gest of the editorial board
>> December 2003
Consulting Firms should position oneself, and apply their advices to
Gil Gidron: Consolidation should continue but there is room
for Niche Players
Gidron, former President of Feaco and currently Partner of Accenture
Spain, responsible for strategy in Europe, gives his viewpoint on the
most recent evolution of the global consultancy market : Audit
splitting, consolidation, fees fall... He talks about the facts we must
know, the trends we have to adapt to and... a few more things we
should think twice about.
The market looks grim
but could reset in 2004. What might we think of current trends?
Gil Gidron: I would say there are
three trends. The first is the economy as a whole: Industry is in
picking up slowly around the world which lends to a demand in services
to industry. The second trend results from structural problems: we grew
very well with the different demand triggers. The Y2K, the advance in
info and com technology, the internet bubble, the liberalization of
state companies and public services and finally the advent of Euro
currency. This contributed to a Consulting which was growing far above
the economy. This has changed. Today consulting growth has slow down
and it is going to take a while to get back to the growth of the late
90’s. And third, I would say the way consumers buy is changing and
demand patterns are different. There appears the concept of « One
Stop Shop »: design, implement, operate! This is really what they
want. Not just advices.
explain the recent merging and take over?
Gil Gidron: As I said the third
trend relates to the necessity for the consultant to be able to give
full services including implementation. This is why IBM merged with
PWC, why EDS captured AT Kearney and Ernst & Young joined Cap
Gemini ... etc, and people from the neighborhood are coming in
because it is very profitable to give a client a comprehensive
approach! IBM saw it as a complete opportunity. So consolidation is a
consequence of the changes in demand and the implementation trend.
Another trend is that consulting houses have to change their business
model. This is where fees are involved. They need to invest and switch
from traditional partnership to leverage the capital markets in order
to create a strong financial structure. However entering the capital
markets makes it necessary to split with audit. The key issue here is
that due to independence, directives, etc, the market demanded
separation. Audit is compulsory and independent. Consulting is
voluntary and fee related. They must be separated business.
trend to comment?
Gil Gidron: The market is becoming
bipolar: on one side we have large multinationals but also sufficient
room for important niche players such as risk analyzer or expert in
industry automation ... My view is that on a two dimensional figure
confronting Size to Specialization, consulting firms have just two
choices: becoming a niche player (get back to the thing they do best)
or merge! So consolidation should continue but there is room for Niche
Players. About most local and small consultancies in emerging markets,
big companies will come and acquire because there are only three
possibilities: recruit people, being bought or make alliances But
alliances are in general not stable.
Gil Gidron: This is how the future
looks like. Unfortunately there is no surprise or any major technology
that would impact the industry in the short term. Yet a lot of small
things: The mobile economy that would allow for specific consulting;
The European enlargement; the liberalization, still continuing in
energy and big utilities... So we will have an exciting future but much
more complex and competitive. With competition from Off-shore activity
which can develop IT on a much competitive scale than in Europe, with
India and the Philippines.... It will be IT in the beginning but slowly
go up the value chain: body shopping then design and implementation. To
this end local players will be necessary
about future players?
Gil Gidron: There was a time we had
HR, Process, Management, Infrastructure, Outsourcing... each type was
next to each other. Then IBM, EDS, etc bought large areas of the market
frontiers disappear. It is the end of separation. Now the client is
asking for transverse assignments. The one able to integrate the
different practices will be the most successful in transforming the
client. And Outsourcing is the key element. So from 2002 to 2012 the
question will remain valid especially if we are going to be there and
if we want to know what company is to survive. So consolidation is to
continue and no doubt the big firms are to survive. There will be half
a dozen successful no more. One in a leading position is IBM. Accenture
has the same model but done organically, not by acquisition, except for
the hardware which is a commodity.
But on a
every day basis does it mean the consulting business is changing ?
Gil Gidron: The projects profile has
changed. If you are a bank with 10.000 people the most difficult thing
when you implement a new strategy or technology is to make the people
understanding where you go. Computers you just buy but you must make
change management through training. But for the entire project
motivation making is the hardest area and will get the most of your
effort to be successful.
the key issue to globalization?
Gil Gidron: Consulting is a global
business. But you work local within your own country. European
diversity makes consulting in Europe much more interesting with a
bigger area of discipline to make it successful. Example: for a big
multinational company located in a dozen European countries, buying a
supply chain is not the problem but to cope with the diversity of the
practices is. One additional thing is that in the USA there is an
obsession for the bottom line and practitioners are very share holder
oriented. In Europe stake holder panel is much more balanced. Last
point, the Human aspect is different for the client and for the
consultants: Competition is global but implementation is local with its
local flavors. For that reason Europe is a challenging market.
brings us to the question of Europe and its enlargement
Gil Gidron: The challenge for
consulting firms will be to bring together international companies and
small local players. And the challenge for FEACO will be to stay
representative of the bigger and smaller ones and keep the network
together. Today the federation is already representative of 23
countries that gather in working groups: multinational, European
institution, small companies and regional blocks such as northern
countries, German speaking countries and eastern countries. Hong Kong
is joining and Africa as well as Latin America could come next.
Also the enlargement of Europe is only an event in the whole
enlargement give a solution to the fees fall?
Gil Gidron: We are facing an over
capacity (worldwide?). This has imply some lay offs, a tremendous
margin pressure and a price deflation. To cope with this set, several
companies have modified their business model to answer a strategic
question: what to compete for and how to compete? It has to be
understood that the field is becoming more a buyer market. Hence to
succeed, innovation, trust in commitment and investments are the keys.
However to answer the issue of lowering fees we must look at the value
of the intended projects. We need to give a « Value Proposal
» to the client. The client value has become a top priority.
Clients don’t engage consulting if they don’t see any value. It is a
shifted mentality of the buyer. In a dipolar consulting market where
big players are facing investors and clients asking for results, and
where niche players are keepers of quality and know-how, the good news
is that subcontracting might develop. But consulting companies will
have to take decisions and will have to position themselves. They will
have to apply their own consulting to themselves and remember the three
things to sell: have a good proposal (something the client want to
buy), have specific assets (knowledge, capability) and a good
relationship and commitment. This last point is very important in the
East and in Southern Countries.
collected by Bertrand Villeret
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