Consulting's New Era

Dec. 21, 2004
As Y2K winds down and business-process automation matures, the consulting community looks for new ways to provide value for its enterprise-application clients.

Soon Y2K will be behind us. Reengineering and automation of business processes are well developed. So, although early on the enterprise-application consulting community had more business than it could handle, supply has caught demand. The question becomes, what new value-added services will consultants offer to manufacturers during the next few years? The answer rests with manufacturers themselves and with the new questions they are raising about how to operate their businesses and leverage their IT investments. "The buying factor in the consulting marketplace has changed," says Robert McIlhattan, vice chairman of U.S. consulting services in Ernst & Young LLP's (E&Y) Chicago office. "In the recent past, the client knew what the agenda was: either to remediate Y2K or implement a particular package for a specific reason. The key buying determinant was how to do that, get it done in a specific time frame, in a cost-effective manner, and minimize risk associated with the solution. Now the client is asking the fundamental questions, 'What do I do to get the value out of the investment, to continue to drive growth in my organization, to increase efficiencies, to leverage my investments?' These are very different questions from how to do it." Manufacturers are looking at information technology to support contemporary objectives such as increasing collaboration, linking businesses, driving decision-making into the organization, improving management decision-making and increasing agility and velocity, and capturing new revenue streams. Up to the challenge, the consulting community has new offerings to capitalize on these opportunities, with services in three basic categories: realizing new benefits from systems already in place; adding value with the ever-increasing list of new bolt-on applications that enterprise-resource-planning (ERP) and specialty vendors are offering; and outsourcing, from applications maintenance, to business process, to entire supply chains and retail-sales channels. New Value Y2K was a major distraction for many companies implementing ERP systems. Some simply installed the solution to beat the impending date of doom. Other companies implemented ERP with the idea of reaping cost and maintenance savings by eliminating legacy and mainframe systems. Still others proceeded with ERP without a firm business case or for competitive reasons. Regardless of the reason, many companies with stable ERP infrastructures in place now find themselves asking, "How can I take best advantage of it?" It's an IT version of all dressed up, looking for a place to go. With some of the distractions behind them, Y2K in particular, companies can focus on real business value and are calling on consultants to help find it. Owens Corning, Toledo, Ohio, had a sound business case for its ERP implementation and is reaping solid benefits, yet it is looking for more. The company has implemented ERP, operating on SAP, in 120 locations worldwide. The original business case called for $50 million in annual savings across multiple areas. In fact, Owens Corning has realized those savings in just two -- global logistics and materials management. The company now is discussing with Deloitte Consulting an engagement to mine savings in other areas, including plant maintenance and administration. "We are focusing on the next set of deliverables, really driving the efficiencies and effectiveness of the global ERP package to generate additional savings," says Owens Corning CIO David Johns. "That's what I would hope to get from the Deloittes of the world. How do we take the global infrastructure we've implemented to the next level?" Most enterprise-applications consultants now have specific after-market programs in place to wring more value out of established systems. PricewaterhouseCoopers LLP has its Enterprise ROI initiative, Andersen Consulting its Find the Value practice, and Deloitte its Second Wave. "Our position is that regardless of what you accomplished with your initial implementation of ERP, there always are ways to improve the value of it," says Bob Dalton, associate managing director for service lines in Deloitte's Atlanta office. "This can include changes to business process to optimize the use of the platform, changes in the way the organization is deployed, new business strategy, and improvements in technical performance." To better understand where to look, consultants conduct benefits-realization assessments with a series of diagnostic tool kits and benchmarks against best practices. New Applications The first take on ERP was that it was the definitive IT support for companies of the future and virtually alone could jolt a company into quantum leaps of improved performance and profitability. The reality is slightly different, however. "Contemporary thinking today is that ERP is the foundation, not the vision as painted in the mid-'90s that it is the strategic enabler of the company's business processes," says Rod Johnson, senior research analyst for enterprise applications at AMR Research Inc., Boston. "Where you really get the value is by adding strategic applications on top of ERP to generate some ROI." These value-added applications, or bolt-ons, include solutions in customer-relationship management (CRM), supply-chain management (SCM), advanced planning and scheduling, strategic procurement, e-commerce, and business intelligence. So while the giant waves of business-process reengineering and ERP technology support subside somewhat for the consulting community, a host of smaller waves of consulting are cresting to support these new applications. Consultants are retooling resources accordingly. The number of analysts dedicated to CRM at IBM Corp.'s IBM Global Services, Somers, N.Y., for instance, will double in the last six months of this year alone, as will those dedicated to SCM. In addition, IBM has added a staff of 80 experts dedicated to advanced planning and scheduling to support its ERP consulting staff. E&Y will add 400 analysts in its CRM practice by year's end to reach a total of 1,000, while Deloitte Consulting suggests revenues in its e-business and CRM practices will exceed 100% growth this year, with SCM revenues growing more than 70%. Custom Space Much more than just putting up a Web store, e-business initiatives are about inherently changing fundamental business processes and integrating them with back-office operations. The need for consulting is great, because most of these efforts require some custom design. "Contributions will be made in defining the business problem, consulting on strategy, application design, user design, and actual code development," says Alex Kormushoff, vice president-marketing for the retail-distribution business unit at Sapient Corp., Cambridge, Mass. Focusing on e-business integration, IBM Global Services has released a product called Commerce Integrator that integrates order-entry front ends to the ERP back-office system. "What we found was there were a lot of customers taking orders over the Web, printing them out, and entering them into the base ERP system," says Murray Mitchell, vice president for ERP integration services at IBM Global Services. "Commerce Integrator eliminates the human step. It has proved to be a tremendous opportunity for us." Integration across all applications in general is a consulting target for IBM Global Services, which suggests that of the 5 million ERP seats in place, only about one-third are truly integrated, "so many are not reaping the benefits of an enterprise-wide solution," Mitchell says. New consulting opportunities also abound in the emerging bolt-on category of business intelligence or strategic enterprise management with systems such as SAP AG's new Business Information Warehouse. These systems are designed to help automate management operations and support decision-making similar to the way statistical process control has automated manufacturing processes. They "move users beyond the transactional world into the knowledge world," says Harry Brakeley, partner-enterprise business solutions at Andersen Consulting, Boston. Software-supported Balanced Scorecard and Economic Value Added systems provide real-time visibility to the key metrics of the organization and are beginning to show up in ERP and specialty-vendor offerings. "The role of the consultant is to help senior management rethink how they convert their strategic intent into operational reality," Brakeley says. "You want the senior management team not to only communicate what they are trying to achieve, but to look at the feedback and see that there's no disconnect with what's happening day-to-day on the ground. This is substantive stuff, and the consultant can play a very strong leadership role." As with business intelligence, many of the new bolt-ons support brand-new business processes, often unfamiliar to a company's own resources. Colgate-Palmolive Co., New York -- with 22,000 users on SAP in 40 countries -- has specific new projects in advanced supply-chain planning and optimization, account management, and business warehouse. It has turned to vendor and consulting partners for help. "A purchase order is a purchase order, an invoice is an invoice," says Colgate-Palmolive CIO Ed Toben. "When you are implementing ERP, you are automating standard transactions. However, when you're talking about optimizing operations, account management, or management information, you are creating new business processes. We are a lot closer to a blank sheet of paper with these initiatives, there's less of a road map, and it requires a different skill set in terms of design. We'll still figure out by ourselves what our 'to be' is, but the consultants and our other partners can help us figure out the process to get there." New Sources Manufacturing companies will continue to benefit from outsourcing offerings from applications maintenance, to complete business process outsourcing, to specific solutions such as CRM. The jury is still out, however, on ERP outsourcing, where the value proposition still needs work. The emphasis in applications maintenance is more inbound service for cost efficiencies. Rolled out in February, the IBM ERP Factory consists of 40 Atlanta-based analysts who consult by phone and even do code modifications. Live since April, IBM has had an online offering called e-business Accelerator to help executives understand how they can use the Web to their company's competitive advantage. The company also introduced a new Return on Web Investment tool that helps managers develop a strategic business case, establish a solid framework, and execute an ROI analysis for an e-business solution. E&Y's online consulting service, Ernie, now offers self-diagnostic functionality for supply-chain challenges, so clients can better understand their own issues before engaging the company. The most exciting new outsourcing opportunities would have a consulting company operating a client's complete supply chain or retail offering. "I'd like people to open their minds on what the definition of consulting is," says Eric Andersen, partner in charge of the global ERP practice at PricewaterhouseCoopers in Philadelphia. "Paying a lot of smart people for their services is one model. But I think you will see firms like ours move into a broader set of services, such as operating a virtual supply chain. I don't mean 100 consultants do it; I mean operating it as a separate business."

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