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

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TBR’s Management Consulting BenchmarkResearch Highlights and OutlookConvergence or anarchy? 2014 will be a decisive year in management consulting

Technology Business Research (TBR) Quarterly Webinar Series

July 15, 2014

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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 HristovProfessional Services AnalystEmail: [email protected]: @boztbr

Jen HamelProfessional Services AnalystEmail: [email protected]: @jenhameltbr

Patrick HeffernanPrincipal Analyst and IT Services Practice ManagerEmail: [email protected]: @TBR_PatrickH

mailto:[email protected]



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• 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

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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

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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 DeloitteBooz & 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

Reve

nue

Gro

wth

YTY

In $

Mill

ions

PWC'S MANAGEMENT CONSULTING REVENUE AND GROWTH

Revenue (in $ millions) (1H) Revenue (in $ millions) (2H)TTM Revenue Growth YTY

SOURCE: TBR ESTIMATES

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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.

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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

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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%

BigFour

Strategy-led Solutions-led HR/Specialty

SOURCE: TBR ESTIMATESInner-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

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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.

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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.

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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

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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.

TBR


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

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PSP Research 1H14 Topics 1H14 Report Key Themes

• Syndicated Vendor Reports:o McKinsey & Co.o Deloitte Consultingo Bain & Co.o Boston Consulting

Groupo Accentureo IBM GSo Capgeminio 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

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Questions?

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Management Consulting Benchmark Highlights and Outlook: Contact Information

Boz HristovProfessional Services AnalystEmail: [email protected]: @boztbrTelephone: 603.758.1882

Jen HamelProfessional Services AnalystEmail: [email protected]: @jenhameltbrTelephone: 603.758.1875

Patrick HeffernanPrincipal Analyst and IT Services Practice Manager Email: [email protected]: @TBR_PatrickHTelephone: 603.758.1834

James McIlroy Vice President of SalesEmail: [email protected]: 603.929.1166

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PSP Syndicated Research CoverageIT 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

TBR

TECHNOLOGY BUSINESS RESEARCH, INC.

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

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