Consultants Can Add Value: Getting the Most from Advisers

Due in part to US regulatory pressure to make auditors truly independent, most top-tier chartered accounting partnerships have already spun-off their consulting arms. Questionable accounting practices that allegedly spurred Enron’s collapse illustrate the danger these firms faced playing poacher and gamekeeper over both company’s books and its business strategies.
But on positive note, the Enron scandal has served to accelerate the speed at which consulting firms are severing ties with their auditing forebears. The last of the top five consulting firms to leave home, PWC Consulting, goes to an initial public offering (IPO) in the northern spring.
It’s no longer acceptable, says Kevin McCaffrey partner with PWC Consulting, for consultants to write report and disappear. Changing business dynamics mean there’s more going into the consulting mix than ever before. “Consultants have progressively evolved from consult and advise through to consult, advise, implement – share risk and operate. Big consultancies now design and build software, configure hardware, implement and operate projects for clients as turnkey solutions.”
The post-Y2K slowdown, tightening in corporate spending and reduced staff levels (10 percent down over the past 18 months) have made local firms increasingly savvy about the way they engage consultants.

No easy targets
The growing realisation that there are no easy targets left is making it harder for local consultants to add value. “With all the low hanging fruit (restructurings and downsizing) of the early 1990s well and truly picked, CEOs are saying – show me the value of using third party,” says McCaffrey.
That’s not to say Kiwi firms don’t use local and global experts. But after the severity of restructuring already witnessed across corporate New Zealand, companies have become more calculated about outcomes, especially when compared with companies across the Tasman.
“With local firms running leaner operations than their Australian counterparts, it’s more difficult for consulting firm to go in and identify immediate and significant saving these days. Consequently, Kiwi firms are more discerning than their Aussie cousins when it comes to the procurement, governance and management of consultants.”
So what exactly do local firms want from consultants today? Keith McArley, principal with Deloitte Consulting, thinks the drive by clients to have deeper relationships with their consultants has altered the terms of engagement. In other words, it’s the more collaborative nature of the client/consultant relationship that’s forcing consultants to get closer to the action than they have in the past.
Severance from their auditing ancestors has enhanced consultants ability to collaborate in two key ways:
1) Unbundling former partnership structures has removed limitations on their ability to raise capital.
2) Consultancies are more focused and their dealings with clients more transparent.

Reduce costs – increase revenue
Nevertheless, the two primary mantras for consulting: reduce costs and increase revenue – remain as relevant as ever. With more companies looking to IT for competitive advantage, it is not surprising they’re also looking to change underlying technology when changing business processes. Outsourcing, infrastructure applications management (software and systems-based), process improvement and strategy are the now hot spots for consulting.
Much of today’s consulting opportunity centres around adaptive technology, according to Paul Cook, Asia Pacific managing director (lines of business) with Cap Gemini Ernst & Young. Having had their fingers burnt on major projects that have failed to deliver on expectations – many clients are now opting for smaller implementations. This suits consultants happy to pick-off “easy win” projects that put cash in the bank quicker than more complex undertakings.
Overlays to an SAP supply-chain that extends enterprise resource planning (ERP) out to both customers and suppliers are the sorts of flexible applications that make IT and business process consulting more seamless exercise, according to Cook. Instead of embarking on massive ERP, customer relationship management (CRM) or business process re-engineering (BPR) rollouts, companies are looking to buy technology in smaller chunks. They are buying consulting in modular bites to ensure that the benefits of each process are demonstrated along the way.
With organisations looking to reduce costs and get better acceptability for those processes, consultancies are forced to gets their hands dirty like never before. In other words, client demands that consultants share in underlying pain and gain – is creating stronger competitive alliances.

Turnkey solutions
Competitive alliances invariably lead to turnkey solutions – especially once companies see the financial sense in outsourcing business processes, according to McArley. This is forcing consultants to own the infrastructure on which projects are delivered. And the joint ventures are used to deliver these projects, the more consultancies will need capital – and plenty of it – to support them. “Adding value today means going to greater lengths to help companies deal with change. client’s desire to hold consultants accountable for deliverables means getting in and implementing and operating these projects,” says McArley.
The EDS/Telecom relationship is one example. But the outsourcing arena is no longer the sole domain of traditional IT firms. Deloitte Consulting recently won major slice of work when it entered an SAP-related outsourcing contract for Telstra (Melbourne). There’s no shortage of similar collaborations further afield. PWC Consulting recently joined forces with Hewlett-Packard to develop and sell products to the aviation industry. Many organisations view cost reduction and major business process implementation as part of an ongoing continuum. ERP was the first wave, the second wave was refinement, and the third leg of that phase is outsourcing.

Sharing risk
Major corporations that want consultancies to buy into their underlying success are, however, muddying the waters. Consultants need “deeper pockets” and to be prepared to put some of their fees on the line. “Good outsourcing arrangements will focus on adding value and can be measured more easily than more traditional consulting engagements. But the greater the outsourcing commitment, the greater the risk,” says Cook.
The way Cook sees things, much of the value multinational consultancies bring when delivering major business transformation today relates to their knowledge capital in both process and technology. “Consultancies add value by bringing skills and experience at the strategic level (gained in the US and Europe) that most companies don’t have or necessarily want on tap. Few companies have the talent needed to deliver excellence in large scale transformation,” says Cook.
The top tier consulting firms that claim to have this talent are becoming increasingly picky about who they work with. What they ideally want to target, says Cook is that part of the market deemed appropriate for the value they think they’re capable of delivering. “Their preference is for deep relationships with smaller number of very big multinational organisations.” In fact, Cook suspects that global, regional and major national accounts comprise most of the total revenue for top tier firms.
Top tier consultancies may indeed want to offer one-stop shopping. But in reality, says Heather Miles CEO with Carter Holt Harvey subsidiary, Mariner7 – much of the synergy benefits top tier firms can deliver are lost on the local market. Beyond the mega projects, Miles (formerly with McKinsey & Co) says companies don’t expect – nor do they want to receive all their consulting from just one firm.
Charged with identifying HR placement and strategy for Carter Holt Harvey, Mariner7 recently ran competitive bid process w

Visited 8 times, 1 visit(s) today
Close Search Window