| | By Mick James
Travelling for most
of December and early
January robbed me of the
opportunity to review
the past year and
preview the coming one
in a timely manner. To
be honest, I’m glad to
have put this off
because the crystal ball
has been clouded for
some time now by the
fact that I don’t really
understand the current
situation; this tends to
hamper the predictive
faculty. Here we have a
world more than usually
blighted by war,
terrorism, natural
disasters and soaring
energy costs, but the
world economy is in rude
good health. Can this be
the same world economy
that pretty much
collapsed a few years
ago because people
weren’t as keen on
buying pet food off the
internet as we thought
they would be?
Consultants have
reacted to this
situation with what I
can only describe as
“bemused bullishness”.
Of course, the economy
is nonsense propped up
on stilts. Of course,
Gordon Brown is going to
put away the public
sector cheque book any
day now. In the
meantime, we’d like to
hire 14 principals, 27
senior consultants and
lease another 12,000 sq | |
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| | ft in the City.
In the absence of any
clear prognosis for the
future, all one can do
is look for signs, an
early event that may set
the tone for the future.
Last year we saw a
steady trickle of niche
acquisitions, notably by
Accenture but also by
smaller firms. What was
interesting about these
was that we saw even the
largest firms using
acquisition to get into
what are often very
detailed niches.
Whatever you may think
of consultants as
individuals, big
consultancy firms are
hungry feeders who will
move into any nutrient
rich environments. The
last couple of years
have seen a remarkable
explosion in small,
rapidly growing firms,
which may think they are
below the radar of the
big boys, even if they
occasionally snatch a
fish from their jaws.
Think again. I suspect
that 2007 may be crunch
time for a lot of young
consultancies, who will
need to take a very hard
look at the long term
sustainability of their
business models. It may
be a hard decision
emotionally, but for
many of these firms a
move into a larger
entity may well be the
safest bet –
particularly if their | |
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| | nearest rivals are also
acquisition targets.
At the other end of
the scale we saw
Capgemini’s
billion-dollar plus
acquisition of Kanbay,
which brought it a more
solid base in India and
a renewed presence in
North America. Oddly
enough, I find I
predicted such a move
back in September,
though I unaccountably
forgot to remortgage the
house and put my money
where my mouth was.
As I said at the
time, mergers and
acquisitions at this
level are highly risky,
but I expect to see a
few more. Everyone seems
to agree that
Capgemini’s move makes
sense, and if, as I
think, it has
anticipated the rush, it
can hope that me-too
moves by its rivals will
make less and less sense
as the year progresses.
What does this add up
to? The first conclusion
is that from now on it
is no longer possible to
hire yourself in or out
of any situation. That
doesn’t mean that the
industry’s voracious
appetite for people will
abate, or that those
involved in the
consultancy
people-traffic will not
continue to make obscene
amounts of money. But it
will no longer be | |
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| | possible to deliver a
growth strategy by
faxing over a shopping
list of bodies to a
recruiter.
My second thought is
that there is no longer
anywhere to hide. The
thought that
“Accenture/IBM/Capgemini
have got that whole
SI/Indian/CRM thing sewn
up but we can
concentrate on x” is no
longer valid. If you
don’t believe me, try
contacting the
procurement side of a
big firm and asking for
a list of companies it
would want to include in
a non-compete agreement.
You’ll receive a list of
everybody and anybody
which stops just short
of the horoscope page of
the Daily Mail.
The Americans have a
phrase for this – it’s
called “multi-sphere
dominance”. That it’s
not working terribly
well in the foreign
policy arena shouldn’t
be held against it –
most of the people who
should be running
America are probably
working for consultancy
firms anyway. A less
pompous term might be
“Tesco-ization” which
(for now) will probably
only have resonance for
UK readers. What
impresses me about
Tesco’s dominance of the
UK retail market is its
combination of scale and | |
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| | detail. At one end it
can create the retail
equivalent of the
neutron bomb, a massive
out-of-town shed which
will sell you everything
from a turnip to a
telephone line. But it
is equally interested in
putting your corner shop
out of business with its
downsized urban outlets.
If the big
consultancies can
successfully operate
like this, then we are
entering a tough
competitive environment,
and I suspect it will be
particularly tough for
the renascent Big Four.
It’s in the mainstream
consultancy firm’s
interests to nip their
growth in the bud before
these powerful brands
become re-established.
If, as I suspect,
acquisition is to become
a key competitive
weapon, the mainstream
firms have the edge with
substantial cash
balances and the
fall-back option of
share issues to give
them the edge. The
tangled history of the
two groups of firms no
doubt adds a personal
edge to the rivalry – we
could be in for an
exciting year.
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