By the beginning of 2003 it seemed as if the big
accountancy firms were out of the consulting business. Now,
however, they are making moves back into the market, and they bring
a new consulting model with them.
In 2003,
Arthur Andersen had split from Andersen Consulting (which
became Accenture), which had been brought down by the Enron affair.
Of the “big four” auditors,
PricewaterhouseCoopers,
Ernst & Young and
KPMG had already shed their consulting arms, and Deloitte was
about to spin off its consulting arm as Braxton.
With a few exceptions, management consultancy now appeared to be
largely a sub-brand of the IT industry. With the acquisition of PwC
and Ernst & Young’s consultants, firms such as IBM and
Capgemini could now not only deliver consultancy advice, but also
follow all the way through to a solution based on their systems
integration or outsourcing capabilities. The wild ride that had
taken an accountancy firm such as PwC to be the world’s largest SAP
implementer was over.
But it was not to be that simple.
Deloitte withdrew at the last moment from the Braxton spin-off
and found itself alone in a potentially lucrative gap that was
opening between the systems houses and the strategy boutiques.
“When we dismantled the Braxton concept we had no strategy other
than to fold the consultants back into the local firms,” says John
Reeve, a senior technology consulting partner at Deloitte. “We did
this with some trepidation because we had talked ourselves into
believing that consultancy and audit could not live together.”
Deloitte’s reborn consulting arm also gained a boost when it
acquired several units from the fragmenting Andersen Business
Consulting network. Rather than compete head-on with the
systems houses, Deloitte moved away from a delivery model to
rebrand itself as an adviser.
“We help business get more value out of technology,” says Reeve.
“All business problems involve IT, and our core business is the
fusion of business and IT.”
Reeve believes it is this area that the rest of the big four are
heading back towards. “My spin is that when the other big four
firms left the market, they left some wonderful business on the
table that we are now taking,” he says. “They have now realised
that and have started rebuilding.”
How much “rebuilding” they will have to do is open to debate, as
many other firms retained substantial in-house advisories. PwC, for
example, has remained a member of the Management Consultancies
Association throughout.
“What we sold to IBM was 80% SAP,” says Steve Beet, a partner in
PwC’s advisory business. “Management consultancy had become a brand
name for big-ticket IT practices, and when consultancy went down
that path a number of us moved across into the audit practice, so
the people who advised management were not actually in the
management consulting practice at that time.”
Despite
an agreement of non-competition with IBM – which is also a
significant audit client – PwC has been able to forge ahead with
its advisory business. “What is attractive to clients is that we
advise them about the direction they want to go in,” says Jeff
Thomson, head of performance improvement at PwC.
“There is a big slot in the middle where you translate strategy
into business. How do you hire the big systems houses and manage
them? We would not be involved in a typical outsourcing contract,
but when the client wants to outsource a problem they would look
for our assistance.”
Analyst firms such as Ovum have questioned whether there really
is a big enough gap in the market for the big four to re-enter and
then subsequently defend. But the concept of “client-side adviser”
sits as much alongside other players in the consultancy value chain
as it does in between.
“People ask, why spend all this money on one set of consultants
and then get another lot in?” says Alan Downey, chief operating
officer for KPMG Risk Advisory Services (the firm has no plans to
recreate a “consulting” brand name). “But when you are spending
tens or even hundreds of millions of pounds on a project, the scope
for failure can be huge. In a commercial organisation it can be an
overriding argument that you can spend a tiny fraction of that to
ensure you extract the value you thought you were going to
get.”
Downey says that while firms such as KPMG always retained their
audit and assurance involvement in IT, they are increasingly
involved in areas that range from “health checks” on IT systems,
through to supplier selection and management and IT strategy.
“Where we see the greater growth potential is in genuine IT
advisory services to the CIO, as IT is driven to get better value
for money,” he says.
“Organisations have been getting much better and smarter at how
they do this, and while they will have some of the expertise they
need, it is not always easy to retain that in-house capability.
Often they will need to turn to someone outside, and that is where
we have a role to play.”
This means that the big four are increasingly “riding shotgun”
on projects that are being delivered by someone else. This is fine
for pure play systems integrators, but for firms such as Accenture,
IBM and Capgemini, the risk is that they will lose out on the top
end consultancy work and the boardroom access that comes with
it.
Both IBM and Accenture have launched major consultancy
recruitment programmes. However, the same Ovum report that doubted
the ability of the big four to establish a foothold in consultancy,
also questioned Accenture’s ability to re-establish itself as a
business consultancy brand alongside them.
And this is because competition in consultancy is not all about
the hearts and minds of clients. In a growing market, competition
for skills is equally important. Already there have been murmurs
that aggressive big four recruitment is pushing up salaries and
creating excess capacity in the market, and there has undoubtedly
been a large move of senior staff out of IT-based firms into either
start-ups or back to their big four roots.
“The big systems integrators do not seem to have the business
capacity any more,” says Steve Varley, head of advisory services at
Ernst & Young.
“There is a big difference between working in a publicly-quoted
business and being in a partnership where you are seen as very
valuable, you are paid very well and there are different
expectations.”
Put bluntly, Varley says he can afford to pay more for
consultants and enterprise architects because he can charge them
out for more. “They have a value that I am not sure fits well in a
big systems integration company, where they are more about building
a system than creating complicated business solutions,” he
says.
Varley believes that the market is splitting into two halves:
high-level “architects” such as Ernst & Young, and systems
integrators and outsourcers who deliver to their designs.
“The rise and rise of offshore work has accelerated that
separation. CIOs are increasingly asking, who are my low cost
commodity suppliers and who are my high value architects?” says
Varley.
From a big four viewpoint, the rest of the consultancy industry
has made a fundamental mistake in attaching itself to huge
implementation and outsourcing resources, which at best offer
commodity returns and at worst compromise the independence of the
consulting advice they provide.
“The depth that matters is the depth of analytic and advisory
capability – the depth of delivery skills is irrelevant,” says
Reeve. Deloitte has retained more IT capacity than the rest of the
big four, but Reeve says this is as much for internal skilling as
anything else. “You cannot credibly offer advice on IT if you do
not do it day to day,” he says.
An issue for the big four is whether they can avoid being sucked
back into the world of implementation by the twin pulls of client
demand and large sums of money.
“We are building up our IT advisory capability, and that
organisation is being subscribed to by our clients as a logical
extension of what we do,” says Downey. “But over time the boundary
of what we will do will change and we will push deeper into that
space. We already have people working for us who know as much about
SAP as anyone doing implementation.”
Currently, the big four are pushing in a different direction. In
the 1990s, consultancy very much followed its own path, but now
integration is the name of the game.
“We are a very tightly integrated company,” says Thomson. “For
example if people are looking for low-cost providers we are very
well placed with our international network to know what is
available, and also what are the tax implications and where to
place things in the supply chain.”
Deloitte is also launching what it calls “propositions”. “That
is evolving into our key ‘go-to-market’ approach,” says Reeve. “We
will take the most relevant skills we have from whatever part of
the business they may be in and apply it to a client’s
problems.”
Although the big four are back – the most recent figures from
the Management Consultancies Association suggest that accountancy
firms account for 16% of their members’ consulting revenues – their
new model has some way to go before it can be considered to be
established. “Just tell us what you do and do not do” was the main
demand at a recent meeting of the Institute for Business
Consulting’s Consultancy Purchasing Group, according to Downey.
“It is still confusing for clients because the landscape has
been changing and client perceptions have lagged behind,” says
Reeve. “And consultancy and IT companies are only too happy to
muddy the waters.”
Accenture ups
intake of IT professionals >>
Management Consultancies
Association >>
PricewaterhouseCoopers >>
Ernst & Young
>>
KPMG Risk
Advisory Services >>
Deloitte >>
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