MCN Direct Newswire

Vol. 2 No. 34, 15 September 2003

This issue is sponsored by:

Ericom, One4all, and InterSystems

This issue news

1. European consultancy revenues fall
2. IBM and LogicaCMG win ABN Amro deal
3. Atos Origin sees signs of market recovery
4. BearingPoint sells itself
5. Ciber cuts third-quarter forecast
6. Further information - feedback/forward to a colleague/unsubscribe

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1. EUROPEAN CONSULTANCY REVENUES FALL

Feaco, the European federation of management consulting associations, has reported a 2% drop in 2002 European consultancy revenues to $52.2 billion - the first decline in more than 25 years.

This reverses an 11.5% gain in 2001, and reflects significant revenue falls in Belgium, Switzerland and the Scandinavian countries, as well as problems in Germany and France, which recorded 2002 revenue declines of 4.5% and 1% respectively.

The UK (0.5%) and Italy (1%) maintained very moderate growth, chasing Spain, which achieved 3.2% revenue growth, and Greece on 19.5%, albeit from a significantly smaller base.

The UK moved ahead of Germany to become Europe's largest market, with 2002 revenues of $15.3 billion. The German market was worth $14.6 billion, with France achieving $7 billion, Spain $2.8 billion and Italy $2.4 billion.

Germany employed the most consultants, 68,700, with an average turnover of $213,000 per consultant. The UK had 50,000 consultants with a turnover per consultant of $303,000, ahead of France with 40,000 consultants each generating turnover of $174,000.

Revenues from IT consulting and implementation represented 28.5% of total 2002 European earnings, down from 33.2% in 2001. Corporate strategy services were also down, representing 19.9% of total against 25.8% in the previous year.

In terms of client industries, the banking sector showed revenues dropping from $9.3 billion in 2001 to $7.1 billion in 2002, but remained the largest market at 13.6% of total revenues. The government sector was second biggest, adding $1.2 billion for a total of $5.8 billion and a revenue share of 10.2%.

2. IBM AND LOGICACMG WIN ABN AMRO DEAL

IBM Business Consulting Services has teamed up with LogicaCMG to secure a global SAP implementation project at Dutch bank ABN Amro.

The bank is seeking to reduce costs by using SAP to introduce uniform processes, standardised systems and increased cost transparency. The software will also help it comply with the international financial reporting standards taking effect in 2005.

Jolle Dekker, division director of ABN Amro group operations, said: "IBM and LogicaCMG's understanding of our SAP environment and their combined experience in worldwide implementations within the financial services industries were the overriding factors that helped us in our decision to appoint these companies. Both are complementary and are therefore able to offer an end-to-end solution."

The contract value was not disclosed, but is believed to be close to $100 million - and may lead to a further agreement on the maintenance and ongoing management of the system, although no decision has yet been made.

IBM Business Consulting Services (formerly PwC Consulting) and LogicaCMG will split the work 50:50, with IBM predominantly handling process transformation and change management and LogicaCMG carrying out SAP customisation and implementation.

While ABN Amro is a long-term client of LogicaCMG, this is the first time the consultancy has worked with IBM in the SAP market.

ABN Amro's other key IT services suppliers include EDS, which late last year won a $1.3 billion outsourcing contract covering the IT infrastructure of the bank's wholesale business.

* IBM has clinched a 10-year, $400 million HR business transformation outsourcing deal with Procter & Gamble (MCN Direct 2-32). The contract is expected to become effective on 1 January 2004 and will include the transfer of about 800 Procter & Gamble employees to IBM's HR business transformation outsourcing team. Three HR service delivery centres will also be integrated into IBM's global service centre network.

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3. ATOS ORIGIN SEES SIGNS OF MARKET RECOVERY

Atos Origin has filled in the detail of its latest financial results (MCN Direct 2-31) and said it is "seeing some signs of a market recovery, although this is unlikely to occur before 2004".

The French IT services firm has based its forecast on first-half revenues up 3.8% at $1.7 billion, including a first-time contribution from Atos KPMG Consulting that was offset by a decline in systems integration.

Highlights of the six months to 30 June included a sharp rise in UK revenues - up from $79 million in the first half of 2002 to $190 million - after the consolidation of Atos KPMG Consulting and the stabilisation of managed operations resulting in 55% of total revenues coming from recurring business.

Operating profit for the first half was down 9% on last year's comparable period at $136.6 million, with net profit down 60% at $27.1 million.

The operating margin for the first half was 7.9%, down from 9.1% a year ago, with the company forecasting a margin exceeding 8% for the full year.

Chief executive Bernard Bourigeaud said pricing pressure in the consulting and systems integration markets is easing and that volume declines levelled off and are improving slightly. Looking forward, he commented: "We are still projecting modest reported revenue growth this year, which will be generated primarily by the consolidation of Atos KPMG Consulting for a full 12-month period, offset by some revenue erosion in systems integration and the adverse impact of exchange rate movements."

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4. BEARINGPOINT SELLS ITSELF

BearingPoint has launched an advertising campaign aimed at wooing companies concerned about the objectivity of their service suppliers. The campaign says BearingPoint will bring an unbiased approach to clients.

The firm's chief marketing officer Linda Rebrovick said: "In our research we learned that a lot of clients are questioning whether their consultants are truly objective, or are simply helping sell pre-packaged solutions or hardware from another division."

The campaign is running in publications including the Wall Street Journal, Time, Forbes and Fortune, and comes just weeks after BearingPoint reported fourth-quarter earnings way below forecast (MCN Direct 2-30).

One advert features a CEO's annual letter to shareholders, dated 2008. The copy underneath says: "In the future you have no shareholders. You have no rivals, no partnerships, no customers . . . No-one does. Because the future hasn't happened yet. It is a white canvas. A clean slate. A blank sheet. How will you write it?".

Greg Johnston, group creative director at Arnold Worldwide/Washington, the agency behind the campaign, said such ads underscore the promise of the future and mused: "Nothing is more exciting that the pure potential of an empty canvas or a blank page."

5. CIBER CUTS THIRD-QUARTER FORECAST

Ciber has issued a third-quarter profit and revenue warning, pushing down its forecasts on the basis of "several challenging items which appear to be a one-quarter phenomena".

The US-based IT consultancy and services provider - which acquired UK SAP specialist ECsoft early this year - said the cut in third-quarter revenue estimates from $178-181 million to $175-177 million was predominantly the result of a telecom industry client scaling down requirements. This contract contraction led to the immediate loss of 140 jobs, although Ciber noted a new contract with another telecom industry vendor that would require 20 consultants by November.

The company said the strength of the dollar was also driving down European revenue contributions, while the electricity blackout in the Northeast of the US took a toll as 20% of its work is based in the region.

Despite the shortfall forecast for the third quarter, Ciber remains optimistic, saying it continues to look at attractive merger and acquisition opportunities in the US and Europe as it attempts to scale its operations.

Ciber president and CEO Mac Slingerlend said: "Our pipeline of new business remains robust. We presently believe the fourth quarter will show improving results, barring unforeseen events, as additional projects get underway. We remain very encouraged about 2004 and the longer term."

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