Consultancy displays united colours

Nine months after the high-profile merger between Europe's dominant consultancy, Cap Gemini, and American counterpart, Ernst & Young, the new entity is eagerly presenting itself as the world's only truly multicultural consultancy.

"We're not dominated by any one culture or continent," said Mr Geoff Unwin, the British chief executive of the new mouthful known as Cap Gemini Ernst & Young, or, more accommodatingly, CGEY. With the reborn consultancy boasting 59,000 employees in 30 countries and provisional revenues of €9.6 billion in 2001, Mr Unwin says CGEY's competitive advantage post-merger is its "globality" and "multiculturalism" that will allow it to serve as "a bridge between Europe and the US".

It's an upbeat time for consultancies as well, especially if your payroll is in the tens of thousands rather than in the tens to hundreds. Over a two-day briefing for analysts and journalists in New York, several CGEY executives admitted that only a year ago the big consultancies were seen as the slow-movers by corporates seeking advice on how to evolve into "clicks and mortar" companies, or dotcoms planning a complete Web strategy.

But no more. With formerly hot, pure Web consultancies like Razorfish and Sentient looking at a glum market of stalled projects and lay-offs, the big consultancies suddenly seem a safe place to go. The influx of Web consultancy defectors has also brought new energy and perspectives to firms such as CGEY, said some company managers privately.

As in many other areas of business, large looks comforting, and, on a live video-link from Paris, Mr Unwin stated that despite the challenges of merging two already big companies, CGEY was not planning any redundancies in an already tight skills market.

However, Mr Unwin did not lose an opportunity to hammer the newcomers that had once threatened to make old-style consultancies such as Cap Gemini redundant. "We're really seeing them exposed for what they are and what their capabilities are," he said of the Web agencies. "If they had spent a proportion of what they spent on advertising on good project management, they'd be in better shape."

But the jury is still out on who can best handle customers' Webrelated needs, especially in the existing medium-size business market and medium-sized startups that Mr Unwin acknowledged were emerging as lucrative new targets for the big consultancies. While Mr Unwin accepted that the consultancies needed to prove themselves in this area - he agreed that this market traditionally had been wary of big consultancy fees and large management structures - he said CGEY could compete effectively "through regional structures of organisation" that enabled "local focus".

CGEY faces a big push in the American market to gain the visibility of other US-originating consultancies such as PriceWaterhouseCoopers and Accenture (formerly Andersen Consulting). Cap Gemini went after Ernst & Young for "market" rather than "cost" reasons, said Mr Unwin. He said that without the merger with a US player the company would have had recognition problems in the US, even though Cap Gemini had approximately 5,000 employees in the US already, and on its own was larger than Texas Systems Integration and consultancy giant EDS.

Ernst & Young was the marriage partner of choice because Cap Gemini felt the two company cultures could merge successfully. Cap Gemini also looked at other mates, said Mr Unwin. "They were excellent companies but a merger just would not have worked because the culture was so different." Blending corporate cultures is a particular challenge, he noted. "These things have to be done like porcupines making love - very carefully."

He thinks the abandoned merger proposal between Hewlett-Packard and PricewaterhouseCoopers last year would not have worked because the two companies had different cultures. He is also lukewarm on rival KPMG's recent flotation in the US market. "They've bought a ticket to the dance, but have yet to do any dance steps."

CGEY wants to be the market leader in the burgeoning information technology services sector, particularly in helping corporates with business-to-business projects, customer relations management and applications management.

Mr Unwin claims the firm already dominates in the first area globally and the third area within Europe. A particular focus for the group will be the telecommunications, media and networking niche, a specialised division that CGEY is addressing through a joint venture with networking giant Cisco, which owns a five per cent stake. The company will also shortly begin a rebranding exercise that some suspect may include a name change, but Mr Unwin refused to be drawn on details.

Mr Unwin said the merger was the most difficult, but also the most rewarding, job he'd tackled in his career. Whether it is also the most successful depends on how well the company can differentiate itself from its competitors, and whether the US market in particular decides to value a "multicultural" consultancy.