Huntswood: The state of the market – Q4 2012
What a fantastic summer! Whilst the nation was glued to the Olympics and Paralympics, we enjoyed a particularly fruitful period; July was one of the busiest months we have seen this year – traditionally a slower month for recruitment. We see this as a reflection of the overall positive noises coming from the market. While the CBI reported a 21% decrease in business volumes in the three months to August, our network in the management consultancy industry told us that, although they had experienced a mild dip in Q2, they had seen a significant (and unusual!) upturn in Q3. This is very much in line with our experience in the consultancy recruitment market.
Company results are a mixed bag; Deloitte has recorded a 14% increase in consultancy revenues and an 8% increase in headcount. Elsewhere in the Big4 the picture doesn’t appear so rosy with PwC having recently offered voluntary redundancy to a number of senior managers and KPMG has warned that it may need to cut 3% of its UK workforce. This may be due, in part, to a decline in general outsourcing advisory work as announced earlier in the summer. In the outsourcing world a strong message is being published: CSC has begun its come-back as it begins its new financial year well with a 2% revenue increase in Business Solutions, while Cognizant posted record profit and revenue figures for its Q2 and Capita is up 15% in terms of revenue. This news, however, is juxtaposed by the disastrous quarter had by HP, where there has been an $8bn write-down in its services division which is dominated by the former EDS group. The MCG, the listed owners of Alexander Proudfoot and Kurt Salmon, announced in August that the latter brand was struggling in Europe and was operating “below management expectations”, leading to the need to “adjust headcount”. There is still tremendous potential in the market for firms who are really innovative about the way that they do business; independent programme management consulting firm ProjectOne has grown 57% in last 18 months!
The collapse of Mouchel in the 2nd quarter of this year was concluded in August when the business and infrastructure services group entered administration. It has been de-listed and transferred into private ownership following a deft-for-equity swap with its lenders. This news astounds me considering the number of acquisition offers they received in the preceding 12 months, including one at 260p per share; the shareholders that rejected that offer now have nothing.
Elsewhere in M&A; news:
• The acquisition of Logica by CGI has been concluded
for £1.7bn, with the Logica brand being “retired”
• Infosys has bought out European SAP management consulting house Lodestone
• Davis Langdon, the cost and project management consulting firm has widened its reach into emerging markets with the purchase of Asian firm KPK
• PA Consulting has added the HR strategy skills of its people and operational excellence practice with the acquisition of the specialist team from Jackson Samuel, the talent management consulting firm. PA Consulting has also enhanced the top teams elsewhere in its Business Transformation Group of practices by appointing Sandra Di Vito as a partner in the project management practice and Keith Molloy into shared services and outsourcing. They join from PwC and Citi Group, respectively
In the public sector sphere the Cabinet Office has announced that they have directly saved £1 billion through a moratorium on consultancy spending and on extending / re-negotiating existing consultancy contracts. Since 2010 consultancy spend has been cut by over 85%. Regional government hasn’t been hit as hard and the NHS has been reopening its doors to those that can bring specialist cost cutting, specifically Lean, skills to the table. The government’s “consultancyONE” framework implementation has been delayed a second time, frustrating firms that have put time and energy into the pitching process. Suppliers who are participating in consultancyONE were told on Monday afternoon that the government will now “phase the conclusion of the procurement by lots”.
In the world of the member organisations, The Institute of Consulting (IC) was delighted to announce that it was signing up Capita Consulting. Capita has an innovative training academy for new consultants, and is partnering with the IC to accredit it. The MCA this month launched the Consultancy Buyers’ Forum, an environment designed to provide support to buyers and clients of consulting services and encourage knowledge sharing and good practice with peers. The forum has around 100 members, representing the procurement groups of FTSE listed companies. It enables their buyers to review recommendations, but also to network with specialist providers of niche consultancy services so they no longer have to simply rely on their contacts with “Big Consultancy”. It will also aid and support procurement managers in advising line managers on their appointment of consultants.
Emerging markets seem to be on many tongues this quarter; the Big4’s investment and growth in the Middle East has been well publicised, with EY particularly at the fore. Serco Consulting has enlarged its presence in the region with the building up of its Bahrain office and Simon Kutcher & Partners, the pricing specialists, has opened an office in Dubai. The 2012 Management Consulting Market Report, from specialist research group Source, published in July, gives the area highest level of growth globally, at around 20%.
Elsewhere, food manufacturing performance improvement firm Coriolis has announced its expansion to the Antipodes as a series of Australian project wins have precipitated a need to build a greater presence down-under.
Last quarter I described the growth in information security consulting. This has continued and is set to continue over the next few years. Particularly of note this quarter is that, in order to compete with PA and KPMG, EY has bolstered its practice with seven mid-level and senior hires, with people coming from a variety of places ranging from IBM’s business continuity team to the Information Commissioner’s Office.
In terms of sectors within consulting, the digital revolution is in full swing. Earlier this year Deloitte launched its digital service line Deloitte Digital to become the place where “left brain meets right”. We have been given a number of briefs recently in the digital shift / transformation / strategy space, along with widening volumes of work in customer analytics, customer loyalty and social intelligence. Global strategy consultancy Booz & Company has formed a partnership with digital market research group Bazaarvoice to try to develop its digital insights service. The social business consulting landscape is being tussled over by PA Consulting, Capgemini, EY and Deloitte Digital in particular, with each “stealing” each other’s people, and trying to stay ahead in a rapidly developing and innovating marketplace.
The most competitive market remains project and programme management (PPM) where a high number of quality mid-sized boutiques, and the PPM practices of larger firms, are all competing in the same limited talent pool. The sector experience has been negligible in these roles; firms see these skills as transferrable and the high demand for the skill set means more desirable areas, such as sector experience, are being put to one side.
In the run up to Christmas I expect to see more strategic senior hires and we have already seen some of this coming through in new briefs for hires at the senior manager level (see below). In general, we continue to see a slow, but steady, uplift in the market for hiring consultants of all levels and skill sets.
Stephen Humphreys, Recruitment Manager, Huntswood
Email: [email protected] ; Tel: 0118 971 8467
Huntswood has been synonymous with successful management consultancy recruitment for 14 years. We
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