Management Consultancy Newsletter

Welcome to the February 2007 edition of PRISM PERSPECTIVE, the quarterly newsletter from Prism - the firm with the largest team of recruitment consultants dedicated to the management consultancy sector.

As we settle into 2007 we are looking at some of the big issues that are carrying us into this New Year such as the ascent of the large Indian services firms and the boom in financial services consulting.

We cannot hope to cover all topics, but if there are subjects you would like our opinion on, please get in touch using “Your Feedback”” link.

Market Wrap

The management consulting market continues apace - consultancies large and small are reporting high levels of business confidence and expect business in 2007 to continue to grow at the same rate as 2006. Most are reporting a strong demand to hire quality consultants.

Interestingly, merger and acquisition activity in the consulting space is currently at its highest since the dotcom boom of the late 90's – this is a strong indicator of market confidence in the sector.

The ascent of the Indian services firms

No doubt about it, the rise of globalisation and the world of outsourcing has made a big impact on consulting in recent years. A few years ago, the big Indian outsourcing companies were virtually unknown in the UK. Now large numbers of UK corporate organisations have outsourced large chunks of their business operations to Indian outsourcing firms. IT outsourcing - focusing on application development - led the way, but now many other business functions (finance, operations, HR etc) are being outsourced.

In merely 15 years, India has made economic history. In the booming sectors of Information Technology, Pharmaceuticals, and Biotechnology, it is companies such as Infosys, Wipro and Tata that are setting the pace.

Each of these companies has seen revenue growth in the 30-50% range every year for the last five years.

The size of these organisations is quite astounding – Wipro has around 65,000 staff, with around 1000 a month being hired. Tata recently announced last quarter sales of over $1 billion; with Wipro not far behind at $900m last quarter. These are worldwide figures, but their impact in Europe and the UK is not insubstantial, with much of sales growth coming from clients in the UK and Europe.

Given their footprint on the UK client landscape, they have not been slow in building UK based consultancy practices – this is a neat business offer: low cost outsourcing being delivered from India with a high calibre, highly educated workforce; and a British based consulting business to assist with higher value business transformation and IT consulting services where locally based, face to face relationships are needed.

Their offer has placed them in a strong position to grow the consulting business in the UK without the handicaps that other small, high growth consulting firms experience. They have been able to exploit existing strong client relationships, which has meant they have been able to build strong practices in a short period of time. Deep pockets from the Indian parent companies have helped too – it has enabled them to plan long term and hire ‘ahead of the curve’.

But this growth level is not without its challenges - salary inflation with Indian outsourcing professionals is running at 16% this year. Detractors claim that the ‘low cost’ element to the offer may be short lived as salaries in the developing world rapidly catch up with the West. The answer from the outsourcing providers is that the volume of output of high calibre graduates from the Indian education system is very much higher than when compared the West, so this will stifle excessive salary inflation.

For Western-based companies that buy outsourcing services, this is good news - the ability to drive down costs by outsourcing back office processes has a very beneficial effect on the bottom line. Conversely, Western based IT services companies with a costly resource base will be looking over their shoulders – the pace of growth of their Indian competitors will be giving them cause for thought about their business models.

To discuss opportunities at Tata or Wipro call Chris Sale on 01784 224595 csale@prismrecruitment.com or James Blackwood on 01784 224575 jblackwood@prismrecruitment.com

A ‘Prism Profile’ with Stephen Warrington, MD at Diamond Management & Technology Consultants

Q What was your first job?
A As a graduate management trainee in corporate banking with HSBC. My first consulting role was as an Associate with McKinsey.

Q Why a career in Management Consulting?
A Initially it provided a tremendous opportunity to accelerate my learning and gain exposure to many business issues across a wide range of industries. It has since provided very enriching professional experience.

Q What are the best and worst aspects of being a Consultant?
A The best aspect: the satisfaction gained from being really helpful to people. The worst: those rare occasions when you feel you have failed to have an impact.

Q What question are you most frequently asked by clients?
A How can we be really sure that this work will make change happen?

Q What has been the most challenging situation you have faced on a project?
A Very occasionally there are hidden agendas, distrust and suspicion: these are always tough to handle.

Q What is the most exotic location you have visited on a project?
A The northern coast of Denmark, based in a factory that produced delicious biscuits.

Q What has been the proudest moment of your career to date?
A Every time a client says we have made a distinctive difference. That's the mark of good consultancy.

Q Who has had the biggest influence on your career to date?
A A number of more experienced colleagues who have taken the trouble to help me learn.

Q What advice would you give to someone considering a career in Management Consulting?
A It's a broad field so choose the colleagues, firm and work that suits you best.

Q What do you see as the key issues facing the Management Consulting sector in the next two years?
A The need for consultants to continually differentiate and bring fresh ideas to their clients

Q Who do you admire in the business world and why?
A Those people who have entrepreneurial ideas and make things happen. They are the ones who do much to add to the productivity of the world.

Q And outside of it?
A The handful of political leaders of the past who have had vision, competence and integrity.

Q What activities provide relaxation outside work?
A My family, tennis, and reading about history.

Q Which five people would you most like to invite to dinner and why?
A A table of great scientists, inventors and explorers such as Captain James Cook, Charles Darwin, Isaac Newton, Cecil Rhodes and Michael Faraday. I would like to see how they tick and what enabled them to do what they did.

Prism is currently recruiting for Diamond. Of particular interest are first rate strategy, operations and technology consultants with experience in the Financial Services, FMCG or Retail sectors. For further information please call Christopher Sale on 01784 224595 (csale@prismrecruitment.com)

If you would like to be interviewed for future issues of the Prism Perspective and tell us about your experiences within the Management Consultancy profession, please email scole@prismrecruitment.com

Finance Transformation

A discussion with Robert Brant of IBM Business Transformational Outsourcing Group

Many Finance Directors are driving their own functions hard to improve the quality and efficiency of the services and information they provide to the business. They are also pushing to deliver these improvements at an optimal cost and recognise that their current approach needs updating. Some FD's have spent years implementing massive step change in new ERP systems, common business processes and structures and now wish to take advantage of establishing new models such as outsourced or shared services to gain further cost and efficiency advantages, while others have been less fortunate and are still in the arena of tackling the disparate legacy systems problems. The need for better and faster information coupled with large demands for investment in regulation and controls (Sarbannes Oxley/ SAS/ FSA) have also increased the costs and complexity of the finance function. A few years ago a benchmark of finance function costs being 1-1.5% of revenue was considered good, today competitors are driving such benchmarks down to 0.75% and less. As a consequence “Finance Transformation” is an area many FD's are embarked upon to meet all of these challenges.

Not really. A finance transformation initiative has the same demands as any investment decision in that the company wants a positive and justifiable return. Initiatives have to compete with other funding demands and therefore we see some small transformations taking place on an ongoing basis as part of a 5+ year programme, while others have decided to make large ‘one off’ focussed investments to make a significant step change. The market is seeing some finance transformation projects being undertaken to allow CFO's & Finance Directors to demonstrate the “Art of the Possible” to other business functions.

What factors influence a company?

Interestingly, although it is often very easy to demonstrate a very robust business case (on both cost and effectiveness grounds) the major influences are often less evident. Some such factors are:

• a) the business model of the organisation: is it highly decentralised and autonomous with both front and back office decision making undertaken locally?
• b) does the (Group) Finance Director/CFO have the strength and the vision to push through radical change?
• c) other business events: We see many clients undertaking significant change programmes all over the business with major demands on executive time. Finance initiatives need to be considered holistically.

While the market is reaching a level of maturity, there is very significant growth potential as organisations continue to strive to get the best performance from Finance at the best price. Greater awareness of the possible outcomes of a large finance transformation coupled with competition between Finance Directors to achieve upper quartile benchmarked performance is adding to the growth. New techniques and tools and success stories also play a part.

You now see new roles appearing in the finance function, “Director of Transformational Change” being one used by a global top 100 client. Teams are being created from operational finance roles with accountants and business professionals being encouraged to take such positions for a 2-3 year period with their performance and added value being acknowledged and rewarded accordingly. The large finance transformation, shared service and outsourcing companies likewise are recruiting professionals into their teams. They also recognise the need to have a formal career path for staff who join to undertake transactional processing services.

For further information on opportunities in Finance Transformation please call Chris Sale on 01784 224 595 or e-mail csale@prismrecruitment.com

The boom in Financial Services: good times for consultants

Many of us have read various accounts of City bankers taking home exorbitant bonuses, and some of the larger banks paying out total bonuses that would match the total national income of some smaller countries in the developing world. Clearly the banking world is booming. But is this the case for the financial services market as a whole? Well undoubtedly, yes.

Some of the figures are remarkable! In the last fifteen years, growth in the financial services market has been more than double that of the UK economy as a whole. It now contributes over 9% of the total economy and employs over one million people. This is dominated by London, which remains today the most competitive centre for global financial services. For example half of all investment banking in Europe is conducted in London and the UK has the 3rd largest insurance industry in the world – the hub of which is the London insurance and re-insurance market.

This means big opportunities for the consulting industry – strategy, business process consulting, transformation, programme management, IT consulting and architecture services are all in big demand.

Mark Sherratt, Head of Business Consulting at Wipro, the Indian outsourcing giant, says that they are experiencing a strong demand for consulting services – all from clients based in London and the South East. “There is a substantial demand for domain expertise in specific financial products, and also knowledge of onshore and offshore activities - the back office/ analytical work is delivered offshore whereas the business facing/advisory work, which equates to 70% of the operation, tends to be conducted onshore.” Mark is looking to double his business in size - “Wipro focuses on a number of key sectors, but financial services is certainly the leading vertical in terms of growth potential”.

Times are good for the niche players too. CSTIM, part of Morse group, has grown rapidly in recent years – it started off consulting in the investment management space, where it has gained a strong foothold before recently branching out into investment banking and insurance. Andy Stewart is Managing Partner for Management Consulting and Financial Services at Morse. He predicts that operating model optimisation will emerge as a key differentiator for financial services institutions during 2007. Andy comments: “In Europe, every large financial services institution is actively seeking to optimise its operating model in response to cost pressures, competitive pressures and regulatory changes. Banks are asking themselves “What should our operating model be? How do we untangle our current operational mess? How do we change? Who should our partners be? What should be our relationship with them? How do we make tangible progress? How do we achieve a world-class cost income ratio?”.

Clearly there is significant demand for consulting services in these areas. The only downside for these firms is finding financial sector specialists with the right consulting skill set – there is a real shortage of talented people. However, for those with the skills, there is every reason to expect that times will be good for some time to come.

If you are interested in talking about consulting opportunities in the Financial Services sector, call James Blackwood on 01784 224575 (jblackwood@prismrecruitment.com) or Jonathan Ross on 01784 224577 (jross@prismrecruitment.com)