers have been rounded)
The model is based on conversations with many end users and providers over the past six to nine months.
It is an aggregation of rates from multiple rms for many project types.
Source: Forrester Research, Inc.

Implementation and integration. Systems integration rates are overall at and stable, but a few
areas like RFID, service-oriented architecture (SOA), and customer analytics are higher than
average. Forrester expects rates for business intelligence and business process management skills
to increase slightly given their role in compliance and process change, respectively.

ENDNOTES
1
Forrester recently completed a study of consulting and integration rates globally. See the January 3, 2006,
Trends IT Services Firms Look For Skills Sweet Spots.
2
Consulting was the only IT services category to show a signicant increase in dollars spent year over year.
Respondents expect that their managed network spending will rise 3%, and applications outsourcing
spending will increase 1%. See the February 3, 2006, Data Overview North Americas 2006 Enterprise IT
Spending Outlook: Business Technographics North America.
3
Pricing for oshore work in general is stable, and we expect to see some very slight upward momentum in
2006. Interestingly, onshore providers tend to quote lower hourly rates for oshore skills than do the major
oshore providers. This is likely because the oshore rms tend to use a higher percentage of oshore
resources overall, and the US rms are looking to show great oshore rates to oset the higher rates for
more senior on-site talent.

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