PracticeConsultingThe new consultancy landscape

The new consultancy landscape

The winds of change are howling through the corridors of the big IT consultancy firms. Seismic shifts in the e-landscape, new ways of sharing risk and a prolonged bout of puritanical zeal from the US regulator SEC, have all stoked the pressures for change. IPOs, trade sales and startling marriages are the order of the day. Moreover, a new breed of e-consultancy, the 'e-five', has grown up on the back of several business models wholly different from the ERP related model deployed by 'the Big Five'. Anthony Harrington asks the big players how they see the road ahead, and what they think of the competition.

E-CRM demand could be limitless Phil Robinson, general manager, Siebel

‘There is no doubt that there is a huge change taking place in the role that IT plays in business. Technology is being used as an accelerator of change – changing relationships, changing markets. IT is now externally focused for the first time and it is being used to drive real revenue growth. At Siebel, this is the change that we have focused on. You can gain advantage from shaving margin points from cost structures for only a limited period of time. Today, product life cycles have shrunk in every sector. The motor industry used to work on a seven year development cycle for new cars. Now we see the Japanese car industry producing new models in two years and the pace is accelerating.

The Internet commoditises everything. The old mantra of the 5 ‘Ps’, price, place, performance, product and promotion is history. We believe that when you do the analysis, the only remaining differentiator for companies today is customer satisfaction. Personalising your service, based on the best understanding of your customer technology can give you, is the basis for customer satisfaction and it is the only way of generating real added value in this new marketplace.

All our research tells us that the e-CRM market is barely penetrated. This is a huge opportunity for every size of consultancy. The Big Five and the major systems integrators like IBM Global Services are pursuing this energetically. Broadband access will stimulate this whole market hugely.’

Departments need highly tailored solutions Matt Price, EMEA marketing vp, Art Technology Group

‘We began as a CRM systems integrator, but our whole approach was to focus on putting the control back into the hands of the business line managers. The problem with traditional CRM, is that it originates in a departmentalised view of the world. Now there are multiple touch points between customer and organisation and you have to have systems that are good at aggregating information from a wide range of sources.

Our customers have Siebel CRM and SAP ERP. What they need is a new level of infrastructure that is geared to dealing with customers coming to the company via multiple channels. The motivation is to increase customer yield, by selling them the right things, and to cut costs through deploying on-line channels.

The on-line environment means that with the right software and systems you can start to instantly personalise and tune information. You don’t want business analysts ploughing through masses of click stream information passing recommendations to IT specialists who then modify web pages by hand.

We provide systems that use 100% Java, together with XML, to automate changes to websites and to back office processes. The result is that business managers can do ‘scenario planning’ in near real time. They can use feedback from the site to trial various personalisation and product strategies.

This is where the real consultancy of the future lies – helping the company to decide how to react to particular users and emerging opportunities.

We are going to see alliances that recognise that the real equity lies in the relationship with the customer.


Systems integration is key David Turner, int’l. marketing manager Jeremy Roche, head of R&D, CODA

‘We are seeing a great deal of effort being made to move towards as much collaborative commerce as people can realistically take on with the systems they are implementing – and this is perhaps less than the hype would suggest.

True c-commerce is going to take years yet. It is a phenomenon that cannot be ignored, but it is not going to be our major business for the foreseeable future. You can write new wave applications and slap nice labels on them, but if the businesses and the people are not in synch you are going to end up with a grand, spectacular mess.

We have clients doing huge integration exercises with suppliers on the purchasing side. For some suppliers, the response is very positive and thing move ahead, but for suppliers whose systems do not link well, things stop very quickly?

What worries us is that a lot of the e-procurement systems we see being implemented today are not linked in to the core financial and business systems. This means that people lose the controls they have built up as a business over the years.

People are reaching for firm ground inside these new practices, but the number of companies who can take real benefit today is less than the headlines might have us believe.

You can’t abandon the basic premises of industry without real cost to your processes. However, as people start conforming to industry standards, setting up pipes between different companies becomes much easier, and costs much less. We think this model of small groups of companies getting together is more likely to fly than the grand exchanges and industry wide communities, at this stage in the market.


The new e-stars are set to destroy the old guardCharlie Blackburn, senior consultant, Scient

 The Big Five consultancies would love to be doing what we do. However, there is no synergy of culture between the e-five and the Big Five. They face huge problems in building a culture that can truly respect different ways of doing things and that can integrate the incredibly different skill sets that are required to do e-consultancy well.

Our revenue model is a skill scale model. We are not looking to put huge teams of people onto a client project. At the top end we are looking at projects where we put in a 20 person team with deep skills. Where we need more, we look to the underlying component technology vendors, such as SAP, to provide specific skill sets. You cannot brute force the kind of project that we get involved with by slamming bodies at it. The whole thing is too complex for that, with too many moving parts. You need architects and you need deep skills – there is no place in this kind of work for hundreds of bright but not brilliant graduates who’ve been through SAP implementation courses.

Our kind of work can’t be dismissed as shiny designer stuff. We’re building big engines and end to end businesses with complete front and back office integration. The sites we’re building can scale to millions of users.

Our growth model is organic. The only acquisitions we know how to make work are the small shops we know how to incubate into our culture. This is definitely not a cookie cutter culture.

If you told me that a bunch of creatives were going to flourish inside Andersen Consulting, for example, I’d say that an awful lot would have to change first. People want to be working on the coolest projects – generally it is pretty safe to say that a 200 person project is not a cool project.

We are going to see a huge need for what the Big Five do extremely well, namely massive enterprise wide systems integration, leveraging information through a central database structure. This is work with lots of code conversion and masses of grunt level integration. It’s not really e-business, but it will be great business for the Big Five.


The Big Five can no longer beat the specialists Graeme Gillespie, Rubus client partner

‘What the Big Five do very well is project management. Asking them to do a specialist leading edge web design project is a bit like putting a decathlete into each of the separate disciplines and expecting them to compete with specialised athletes. If your whole focus is on doing one of these events very effectively, why would you go to a generalist?

We have no aspiration to be the biggest consultancy in the world, but we certainly do have the need to be the best. We’re not chasing scale and growth just for the point of it. In our line of business there is less value in economies of scale. For our kind of consultancy, in our third or fourth year of business we probably need to be 1,000 strong, or thereabouts and we need to have some international capacity. But we do not need to be a 65,000 strong global operation like Andersen Consulting.

There is no virtue or payoff for us in trying to achieve this sort of scale.

For the traditional consultancies, most of the money is on the pull through.

You have the technical architect and the senior consultant in these companies, on #2,000 a day or more and the clients love them. Then they have a team behind them of 20 to 30 graduates who generate four or five times what they are paid, and this is the business model.

Our staff, by contrast, have an average experience level of nine years in leading edge projects, with an average age of 32 or 33. We are around 280 strong at the moment and we probably have fewer than a dozen graduates working as technical developers.

This whole market is immature. All the tools are still being developed and when you take a component approach, you need the deep specialist skills to be able to test how things really work together. You need architecture labs that can hammer useful technology to see where it falls over. These are really niche, techie things and 99% of the people in a Big Five firm would be totally out of their depth in our space.

In fact, we rarely come across the Big Five any more in structured procurement opportunities, and never at the short list stage. By then clients have either got smart enough to narrow it down to us and to companies like us, or they have thrown e-consultancies off the list altogether and gone to the Big Five.

We don’t even see the Big Five as competitors in any interesting way.

In general the stuff they win we just do not want. When they sign a #50m deal their junior staff face a death march grinding out turgid code into the dim and distant future … We’ll take the smaller, $5m-$10m, cooler projects, thanks.’


The Big Five acknowledge that it is time to move on Alan Buckle, CEO, KPMG Consulting

The term, ‘Big Five’ is now meaningless. As of today only three of the Big Five remain as part of an integrated accounting firm, and two of these, PwC and ourselves, are clearly heading for separation. Only Deloittes still believes in the integrated model, and they seem to be in some kind of irrational denial about the power of the SEC to drive this industry.

In our view this is an industry that has outgrown its parents. Now is not a time for sentimentality – it is a time to move forward.

A year ago Forrester Research did a report about the death of the Big Five, suggesting we were too slow to change, too unwieldy. At that time it may have been a question worth asking.

Clearly there is a dramatic shift going on in the market and when this happens you get new strategies and new business models emerging. You also, inevitably, get some big new players coming forward. It is much harder to move 20,000 people to a new business model than it is to move 200 or 300, so it has taken us a while.

We have changed and our traditional partners, companies like Oracle and SAP, have strengthened their e-offerings dramatically. We are clearly also expanding our partnerships as our relationship with Cisco shows, and as a consequence we are winning great new clients in the telco space, for example.

Large telcos are not going to look to a US West Coast start up to help them build their e-services, since these operations do not have the scale and breadth that the big blue chips need. The challenge to the design boutiques is to show that they can deliver solutions rather than content fizz. What they have that we do not is strengths on the creative side, and this is something we are going to have to develop fast. Already we are hiring from those organisations. Look too, at the initiatives we are taking.

Our UK service provider business, for example, was built from scratch in a new environment opposite Cisco, and this business will deliver #50m of revenues in the next 12 months. We’re doing business around the Internet and communications that have never been done before. We’ll be doing the same thing on the creative side, putting them in separate premises with their own management team, making sure they don’t get stifled – and making sure we have the capacity to go head to head against the boutiques. We’ve already done this in the US, with our separately branded Metrium business, which runs out of a converted bar in downtown Los Angeles. We’re winning business head to head against Scient there, and we’ll do it here.


Experience and expertise are back in fashion David Owen, UK CEO, Deloitte Consulting

‘The kind of thing the boutiques are saying about the Big Five is pretty dull, tired stuff – and it’s at least seven months out of date. Things have moved on. On the creative side, we have a mother-ship and pod approach.

We put the right culture, structure and feel in place and we give the creative teams what they need. One of the best examples of this is the unit we launched called Roundarch, using the Broadvision content management toolset.

What we do, however, is to put professional management in place. Many of these small startup e-consultancies couldn’t manage their way out of a paper bag. Big corporates do not do websites for fun – it is mission critical for them, and they want to see professional management structures in place.

People need to realise that the average age of our practice today is 34 years. The idea that we are loading up with graduates is just plain wrong. What we look for are people who can work in a high octane, team based and essentially respectful environment. This is a place for people with a lot of self confidence who realise that consultancy is a people business and who can play on a team that respects the client’s requirements.

I hear a lot about the deep technical specialisation claimed by the boutiques.

My answer is that you do not succeed in this market unless you can demonstrate deep technical competence. We would not be winning the very large, very significant engagements we are, if people did not think that we could do the job. One of our enduring skills as an organisation is to adapt to new technologies and skills very successfully.

If I wanted to play tit for tat with the e-crowd I’d ask them what has happened to their share price over the last six months. Their stock options in general are now worth 84% less than they were half a year ago. Part of the reason is that clients are awarding us and other Big Five firms the new economy type engagements and they are doing so because they trust us to do the serious stuff, and to make it work.


Managing creativity is still a major hurdle Mark Curtis, European vp, global skills, practices, Razorfish

There is no doubt that our sector has been guilty of arrogance in the past. It all stems from the fact that three years ago we were way ahead of the curve and a long way ahead of the traditional consultancies. I don’t believe that this is any longer the case, to any significant extent.

There are two issues here. The first is that it is extremely naive to assume that the large consultancies have lost the plot, will never get it, and don’t understand digital. These are bright people who put a lot of energy and resource into catching up, and they’ll get there, that’s for sure.

The second issue is more complex. Will the large consultancies be able to deliver across the wide range of specialist skills required for a full e-solutions package? To them the phrase ‘full solution’ inevitably takes the focus back to back office processes. Our focus is to look at how we can apply our understanding of digital channels, from set top TV to mobile phones, to leverage the client’s business. This is not just about technology and strategy, it is about understanding complex issues like human motivation and market psychology.

For us this means integrating four networks of people, technologists, strategists, experience specialists and business value experts. This kind of management job has just never been done before. It’s a bit like taking a pastry chef, a dentist and a sheet metal basher and getting them to gel together into a slick team. Moreover, as the projects get bigger and more ambitious, the management component just gets tougher.

I am very reassured at the way senior Big Five figures talk about managing creatives. It shows me that they still have a huge distance to go before they get what this is all about. However, it is not just a problem for the Big Five. Clients are going to have to learn how to do this too. The question we are all grappling with is how do we get these multidisciplinary teams to work together in the digital age?

It is true that the e-five share prices have dived in recent months, but this is because the crash in dotcom stocks settled the panic bricks and mortar companies were feeling about e-enabling themselves. They all took their feet off the accelerator and took time out for a look round.

We were getting 100 new business calls a week in May and it declined savagely after the crash. It is now rising again. There is plenty of business out there and we feel pretty good about our chances of winning it.


Partnerships are the name of the game Alan Baker, director of enterprise services, Microsoft

‘Our consultancy services are one of the fastest growing areas in Microsoft.

But we work with our partners, since this is the bandwidth in the market to get the right skills mix to the client. We take a lead role, since we have to skill ourselves in our own products, then skill-up our channel as part of the process of taking new products to market. We will take on prime contractor role with big client companies when that is necessary for our own, market movement requirements.

Obviously, we have relationships with both the Big Five and the e-five.

As a technology company we focus heavily on those consultancies who look at how they apply technology to give competitive advantage to their clients, which tends to be the e-five. We also work closely with the Big Five to explore how our technology can help businesses effect strategic change.

Our initiative is all about integrating different web applications into new solutions. It is a very enterprise centric view and it plays well in the new c-commerce space. Essentially, our play is high volume, low margin and we need a great deal of highly capable support, which means we need both the Big Five and the e-five.


The devil is in the detail Paul Spence, partner, Andersen Consulting

Yes, we need to change as the market changes and we are doing so. The first part of my answer to the e-five is ‘watch this space’ as far as the creatives are concerned. The second part is that within our dotcom launch operation we already have many of the necessary skills in place.

We are already doing very strong creative and technical consultancy with a number of clients. We also work very effectively with third party creative agencies, melding design skills and delivery skills.

What we are starting to see in spades in the US, and in early form over here, are instances where the idea that boutiques could cobble in systems integration skills from ERP vendors, without themselves having the depth of experience, has gone horribly wrong. Deep back office integration requires people with experience and with the patience to finish the job – to test it under every conceivable circumstance.

Trying to be lead consultant without these skills is dangerous. Our people learn these things from a very early stage. The boutiques, by contrast, tend to be full of people who find it natural to dismiss this kind of thing as boring detail work. But with e-business the devil really is in the detail. If you get this wrong, ultimately the project bombs.

Basically, the e-five tend to misunderstand what we, or any of the other large consultancy firms, are about. With 65,000 people in the firm I can say with confidence that whatever technology the e-five guys think they have, we can produce specialists with more depth than they could ever imagine. I only have to look at the number of job offer calls our people are getting from the e-five. If we’ve got such a bunch of generalist no-hopers, why ring us so often?

We have doubled the number of partners in the firm since September and we have visibly shortened the length of time it takes to make partner.

We have a reward scheme, called ‘e-units’ that mirrors stock options.

Are we changing? Of course. I’m quite happy for the e-five to think we’re fat, blind and stupid, but they’re in for a shock.


Collaborative commerce will be the new mantraRob Sharpe, vice president Internet business, IBM

‘There is no doubt that over the next few years collaborative commerce is going to radically change the way many businesses go about things.

We are going to see a shift in vertical market trading, with new corporates emerging in a marketplace model. There will be masses of collaboration between host companies and buyer/supplier portals. At IBM we are positioning ourselves to be able to work with customers to exploit these opportunities.

We have always seen ourselves as a solutions company, be it as a platform provider, or as a full solutions deliver company. IBM Global Services has a dedicated and growing consultancy and implementation arm directed at B2B opportunities. The web design and integration consultancy space is very fast moving and we are seeing opportunities for partnering as well as competitive threats coming from this space.

We have had our own creative capability for a long while now. Many people do not know that we have 100 or so people in Hursley who do web design for blue chip companies like Vauxhall. In addition, we have launched a series of e-business innovation centres where partners can come and work on their e-business projects, from trial tests of components right up to full design and delivery. The aim of these centres is to allow customers’ staff and IBM Global Services teams to work together in a creative environment designed to encourage innovation.

These centres also help to ensure that there is a proper hand-over of skills and knowledge to the client. We can build the solutions with the customer in a way that enables them to have the skills to carry projects forward. We think this is a winning formula.

Of course, we look to partner with all the big consultancies as well as with the e-consultancies. We believe we have the best platform going with WebSphere, and we would rather they build on our technology than anyone else’s.

We are also very keen on alliances with key partners to produce solutions in new areas. We have a three party venture with i2 and Ariba for the provision of collaborative supply chain and e-procurement. The market is very buoyant and getting hold of enough skilled people is a problem for all of us …’

Accountants still count Jan Babiak, managing partner, IS assurance and advisory services, Ernst & Young

‘There are two major issues for the top five firms and their consultancy arms. SEC pressure is one, the partnership structure another. This does not allow funding through the markets. Distribution of earnings in a partnership is specified in a way that does not allow you to build capital. So you have to find a different financing model if the services element is going to compete with the IBMs of this world, and separation is the logical answer.

However, for those of us left in the continuing mainstream practice, life remains exciting. There are still plenty of areas of advisory work for us, including security, business risk management and systems assurance.

The SEC may attack these in turn, but it is hard to see how you can ultimately narrow audit down to just ‘the books’.

There is still plenty for us to talk to our clients about, irrespective of whether their e-work is being done by what used to be the Big Five, or by the boutiques. For example, a worrying aspect of what we are seeing now is a great deal of devolved decision making as companies roll out their e-sites. Many organisations have not aligned their external branding with what they are doing on the web. The ease with which front end technology can be rolled out means that junior staff or external contractors make decisions on the fly and there is a huge disconnect between branding theory and practice.

And companies are committing themselves to publishing fast moving content without having any capacity to generate new material. We are seeing an awful lot of stale, outdated material on websites, which, again, kills brand value.

Things are happening very fast, without senior management necessarily being fully engaged. We are seeing similar fuzziness over detail when it comes to security. People are accustomed to running low levels of security in-house, where they have the means to exact retribution if employees do things wrong. With the web we are seeing all kinds of innovative procedures which short cut manual processes and controls. Many e-consultancies seem to be taking the view that if you knock out security issues and get a system 80% right, speed to market generates a win for the client. That is a concern for traditional accounting firms and for people like ourselves doing systems assurance work.’

Anthony Harrington is a freelance journalist. 

This article first appeared in Management Consultancy magazine.

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