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| | robust and unified
culture. Acquisition is
expensive, can lead to
crushing debt burdens
and brings with it
integration problems
which can be very
embarrassing for a
consultancy firm if they
become too public.
The market’s lukewarm
reaction to the
LogicaCMG bid is an
indicator of this, but
is possibly a little
harsh. LogicaCMG has a
pretty good track record
on integration, its own
post-merger integration
having gone with
unseemly smoothness in
an industry where “not
utterly disastrous” is
considered a reasonable
outcome for a merger.
This was largely
because Logica and CMG
were well-matched,
bringing together
similar cultures with
both complementary
portfolios and
geographic spread. Most
of the argy-bargy that
comes out of other
consultancy mergers
revolves around the
subtle fault lines of
self-image and focus
that divide the
strategist from the
process expert, the
“management” from the IT | |
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| | consultant. But
acquiring a peer entity
in a weak geography has
a lot going for it,
particularly if service
offerings, best-of-breed
methodologies and client
relationships can be
quickly shared across
the expanded markets. In
these terms any
intention of following
up the French
acquisition with a
similar move into
Germany looks pretty
sound.
What worries me
though is the company’s
stated goal of becoming
a “top 10” European
consultancy by the year
2010. Nothing wrong with
wanting that but
acquiring simply to get
bigger is, in my view, a
dangerous route. After
all, who cares where you
are on a league table?
Not clients — clients
hate it when firms focus
on internal issues like
merger integration. As
do investors.
There’s long been a
“grow or die” impetus
associated with
consultancy, and an
obsession with league
tables that is surely
now past its sell-by
date. In the past, it
was convenient to talk | |
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| | about “Big Four
consultancies” and many
still do, but it’s been
a very long time since
it was clear just whom
this referred to and
even how many of them
there really were. There
may be a Magnificent (if
slightly lopsided) Pair
in the shape of
Accenture and IBM but,
even though they go head
to head more often than
a lot of firms, they are
still very different
entities. After them
there are any number of
good sized entities, but
trying to sort them out
involves even more apple
and pear comparisons and
helps no-one.
For a long time
consultancy seemed to
have a “natural shape”:
a small elite group of
very large consultancies
that were unassailable
(at least through
organic growth). Size
itself was seen as
competitive weapon and
this group had certain
pastures all to itself.
This was why other firms
sought to grow.
But, if everyone
starts seeking growth
for its own sake, an
undesirable and unstable
situation develops.
Lower-order firms are | |
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| | encouraged to seek
merger and acquisition
simply to cross the size
gap, and those at the
top are committed to a
relentless cycle of
recruitment to keep
growing. Recruiting 10
excellent people is
difficult enough, but if
someone tells me that
they’ve got 10,000
graduates and they’re
all brilliant it strains
my credulity.
Continually supersizing
consultancy is bound to
leave a substantial and
irreducible pool of
mediocrity in the
organisation at any one
time.
At the moment we may
not quite have a
thousand flowers booming
at the top of the
consultancy market, but
there is substantial
variety and choice, and
barriers to entry have
lowered significantly.
More importantly,
clients seem to be
voting with their money
to keep it that way. I’d
be very happy to see the
industry continue to
flourish along these
lines, and never have to
talk about a “Big N”
again.
| |
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| | By Mick James
LogicaCMG’s
acquisition of French IT
services firm Unilog
raises the question of
whether we are about to
see a new round of
consolidation in the
consulting industry.
Consulting firms often
talk about the “critical
mass” necessary to
compete at a certain
level in the market. But
does that concept hold
water any more?
There is certainly a
case for a bit more
consolidation in the
industry, or should I
say, tidying up. The
shufflings and
divestments of the last
few years have left many
firms looking a bit
lopsided, whether in
geographic presence or
service offerings. The
choice is simple: buy
your way back in, or
grow again from scratch.
Growing from scratch is
costly in terms of time
and missed
opportunities, but
otherwise is cheap and
allows you to build a | |
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