Telkom’s R1.35 billion consultant, security bill

Bloomberg recently reported that Telkom awarded a R91.1 million advisory contract to Bain & Co without following an open bidding process.

Bloomberg added that Telkom CEO Sipho Maseko hired Bain to advise the company on its broadband and mobile strategy within days of his arrival at Telkom on 1 April 2013.

This raises the question as to whether spending millions on consultants is really necessary. Over the last financial year, Telkom spent R1.355 billion on “consultants, security, and other”.

According to a source, the company may well have spent hundreds of millions of rands in recent years on consulting fees with firms like McKinsey, Bain, Delta Partners, Boston, and Genpact.

Telkom explained that “consultants, security and other service fees increased 2.3%, which was driven by higher costs incurred relating to the company’s transformation programme”.

Some commentators are not convinced this is money well spent. One source close to the company said far too much money is wasted on consultants, and that most of the work can be done internally.

“Telkom has extremely well qualified and capable staff that can do exactly what the consultants are doing, and even better,” said one source.

He added that whenever a new top executive joins Telkom, new consultants often follow. “The typical mind-set with new entrants is not to trust what Telkom staff tell them, and always check with consultants,” he said.

The current system also seems to create inconsistency, with some projects being closed before they are fully implemented. Telkom’s Project Renaissance is one example.

Telkom explains its use of consultants

Telkom said it uses consultants for their highly specialised skills and services.

“These consultants offer expertise which fall outside of the ambit of the company’s core business focus,” said Telkom.

“Such specialised expertise is often required on an ad hoc basis for specific projects on a short term basis and offer support to Telkom’s permanent employees in a highly cost effective and results oriented manner.”

Telkom highlighted that it is not always the case that consultants are used because of a lack of in-house skills.

“In fact, Telkom also uses banking services, cleaning services, vehicle fleet management services, and property portfolio management services, amongst others, and does not see the need to bring these in-house,” Telkom said.

With the high cost of consultants, it raises the question as to whether it would not be cheaper to employ people, or train people, with the necessary skills to perform these tasks.

Telkom explained that consultants are brought in on a term contract basis to perform a specific or a range of tasks.

“Herein is the opportunity to negotiate cost upfront, spread over the term of the contract. It is not indefinite. Consulting companies will bring in the necessary skills required at any juncture during their tenure at the company with no variation to the cost,” Telkom said.

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Telkom’s R1.35 billion consultant, security bill