Convergence or Anarchy? 2014 Will be a Defining Year for Management Consulting

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Between reorganizations to make IBM and Accenture more like Deloitte and PwC's Booz acquisition making the Big Four firm more like McKinsey, the management consulting market appears to be converging around a similar approach. However, massive potential disruptions such as emerging technologies, new entrants and commoditization of management consulting services lie beneath the surface.

Practice Manager and Principal Analyst Patrick Heffernan, Analysts Bozhidar Hristov and Jennifer Hamel shared their perspectives on 2014 trends in management consulting, focusing specifically on acquisitions in the field. The team also spoke on new offerings in management consulting and regional developments as well as how all of this affects TBR's 2014 outlook for management consulting.

Questions for discussion will included:

• What does the Booz acquisition mean for PwC and the management consulting market?
• Will Accenture and IBM's restructuring and reorganizations finally shift their management consulting growth into a higher gear?
• Will Europe's new love for offshoring have a ripple effect on the management consulting market?

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  • Both firms’ revenues declined approximately $30M from 2012 to 2013.
    Both firms grew revenues slightly in the United States over the same period.

    And while Accenture added global headcount, IBM trimmed resources, resulting in an apparent substantial divergence of strategies around reorganization. IBM created Strategy and Analytics, a division dedicated to pulling emerging technologies into management consulting engagements. In contrast, Accenture announced separate Strategy and Digital divisions, with the latter housing the company’s analytics, digital and mobility expertise. Accenture Strategy’s mission and structure, however, echoes IBM’s: Meet demand for strategy services at the intersection of business, technology and operations. In both cases, the Solutions-led vendors recognized the impact from emerging technology permeating into strategy consulting isn’t the end of strategy — it’s an imperative to offer strategy consulting on par with their market-leading technology.
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  • Convergence or Anarchy? 2014 Will be a Defining Year for Management Consulting

    1. 1. TBRT ECH N O LO G Y B U SIN ESS RESEARCH , IN C. TBR’s Management Consulting Benchmark Research Highlights and Outlook Convergence or anarchy? 2014 will be a decisive year in management consulting Technology Business Research (TBR) Quarterly Webinar Series July 15, 2014
    2. 2. TBR 2 TBR Quarterly Webinar Series | 7.15.14 | www.tbri.com | ©2014 Technology Business Research Inc. Management Consulting Benchmark Highlights and Outlook: Webinar Presenters Boz Hristov Professional Services Analyst Email: bozhidar.hristov@tbri.com Twitter: @boztbr Jen Hamel Professional Services Analyst Email: jennifer.hamel@tbri.com Twitter: @jenhameltbr Patrick Heffernan Principal Analyst and IT Services Practice Manager Email: patrick.heffernan@tbri.com Twitter: @TBR_PatrickH
    3. 3. TBR 3 TBR Quarterly Webinar Series | 7.15.14 | www.tbri.com | ©2014 Technology Business Research Inc. • The Professional Services Practice publishes quarterly and semiannual reports covering 33 vendors. • Of those vendors, 16 are included in our Management Consulting Benchmark. o TBR reports are unique for their deep holistic analyses of leading vendor businesses. o Financial modeling and TBR insights help customers gain a better understanding of vendor business models. o TBR reports and webinars are responsive to client timelines, are clear and concise, and provide insights into multiple layers of a vendor’s organization and infrastructure. o TBR’s strategic assessment provides an impartial check on a vendor’s progress in its strategic objectives. Clients gain advantages and a better understanding of revenue opportunities through our reports and their personal relationships with TBR. Management Consulting Benchmark Highlights and Outlook: Webinar Overview TBR’s Management Consulting Benchmark delivers unique insight and value through in-depth analysis in a concise, consumable format TBR’s Professional Services Business Quarterly Management Consulting Benchmark
    4. 4. TBR 4 TBR Quarterly Webinar Series | 7.15.14 | www.tbri.com | ©2014 Technology Business Research Inc. Management Consulting Benchmark Highlights and Outlook: Key Trends Management Consulting Benchmark July 2014 Leaders: 2013 performance results across various benchmark metrics Outlook: Projections for 2014; closer look at APAC and LATAM trends Vendor Evolution: PwC’s acquisition of Booz & Company; Accenture and IBM reorganizations Disruptive technologies permeating all layers of management consulting forced vendors to ally, acquire or reorganize to meet client demands SOURCE: WWW.PERSONALBRANDING.NET SOURCE: WWW.NEWSYSTEMSTHINKING.COM SOURCE: WWW.JUSTWEB.COM.AU
    5. 5. TBR 5 TBR Quarterly Webinar Series | 7.15.14 | www.tbri.com | ©2014 Technology Business Research Inc. Management Consulting Benchmark Highlights and Outlook: Performance By acquiring Booz & Company, PwC vaulted into the top tier of strategy consultancies, closing the gap with McKinsey and Deloitte Booz & Company also brought PwC additional digital consulting resources, enabling the firm to launch PwC Digital Services in early 2014 $3,095 $3,487 $3,549 $3,260 $3,499 $3,625 $7,591 20.3% 9.9% 2.7% 5.8% 0% 5% 10% 15% 20% 25% $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 2011 2012 2013 2014 RevenueGrowthYTY In$Millions PWC'S MANAGEMENT CONSULTING REVENUE AND GROWTH Revenue (in $ millions) (1H) Revenue (in $ millions) (2H) TTM Revenue Growth YTY SOURCE: TBR ESTIMATES TBR PwC’s 2013 management consulting revenue is estimated at $7.17 billion, making the firm the fourth-largest management consulting firm behind Deloitte, KPMG and McKinsey in the benchmark.
    6. 6. TBR 6 TBR Quarterly Webinar Series | 7.15.14 | www.tbri.com | ©2014 Technology Business Research Inc. Management Consulting Benchmark Highlights and Outlook: Performance IBM and Accenture reorganized in seemingly different ways, but both vendors reacted to clients’ demands for technology and strategy The two largest solutions-led vendors, Accenture and IBM, performed almost identically in 2013 but diverged in 2014 by adopting opposite organizational strategies IBM Strategy and Analytics • Combined practice delivers end-to-end analytics services (design-implement-run) • Includes management consultants and data scientists (15,000+ dedicated experts) within GBS Accenture Strategy and Accenture Digital • Accenture Strategy: Management and technology consulting to guide transformation • Accenture Digital: Implementation and managed services around cloud, digital marketing, mobility and analytics SOURCE: IBM SOURCE: TBR AND ACCENTURE
    7. 7. TBR 7 TBR Quarterly Webinar Series | 7.15.14 | www.tbri.com | ©2014 Technology Business Research Inc. Management Consulting Benchmark Highlights and Outlook: Performance Ongoing efforts to cater offerings to evolving client needs do not translate to market share gain for solutions-led vendors We have observed this transition since TBR’s 2H11 Management Consulting Benchmark: Yet, solutions-led vendors’ share of benchmark revenue continues to shrink, dwarfed by Deloitte “Solutions-led firms combine technology expertise and industry domain knowledge for broad management consulting capabilities. Services aligned to industry-specific needs with standardized offerings and delivery set these firms apart, while C- Suite interests forge IT and business agendas into one opportunity.” “Investments in industry-specialized talent and cross-training consultants enabled segment growth on the innovation platform in 2011. ROI metrics from technology-led business enablement deals within growth verticals fed operations and technology revenue gains.” Deloitte $11,409 16.2% $22,507 32.0% $19,148 27.2% $10,087 14.3% $7,225 10.3% Big Four Strategy-led Solutions-led HR/ Specialty SOURCE: TBR ESTIMATES Inner-most circle represents 2012; middle circle, 2013; outer circle, 2014 15.7% 31.7% 26.8% 15.2% 10.6% 15.2% 31.5% 26.5% 16.1% 10.8% Solutions-led vendors as a group Deloitte
    8. 8. TBR 8 TBR Quarterly Webinar Series | 7.15.14 | www.tbri.com | ©2014 Technology Business Research Inc. Among benchmarked management consulting vendors, relative size, growth and profitability remained fairly constant in 2013 Management Consulting Benchmark Highlights and Outlook: 2013 Results • Deloitte cleared $10 billion in global management consulting revenues in 2013, up from $7.5 billion in 2010. • McKinsey’s slow growth dropped it to No. 3, although the firm continues to outpace the field in profitability. • IBM and Accenture, growth laggards among the large vendors, were essentially stagnant from 2012 to 2013. Second-half improvements point to a return to solid growth in 2014 for IBM and possibly for Accenture.
    9. 9. TBR 9 TBR Quarterly Webinar Series | 7.15.14 | www.tbri.com | ©2014 Technology Business Research Inc. As technologies grow, consultancies will struggle to differentiate, forcing vendors to seek niche offerings and profitable growth channels Management Consulting Benchmark Highlights and Outlook: 2013 Results Nearly every benchmarked vendor expanded technology revenues from 2012 to 2013 • KPMG benefited from inorganic investments. • McKinsey invested in proprietary, vertical-specific solutions. • Accenture enhanced its in-demand solutions portfolio offerings and expanded relationship with leading software vendors.
    10. 10. TBR 10 TBR Quarterly Webinar Series | 7.15.14 | www.tbri.com | ©2014 Technology Business Research Inc. Management Consulting Benchmark Highlights and Outlook: Projections As a result of emerging technologies permeating through management consulting, clients are upending the traditional consulting flow, looking to analytics and metrics to guide strategy, rather than starting with a high-level view and approach. Consulting vendors provide guidance across ever-changing business and market landscapes — and 2014 is poised to be a highly disruptive year Concurrently, consultancies rolled out new offerings based on acquisitions and IP, increasing the scope of, and revenues from, management consulting. Transformation of service lines, lines of business, IT shops and CxO roles generates opportunities. The impact of emerging technologies, broad reorganizations and benchmark- altering acquisitions will erode any stability or predictability in the market. SOURCE: WWW.BEARINGPOINT.COM
    11. 11. TBR 11 TBR Quarterly Webinar Series | 7.15.14 | www.tbri.com | ©2014 Technology Business Research Inc. After years of double-digit consulting growth, APAC revenues slowed; despite the setback, vendors bet that APAC clients may fuel growth Management Consulting Benchmark Highlights and Outlook: APAC PwC’s APAC revenues declined in 2013, dropping slightly after double-digit growth from 2010 to 2012. IBM’s and Accenture’s APAC revenues declined in 2013, while Deloitte’s and McKinsey’s expanded modestly. For all vendors, China’s uncertain economy, lack of IT spending and increased competition slowed expectations that APAC and emerging market revenues would offset ongoing revenue depression in Europe. Despite ominous signs from Beijing, vendors continued to invest. In May, the Chinese government, in reaction to a U.S.-China cyber-espionage spat, ordered all state-owned firms to sever ties with U.S.- based consulting companies. Coming on the heels of a slowing consulting market in China, TBR expects the ban — if enforced — to encourage consultancies to bolster APAC investments in Australia and Japan.
    12. 12. TBR 12 TBR Quarterly Webinar Series | 7.15.14 | www.tbri.com | ©2014 Technology Business Research Inc. The 2014 challenge in Latin America will be sustaining revenue growth as competition increases and macroeconomic pressures loom Management Consulting Benchmark Highlights and Outlook: LATAM Macroeconomic trends could dampen 2014 growth, particularly as Brazil comes down from its World Cup high. The management consulting vendors demonstrating the deepest investments — EY and Accenture stand out — will most likely weather any macro-level adjustments in stride. “We have a hold over the major segment in the Americas region, especially in Brazil. We are adapting both organic and inorganic investment methods, implementing more manpower in the untouched regions and looking to invest in acquiring firms. Our management considered investment as an opportunity that comes up with various growth perspectives. So, we are adapting those perspectives and try to convert our deals into numbers.” — Director, management consulting vendor, based in Brazil Every vendor in the Management Consulting Benchmark grew revenues in Latin America in 2013
    13. 13. TBR 13 TBR Quarterly Webinar Series | 7.15.14 | www.tbri.com | ©2014 Technology Business Research Inc. PSP Research 1H14 Topics 1H14 Report Key Themes • Syndicated Vendor Reports: o McKinsey & Co. o Deloitte Consulting o Bain & Co. o Boston Consulting Group o Accenture o IBM GS o Capgemini o PwC • Management Consulting Benchmark Consulting opportunities in LATAM will expand as vendors’ investments in local and regional resources pay off.  Gain detailed and data-driven understanding of opportunities, engagements, changes and growth by management consulting vendors in LATAM. Compare and contrast leading and lagging vendors in LATAM, with country- specific examples when appropriate. Use of acquisitions to gain expertise in niche areas and expand local market presence  Assess how vendors are leveraging acquisitions to build expertise in niche areas and/or expand local or subregional market presence, particularly in emerging markets. Compare and contrast vendors’ use of acquisitions versus establishing new offices. Adjusting for slowdown in APAC driven by China’s economy stumbling and U.S. consulting firms coming under fire  Examine how management consulting vendors readjust APAC-centric strategies in the face of twin pressures: China’s macroeconomic slowdown and a Chinese government crackdown on U.S. consulting firms. Consultancies are expanding strategy capabilities around cloud, analytics, mobility and digital as clients modernize business models Management Consulting Benchmark Webinar: 2014 Research Outlook
    14. 14. TBR 14 TBR Quarterly Webinar Series | 7.15.14 | www.tbri.com | ©2014 Technology Business Research Inc. Questions?
    15. 15. TBR 15 TBR Quarterly Webinar Series | 7.15.14 | www.tbri.com | ©2014 Technology Business Research Inc. Management Consulting Benchmark Highlights and Outlook: Contact Information Boz Hristov Professional Services Analyst Email: bozhidar.hristov@tbri.com Twitter: @boztbr Telephone: 603.758.1882 Jen Hamel Professional Services Analyst Email: jennifer.hamel@tbri.com Twitter: @jenhameltbr Telephone: 603.758.1875 Patrick Heffernan Principal Analyst and IT Services Practice Manager Email: patrick.heffernan@tbri.com Twitter: @TBR_PatrickH Telephone: 603.758.1834 James McIlroy Vice President of Sales Email: mcilroy@tbri.com Telephone: 603.929.1166 Twitter: @TBRinc SlideShare: www.slideshare.net/TBR_Market_Insight YouTube: www.youtube.com/user/TBRIChannel LinkedIn: www.linkedin.com/company/technology-business-research
    16. 16. TBR 16 TBR Quarterly Webinar Series | 7.15.14 | www.tbri.com | ©2014 Technology Business Research Inc. PSP Syndicated Research Coverage IT Services Vendors Public Sector Vendors Benchmarks (Benchmark XLS data also available) • Accenture • Atos • Capgemini • CGI* • Cisco Services • Cognizant • CSC • Dell Services • Fujitsu • HCL Technologies • HP Services • IBM Global Services • Infosys • T-Systems • Tata Consultancy Services • Unisys • Wipro IT Services • Xerox Services • Booz Allen Hamilton* • CACI International* • General Dynamics IS&T* • L-3 Communications* • Leidos* • Lockheed Martin IS&GS* • ManTech* • Northrop Grumman IS&TS* • Raytheon Intelligence, Information & Services* • SAIC* • Global Delivery Market Landscape • Healthcare IT Services Vendor Benchmark • IT Services Vendor Benchmark • Management Consulting Benchmark • Public Sector IT Services Vendor Benchmark • Software Alliance Benchmark Healthcare IT Services Vendors • Accenture HITS* • CSC HITS* • Dell HITS* • HP HITS* • IBM HITS* Management Consulting Vendors • Bain & Company* • Booz & Company* • Boston Consulting Group* • Deloitte Consulting* • McKinsey & Co.* TBR Professional Services Practice Syndicated Coverage *Semiannual publication
    17. 17. TBRT ECH N O LO G Y B U SIN ESS RESEARCH , IN C. About TBR Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, telecom and enterprise network vendors, and operators. Serving a global clientele, TBR provides timely and actionable market research and business intelligence in formats that are tailored to clients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis. TBR has been empowering corporate decision makers since 1996. To learn how our analysts can address your unique business needs, please visit our website or contact us today. Contact Us 1.603.929.1166 info@tbri.com www.tbri.com 11 Merrill Drive Hampton, NH 03842 USA This report is based on information made available to the public by the vendor and other public sources. No representation is made that this information is accurate or complete. Technology Business Research will not be held liable or responsible for any decisions that are made based on this information. The information contained in this report and all other TBR products is not and should not be construed to be investment advice. TBR does not make any recommendations or provide any advice regarding the value, purchase, sale or retention of securities. This report is copyright-protected and supplied for the sole use of the recipient. Contact Technology Business Research, Inc. for permission to reproduce.

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