Consultants have seized upon their Next Big Idea: You. Having seen clients pull back on discretionary spending, consulting firms now regard the finance department as a still-warm, if not hot, target for their services, thanks to the slimming down most departments have endured. IBM, for example, plans to approach CFOs “with some pretty bold claims” about how much and how fast its new business-analytics unit can cut costs in areas like financial reporting, says Fred Balboni, head of the unit. Tata Consultancy Services is offering finance chiefs a two- to three-week “diagnosis period” to help assess where the quick fixes lie, and says many projects can pay for themselves within two quarters. Still others are benefiting from clients’ fear, offering reassurance to CFOs who must supervise activities outside their expertise, such as international expansion.
Services specific to CFOs are “the bright spots” for firms like Accenture, Ernst & Young, and many smaller ones, says Derek Smith, director of research for Kennedy Consulting and Advisory, a market-research provider. That’s relative, to be sure: Kennedy projects just 2% growth in finance-management consulting in 2009, down from 16% in 2008. Still, in some areas, the growth can be called dramatic. For example, some 42% of executives who began an outsourcing relationship this year report using an adviser to help structure it, according to a recent Black Book of Outsourcing report, up from just 16% last year.
Even in high-demand areas, however, consulting is still a buyer’s market. In IT consulting, for example, bill rates are down anywhere from 5% to 15%, says James Friedman, an analyst with Susquehanna International Group who follows Accenture and other IT consulting firms. CFOs also have “a fair amount of leverage” in negotiating with firms that work on a contingency-fee basis, notes Steve Crane, CFO of ModusLink Global Solutions. In general, clients are pressing for “the ROI to be a lot more visible and a lot shorter,” says Mark Goodburn, vice chair for KPMG’s advisory services.
Finance chiefs thus have an opportunity to get more bang than usual for the consulting buck, but only if they structure projects to make consultants’ time as efficient as possible. If an engagement drags on without a clear sense of direction or tangible achievements, lower hourly rates can still add up — and perhaps culminate in a potentially far greater cost: outright failure. CFOs, in short, need to select the best consultant for the job, crisply define the tasks to be accomplished, break them into independent phases so that spending can be turned off at any point, and lean on internal staff to both monitor and streamline the process.
To Buy or Not to Buy
Buying smart begins with deciding whether you truly need to hire a consultant. CFO Holly Koeppel, for one, has progressively challenged her staff at American Electric Power (AEP) to take on roles she once used consultants for, such as leading strategic-planning exercises and managing budget overhauls. That has saved untold millions of dollars, she says, and such processes “have actually gone more smoothly, because people are more engaged” with an internal expert at the helm rather than an outside consultant.