Maybe you can put it down to press training or his stint at Harvard Business School, but for someone looking to go head to head for a slice of the Big Four pie, Owen Sullivan certainly looks the part and he talks the talk. If bullishness were a prerequisite to stock price, shares in Jefferson Wells would be sky high. But as his firm takes its first tentative steps into the UK market, all eyes will be on him to see if he can walk the walk.
Amid calls for a tightening up of controls across UK plc, the corporate mantras of corporate governance and damage limitation, and with the bitter aftertaste of Parmalat and Enron lingering, Jefferson Wells has crossed the Atlantic to shake up the market.
The eight-year-old professional services contender – a mere infant in big firm terms – launched in London last month, proposing an alternative to traditional large accounting firms and offering a raft of non-audit services across the areas of risk, corporate governance and regulatory compliance, internal control and financial process improvement.
There’s nothing particularly unorthodox about their business proposition, unlike the career path of the man drafted in 18 months ago to the CEO post. Unlike many of his peers, Sullivan didn’t train with a big firm and doesn’t have an accountancy qualification.
He learnt his trade during 14 years at IBM, working his way up the sales and sales management ranks. After Big Blue, Sullivan cut his teeth in the compliance field with a nine-year stint in regulation management at Metavante Corporation, a software company specialising in technology processing for banks – and a Jefferson Wells customer.
He was running his own consultancy, Sullivan Advisors LLC, when he accepted the Jefferson Wells top job last April.
This challenger to the Big Four admits his CV may come as a surprise. ‘It is a strange career path, but it was all focused on a services-centred market offering. That’s what we’re doing here. Packaging, selling and making sure you deliver is what it’s all about.’
The firm has a rather schizophrenic view of its Big Four rivals – on the one hand they are the competition, on the other they are quasi-commercial partners. As details of Jefferson Wells’ aggressive marketing push in the UK emerge, though, it will be interesting to see how long things remain cosy between them.
‘Most of the Big Four really protect their external auditor relationship with clients so they’d rather not have another Big Four firm come in and do internal audit. So we’d quite often get referred into a client by a Big Four firm. But then sometimes we’re competing for work – so it’s a bit of a love-hate relationship. As we become bigger and bigger and compete with them on other services, they may be less likely to recommend us,’ Sullivan concedes.
But then, all’s fair in love and regulatory compliance. The advent of Sarbanes-Oxley in the US marked a turning point for the company, originally set up as Audit Force back in 1996 to provide internal audit and risk management around internal controls. Back then, Sullivan admits, the premise was simple and yet fairly challenging.
‘In 1996 we struggled to find people who wanted to hear about auditor independence, but with Parmalat and Adecco, that message was really enforced. All of the consultancy work is conflict work at the heart of the independence issue. We want to capitalise on these opportunities,’ Sullivan says.
The company has over 500 clients in the US. They include household names Boeing, US Bank and P&G, and Sullivan is bullish that the UK is ripe for picking. ‘We think we’re well positioned with our background and the fact that we have 500 Sarbanes-Oxley engagements suggests we’re bringing something very practical to the market.’
Sullivan is confident that his firm’s modus operandi – a flat structure that shies away from the partnership model – is good for customers. ‘It benefits our clients because we’re not carrying a substantial cost structure, and it’s a more responsive model. As issues arise or the scope of projects changes, you don’t need sign-offs and the team can move quickly.’
It’s early days of course. The company has only just found a London office, and recruitment activity in the UK is at an embryonic stage. Apart from UK managing director Mike Nelson, so far there are just two permanent employees, and one of them has been drafted over from the US parent.
Admittedly Sullivan’s IT background is likely to stand him in good stead – notably the ability to wow potential customers with three-letter acronyms. Return on investment in particular is likely to be top of the agenda. ‘Most CIOs would like to rationalise the platforms they use, and that’s consistent with having good controls in place.’
IT audit services – identifying and testing high-risk areas to ensure that adequate controls are in place ƒ? ¬? is a cornerstone of Jefferson Wells’ proposition to the UK market. The market for IT security management services is far from saturated, but several hefty IT services players have attempted to stake their claims to a growing business opportunity.
Sullivan, for one, remains confident: ‘Our heartland is finance ? with all due respect to the IBMs and Capgeminis of this world, they haven’t understood the degree of control needed in those environments. We’re getting work where they didn’t address documentation and control properly. The more evaluation that occurs as a result of Sarbanes-Oxley, the more this issue crops up,’ Sullivan says.
Nor is he fazed by predictions that auditor independence is nothing short of a golden ticket to revenue growth for mid-market firms hungry for new opportunities. ‘In the US, they don’t have the breadth, reach or credibility,’ Sullivan says. As if to play down his bullishness, he adds: ‘In the UK we will build our brand on our reputation. We have no never expectations, just because we did it in the US.’
The proof of the pudding will, as always, be in the eating – and with few UK clients’ testimonials up for grabs, it’s almost impossible to predict what sort of impact Jefferson Wells will have. The company has categorically ruled out acquisitions in the UK as a strategy for building up client base or hearts and minds. ‘You run into a lot of cultural issues,’ Sullivan explains. ‘Building your own business is also more cost effective. It may make sense for us to acquire a software product to use as part of our audit or tax performance work, if there’s something unique to the UK market, but acquisition as a growth strategy we wouldn’t do it.’
Sarbanes-Oxley has been a bit of a golden goose for Jefferson Wells, but that’s not to say it’s all good news as far as Sullivan is concerned. ‘It certainly has put an emphasis on the profession and elevated the role of accountants for most executives. Board members and CEOs are talking a lot more about control environments than ever before.’
But Sullivan is also critical of Sarbanes-Oxley for encouraging what he describes as a ‘box-ticking’ approach to regulation and corporate governance. ‘It’s important not to lose sight of the bigger picture. The legislation doesn’t help much in that respect.’
Sullivan believes the UK would be wrong to leap into following the US’s highly prescriptive approach to compliance. ‘The UK should take a long look at the trade-offs to building investor confidence. In the US it’s more of a checklist than necessarily good compliance. There are clearly benefits, but sometimes you lose them by going too far or by ambiguity that doesn’t cover the fundamentals in enough detail.’
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