Billing Rates Fall In Tight Economy

"We are seeing rates that have fallen [by somewhere in the 15 [percent-to-18 percent range, depending upon the length of your project or what kind of resources you're hiring," said Julie Giera, vice president and research leader at research firm Giga Information Group. "But rates are down, for sure."

The rates of the larger consultants now hover somewhere between $230 and $250 per hour, with some even in the $210-per-hour range, Giera said. This is down from $275 to $300 per hour for a senior-level person, she said.

New York-based Razorfish has also reduced its rates in a bid to return to profitability, compete more effectively and get its new enterprise portal practice off the ground.

Bob Lord, COO of the once-high-flying e-services firm, said Razorfish's average billing rate is $170 to $180 per hour or lower, depending upon the size of the project. That's a significant decrease from a onetime high of $246 per hour during the market high in the fourth quarter of 2000, he said.

"Rates are down, but now it really comes down to [customer references," said Lord. "That's not to say we don't get in a competitive bidding situation where we go with $150 per hour just to get our foot in the door."

For many solution providers, the larger question is how to keep utilization rates,or the percentage of consultants working on projects,high when everyone is worried about economic recovery.

Brian Keane, CEO of Boston-based integrator Keane, said utilization rates are a key barometer of financial health for his company, which also is experiencing pricing pressure in its consulting division.

"There's a real pressure to cover your fixed costs," Keane said. "[In this market, in order to get higher utilization you have to drive some of the prices down."