Sunday, 6 March 2011

A new kind of Capgemini Consulting, errrrr attrition

I was alerted on Twitter to this thoughtless, clumsy, mindless piece by Peter Sayer on PCWorld:

Capgemini Consulting, a specialist in strategy and transformation, is about to transform its own strategy for the second time in two years. To cope with the change, the company plans to recruit up to 1,000 staff this year, predominantly younger workers with social media and "digital transformation" skills, although it expects other staff to leave

Its title? Capgemini Consulting Readies 'a New Kind of Consulting'

What Peter doesn't know, probably because usually he covers open source software, European intellectual property legislation and general technology breaking news for IDG News Service, is that Consulting Services actually is a very profitable discipline for Capgemini. What he also doesn't know, and maybe can't know, is that Consulting is no longer the direction Capgemini wants to travel.

A small glance at Capgemini's annual report site would have helped: here you can find all the annual and financial reports dating back years

Here are the figures for Capgemini Consulting Services from 2005 to 2009:

The second column shows headcount percentage. Not wanting this post to become a figure fetishist one again, I decided to just show the percentage - you can do the math. In 2005, CS generates 13% of total revenue with only 8.4% of total employees - but only turns that into 4.5% operating profit.
In 2006, that got turned around: with 7.4% of employees, CS generated more than that in operating profit: still, it generated even more revenue than that so squandered some

2007, 2008, 2009: those were the lucky years for Consulting Services. I mean if you generate almost three times the amount of profit that you relatively should (11.4% operating margin in 2009, with 4.3% of all employees), then are you good or God? God, I'd say, or at least close enough

The secret to all this? Trimming the old Ernst & Young people, pruning the Consulting bush down to a good size. No more ridiculously high rates and costs, but just high to way high ones, with moderate costs. Of the old people bought in 2001 when then Cap Gemini bought Ernst & Young IT Consulting, almost no one is left. Yet, with the narrowing of the ranks over the years (shrinking 20% in 4 years, while total Capgemini headcount increased by 50%) the profitability increased like crazy

Now I don't have the figures on 2010, but I suggestimate headcount down to 3,600 being 3.4% of total, revenue will be like 5.5% and operating margin in between 10% and 11%.
So why kill this goose with the golden eggs? There's plenty of other killing to do!?

According to the flimsy rewording by Peter of Pierre-Yves Cross, it's innovation, understanding customers, and risk management that customers now require. The solution?
Cros expects to recruit 800 to 1,000 consultants this year, mostly younger candidates already familiar with the newer technologies
Mostly younger candidates, so young they'll probably drag down salary, because the customer wants innovation, to be understood, and risk management - nothing adds up here.
I wonder: would Capgemini want to get rid of their Consulting Services consultants because Capgemini aims for big Technology Games, Outsourcing, Offshoring - and CS doesn't fit in anymore?
Highly successful, these consultants can't possibly be fired. Most of them in France, the rest in the Netherlands, firing them would take years and cost tons (sic) of millions

So, the best way to crash a party is by throwing in a few party crashers - young ones always scare old ones. After a while, the young will get disappointed and leave, following the old ones, and at the end of 2011 there will be left a little over 1,500 Consulting Services consultants, to be sold to some other company probably

Am I paranoid? Maybe, but this is my explanation for changing this perfect winning team. What's yours?

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