A once glamorous sector is content to be stable, writes Jamie Smyth, Technology Reporter.
Over three years of economic decline a lot of the glamour has been beaten out of the global technology consulting industry. The days of six-figure performance bonuses and executive travel are largely over as firms cut back on costs and restructure their staff.
But its not all bad news and there are now encouraging signs that the worst may be over for the industry, says Mr Michael Donahue, chief operating officer of the global consulting firm BearingPoint, which was formerly known as KPMG Consulting.
Earlier this week Mr Donahue flew into Dublin to announce the creation of 150 new jobs at BearingPoint's new global technology services unit. The firm will hire 20 professional consulting staff immediately and a further 130 next year as demand picks up.
The new technology services unit will provide Irish and European customers with a range of consulting services and managed services capabilities. It will offer on-site and offshore services to corporates and public services.
Three years ago the announcement of 150 jobs would barely make a headline as firms like Accenture, IBM and HP hired thousands of Irish staff to serve their European operations. But skilled technology jobs are now a much more precious commodity.
"In the heyday of the late 1990s I think we all knew it was too good to be true. There was so much demand for services and profits being made by the consulting firms," says Mr Donahue.
This was driven by several waves of change in the technology sector in this period such as business process re-engineering, enterprise resource planning, the millennium bug and the internet. I think it has become a little bit frustrating lately in the business because there doesn't seem to have been any big trend, he says.
"There is now a big fear that there won't be a big new trend in the technology industry but I think this is misplaced," says Mr Donahue, who has 20 years experience working in the technology sector with BearingPoint.
It is this lack of a big trend that has caused firms to cut back on spending, which in turn has hurt the technology consulting sector. BearingPoint was forced to cut 1,000 staff last year. It has also recently ruled out giving its staff bonuses after the company failed to meet its own financial targets.
But BearingPoint has bucked the downward trend in the consulting business because it of its reliance on public service business and an aggressive acquisition campaign. It has acquired 23 firms since 2001. Its US business grew 1 per cent large year, while its overall business grew almost 33 per cent last year.
The company, which has slightly less than 16,000 staff in 39 countries, has also scooped some high profile contracts with the US administration such as the rebuilding Afghanistan and Iraq. It is also advising the US Department of Homeland Security on technologies to protect against terrorism.
Mr Donahue, a personal friend of the current US administrator in Iraq Mr Paul Bremer, says there was no shortage of volunteers for consulting jobs in Iraq despite the obvious security dangers.
"We are doing a lot of work helping people to rebuild their financial processes and systems out there and I think our consultants just want to be where the action is," he says. "We have a number of consultants on the ground in Iraq based in secure facilities and before they travel staff members are given personal security and weapons training."
BearingPoint personnel are managing the currency changeover in Iraq and are running the payroll for the Afghan administration. Many of the consultants who work on rebuilding projects include former diplomats and government staff who move into the private sector, says Mr Donahue, who believes political stability is linked directly with firm's willingness to invest.
This is one of the key issues that will help Ireland to maintain its competitiveness against other low cost locations. The clampdown on world security may also affect some Asian States attractiveness as a location for consultants which have to work on-site.
Mr Donahue is also quietly confident that technology spending will rise over the next few years as a new trend begins to become established at major companies.
"The industry seems to be stabilising now, he says. "Firms are recruiting, bookings and revenues are up and the retention rate of key employees has risen."
He cautions that it will take several quarters of growth to call it a lasting trend but BearingPoint is well-placed to capitalise.
Matching the 30 per cent plus rate of growth achieved by BearingPoint between 1997 and 2002 may not be achievable. But it now aims to grow at double the rate of the market, says Mr Donahue.
BearingPoint's hectic growth since 1997 created its own problems with internal financial controls causing it to restate its revenues earlier in the summer. But Mr Donahue says these problems are now behind the firm as it has integrated all its European business and technology systems.
There are also positive signs that a new technology trend is emerging around supplier and customer integration, he says.
Mr Donahue has seen the trend towards much closer links between suppliers and manufacturers close up from his position on the board of the multibillion US chemicals firm, Airproducts.
The firm already builds plants close to its major customers such as chip giants Intel and Samsung in an effort to make the supply chain more efficient. And this trend is set to continue over the next five years as suppliers begin to link their systems directly into customers networks, he says.
BearingPoint, which generated $3.1 billion revenues in the year to the end of June 2003, is also confident that it can grow its managed services business. This unit- which manages the technology processes for other companies- currently accounts for just 10 per cent of its revenues. But BearingPoint wants to grow this figure to 20-25 per cent of revenues with a few years, says Mr Donahue.
"We often design and build a system for a customer and increasingly we are managing the operation of it for them as well... One significant project we are currently engaged in is the management of the Texas Online portal for public services."
This portal enables citizens to conduct business with the Government using the web. BearingPoint built the online portal and now operates it on behalf of the state. It gets part of the transaction fee every time a citizen uses the site, says Mr Donahue.
The company's Irish division is on the shortlist for a similar Government portal project, the public services broker, that is likely to form the core engine of the Irish e-government strategy.
BearingPoint has already won a project to design and build an automated passport production process in the Republic. This is scheduled to be completed sometime next year and will enable the introduction of more secure passports, possibly documents incorporating biometric security.
The halcyon days of the late 1990s may not return but consultancy still offers interesting projects and a carrer with good earning potential, according to Mr Donahue, who shows few signs of stepping off the BearingPoint bandwagon anytime soon.
