“H.I.S.-tory” by Vince Ciotti

© 2011 H.I.S. Professionals, LLC

Episode # 33:

HIS

Consultants

Part 1

I thought we were doing Minis!?• We were, but with HIS Inc, that 3rd epoch is now done.• And before moving on to Micros, time for a little

diversion into a field that has become so big, it just can’t be ignored in the HIS-tory of HIS: consulting firms.

• And, since I are one, I thought it would be fun to poke a bit of nastiness the monsters in this field are guilty of, and recap the careers of some of the early pioneers.

• Unlike many modern “consultants,” some of whom are too young to vote, the original HIS consultants were true mavens who knew more than, well, these folks pictured on the right:• Don’t recognize the faces? Well, hang on,

you’ll get to meet the Newtons & Galileos of HIT consulting, up close & personal…

Consulting “Epochs”• Just like the 4 epochs of HIS systems (mainframes,

shared systems, minis & micros), there were 4 different time periods in consulting dominated by various firms:

1970s = the “Big Eight” accounting firms: - AA, AY, C&L, E&W, DH&S, PMM, P-W, & TR

1980s = the rise of “Boutique” firms, like: - SIDA (Dorenfest), Kennedy Group, Johnson…

1990s = the rise of HIS consulting “Giants:” - Superior, First Consulting Group, ACS…

2000s = mergers, acquisitions & consolidations:- Xerox acquires ACS who had bought Superior- Dell buys Perot who had bought JJ Wild- CSC acquires First Consulting Group

The “Big Eight”• Hard to remember back in the 60s & 70s when

“consulting firm” was synonymous with “audit firm!”• The trick then was the intense inside relationship of an

audit firm and their clients: any recommendations they made in management letters were hard to ignore!

In case you aren’t good at acronyms, they were:• AA = Arthur Andersen, est. 1913• AY = Arthur Young & Company, 1968• CL = Coopers & Lybrand, 1973• EW = Ernst & Whinney, 1979• DH&S = Deloitte, Haskins & Sells, 1978• PMM= Peat, Marwick & Mitchell, 1925• PW = Price Waterhouse, est. in 1890• TR = Touche Ross, est. 1960

Big Eight Dominance• Just how dominant were the Big Eight consultants back then?

Check out the figures below from a study published in the early 1980s by Systemetrics/McGraw Hill (one of the few firms that competed with Sheldon Dorenfest “Guide,” the early HIS bible!):

• They identified 180 firms offering HIS consulting in a survey of about 1,500 hospitals (the AHA counted about 7,000 back then), and about 1/3rd use consultants (≈500 respondents), the leaders:– Ernst & Whinney = 46 clients (≈10%)– Arthur Andersen = 41 clients (≈8%)– Coopers & Lybrand = 21 clients (≈4%)– Peat Marwick & Mitchell = 21 (≈4%)– Price Waterhouse = 16 (≈3%)– Deloitte Haskins & Sells = 14 (≈3%)– Touche = 8 (2%), Arthur Young = 3

“The Other Guys”• The also-rans were an odd mix of HIS vendors and “Boutique” firms:

7 = First Consulting Group (≈2%)6 = Burroughs (Programming?)6 = Dorenfest & Associates (≈2%)6 = HMS (Nashville, not NY!)5 = HBO (implementations?)5 = SMS (“Strategic Systems Group”)4 = Software Services (programming?)4 = Henderman (later bought by Dairyland)3 = Computer Power (to the people!)3 = Dairyland Computing & Consulting (today’s “Healthland”)3 = Dakota Programs (ran in all 50?)3 = McDonnell-Douglas (McAuto)2 = William Andrews (another early HIS guru)2 = Laventhol & Horwath (accounting firm)2 = Lake Superior Software (LSS - of later fame as Meditech’s PM partner)

Big Eight Auditing HIS Vendors• I got my introduction to consultants at SMS in the early 70s as a

corporate hot shot in King of Prussia where I met a number of individuals from our auditors, Arthur Andersen, who played major roles in SMS’ fortunes and the future of the HIS industry:– Tom Shaffert - our audit partner, regularly brought in AA’s HIS

consultants to hone up on the improvements we were making to SHAS, which of course started popping up in their RFPs…

– Lou Amoroso – as nice a guy as he was smart & hard-working, Lou turned around one of our early install debacles in PA, a giant gig that showed AA partners there was gold in HIS hills!

– Jay Toole – project manager for AA at Chesapeake Physicians in Baltimore, where I helped them install SHAS for physician’s billing, which in those ancient days were white 1554 forms.

– Bob Flippin – one of Lou’s hot shots at Altoona, who later joined SMS and became a super salesman out in San Fran.

HIS Vendors & Big Eight Firms• When I went to McAuto in 1980, I encountered their auditors,

Price-Waterhouse, who were just as smart & hard-working as AA.• We brought them in to learn the nuances of HFC, HDC, PCS, etc.,

just like we had shown AA our SHAS improvements in K of P…– The result? P-W’s RFPs started to read like McAuto’s

brochures, and our win rate with them shot up dramatically!• Was this nasty or immoral? It was business!• Just like hospitals want physicians to refer

patients to them, so they give MDs the best parking places, a private cafeteria room, etc.

• Where does one draw the line? In consulting, it’s a very murky line at best...

• If you worked for an HIS consulting firm that specialized in implementing Meditech - just how objective would your RFPs be? Caveat emptor!

Denouement…• And that, in a nutshell, explains why the Big

Eight “accounting” firms all shed their consulting divisions post-Enron and SOX…

• Even giants like Coopers & Lybrand, whose consulting division revenue was huge, let go scores of excellent consultants like Frank Cavanaugh, Everett Hines, & many others.- Who survive today as “Cardinal” or CCI…

• Ironically, AA’s consulting division grew so large it had split off circa 2000 as Accenture before that debacle, and so escaped AA’s demise.

• Through mergers & acquisitions, today, we’re down to the “Big Four” all of whom are now re-growing their consulting divisions rapidly.- Again, is that kosher? Once again, it’s business, and the four

remaining auditors have thriving HIS consulting divisions...

And Then There Were…• So how did the Big Eight shrink down

to the “Big Four” or “Final Four” as they’re known today? In a nutshell:

• First, the Big 8 became Big 6 when:- In 1989, Ernst & Whinney merged with Arthur Young to form

Ernst & Young- Also in 1989, Deloitte, Haskins & Sells merged with Touche Ross

to form Deloitte & Touche • The Big 6 became the Big 5 in July 1998 when Price Waterhouse

merged with Coopers & Lybrand to form PricewaterhouseCoopers.• Subtract Arthur Andersen post-Enron in 2002 and you get our Big 4.

- Where did the name KPMG come from – it was not in the original Big 8!? In 1987, Peat Marwick merged with the KMG Group to become KPMG Peat Marwick, later known simply as KPMG.

Next Week• The 2nd epoch of Boutique consulting firms is about several HIS-

tory heroes who already appeared in several past episodes.• How many of their names can you guess?– One started Compucare, one of the earliest and long-lived HIS

mini-based systems (lives on as QuadraMed today).• No, not Ron Apprahamian, the other guy!

– 2 others both worked at Lockheed’s early MIS project:• And both formed thriving consulting firms in the 1970s…• One consulting to hospitals, the other to HIS vendors.

– Another was an early client of HIS Inc., which if you remember last week’s episode, was a pretty risky idea back in the 1980s…

• As always, if you have any gems about these early days in HIS (especially pictures, ads, brochures, business cards, inside dirt…)

• Please send them to vciotti@hispros.com or call (505) 466-4958