MCN Direct Newswire

Vol. 2 No. 21, 2 June 2003

This issue is sponsored by:

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This issue news

1. Deloitte Consulting in about turn
2. Consultancies feel the effects of war
3. Government narrows field for £8bn NHS contracts
4. CSC clinches $735m Marconi deal
5. McKinsey brand holds its value
6. Further information - feedback/forward to a colleague/unsubscribe

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1. DELOITTE CONSULTING IN ABOUT TURN

Deloitte Touche Tohmatsu has made a dramatic U-turn, deciding to integrate Deloitte Consulting back into its audit business after the consultancy failed to complete a management buyout plan (MCN Direct Vol. 2 No. 13).

The integration is due to be completed in a few weeks' time and will create a single organisation that combines Deloitte Consulting with Deloitte Touche Tohmatsu's business consulting and human capital practices.

The resulting organisation and its global leader have yet to be named, but the business will be a major contributor to the firm's global annual revenues of about $3.5 billion from consulting and advisory services.

The unit will target clients from the global top 100 down to the mid-market, offering consulting and IT services broadly in line with those of Deloitte Consulting and its new compatriots - including strategy and operations, organisation and performance, customer relationship management, supply chain management, enterprise applications, technology integration, outsourcing and human capital.

In the UK, the operation is expected to be led by Nick Griffin, head of Deloitte & Touche's business consulting practice - known in the UK as management solutions. Others expected to make the leadership team are David Owen, head of Deloitte Consulting in the UK; Brett Walsh, head of human capital within Deloitte & Touche; and Nick Owen, a business consulting partner and head of Andersen's UK business consulting unit before it was subsumed into Deloitte & Touche (MCN Direct 29).

Staff worldwide have been informed about the integration, but there have been no discussions or decisions about job cuts so far.

Unlike other former Big 5 firms that hived off their consultancies at the top of the market and have since waved the flag of auditor independence, Deloitte Touche Tohmatsu mis-timed its move and found itself unable to either spin-off or sell its consultancy.

2. CONSULTANCIES FEEL THE EFFECTS OF WAR

Members of the Management Consultancies Association (MCA) have been hit by the war in Iraq. Reporting revenues for the first quarter of 2003, the MCA said one third of its members found the war had had "a significant impact on clients' businesses".

Despite this squeeze on client spending, the MCA did improve revenues quarter-on-quarter, with the first quarter generating $1.98 billion - up 6.6% on Q4 2002 revenues of $1.87 billion, and up from $1.86 billion in last year's comparable quarter. Membership growth distorted the percentage gain, however, with the MCA showing an underlying growth rate of 1.7% in the quarter.

Outsourcing led the way, with an underlying gain of 7.9% quarter-on-quarter to $489.6 million, ahead of IT consulting up 1.1% at $451.6 million. Underlying growth was down 1% across management consultancy services, with first-quarter revenues of $1.05 billion.

MCA president and Accenture UK MD Ian Watmore said: "Clients have been hesitant following the collapse of the dotcom boom. This hesitancy has been prolonged by September 11 and the Iraq crisis. The result has been a period of deferred investments, with clients squeezing the most they can out of existing assets. But there are grounds for optimism as companies seek to innovate in advance of the post-war upturn and the internet revolution sees further growth."

Looking forward, MCA members expect the volume and value of new orders to increase in the second quarter and the sales cycle to shorten, leading to an upturn in consultancy revenues. The best prospects are perceived to be in the public sector, followed by transport and communication, and financial services.

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3. GOVERNMENT NARROWS FIELD FOR £8BN NHS CONTRACTS

The Department of Health (DoH) has whittled down the number of competitors bidding for a slice of its $8 billion National Health Service National Programme for IT.

The 99 suppliers initially expressing an interest have been whittled down to 31 pre-qualifying bidders for the roles of local service providers or national application service providers for the Integrated Care Record Service. They comprise 22 contenders for local service provision and eight potential national service providers.

All the firms have been given access to an output-based specification document, and invitations to negotiate are expected shortly.

The first two of five local service provider contracts identified by the DoH are expected to be awarded in London and in the North East, Yorkshire and Humberside by the end of October 2003. The other regions are the South East and South West, the East of England and East Midlands, and the West Midlands and North West.

The procurement of an electronic appointments booking system has also moved ahead, with three companies shortlisted for a national contract due to be awarded in September.

The Government has also identified the need for a new broadband network across the NHS and has issued a contract notice for a national infrastructure service provider to build and manage the so-called N3 network over the next seven to 10 years.

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4. CSC CLINCHES $735M MARCONI DEAL

CSC has secured a $735 million, 10-year outsourcing contract with telecommunications equipment and solutions provider Marconi.

CSC will support and manage Marconi's IT helpdesk, desktop computing and mid-range operations, as well as develop and maintain software applications. BT will act as a subcontractor to CSC, providing network services and global remote access facilities to Marconi.

The arrangement covers Marconi's IT operations worldwide, with the exception of its Asia-Pacific and Middle East regions, and its UK-based Interactive Systems business. Some 360 Marconi IT employees across Europe, Africa and the Americas will transfer to CSC this month, with a further 40, predominantly in the UK and North America, moving to BT.

Mike Donovan, Marconi's chief operating officer, said: "This agreement will contribute significantly to our committed cost reduction and efficiency programme, and allows us to focus on our core business, which is building, maintaining and supporting the networks of the world's leading telecommunications companies."

The Marconi contract is the most valuable in a string of contracts secured by CSC since its major win at the Royal Mail Group (MCN Direct Vol. 2 No. 18). Other deals include a $450 million, 10-year IT outsourcing deal with global facility services group ISS - 120 ISS employees will transfer to CSC in Europe this month; a $17 million, five-year contract with Barclaycard to implement CSC's CAMS II merchant acquiring and card issuing solution; and a $25 million, five-year IT outsourcing deal with Scandinavia-based alcoholic beverages company V&S Group.

CSC said the Marconi contract took its new business total in the first quarter of fiscal 2004 to $3.5 billion.

5. MCKINSEY BRAND HOLDS ITS VALUE

The McKinsey brand appears to be maintaining its value as a number of alumni take top jobs in industry and consultancy.

Among the leavers is Henry Nicholson, a partner in McKinsey's reorganisation services practice. He has been poached by Deloitte & Touche's restructuring team to provide strategic advice to under-performing companies.

Logistics service provider Tibbett & Britten Group has recruited former McKinsey associate Damian Coffey to the newly created post of product development director for Europe. Coffey will aim to keep Tibbett & Britten at the forefront of supply chain technology, as well as drive the development of value-added services further up and down the chain.

Other alumni moving include Max Landsberg, a former McKinsey partner and writer of numerous books on coaching, motivation and leadership. He joins the leadership services practice of head-hunting and consulting business Heidrick & Struggles as a partner. Former McKinsey consultant Agnès Touraine has also been appointed a non-executive director of Lastminute.com.

McKinsey said the moves reflected the calibre of its consultants and the strength of its alumni organisation rather than any downsizing within the consultancy.

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