MCN Direct Newswire

Vol. 5 No. 25, 18 September 2006

This issue is sponsored by:

Annual Consultants' Forum 2006 and PH Media

This issue news

1. Cornwell axes nine professionals as profits fall
2. Accenture gives Astall government role
3. India's Infosys brings jobs to Europe
4. Consulting growth back in double digits
5. Capgemini pushes up profitability
6. Further information - feedback/pass on to a colleague/remove from mailing list

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1. CORNWELL AXES NINE PROFESSIONALS AS PROFITS FALL

Cornwell Management Consultants has cut one sector director and eight consultants from its payroll as a result of a fall in profitability and poor staff utilisation in the second quarter of its financial year.

Cornwell is down to 75 employed consultants and has slowed its recruitment of permanent staff, in favour of engaging associates, until staff utilisation is back to an acceptable level.

In total, Cornwell made a net loss of £406,000 in the six months to 30 June, reversing a net profit of £689,000 a year ago. Turnover in the half-year rose 15% to £11.5 million, with 86% coming from the public sector.

Cornwell blames the loss on a 'dramatic slowdown' in the public sector as the Government moved to a new financial year - causing slippage in client project approval - as well as a loss on Quantum Plus, the outsourcing advisory firm Cornwell acquired last August, an increase in administration costs and £200,000 in amortisation of goodwill.

As a consequence, Cornwell's board reviewed its strategy, organisation, staffing levels and skills, concluding that nine jobs would be cut and that responsibility for day-to-day staff utilisation would be placed on sector directors.

Noting ongoing demand for public sector services, but a competitive private sector market, Cornwell executive chairman Keith Cornwell said: "As a result of the actions that are being implemented from the strategic review, I am confident of an improved performance in the second half of the year."

• UK business transformation consultancy Axon has turned in a stellar first-half performance, showing net profit up 56% at £3.9 million, on turnover rising 57% to £63 million. Axon said its strategy of delivering business transformation to large SAP users continues to be successful and suggested that its second-half performance could be as good as its first-half achievement.

2. ACCENTURE GIVES ASTALL GOVERNMENT ROLE

Lis Astall, Accenture's former UK country managing director, has been named as head of the firm's government operating group in Europe, the Middle East and Latin America.

In this role she will remain involved in helping run Accenture's NHS operating unit - which is under severe pressure as speculation mounts about Accenture's local service provide contract within the NHS's £6.2 billion Connecting for Health IT modernisation programme.

Although Accenture has refused to comment on rumours that it wants to pull out of the deal, or at least renegotiate the contract substantially, the firm is known to be suffering from the financial collapse of its software partner iSoft, ongoing delays in rolling out the programme and subsequent delays in payments to suppliers.

Accenture last made an official statement on the Connecting for Health contract when it reported second-quarter results in March. At that stage, it made a financial provision against the loss-making contract and said it was "actively exploring all options with respect to the contracts and expected to work with the NHS to accommodate, in the contracts, changed circumstances".

The NHS did not publicly respond to that statement and has not made a statement regarding its relationship with Accenture. To date, the Connecting for Health programme has made clear its intention of sticking to the original contracts, despite complaints from suppliers.

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3. INDIA'S INFOSYS BRINGS JOBS TO EUROPE

Indian outsourcing firm Infosys Technologies is extending its operations in the UK and Europe to meet increasing demand from European companies for global sourcing strategies that include local expertise.

Infosys has opened an onshore development centre in Swindon, adding to a centre in Germany, and is running a campus recruitment programme to "attract the UK's brightest talent". It is also adding a 350-seat BPO facility to its nearshore site at Brno in the Czech Republic, where it already has 130 staff.

Originally opened in 2004, the Brno centre offers sales order management, finance & accounts, market research and underwriting services for clients in 16 European countries. The additional facility, which will open next January, will add IT services including infrastructure management and application implementation to the mix.

Commenting on the expansion, Infosys' head of the EMEA region, BG Srinivas, said: "The debate is not about nearshore versus offshore, but about effective global sourcing - outsourcing to the right location, with the right skill, where it makes most economic sense. As European customers continue to adopt a global sourcing approach, we will continue to invest in geographies where local talent provides the specialist skills required to respond to EU regulation, language capabilities, local market understanding and cultural diversity."

Infosys, India's third largest outsourcing firm, claims to have increased its European revenue by 60% over the past three years.

4. CONSULTING GROWTH BACK IN DOUBLE DIGITS

The UK Management Consultancies Association has reported that its member firms earned £2.1 billion in the second quarter, a 14% gain on last year's comparable period. This is the first time that year-on-year quarterly growth among MCA firms has reached double digits since the beginning of 2004.

Outsourcing was the driver behind the gain, with revenue up 25% on last year's second quarter at £810 million. Management consulting climbed 8% to £862 million, with IT consulting also gaining 8% to reach total revenue of £461 million.

MCA chief executive Peter Hill commented: "While the industry has grown in size and stature, it has also continued to demonstrate the value consultants add and the positive effect they are making on their clients' business, both in terms of improved productivity and increased revenue."

The growth of the management consulting sector within the UK is reflected in figures from the Office for National Statistics showing that the industry has been one of the largest contributors to economic growth over the past 15 years - along with landlords, bankers, doctors and computer programmers.

5. CAPGEMINI PUSHES UP PROFITABILITY

Capgemini increased its net profit by 22% to €71 million (£48 million) in the first half of this year and achieved an operating margin of 4.8%, up from 1.8% a year ago.

Total group revenue also rose 9% to €3.5 million in the six months to the end of June. Consulting contributed 12% of this revenue, up 4% on last year's first half and with an operating margin of 8.9%.

Outsourcing rose 12% to become 38% of total revenue, and turned a negative operating margin a year ago into a positive 2% margin.

Commenting on the company's outlook for the full year, the Capgemini board said: "Following the good results for the first half year, the group confirms that 2006 full-year revenue growth should approach 10% and the operating margin should exceed 5.5%, versus 3.2% last year."

• Boosting its finance & accounting BPO business, Capgemini has acquired a 51% stake in Unilever India Shared Services, known as Indigo, from Hindustan Lever. Details of the acquisition have not been disclosed, but the agreement includes the transfer of 600 employees to Capgemini, the addition of two BPO centres in India and a seven-year contract for Capgemini to provide finance & accounting BPO services to Unilever companies that are Indigo customers.

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