MCN Direct Newswire

Vol. 9 No. 3, 8 March 2010

This issue is sponsored by:

Symantec, IBM and NCC

This issue's news

1. MCA 'proves' value of consultancy
2. Consulting revenue dives at Atos Origin
3. TCS feathers its Nest
4. Deloitte buys UK wargaming business
5. Logica promises to outperform rivals
6. Further information - feedback/pass on to a colleague/remove from mailing list

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1. MCA 'PROVES' VALUE OF CONSULTANCY

The Management Consultancies Association (MCA) has released a report claiming that consultancy projects generate financial returns of 2-20 times their cost and that the UK consulting industry is generating annual benefits worth £56 billion for clients.

According to research underpinning the MCA's 'Value of Consulting' report, 58% of clients are 'very satisfied' with the work of their consultants. These clients, from both the public and private sectors, suggest that the value derived from using consultancy is between two and 20 times its cost or, on average, about 10 times the fees paid.

Based on an average return of £6 for every £1 invested and a total 2008 UK spend on consulting of £9 billion, the MCA suggests the total benefit of consulting to clients over the year was £56 million. The MCA also reports that the industry spent over £180 million on innovation, £85 million on training and £80 million on pro bono work in 2008.

MCA chief executive Alan Leaman commented: "Too many conversations about consulting start and end with the assumption that it is just about cost. We can now see that there is a significant return on investment. This work is based exclusively on the views and experiences of clients and the methodology was cautious."

The report is the MCA's first step towards developing a broad understanding of the contribution made by consultants. It is based on research that analysed 1,800 consulting projects and interviewed 30 clients.

The MCA worked on the research report as a member of a steering committee which included Tim Morris, professor of management studies at Oxford University, and a number of consulting industry representatives.

2. CONSULTING REVENUE DIVES AT ATOS ORIGIN

Atos Origin's consultancy revenues dropped 24% to €248 million (£223 million) in 2009, representing just 5% of group turnover. The company blamed tough market conditions and projects that were delayed or cancelled by large customers, but said consultancy picked up in the fourth quarter to show 14% growth.

Total revenue for 2009 slipped 4% to €5.1 billion, but Atos Origin continued to rebuild its profitability, recording a 40% gain in net profit to €32 million after restructuring and exceptional costs. Its managed services, high-tech transactional services and medical BPO businesses showed positive growth, though systems integration joined consulting on a downward slide.

The company's UK business - which only a few years ago was a drag on revenue - showed the highest growth of 7% to a total of €902 million. Revenue in France, the group's largest market, slipped 3% to €1.1 billion, while Benelux plunged 14% to €997 million.

Atos Origin chairman and CEO, Thierry Breton, said: "Despite a declining economy in 2009, the group achieved its objectives. The operating margin increased and cashflow generation improved to reduce net debt."

Looking ahead, Atos Origin said its priorities fro 2010 are to maintain and reinforce staff skills, improve the operating margin and generate more cash.

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3. TCS FEATHERS ITS NEST

Tata Consultancy Services (TCS) has been chosen to run the UK's National Employment Savings Trust (Nest), a low-cost pension scheme that will be introduced by the Government in 2012.

Winning the contract, worth up to £600 million, is a landmark for TCS as it has taken Indian IT services providers a long time and many attempts to break into the UK public sector market.

TCS reached the final bidding stage alongside Logica and two European pension specialists. But its victory became a foregone conclusion when Logica and the pension specialists withdrew from the final stage of the procurement.

N Chandrasekaran, CEO of TCS, said: "This project will make a difference to millions of people in the UK and we are fully committed to it. Our selection as the preferred bidder demonstrates our strong domain and solution expertise and highlights our commitment to the UK public sector."

The Nest contract is divided into two stages and will run for 10 years, with a possible extension of five more years. The first-stage contract, which will be signed this month, runs to October 2010, giving TCS time to begin the activities required to set up and administer Nest. Before the end of the first stage, the decision will be made on whether to proceed with the second stage.

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4. DELOITTE BUYS UK WARGAMING BUSINESS

Deloitte has acquired wargaming specialist Simulstrat from King's College, London, in a bid to boost its information & technology risk practice which is dedicated to helping clients with complex risk and control problems.

Simulstrat, a commercial spin-off from Kings' department of war studies, will join the 40-strong resilience & testing team within the Deloitte information & technology risk practice, which numbers over 500 consultants.

Simulstrat has developed commercial business wargames and simulations from military methodology for the past three years. As part of Deloitte, it will help public and private sector organisations understand and prepare for complex future events and run simulations to help build contingency plans, inform strategies and test and validate the assumptions behind them.

Simulstrat CEO Ken Charman will join Deloitte as a director. He said: "Deloitte is willing to be innovative and pioneering in hunting down new methods for its clients. It has a proven and respected capability and is committed to leading the market in developing new and more robust methods of testing based on simulations, including live scenarios."

Rick Cudworth, head of resilience and testing at Deloitte, added: "The acquisition of Simulstrat is a clear demonstration of Deloitte's ambition to build a unique and market-leading practice in this field."

5. LOGICA PROMISES TO OUTPERFORM RIVALS

Logica claims it is well-placed to outperform the market in the medium term, despite falling full-year 2009 results.

Logica made a pre-tax profit of £43 million in 2009, down from £44 million in 2008, on revenue slipping 3% to £3.7 billion. Its consulting and professional services revenue fell 10% to £2.3 billion, with outsourcing rising 9% to £1.4 billion.

Logica held its operating margin at 7.4%, despite exceptional restructuring costs of £95 million. It also reinvested £30 million towards further growth from a total of £75 million saved as a result of its Programme for Growth.

Logica CEO Andy Green said: "In 2009, we grew orders, protected margin and converted profits to cash by executing on our plan in a tough market. As we enter 2010, Logica is a more integrated, confident company. We are positioned to deliver sustainable results for our clients, people and shareholders."

Logica's UK business fared best in 2009, raising revenue by 6% to £750 million and offsetting losses in all other geographies. In terms of markets, the company's public sector, energy & utilities, and telecoms & media operations showed revenue growth, with financial services down 20% and industry, distribution & transport down 9%.

Looking ahead, Logica predicted continued growth in outsourcing this year and a gradual stabilisation in consulting and professional services. It said: "The solid based we have put in place through the Programme for Growth should allow us to outperform the market and improve margins over the medium term."

6. FURTHER INFORMATION - FEEDBACK/PASS ON TO A COLLEAGUE/REMOVE

• For more information or if you have any feedback on MCN Direct, please email editor@ncc.co.uk
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Written by Sarah Underwood. Copyright 2010 The National Computing Centre Ltd.

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