Butcher has Caley threatening to finish inside the European places this season.
Bomber told The Scottish Sun: "Terry has done an incredible job at Inverness.
"Don't underestimate the influence Terry can have on a dressing room. He was a massive figure when I joined Rangers.
"Terry had a broken leg at the time but he was still in and around the dressing room and he still had a massive presence.
"You could see that influence as Caley won promotion. You can see why Terry was so successful as a player. As a manager, players will run through brick walls for him.
"He gets them fired up and raring to go, that's the kind of guy he is.
"If you're not doing your job he's the first to let you know. He won't go behind your back either, he says things to your face.
"But if you're doing well he'll back you 100 per cent.
"Terry has many great qualities. People say he can only motivate players but that's rubbish. He knows the game inside out. You won't play for England as often as he did without picking up tactical tips.
"Caley are a counter-attacking team and every player knows his job inside out. They all work their backside off for Terry.
"I will always cherish my time at Rangers with him. He was a great influence on me and I loved playing alongside him."