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T EC H N O LO G Y B U S I N ES S R ES EAR C H , I N C .

PROFESSIONAL SERVICES PRACTICESM

Beyond the Jargon: TBR’s 2H11 Management Consulting Benchmark Report

WEBINAR

Liz Leonard ([email protected]), Professional Services Practice Senior Analyst

mailto:[email protected]

2H11 Management Consulting Benchmark Webinar

TBR

©2012 Technology Business Research Inc.

TBR’s 2H11 Management Consulting Benchmark provides insights into competitive approaches and opportunities

Management Consulting CY2011 Firm Dynamics

• Talent, technology, facilities

Investments

• Industry specialization

Offerings Strategy

• Resource mix, utilization, profit

Delivery

Key Areas Covered and Questions Answered

2


TBR


Leading firms compete on breadth and depth, align capabilities to opportunities

Vendors currently included in the study are:

Beyond the Jargon: Approach and Vendors

The output of this study includes:

• Executive summary and report comparing headcount, business metrics and vendor strategies

• 16 in-depth profiles on each benchmark consulting firm

• Database and Excel pivot table

• Analyst knowledge transfer

3

Deloitte Accenture McKinsey Mercer

PwC IBM Bain Aon Hewitt

KPMG Capgemini BCG Towers Watson

E&Y A.T. Kearney Booz & Co. Oliver Wyman


TBR


Benchmark firms cluster into groups whose assets vary in relevance to growing demand for technology-enabled business consulting

Focal Points

Management Consulting Benchmark

•Deloitte •Ernst & Young •KPMG •PWC

•A.T. Kearney •Bain •BCG •Booz & Co. •McKinsey

•Accenture •Capgemini •IBM

•Aon Hewitt •Mercer •Oliver Wyman •Towers Watson

Management Consulting Benchmark Segment Overview

Segments

4


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Continued growth in 2011 was born from relevant alignment of offerings with high-priority business issues

Management Consulting Benchmark Revenue Growth

CY2011 Revenue (in $ million) and Revenue Growth (vs. CY2010)

SOURCE: TBR AND BENCHMARK FIRMS

62.3%*

0%

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*This data point was adjusted to present the data in a more visually readable way.

5

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Management Consulting Revenues and Growth

• Total 2010 to 2011 from $48.3 billion to $56.1 billion, 17.3% YtY growth

• Deloitte, PwC, McKinsey, Accenture, E&Y led in revenues through strategic scale, reputation, breadth and depth

• Growth leaders Aon Hewitt, KPMG, PwC, Accenture, Deloitte driven by key investments, acquisitions


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Industry alignment within service line capabilities and acquired expertise drove leading firms’ positions in 2011

CY2011 Headcount & Revenue Growth in Millions (vs. CY2010)

SOURCE: TBR AND BENCHMARK FIRMS

Deloitte

PwC

Ernst & Young

KPMG

McKinsey

Bain

BCG

Accenture

IBM

Mercer

Towers Watson

Capgemini

Aon HewittHeadcount Growth:

36%; Revenue Growth:

62.3%*

Oliver Wyman

Booz & CoAT Kearney

0%

10%

20%

30%

40%

50%

60%

-15% -5% 5% 15% 25% 35% 45%

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Headcount Growth %

.

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Management Consulting Benchmark Headcount and Revenue Growth

Benchmark of Revenues and Headcount

• Benchmark firms drove annual average growth rate of 17.3% in CY2011

• Acquisitions in key growth regions also drove headcount among leaders Deloitte, E&Y and PwC

• Revenue laggards in 2H11, Booz & Co. and IBM GS suffered exposure to weak economies that dragged down management consulting deals.


TBR


Management consulting firms continued to invest, specialize and improve bottom-line results in CY2011

Revenue growth correlates to headcount volume, driving scale of talent demand in an essential relationship-led business.

Investments driven revenues

Leaders go-to-market with deep vertical expertise emphasizing significant growth industries and competitive focus.

Industry-specialized offerings

High utilization rates coupled with lower-cost resource leverage improves operating margin.

Efficiencies enable profit

Key Market Drivers: Headcount and Capacity, Industry Alignment, Efficient Delivery

7

Management Consulting Benchmark Market Drivers


TBR


Firms increased investments in headcount, tools and locations to expand global operations

Benchmark firms expanded consulting headcount, increased technology-led delivery innovations and global footprint.

Investing in people, technologies and

locations

• CY2011 headcount growth enabled breadth and capacity to capitalize on opportunities

• Big Four firms led headcount base and growth through acquisitions and headcount investments aligned to demand, Strategy-led is second largest with relatively slow headcount growth

Investments Growth

8

Management Consulting Investments Overview


TBR

©2012 Technology Business Research Inc. 9

Total MC headcount grew to expand capacity in both billable and non-billable employees in CY2011

-10%

-5%

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35,000

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TOTAL MANAGEMENT CONSULTING BILLABLE VERSUS NON-BILLABLE HEADCOUNT AND GROWTH

Billable Headcount Non-Billable Headcount

Billable Headcount YtY Growth Non-Billable Headcount YtY Growth

TBR

SOURCE: TBR AND COMPANY DATA


• Aggregate billable headcount growth rate vs. non-billable • Increased leverage of centralized research and client-delivery support

personnel, as firms increased standardization and realize improved profit form leverage of lower cost resources

Billable and Non-Billable Headcount and Year-to-Year Growth


TBR


Fast-growing and core geographies grew as firms compete on scale

Key Geo Insights

• Americas remains home to the majority of resources with 45% of global headcount and 13% YtY growth

• U.S. is single largest country for MC headcount and grew by nearly 14% YtY

• EMEA’s fast growing areas (MENA) enabled 10% headcount growth YtY for the region

• APAC led in growth for CY2011, headcount up 18% however is still smallest global region overall

Americas Total Headcount: 88,200

% of Global Headcount: 45%


EMEA Total Headcount: 72,100


APAC Total Headcount: 38,500


Management Consulting Headcount by Region

10

Average Total Headcount Growth Overall: 10.5%

Benchmark Leaders Headcount Growth Overall: 17.5% (Top 6)

US Total Headcount: 71,350



TBR


Financial Services and Healthcare present opportunities

Firms increased

capabilities and

offerings that align to

strategic industries to

build depth and

capitalize on growing

demand

Offerings increasingly align to industry

priorities

Management Consulting Industry Overview

Industry-led Growth and Specialization

11

Financial Services Consulting CY11 Revenue and Revenue Growth in Millions (2011 vs. 2010)

Healthcare Consulting CY11 Revenue and Revenue Growth in Millions (2011 vs. 2010)

• Largest vertical remains Financial Services at $14 billion for CY2011

• 17% aggregate revenue growth for financial services on YtY basis

• $4 billion in CY2011, but growing

• 22% average YtY revenue growth per firm for healthcare sector


TBR


Industry-specific expertise drives opportunity for specialization

Tactics to Capture

Opportunity

Vertical

Financial Services

$14 billion

17%

• Acumen in reform, compliance with latest regulations

• Global reporting methods excellence

• Transform operating models, product/service portfolios

• Leverage of analytics, mobility, social media

High Tech, Comm. & Media

$8 billion

18% • Presence,

relationships and knowledge of fast-growing adjacent markets

• Competitive marketing and pricing strategies

• Guide through regional regulatory impact

Industrial Solutions/Manu.

$7 billion

21.2% • Innovation for

efficient supply-chain operations

• Leverage integrated multichannel customer distribution model.

• Develop global expansion plans based on regional analysis.

Energy & Utilities

$8 billion

17%

• Expertise in new service access, infrastructure planning in India and China

• Strategy services for long-term sustainability and optimization of resource mix

• Regional utility insights around Smart Grid technologies

Verticals of Focus With Benchmark Total Leading Vertical Revenues and year-to-year Average Revenue Growth for 2011

12



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Vertically aligned contribution to firms’ revenues reveal areas of client traction, alignment and investment for firms in 2012

Increasing industry depth across service line offerings in 2011 indicates where firms are heading in terms of both capabilities and focal clientele in 2012

Source: TBR and Benchmark firms Key: LOWHIGH MEDIUM

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Financial Services 26.2% 29.8% 20.0% 28.1% 11.9% 27.6% 22.3% 18.0% 18.7% 19.0% 19.4% 25.0% 22.3% 34.3% 47.7% 31.3%

Retail 5.6% 6.5% 9.0% 11.9% 22.3% 9.7% 11.2% 6.2% 4.5% 2.1% 4.2% 7.1% 4.7% 10.6% 14.1% 7.5%

Energy & Utilities 9.2% 13.3% 9.9% 15.2% 19.4% 11.7% 12.0% 11.5% 19.9% 18.5% 12.1% 6.3% 16.5% 12.9% 10.2% 13.4%

High Tech, Communications & Media 11.7% 22.5% 16.9% 11.2% 13.8% 16.7% 14.5% 20.9% 13.6% 21.8% 9.3% 9.5% 18.4% 9.2% 6.8% 19.6%

Industrial Solutions/ Manufacturing 15.2% 6.5% 16.5% 6.4% 13.7% 17.5% 11.0% 12.9% 13.2% 12.3% 17.4% 12.4% 20.7% 20.6% 6.8% 11.8%

Public Sector 4.9% 7.0% 11.8% 9.7% 3.9% 5.6% 8.8% 8.4% 13.1% 13.8% 21.0% 10.1% 8.2% 3.9% 2.8% 2.9%

Healthcare 11.7% 7.0% 7.5% 6.4% 7.8% 3.1% 8.4% 4.1% 9.7% 5.5% 5.7% 6.9% 4.6% 2.2% 5.4% 5.2%

Consumer Packaged Goods 12.6% 4.5% 3.4% 9.2% 5.8% 8.1% 3.1% 7.7% 4.0% 6.9% 4.6% 3.6% 1.2% 1.9% 1.9% 0.8%

Other 3.0% 2.9% 5.0% 1.9% 1.3% 0.0% 8.8% 10.3% 3.3% 0.1% 6.3% 19.3% 3.5% 4.5% 4.2% 7.5%

Big Four Strategy-led Solutions-led HR/Specialty


Industry Revenue Contribution per Firm in CY2011


TBR


MC firms increased utilization through service delivery sophistication

Standardization, resource mix and utilization drove profitability.

Efficient resource leverage

• Increased leverage of standardization, automation, and communication enabled utilization rates for more sophisticated vendors (i.e., Accenture up 100 basis points, McKinsey up 150 basis points since 1H11).

• Efficient internal communications platforms (Yammer, other social media) facilitate multi-location teams’ success and enabled reach to global clientele.

Management Consulting Delivery Overview

Efficient Delivery Methods

14

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2011 MANAGEMENT CONSULTING UTILIZATION RATE BY VENDOR

SOURCE: TBR AND COMPANY DATA

TBR


TBR

©2012 Technology Business Research Inc. 15

Strategy-led firms averaged most profitable segment, holding down costs and driving up utilization in CY2011

RANKING COMPANY

1 33.3% MCKINSEY

2 26.3% BCG

3 23.8% BOOZ & CO.

4 22.5% BAIN

5 20.5% PWC

6 16.8% IBM

7 16.5% DELOITTE

8 16.0% KPMG

9 15.5% AT KEARNEY

10 14.8% ERNST & YOUNG

11 13.9% TOWERS WATSON

12 13.3% ACCENTURE

13 10.5% CAPGEMINI

14 7.5% AON HEWITT

15 6.0% OLIVER WYMAN

16 5.4% MERCER

TOP 3 COMPANIES

TBR

Management Consulting Delivery Overview

Operating Margin Metrics and Benchmark Leaders

• McKinsey’s operating margin is 21% higher than next closest peer, attributed to maturity of its operating methods, high utilization rates and cost containment


TBR


Firms are opportunistic with investments, developing portfolios that align to clients’ highest priorities

How are MC firms meeting demand?

Investing for Growth

Added depth, industry expertise

Innovating for Efficiency, Profit

Management Consulting Trends

Responding and

delivering on the ever-

evolving inventory of

client needs

Reacting to changing

economic climate to

provide the highest-

value services

16


TBR


TBR’s 2H11 Management Consulting Benchmark report includes profiles for 16 vendors with key competitive metrics

Example Firm Profile: Key Competitive Metrics

Semi-annual and Year-to-Year revenue changes

Regional revenue, headcount, partners, billable, non-billable

resource mix

Service line revenue contribution to total

revenue per firm

17

Service Lines 2H11 (% of revenue)

Metrics

1H10 2H10 1H11 2H11 2010 2011 Year to Year 2H10 to 2H11

Americas

Revenue (in $ mill ions) $1,012 $1,106 $1,241 $1,363 $2,118 $2,604 22.9% 23.2%

Headcount 6,150 6,399 6,802 7,202 6,399 7,202

Partners 381 398 426 452 398 452

Bil lable Employees 5,386 5,603 5,958 6,308 5,603 6,308

Non-Billable Employees 764 796 844 894 796 894

U.S.

Revenue (in $ mill ions) $831 $909 $1,021 $1,123 $1,740 $2,144 23.3% 23.6%

Headcount 4,350 4,498 4,815 5,148 4,498 5,148

Partners 269 280 302 323 280 323



EMEA

Revenue (in $ mill ions) $1,014 $1,068 $1,190 $1,227 $2,082 $2,417 16.1% 14.9%

Headcount 5,200 5,300 5,600 5,890 5,300 5,890

Partners 323 326 348 368 326 368



APAC

Revenue (in $ mill ions) $318 $360 $417 $449 $678 $867 27.8% 24.9%

Headcount 3,150 3,301 3,598 3,908 3,301 3,908

Partners 167 184 196 210 184 210



18.4%

14.4%

18.4%

18.1%

14.6%

13.2%

11.1%

12.9%

11.1%

11.6%

12.5%

13.5%

12.6%

12.4%

14.5%

15.4%

Accenture: Management Consulting Geography Metrics

Half-Year Full Year Percent Change


TBR


TBR’s 2H11 Management Consulting Benchmark provides insights into competitive approaches and opportunities

Management Consulting CY2011 Firm Dynamics

• Talent, technology, facilities

Investments

• Industry specialization

Offerings Strategy

• Resource mix, utilization, profit

Delivery

Key Areas Covered and Questions Answered

18

TBR


For additional information please contact:

Liz Leonard, Professional Services Practice Senior Analyst

[email protected]

Alison Crawford, Marketing Director

[email protected]

James McIlroy, Sales Director

[email protected]

www.tbri.com

11 Merrill Drive Hampton, NH 03842




TBR


QUESTIONS


TBR


Terms Defined and Report Overview

21


TBR


Management Consulting Benchmark Metrics: Terms Defined

22

Terminology Definition

Billable Employees Any employees who perform professional services that may or should be billed to clients as part of contractual agreement; these employees contribute more billable hours than non-billable hours to their organization.

Non-billable Employees Any employees who perform professional services or activities common to all clients as part of doing business or in support roles for the organization; these employees contribute more non-billable hours than billable hours to their organization.

Partners

Principal leaders of consulting organizations who often contribute capital and usually share in the risks and profits of the organization; TBR includes all levels of partners and most senior organizational leaders (regardless of title or capital contribution) as part of the management consulting benchmark partner definition and calculations that factor partners.

Attrition Rate

The number of billable employees who voluntarily turn over within a certain period; TBR uses a multichannel approach to attain the information in our attrition rate estimates and assumes the understanding [as a calculation] to be: Attrition rate (%) = Number of billable employees resigned for the period/total number of employees for the period.

Utilization Rate The billing efficiency of an individual or a firm; current utilization rates in the management consulting benchmark are self-reported by the firms based on their calculation. Utilization rate calculation = Number of billed hours for the period/fixed number of expected total work hours for the period, typically between 2,000 and 2,100 hours annually.

Operating Margin/Profitability

Operating margin is equal to operating profit divided by revenue. Operating profit is total revenue less all costs before adjustment for taxes, dividends to shareholders and interest on debt. TBR uses a multichannel approach to attain the information in our profitability rate estimates and assumes the understanding [as a calculation] to be: Operating margin = Operating income/revenue.

Revenue per Employee Revenue per Employee is the ratio that indicates a firm's sales performance in relation to number of employees. TBR assumes the understanding [as a calculation] to be: Revenue per employee = Total revenues/total headcount; for half-year calculations derivative factors are multiplied by two to align to annual performance.


TBR


TBR’s Management Consulting Benchmark provides revenue and resource analysis by region, service line and vertical

Management Consulting Benchmark Report Overview

Vendors Firm Segments Service Lines Regions Verticals Key Metrics Time Period

•Deloitte

•Ernst & Young

•KPMG

•PWC

•AT Kearney

•Bain

•BCG

•Booz & Co.

•McKinsey

•Accenture

•Capgemini

• IBM

•Aon Hewitt

•Mercer

•Oliver Wyman

•Towers

Watson

• Solutions-led

• Strategy-led

• Big Four

• HR/Specialty

•Strategy

•Operations

o HR

o Supply

chain

o Finance &

Accounting

o CRM/

Customer

o Governance,

Risk &

Compliance

•Organization &

Change

•Technology

• Americas

• U.S.-only

• EMEA

• APAC

•Financial

services

•Retail

•Energy &

Utilities

•High Tech,

Comm., and

Media

• Industrial

solutions/

Manufacturing

•Public sector

•Healthcare

•Consumer

Packaged

Goods

•Other

• Revenue by:

o Service line

o Region

o Verticals

• Headcount

(partners, billable,

non-billable) by:

o Service Lines

o Regions

• Operational

Metrics

o Profitability

o Utilization

o Attrition

• Current report

includes data

for:

o 1H10

o 2H10

o 1H11

o 2H11

o CY 2010

o CY 2011

• TBR’s Management Consulting Benchmark is a semi-annual deliverable providing key service line, regional, vertical and operational data and analysis across 16 leading management consulting firms.

• Benchmark deliverables include:

o Executive Summary and Report

o Appendix data

o 16 Individual firm reports

o Database and Excel pivot table Management Consulting Benchmark Coverage

23

tbr's management consulting webinar

Technology

benchmark of revenues

management booz

business metrics

headcount base

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growth leaders aon hewitt

growthcy2011 revenue

average growth rate