| | By Stephen Humphreys
Last quarter I began
by talking about growth.
In January, the country’s
GDP was falling but more
recently the Office for
National Statistics has
shown that the fall was
smaller than initially
thought. George Osborne
has delivered a “budget
for growth”. I am
optimistic for the next
set of figures. A bit
closer to home, January
saw a 1.3% growth in
service sector output,
with “business services”
posting a 1.4% growth.
Following on from the
strong figures that the
Big Four delivered
(reported in the last
edition), Accenture has
had an equally strong
start to the year. Its
consultancy practice is
20% up on last year. And
the Management
Consultancy Group, which
owns Kurt Salmon and
Alexander Proudfoot has
seen an 88% increase in
operating profits.
KPMG & Hitachi have
made sizeable
acquisitions in the
outsourcing space: KPMG
with the purchase of Equa
Terra, and Hitachi
Consulting with 2,400
offshore employees in
Sierra Atlantic. As part
of the restructuring at
LECG, FTI Consulting has
taken over the majority
of its UK offerings. I
also hear murmurs across
the market that other
acquisitions are
expected.
In line with the KPMG
and Hitachi acquisitions,
a number of large
outsourcing deals have
been declared which will
require significant
consultancy support.
Efficio has won a five
year procurement
outsourcing deal with
Thames Water, while Atos,
Accenture and Capgemini
have signed significant
IT outsourcing deals with
Siemens, the Ministry of
Justice (MoJ) and BAA
respectively.
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The Accenture deal is
particularly noteworthy:
the Ministry of Justice
will pay Accenture £22m
over five years. This is
a significant development
in the current public
sector spending climate.
There are rumours that a
similar deal might be
seen at the Department of
Work and Pensions as
well. Elsewhere in the
public sector, readers of
our regular column will
have already learnt about
the growing pockets of
work in education and
healthcare. McKinsey,
PwC, Tribal and Niche
Health & Social Care
Consulting all report
that initial work on
business cases and
feasibility studies have
been carried out with GP
consortia. In education,
Mouchel is working on the
developing academies
projects, with the
schools equivalent of GP
consortia. Capita
Consulting, Tribal and
The Parthenon Group have
been investing in their
higher and further
education practices.
Universities and colleges
have been seeking
significant support as
they adapt to the new fee
models. Critically for
the larger consultancies
that operate in the
public sector, Buying
Solutions has announced a
one year extension to the
multi-disciplinary
consultancy framework.
This means that companies
such as the Big Four and
McKinsey can continue to
bid for tendered
government contracts.
Elsewhere in the
consultancy industry,
Paul Winter, of strategy
consultancy Corpra, has
been announced as the new
president of the MCA. And
the MCA Awards have been
unveiled. Management
consultancy firms
performed very well in
the Sunday Times Best
Place to Work 2011 with
six firms featuring in
the top 25 of the large
companies category. In | |
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| | Enron,” said Edward
Helmore of
thisismoney.co.uk. I am
fascinated to see how
this case develops, and
to see how it impacts
upon the industry;
another “watch-and-wait”
scenario.
Growth
markets?
In terms of growth,
the market is similar to
that of earlier in the
year. Financial services
is enjoying continued
strong growth. This is
followed up by all
commercial service lines;
telecommunications &
media, energy &
utilities, pharmaceutical
& life sciences and
retail & consumer goods
are all strong. In the
service lines, we are
seeing the most growth in
procurement, supply chain
and logistics in the
commercial sectors and
risk, regulation and
broader operational
consulting in financial
services. We also have a
better idea of what
public sector consulting
will look like going
forwards; continued
reduction from central
governments, but growth
is coming from the
devolved areas of power;
GPs, local governments,
school ‘consortia’ and
higher and further
education.
These observations
have all been echoed in
Top-Consultant.com’s
Annual Recruitment
Channel Report, which
examines forecasted
growth areas for the next
year. You can read that
full
recruitment report
here.
We were pleased to
have performed so well in
the awards associated
with the report. We were
runners up in the best
recruiter category, and
Rachel Snelgar received
an award for outstanding
candidate feedback.
Hiring trends
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Top-Consultant.com’s
Recruitment Channel
Report also highlights
the significant increase
in expected attrition
rates for the next 12
months. This, it
believes, is driven by
consultants who have not
seen pay rises in three
years, who rightly
realise that the only
sure way to get one is to
move. The report predicts
that consultancy
companies will need to
hire 23% of current head
count in order to tackle
attrition and meet growth
targets.
News regarding the
immigration cap remains
important. As previously
discussed the Tier 1 cap
sits at 1,000 per year
and the post-study work
visa is to be changed
significantly. This will
have a big impact for
consultancies hiring the
top international
candidates that study for
an MBA in the UK. This,
along with the increasing
demand for EU language
skills, creates
significant opportunities
for EU-based operational
improvement and IT
consultants
particularly.
The number of senior
hires being made is on
the rise: Capco has taken
on a number of new
partners; Greenwich
Consulting has taken a
PwC partner, and Hitachi
Consulting has named a
new UK head who comes
from Capgemini, for
example. This is very
good news for the wider
recruitment market within
consulting, as new senior
hires invariably require
the “pyramid” beneath
them.
This remains an
exciting time to move
into consultancy!
Until the next
quarter, enjoy the
market! | |
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| | the small companies
category, our
congratulations go to
Qedis and Baringa
Partners.
Alongside all this
good news, consultancy
firms are still operating
in a marketplace that is
healing. Although
consultancy hiring is
very much on the up, this
isn’t the case
everywhere. As such,
firms are being much more
innovative in their fee
models. Performance
related pay is very much
on client organisations’
agendas. In the private
sector this is
particularly in the realm
of procurement and
cost-saving projects,
where savings generated
are easy to see,
calculate and therefore
bill on. The public
sector has traditionally
been keen on these
models, but is less clear
on how to implement them;
something of a
“watch-and-wait” in the
market.
Shaking the industry
is the Raj Rajaratnam
insider trading trial in
New York. Jurors have
heard secretly-taped
telephone conversations
between Rajaratnam, who
faces 14 counts of fraud,
and high-level McKinsey
executives who supplied
the billionaire founder
of the Galleon hedge fund
with illegal tips about
McKinsey clients. It
doesn’t look good,
especially when much of a
consultancy’s reputation
is built on it being able
to keep boardroom
confidentiality.
“How much damage the
McKinsey brand has
suffered is hard to
gauge. Analysts warn that
if corruption is believed
to be systemic, the worst
case scenario could see
McKinsey collapse as the
accountant Arthur
Andersen did after | |
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