TechnologyThe Big Five: When the climate changes…

The Big Five: When the climate changes...

Forrester Research says the Big Five are ill-equipped for the e-commerce age and are threatened by newer, more agile species of consultancies. Dan Sabbagh reports on their attempts to adapt to new conditions.

The top five management consultancies – Accenture, Deloitte & Touche, Cap Gemini Ernst & Young, KPMG and PricewaterhouseCoopers (PwC) – are natural survivors. Yet, according to Forrester Research, these mighty blue-chips may have had their day. In a recent report, The End of the Big Five, Forrester says the giants are ill-equipped for the e-commerce age. It predicts corporates will toss them aside for newer, more web-focused agencies. Recognising this trend, the Big Five are re-inventing themselves to handle e-commerce and web-based projects. That means tasks are completed faster than in the past and fewer consultants are involved on-site. In short, consultancy should become a lot more affordable.

The management consultancies made big bucks through the ’90s, but didn’t necessarily deliver customer satisfaction. The focus was on implementing enterprise resource planning (ERP) systems, principally R/3 from ERP specialist SAP. Projects were and are lengthy, from six months to three years, and often see one consultant deployed for every five users. They are expensive, too: average day rates start at £500 to £1,000 for a graduate and reach £3,000 for a partner. That compares with an industry average that starts at £375 and levels off at £1,500, according to the National Computing Centre.

None of the Five will reveal how much they earned from ERP work, but analyst Richard Holway estimates the worldwide market for SAP services is 10 times greater than SAP’s own revenue. That works out at less than $43bn (£28m), according to SAP’s 1998 figures. But the ERP market is now in decline, as shown by vendors’ losses and resulting redundancies. The downturn coincides with the rise of the Internet, which Forrester says has outmoded the way the consultancies work. The Big Five employ huge numbers of staff – 155,000 worldwide at PwC, for example. Long-serving staff are rewarded with a partnership, with a slice of often hefty profits.

Forrester says the firms are too hierarchical and overmanned to suit the Net economy. Staff are not sufficiently motivated, because it takes too long for them to reach the top or enjoy other rewards. In a world of Internet millionaires, staff want share options, not a partnership somewhere in the future. Christine Ferrusi Ross, the Forrester report’s author, says: “The Big Five operate on a model that’s 100 years old and is completely unsuited to the Internet. Internet projects don’t last that long. It should take just four to six weeks to decide your e-commerce approach. And you don’t need so many people per engagement. This model is too slow to make it in the e-commerce services industry,” she adds.

British customers are now turning to newer, nimbler consultancies, such as US Web/CKS, for advice. Founded in 1995, US Web/CKS has just 3,800 employees and like many other Internet-focused startups it makes a loss: $188m in 1998, compared with Accenture’s $8.3bn revenues for the same year. Pete Marsden, IT director of Web bank Egg, thinks highly of this new breed of consultancy, and used US Web/CKS plus six other striplings, to develop the online bank which is based at blue-chip giant Prudential Assurance. Marsden says he is wary of using the Big Five, on the grounds that he needs rapid project delivery, on average 50 days, and delays lead to massive cost overruns. He says the Big Five suffer from inappropriate methodologies and skillsets. “There are some great people in the Five, but I have found a greater percentage of capable people in the smaller UK consultancies, and the larger US-based web agencies such as US Web,” he says.

The giants have a lot to lose if they miss the e-commerce boat. Analyst GartnerGroup says that half of the world’s IT spending ($3.3 trillion) in 2002 will be e-business based.

This year, e-business growth has been slow because 40% of the global IT spend went on fixing the year 2000 bug. The Big Five are now re-inventing the way they deliver IT consultancy. The first step has been to wean themselves off SAP and adopt software focused on e-commerce. PwC is training 10,000 staff to use Java, and recently partnered German e-commerce vendor InterShop to deploy its Enfinity product. Enfinity is a set of Java and wireless access protocol-enabled software modules for specific business processes.

It is designed to be used by non-technicians, enabling them to build a high-performance e-commerce website without too much software coding or systems integration.

Mark Reid, PwC e-business consultant, says PwC staff will be trained in Enfinity. “In two years we will see a large percentage of our business analysts retrained to do business IT integration, but without needing to know about it at a deep level,” says Reid. The advantage is twofold.

Customers get quick project turnaround – PwC set up online music shop Cicada in just 30 days based on Enfinity, compared with six months for its average SAP installation. PwC, meanwhile, can can increase both projects and revenues.

Reid adds that Enfinity also frees PwC’s more qualified engineers to tackle difficult systems integration work on e-commerce projects.

Last autumn Accenture invested in ChemConnect, an online chemical and plastic exchange. PwC acquired 12% of web designer Methodfive, whose work includes CGE&Y took stakes in online patent exchange, the Patent and License Exchange, and in financial deal-making service IntraLinks.

Accenture says it makes two investments a month, on average. Some firms are thought to be offering free or cut-rate consultancy in return for a stake. But what impact will partnering with specific technology providers have on consultants’ objectivity? Will that ’90s dependence on SAP become dependency on a core set of e-commerce software?

Morris claims the diversity of Accenture’s projects will mean it is unable to recommend a specific technology across the board. “We will see a much greater diversity in our work,” he says. If these strategies prove successful, the consultancies have a lot to gain.

  • Dan Sabbagh is a freelance journalist.

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