Dante once said "that the hottest places in hell are reserved for those who in a period of crisis maintain their neutrality”.
More than half of global business executives say that the current economic crisis has revealed shortcomings in their organization and two-thirds say their organization is using the crisis as an opportunity to drive change, according to new research by Celerant Consulting.
Nevertheless, Consulting Magazine reports that many public consulting firms continue to struggle. At least three companies reported double-digit declines in consulting revenue for the latest quarter.
Watson Wyatt: Firmwide revenue fell 13 percent, to $396.5 million, in its most recent quarter. More alarming is that profit fell 25 percent in that three month span, down to $31.2 million from $41.7 million a year ago. Analysts blamed the declines on the economy, stressing that many HR consultancies are seeing significant declines in compensation consulting work.
With the economy limiting the number of high level job openings, fewer companies are worrying about compensation competitiveness. While the earnings news is sobering, it’s actually better than Wall Street anticipated. And the firm’s stock price continues to climb in anticipation of its upcoming merger with Towers Perrin.
Hewitt: In its most recently completed quarter, Hewitt’s consulting revenue fell by 13.8 percent and profits sank by 7.5 percent. Overall, the firm’s revenue fell to $729 million, down a modest two percent after adjusting for currency effects.
The firmwide number was bolstered by modest growth from its benefits outsourcing business, which now accounts for almost 27 percent of the firm. The firm’s HR BPO business saw revenue decline by almost 12 percent in the quarter. The good news for that unit was that it managed to post a profit, a positive sign after a loss last year.
CIBER: CIBER’s consulting revenues took a hit in its most recent quarter, falling from just over $300 million in the three months ending June 30, 2008 to just over $250 million in the same three months of 2009. The year-over-year 17 percent decline comes after a 11 percent decline in the firm’s consulting business between the first three months of 2009 and the same period of 2008.
Costs associated with the consulting business accounted for about 75 percent of revenue in the three months ending June 30, 2009, that’s up from 72 percent in the same period of 2008. The challenges facing CIBER’s consulting practice speak to the highly commoditized nature of many segments of IT consulting. Average hourly rates fell from $89/hour to $83/hour. Consultant utilization dipped from 90 percent to 87 percent. As a result, the firm’s headcount has also been reduced, down from 7,445 to 7,150.
And now there seems to be an apparent disjoint here: Why would More than half of global business executives say that the current economic crisis has revealed shortcomings in their organization and two-thirds say their organization is using the crisis as an opportunity to drive change, while most large consulting firms are seeing substantive reductions in revenues (new/more work) and headcount? Why are consulting firms not taking this crisis (business/personal) and addressing it from a strategic and business development perspective? You can't grow your business by reducing headcount. There's no math in that. It doesn't resonate! More then that, it does not work.
Perhaps it is time for these firms to start to 'outsource' their strategy and business development efforts to smaller, more flexible, agile firms who respond quicker to market changes, and can deliver new business without the high overhead.
I think Dante also once said" "Give 'em hell, Harry!" Or perhaps 'go to hell Harry'... or something to that effect. Maybe not.
Hi...I also had a chance to go through that Celerant Consulting sponsored Survey. Though the current economic storm has revealed the shortcomings in many organizations, the consulting firms are not up to the mark clinching those opportunities and pitching a quick win. That is the reason many consulting firms are on the decline. They need to revise their marketing strategies and face the reality that there are no more easy pickings. This also has exposed many consulting firm's marketing strategies, which in most cases are outdated and focused on only old school methods.
ReplyDeleteI think they need to go DIGITAL and focus on green, which is cheaper, efficient and measurable.
Ron: Internal strategic direction and busdev strategy are sorely lacking. It's still the ol boys at work philosophy. Too slow, not targeted.
ReplyDeleteThe 'shotgun approach' to doing business.
Small is good today. You don't have the overhead costs, and you can be flexible and move quickly.