9 November 2006 feaco 1 European Trends in Management Consulting Antoine Beuve-Méry, IBM- Belgium, Chairman of Feaco Feaco annual conference Budapest, 8-10 November 2006

9 November 2006 feaco 2 Market trends: The Background  Significant impact of globalization and of ever faster innovation  Innovation is everywhere (traditional R&D BUT ALSO in new business models)  Ever increasing role of technology  high degree of adaptability is a MUST  Globalization impacts our clients and our industry  Best shoring is becoming standard practice for consultants AND for their clients  Economies grow at different paces  Western Europe  Central Europe  China India, Far East  Consulting industry is changing fast but has a bright future  Support / assistance to innovation & change remains in high demand  Strong demand as well in outsourcing an best shoring  To actually take over some non core process’  IT, Finance, HR, cal centers, other support process’…  To support change associated to best shoring

9 November 2006 feaco 3 Feaco survey Market growth

9 November 2006 feaco 4 Feaco survey MC market size by country/region

9 November 2006 feaco 5 Feaco survey What hides behind these charts ?  14% average growth rate in 2005, partially due to a redefinition of the scope of the MC market  Wide disparity in growth between countries  Growth of MC EU and (most) national markets > growth GDP, but there is a wide disparity in the part of national GDP that MC represents  An a-typical market: few very large players, very many very small players; which keeps concentrating  National markets, and the ways in which they are developing, are unique

9 November 2006 feaco 6 FEACO Survey Common trends  Main drivers: economic growth and stability, the increased export to Eastern European countries, accession to the EU,  Driving sectors: the public sector and the Financial Services sector  Consulting services are reaching maturity in most countries.  Increased loyalty from clients towards consultants. Experience is a key element for choosing a consultancy. Clients are clearer about their requirements and interested in measurable results.  Short-term projects are still dominating most markets, but there is a shift towards more long- term projects.  Fee rates are still under pressure.  quality is essential to be able to compete in the marketplace. Ethics and professionalism also play an important role in the selection of a consultant.  trend towards investment in new projects, especially in the countries that reported good market growth..  The EU expansion was generally judged as having a positive effect on the market.

9 November 2006 feaco 7 MC Industry trends: Other considerations  A word of caution: The crystal ball is still a myth…  Looking forward:  Expect continuation of 2005 trend for 2006 & 2007  Top markets remaining UK, Germany France, Italy, and Central Europe  Consulting Industry is on slow but clear consolidation trend  More acute in the IT consulting industry  Appearance of the Indian players willing to increase foot print in Europe  The hot topics  Growth vs cost reduction  R&D & Customer interaction vs Operations (supply chain, procurement etc)  Strategy (IT & global growth), Perf. Mgt & Business intelligence, SOA enabling easier and cheaper data exchange internally and externally (driving major changes in process and innovation)

9 November 2006 feaco 8 Market trends: Other considerations  BPO still a very hot topic (cf process innovation even as part of SSC set-up)  Important source of revenue short and mid term  Competition between “Outsourcers” and Consultants specialized in Outsourcing advisory  Latter assist in:  preparation of deals / selection of outsourcers (to avoid conflicts of interest with the “big players”)  PMO support / QA / X-cultural support  Outsourcers claim they can do it all  Change Mgt and organizational support for  the locally remaining operations  In the X-cultural working relationships  Potential important role in support of / cooperation with the Indian based big players  Ever existing debate / competition between BPO transformational outsourcing VS Transform and outsource  Potential issue on the longer term? Not really  Limited as not every corporation is culturally ready for outsourcing (evolution process over time)  Consulting lives out of change … There will be a next wave

9 November 2006 feaco 9 Market trends: Other considerations  Best Shoring is here to stay  Reserves of top educated brains in India and China are limitless  Not limited to IT, e.g. presently leveraged  By the strategic consulting firms for their desktop research  For multilingual and translation purposes  For development and delivery of e-learning  Big Indian players are more and more present and aggressive  Develop higher value added commercial proposition  Are hardly visible as rarely part of local associations  The reborn of the big 4 consulting practices, BAS  M&A, Business planning & Perf. Mgt, FOI, BPR, Risk management…  Growing faster than the rest of consulting,  Business anchored on broad financial skills,  Remaining distant from Business model transformation involving IT except for PMO & Change Mgt support – Public Sector is a potential exception  Other Key players are  Local MC firms potentially members of X-borders networks  “Value added system integrators” focusing on local process improvements, not on Business model innovations

9 November 2006 feaco 10 Market trends: Other considerations  Fee discounting still present but becoming less of an issue  Exist overcapacity in some segments  Best Shoring impact on gross numbers, but delivering higher profitability  Consulting “come back” as a good lever to facilitate & accelerate change  Engagement size  Ever present need to get support