MCN Direct Newswire

Vol. 5 No. 32, 6 November 2006

This issue is sponsored by:

TeleWare and The UK Consulting Industry Report 2005/6

This issue news

1. KPMG builds strategic consultancy business
2. Atos Origin underperforms in the UK
3. Clients fail to make best use of consultancy
4. CSC back in the black
5. EDS reports strong third quarter
6. Further information - feedback/pass on to a colleague/remove from mailing list

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1. KPMG BUILDS STRATEGIC CONSULTANCY BUSINESS

KPMG has brought together several business practices to create a UK advisory group that will be run by Alan Buckle - head of the firm's management consultancy operation in the UK and Europe before it was sold in 2002.

Buckle's new business includes risk and performance improvement advisory services, transaction services, restructuring, corporate finance and forensics. It will have more than 3,000 staff in the UK and annual revenues of £650 million, growing at 23% a year. New growth areas identified by the group include post-merger integration, cost optimisation, infrastructure development and regulation.

KPMG said the creation of the advisory business does not signal a return to major IT implementation and operational projects, but a more strategic approach to management and IT consultancy. The company sold its UK consulting arm and some European operations to Atos Origin in 2002, while the US business became BearingPoint later that same year.

Commenting on his new job, Alan Buckle said: "This is a great time to be taking on this role as advisory services is a major growth area for KPMG right across the globe - not just in the UK. We have market-leading positions in many business areas. We will build on these and work hard to bring together teams from our various business areas to help our clients in an increasingly complex and unforgiving commercial world."

KPMG said it is continuing to invest in the UK advisory business and is actively recruiting in areas such as risk and performance improvement advisory.

2. ATOS ORIGIN UNDERPERFORMS IN THE UK

Atos Origin's UK operations are failing to hold their ground, producing reduced revenue and a significant drag on the group's overall performance.

Reporting third-quarter results to 30 September, Atos Origin said a further and bigger-than-expected fall in UK revenue of 18% pulled total revenue down 1.3% to €1.3 billion (£870.4 million). While UK revenue collapsed, Atos Origin's operations elsewhere turned in growth of over 5%.

Excluding the UK, the company's consulting, systems integration and managed operations service lines all achieved revenue growth. Including UK performance, consulting was down 7% in the quarter to €96 million and managed operations was down 2% to €657 million. Systems integration revenue remained flat at €523 million.

Atos Origin attributed half the UK decline to the loss of a Metropolitan Police contract and the expected ramp-down of a major Ministry of Defence contract. The other 50% of the fall was spread across the service lines with each one down about 10% due to weak short-term order entry in consulting and systems integration, delays in final negotiations on difficult contracts and postponement of some projects into the fourth quarter.

On the upside, Atos Origin announced UK contract signings worth €1 billion since September, including deals with Government Gateway, the Rail Settlement Plan, NHS Scotland and the Department for Constitutional Affairs.

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3. CLIENTS FAIL TO MAKE BEST USE OF CONSULTANCY

The use of management consultants is increasing, but some companies lack sophistication in how they choose, manage and monitor the consultancies they use.

According to research by LogicaCMG among 100 leading UK companies, 35% of consultancy users do not do any cost/benefit analysis at the end of a project, suggesting that some £3 billion of the £8.5 billion annual UK budget on consulting may not be well spent.

The research assessed buying habits and found that 10% of the companies could be classified as lacking maturity in the way they bought consultancy. Some 40% of the companies were rated mature buyers of consultancy with a strategic approach, but 23% displayed reactive buying patterns - continuing to hire consultants to solve problems rather than undertake strategic programmes.

Respondents expressed reservations about using larger consultancies, fuelled by frustration that consultants from large firms spend as much time looking for more work as doing the job they were hired for. In addition, 61% expected to pay extra for using a large consultancy simply because of its name and 50% were deterred because of high-profile failures and cost overruns.

Alan Russell, director of LogicaCMG's consulting division and president of the Management Consultancies Association, said: "The research indicates that many clients buy consulting services in the same way they would purchase commodities, which suppresses the business value that a well-founded consulting assignment can bring."

• LogicaCMG, through its Unilog brand, has been selected by the French army to upgrade a human resources information system initiated by the French Ministry of Defence in 2002. The mySAP ERP solution will be available from January 2008 and will manage 240,000 military personnel.

4. CSC BACK IN THE BLACK

CSC, which recently took over two key NHS Connecting for Health contracts from Accenture, has followed this with news that it has recovered from a first-quarter loss of over $55 million (£29 million) caused by financial charge to turn in net profit of $92.6 million in Q2.

But CSC's global commercial revenue fell 2.3% in the second quarter to $2.3 billion and its European commercial revenue was down 4.2% at $942.8 million. This fall was attributed to several European outsourcing contracts producing less revenue and soft demand for consulting and systems integration services. US commercial revenue fell 5.6% to $948.9 million for similar reasons.

At the halfway mark, CSC has announced contract awards worth about $11 billion, compared to $12.1 billion for all the previous fiscal year. Among the new contracts are the NHS National Programme for IT deals handed over to the company by Accenture.

Commenting on this arrangement, CSC chairman and CEO Van Honeycutt said: "We are extremely pleased with our large and significant win of additional business from the UK National Health Service as part of the NHS Connecting for Health programme. This plays to one of our major strengths, successfully managing long-term, very complex and critically important programmes. We estimate the value of the nine-year contract to be about $3.7 billion if all options are exercised."

For the full fiscal year to 30 March 2007, CSC is forecasting a revenue rise of 2-3%.

5. EDS REPORTS STRONG THIRD QUARTER

EDS has increased its third-quarter net profit by 83% to $128 million (£67.1 million), on revenue rising 9% to $5.3 billion.

In the EMEA region, operating profit rose 10% to $228 million in the quarter, with revenue climbing 4% to $1.5 billion compared to last year's comparable quarter.

Following the revenue statement, EDS promoted the role of EMEA in the company, making Bill Thomas, vice president and general manager of the region, executive vice president and giving him a seat on the company's executive committee.

Further strengthening the EMEA team, EDS named insiders Tom Haubenstricker as vice president and CFO for the region, and Mike Koehler as vice president of operations.

Commenting on the results, CEO Mike Jordan said: "EDS posted another solid quarter reflecting improved execution on contracts, increased productivity and better management of overhead costs."

EDS said its third-quarter contract signings went down from $5.3 billion a year ago to $3.5 billion, but said signings for the first nine months were up 28%, reaching $18.9 billion.

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Written by Sarah Underwood. Copyright 2012 PMP (UK) Ltd.