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Counsel of perfection?

first_imgAs consultancies increasingly link up with IT firms, a new model isemerging. Alliances bring together strategy, technology and HR to form aflexible resource, offering clients a more rounded solutionThe global market for consultancy services has dramatically fallen off thisyear, amid upheavals that could transform the face of the whole industry. In the US, growth in 2001 is down to 3 per cent from an average 20 per centannually over the past eight years, according to Consulting InformationServices. That is largely due to the recession in IT, and following the Y2Kscare and the scramble for e-commerce, major technology projects are less of apriority. Unable to find room even for graduates they have offered places to, some bigfirms have shed jobs and offered sabbaticals to employees. In the UK, the downturn is less fierce, but still discernible – theManagement Consultancies Association estimates that growth has slowed this yearfrom 21 per cent to around 10 to 15 per cent. But beyond the immediate difficulties are wider concerns. One is theperceived need to separate accounting firms from the consulting services theyso successfully spawned. Accenture, KPMG and Ernst & Young have all split,and PricewaterhouseCoopers is expected to follow suit. For the moment, ArthurAndersen and Deloitte Consulting remain connected, though some observers thinkthat they too may change in future. The reason is a potential conflict of interest that prompted aninvestigation last year by the US Securities and Exchange Commission. A companythat simultaneously provides a client with a £1m audit and a £20m consultancyproject is at least notionally vulnerable to pressure to quietly massage thefigures. But perhaps the biggest force for change has been the powerful shift towardstechnology in clients’ consultancy needs. In order to be equipped fore-commerce, consultants have had to behave like IT companies, marshalling notjust intellectual skills, but costly hardware and software that in many casesrequires substantial investment. To satisfy the need for capital, companies such as KPMG and Accenture havesold shares in an initial public offering. This means partners do not have todig into their own pockets for cash, as well as attracting talent with thepromise of share options. “As technology and strategy continue to converge, you’ll see moreconsultancies consider the public markets,” predicts Tom Rodenhauser, headof Consulting Information Services. But he adds, “Traditional consulting is a cyclical business and thatdoesn’t bode well for investment purposes, where predictable or repeatablerevenue is preferred.” Nor is it necessarily ideal for the client organisation. Those that havechosen not to take this route, notably Deloitte, point out that going publicshifts attention to shareholders, investors and analysts, an equation in whichthe customer no longer comes first. The alternative for consulting firms is to merge with the technology giantswith which they have become so closely involved in recent years. That providesthem with ready access to the funds and skills they need to implement ITprojects, while manufacturers benefit by shifting from the production ofcommodities to high-value advisory services. The “big five” have already developed alliances with major firms.Accenture has been collaborating with Microsoft, and KPMG with Cisco Systems,while PricewaterhouseCoopers has linked up with Hewlett-Packard to develop andsell products to the aviation industry. Last year, Ernst & Young wentfurther in selling its consultancy arm to Cap Gemini. More recently, Hewlett-Packard failed in its pitch forPricewaterhouseCoopers, but both parties are thought likely to continue to seeka partner, especially since the former’s acquisition of Compaq. Collaboration of this kind could point the way forward, some observersthink. But here too there are concerns, since ownership by a technology companycasts doubt on the ability of consultants to give impartial advice on ITsystems. That might seem to give an advantage to the larger number of middle-sizedfirms that remain independent. However, in reality these are likely to sufferas their big rivals, newly beefed up with capital and resources, put thesqueeze on the mid-section of the market. Rodenhauser argues that many firms will cease to exist. “In a lot ofways, this is the demise of consulting as we know it,” he declares. So what is likely to emerge in its place? Gilbert Toppin, chief operatingofficer in Europe for Deloitte Consulting, sees those companies that havedeveloped a global reach prospering at the expense of those that still operatenationally. He also believes the market will diverge between relatively low costtechnology implementers on the one hand, and on the other those such asDeloitte and McKinsey that combine an element of IT capability with high-valuestrategic advice. “Fee rates have diverged, since technology firms arebased on programmers costing less than highly qualified industry experts withMBAs,” he says. Toppin argues that companies are returning to a deeper appreciation ofbusiness benefit, after a period when they were forced into costly ITdevelopment by the “Millennium Bug” problem and the need to wire upfor e-commerce. That will mean a bigger market for traditional businessconsulting, he predicts. If companies further down the pecking order are quaking in their boots, thatdoes not apply to Hewett Associates, currently ranked at number two in themarket for HR consultancy, and number 13 overall. Like Deloitte, Hewett Associates believes its global presence makes it wellplaced to compete with the big players, no matter how well resourced. But incommon with them it has been moving towards a collaborationist model. Tom Eddington, head of client development group for Europe, notes aconvergence between strategy, technology and people. “It used to be if youhad access to capital you could dominate the market. Now you need accessequally to talent and ideas,” he says. Companies that have historically offered technology consultancy are seekingalliances or acquisitions with strategy or HR, Eddington continues. Conversely,HR consultancy organisations such as Hewett are entering into strategicalliances to provide IT solutions, and, in some cases, host the systemsthemselves. Earlier this year, Hewett teamed up with PeopleSoft, one of the majorproviders of HR and payroll technology. Among others, it also has relationshipswith Compaq and Dell, and, until it lost its funding, Skillset, a provider ofrecruitment solutions. The effect of such alliances is to extend the consultancy’s capability. Whenadvising on services such as employee portals, Hewett can help the client purchasethe necessary equipment through its relationship with manufacturers. It can gofurther, for instance by providing a flexible benefits scheme that offers taxadvantages to employees buying their own computers. Partnerships can also be a way to find new markets. When Hewett developed anHR delivery platform for Royal Bank of Scotland three years ago, client andconsultancy entered into a joint-venture, seeking ways to market it to otherorgan- isations. The fact that the bank already used PeopleSoft, an existingalliance partner of Hewett’s, meant that the two shared a commoninfrastructure. As well as collaboration, Eddington refers to a process of”co-opetition” with rivals such as Accenture. “They are our auditors,and we provide HR outsourcing services to them, yet we frequently findourselves competing against each other directly,” he explains. Partnership between technology companies and consultants makes sense at atime when clients are increasingly seeking business benefit from their costlyinstallations. A driver is the growing recognition that technology works bestin conjunction with an understanding of how organisations work. For instance Accenture has teamed up with BT offering HR services online ( It also has a year-old joint venture with Microsoft calledAvanade , which draws on expertise from both camps to build business-criticalsolutions. Avanade benefits from Accenture’s consulting resources, industryknowledge and business solutions delivery expertise. Microsoft providesspecific product expertise and access to its intellectual capital. One telling change over the past few years has been the growing level oftrust in the consultancy market. Research by the Management ConsultanciesAssociation (MCA) reveals a high degree of satisfaction, with 88 clients out of100 questioned saying they would use the same service again, and 79 expectingto benefit from the advice they were given within one year. More than halfexpected the measurable benefit to be many times cost of investment. The survey also noted the increasing willingness of companies to getinvolved with clients. In a similar survey six years ago, a third of companiessaid they preferred to keep the consultant at arm’s length. That has dwindledto 4 per cent. “There has been a real change in attitude,” comments Sarah Taylor,deputy director of the MCA. “Clients see consultants much more as partnersnow than outsiders and there has been a maturing in the relationship. They areincreasingly sophisticated and know how to evaluate projects, which means thatalthough they are more demanding, levels of satisfaction are higher.” Taylor agrees that middle-ranking consultancy firms are likely to besqueezed as consolidation takes place at the top. But she predicts that nicheplayers offering specialist skills will continue to flourish, often developingrelationships of their own. These could be large or small, but focused on asingle area, such as customer care, supply chains, or integration. Both trends are illustrated by Ashridge Consulting, a specialist businessconsultancy which offers a technology element through its partnership withAmaze, a provider of knowledge management systems. The relationship grew out ofthe recognition from both parties that clients needed something more than aninert piece of hardware and software. “There was an understanding that technology cannot provide betterprocesses within an organisation on its own and that there needs to be culturalchange to bring value,” explains senior consultant Bill Critchley.”Partnership enables us to unlock the power of IT by attending to theculture of organisation. Otherwise it just sits on the desktop.” Where Ashridge believes it differs from much of its competition is infavouring a participative approach to the client. Instead of telling thecompany what it should do, it prefers to provide ideas and methods to help itthink the problem through for itself. “There is a sense of frustration in marketplace with conventionalmethods,” Critchley comments. “Consultants have a tendency to offerstandard solutions that are tailored to fit.” “But these are inflexible, and advisers’ unwillingness to vary themtends to deny the unique context of a particular organisation. Nor does itengage its members in the development of solutions. As a result they feel theyare being imposed on and driven by an external methodology.” Not only do clients resent being talked down to, Critchley says, they mayalso suspect that in their perpetual search for work consultants are alwayslooking out for potential new projects within the organisation whether or notthey are really needed. Another development is the trend for niche firms to form relationships witheach other. For instance Burch Taylor, a firm of organisational psychologists,provides consultancy to blue-chip clients who know what they want and prefer towork with teams of specialists rather than go to a single large supplier. “Some companies have been asking us to collaborate closely with ahand-picked group of niche providers like ourselves,” says partner JillFlint Taylor. “It is to everyone’s benefit to do that as an alternative tobringing in a large consultancy.” For example Burch Taylor works with management development consultantsspecialising in executive search. Once likely candidates have been sourced andinterviewed, the next step is to get the psychologists to give theirrecommendations. Taylor thinks that the changes at the top end of the market could mean that thebig consultancies strengthen their specialist expertise. But far from fearingthe competition, she believes that it will draw companies’ attention to thekind of services the niche consultancies provide. That particularly applies tobusiness psychology, she says, whose benefits are only now beginning to bewidely understood. Other specialists are uncertain about what the future holds. For instanceAveva Consulting advises on IT issues in the engineering process industry, suchas the construction of offshore oil platforms. This has been largely neglected,and is just the type of niche area that smaller companies have been able tocultivate undisturbed by the big firms. “They may possibly decide that they need to start moving into this kindof specialist activity,” says Paul Wheeler, vice president of businessdevelopment. “They have a lot of inertia, and there is a lack of expertisein their organisations, so we haven’t seen any signs of it so far. On the otherhand it doesn’t take long for these guys to realise they might be missing anopportunity.” Whatever happens to the consultancy providers themselves, clients can besure that it is their own needs that are shaping the market. And just asconsultancies themselves are teaming up with each other, it makes sense fortheir customers to develop closer ties with their advisors. “At the end of the day, consultancy provides a flexible resource,”says the MCA’s Sarah Taylor. “Being able to pick and choose what kind ofskills it brings to the business, and where it gets them from, is a hugeadvantage for the client, and it is always better for that to be part of a longterm strategic relationship.” Case study: Ashridge Consulting/AmazeAlliance offers tailored IT approach A particular failing of knowledgemanagement systems is that they are vulnerable to an excessive focus ontechnology at the expense of organisational change. Ashridge Consulting hasbegun working in partnership with Amaze, a systems supplier, to enable clientstake full account of both.The consultancy started by setting up a pilot service sixmonths ago for its own employees, and this is currently in the implementationstage.”We try our methodologies before selling them on,”says Nicolas Worms, senior consultant at Ashridge. “The way we usuallywork is innovative and quite intangible, which makes it difficult to explainunless we have experienced it ourselves.””Where we add value with Amaze is understanding what itcan do strategically for a given organisation in its current context,” hecontinues. “The aim is to support knowledge sharing and development, whichhas particular relevance within our own organisation.”Because Amaze approaches the concept of knowledge sharing froman IT perspective it tended to look only for the right kind of interface.Ashridge builds on that by supplying an understanding of organisationaldynamics. By identifying the social issues in a client company it can determinewhat system is needed.”Most clients have good IT and strategic people, but theywill often have a rather mechanical approach, whereas we start with anunderstanding of the organisation,” says Worms.”Organisations are complex entities, and for thetechnology to work it needs to be merged with the social fabric.” Previous Article Next Article Counsel of perfection?On 9 Oct 2001 in Personnel Today Comments are closed. Related posts:No related photos.last_img read more