| | By Mick James
At the beginning of
this year, I found
myself baffled by the
way the world economy
seemed unfazed by war,
terrorism, natural
disasters and soaring
energy costs. We’ve had
all that again in 2007,
but all these paled into
insignificance compared
to a mystery bug called
the credit crunch, which
may be the dot.com boom
de nos jours. It shows
that even if economists
could predict the future
it wouldn’t matter
because no-one would
believe them.
So consultancies
remained bullish
throughout the year.
Recruitment became such
a headache that some may
welcome a (slight)
slowing of demand to
allow initiatives such
as graduate recruitment
and hiring from industry
to mature. One has to
hope that things don’t
get too rough too
quickly, leaving all
those people who gave up
good client-side careers
and graduate
opportunities to come
into industry, out in
the cold before they’ve
had time to do much
consulting.
As I predicted,
mergers and acquisitions
became an important
vector for expansion,
with 2007 being “crunch
time” for those | |
|
| | consultancies that had
reached a watershed in
their growth cycles.
Fortunately, there was
no shortage of larger
firms to snap them up,
and given the slowing
economy and also the
radical overhaul of the
UK’s capital gains tax,
those founders that
successfully pursued an
exit strategy this year
should probably count
themselves lucky. An
interesting development
in this context was
Hitachi Consulting’s
acquisition of Impact
Plus, which proved a
highly effective way of
building out the larger
firm’s footprint.
There’s a lot to be said
for this model –once a
consultancy firm has
grown beyond a certain
point, infrastructure
becomes a real headache
and a barrier to growth.
It’s surely preferable
to lock into a
well-established
corporate structure than
to try to build it
yourself. And
consultancy is a great
way to add value to
mature customer
relationships.
Perhaps for this
reason I was expecting
to see more inroads made
into consultancy from
new names that were
already established
brands elsewhere. I
think it’s coming –
expect to see more | |
|
| | activity in the sector
particularly from
telecoms and IT players,
and possibly banks as
well.
What we didn’t get
this year were any
really, really major
acquisitions and
mergers, the biggest
being Xansa’s
acquisition by French
group Steria. I expected
by now that there would
have been some much more
serious realignments or
link-ups between Indian
firms and their European
and American rivals, but
this still remains “on
the cards”. I also
expected that the deep
pockets of the
established firms might
have helped them to see
off the threat of the
re-emerging Big Four
accountancy firms, but
this hasn’t happened.
But nor have the Big
Four succeeded in
completely capturing the
high end of the market
from the rest of the
industry. It might take
a bit of a shake-out
before it becomes really
clear exactly what shape
the industry is
gradually assuming. The
matches “India vs the
West” and “Big Four vs
the Rest” may not have
been cancelled, but it’s
certainly a late
kick-off and no result
in sight.
Another thing that
didn’t happen was the | |
|
| | swallowing of the entire
world by private equity:
as the cheap credit
dried up, so the
enthusiasm for doing
deals has lessened.
Fortunately, this
happened before the
consulting industry fell
completely overboard for
PE the way it did for
venture capital a few
years back.
Nevertheless, I think
the two worlds have much
to offer each other:
deals will still occur,
but they will need to be
both more tightly
structured and have more
predictable outcomes:
locking in a
high-profile consultancy
firm on a risk/reward
basis early might become
an essential component
of a deal.
Meanwhile, other
things failed to happen.
Confusingly, in the UK
we got a new Prime
Minister and a cancelled
election. Apparently,
once Mr Brown found out
we actually loved him,
and so didn’t want an
election, he decided to
have one. But when he
changed his mind we
remembered we hated him
and wanted him to go –
so he declared he was
going to stay for as
long as possible. This
sort of thing is so very
hard to explain to those
benighted folk denied
the blessings of
democracy that we should | |
|
| | probably avoid invading
any dictatorships in the
near future.
It also hasn’t left
very much time to work
out what is going to
happen to the
Government’s change
programme. On the one
hand there is the clear
feeling that a decade of
reform hasn’t really
delivered, particularly
in areas such as health
and education, and that
many areas of public
service are suffering
from initiative fatigue
– which is bad for
consultancy. On the
other hand, things
clearly can’t be left as
they are, and the
Government will need to
redeem itself by
delivering some major
and successful changes –
which must be good for
consultants at some
level.
Overall, the
potential is there for
2008 to be a very bad
year indeed. Personally,
I have the feeling that
things will rumble on
more or less as they
have done, and that I
will end next year
feeling even more
baffled than I did at
the beginning of this
one.
| |
|
Previous Page 