Cost-cutting advisers the bright spot in professional services
Consultants who specialise in helping clients reduce costs are in high demand amid the uncertain economic and geopolitical environment, a bright spot for an otherwise slow advisory market.
Advisers – from strategy firm Boston Consulting Group, big four firms KPMG and PwC and consultant marketplace Expert360 – are increasingly being asked to carry out cost-cutting programs that range from optimising the use of existing assets, upskilling and reducing staff numbers, to digitisation and automation.
Boston Consulting Group’s Monika Saunders says interest in cost reduction advice has been a consistent theme in her work as clients seek to make sure they are operating as efficiently as possible. Louis Trerise
This emphasis on operational efficiency was on display on Tuesday when Telstra announced it would cut 2800 jobs, or about 10 per cent of its staff. It follows Crown cutting 1000 jobs at the end of April and the major consulting firms cutting hundreds from their ranks this year.
Another sign of growth in the area is the move by Accenture to buy renowned “cost-out” operational consultancy Partners in Performance. The deal, revealed in The Australian Financial Review on Tuesday, is expected to be finalised next month.
Boston Consulting Group’s Monika Saunders, an expert in “cost-out” consulting, said interest in cost reduction advice had been a consistent theme in her work as clients seek to make sure they are operating as efficiently as possible.
So that’s all around optimising how you maintain your equipment, increasing the throughput that you get, getting more out of your assets that you have,” Ms Saunders said.
It is also around “really looking at your support functions – so your finance, HR, external affairs, [the] legal teams et cetera ... and understanding ‘am I getting the maximum out of this?’ And ‘are they supporting my business in the best possible way?’.
“It’s almost like getting the licence to grow. You need to show that you can manage your money well [to] your shareholders so that they give you the licence to then invest elsewhere.”
Ms Saunders, who has worked at the strategy consulting firm for 15 years and also focuses on advising mining, agricultural and manufacturing companies, was promoted to the equity-owning position of managing director and partner in the firm’s Melbourne office a fortnight ago.
‘Digitisation, optimisation’
It isn’t just BCG. Bridget Loudon, the CEO of consultant marketplace Expert360, said consultants with technology-based optimisation skills, which help trim costs, were in high demand.
“A significant and growing portion of the work that Expert360 and our workforce is working on right now is large programs around automation, digitisation and optimisation,” Ms Loudon said. “This is in contrast to previous programs around growth, innovation and expansion.”
The fast-growing platform is now being used by more than half of the ASX 200 to hire and manage consultants.
Expert360 CEO Bridget Loudon says demand for optimisation experts has grown.
It is a similar outlook at big four firms KPMG and PwC. KPMG’s Karen Parkes, a partner in the big four firm’s customer and operations consulting service, agreed that client demand for digitisation was increasing.
“Our clients are experiencing challenging times, with relentless cost pressures, crowded competition and increasing customer expectations ... many of our industrial clients are shifting their business model to become more sustainable by digitising their services and operational processes,” Ms Parkes said.
PwC’s national mining leader, Marc Upcroft, said the push to reduce emissions was forcing miners to reassess their ongoing costs.
“We are asking a lot from our mining companies on decarbonisation – both in transforming their operations to reduce emissions and to invest in growth projects for the minerals that the world needs to decarbonise,” Mr Upcroft said.
“This logically puts pressure on costs across the business, which miners need to respond to, for example through technology, supply chain efficiencies and deferring non-essential capex.”
Political turmoil
The demand for all the different flavours of “cost-out” advice has held up even amid a downturn in the overall advisory market as public and private sector organisations cut back on calling in consultants.
BCG’s Ms Saunders said that for her clients, the turmoil included political issues such as November’s US presidential election through to the war in Ukraine and continuing tensions in the Middle East; economic issues such as higher interest rates; and environmental issues such as the effect of new taxes and levies around decarbonisation that are being put in place by governments around the world.
Originally from Germany, she joined the firm in 2009, after completing a Master’s in Finance from the University of Cambridge. It was the year after the global financial crisis had hit the world economy and “not the best year to start” her professional career. Like now, the focus then was on cost-out.
“I had quite a few friends coming out of [the master’s course] that went into investment banking, including to Lehman Brothers, which then collapsed just as they were about to start. So [there] was a lot of turmoil,” she said.
She chose BCG because it offered her an opportunity to “pressure-test myself a bit more, [to get] into a high-intensity job, see the world [and] work on the most important problems ... I got the opportunity to work on a different series of problems that companies were facing at the time, a lot of it around cost pressure, a lot of it around trying to be leaner and preparing for the world to come.
“[I] worked on the topics that you dream of working on … for me, the focus was probably more on cost-[reduction] than on growth at the time.”
‘Excitement, variety’
Ms Saunders moved to Australia in 2015 after spending time at the University of NSW as a visiting student while she was pursuing a Doctor of Philosophy at the Luiss Guido Carli University in Italy.
“I did a PhD in business model innovation and it probably was a bit of a test to say, ‘do I actually want to go into academia or do I want to go back into industry?’,” she said. “I think I realised for myself that while I enjoy [studying], I think I prefer working more ‘hands on’ on tangible problems, rather than one problem very, very deep.”
She is now one of the 51 managing directors and partners and roughly 450 consultants at BCG Australia and New Zealand.
Asked why she had stayed at the firm for all these years, she was quick to respond: “[To] be honest, I like the excitement of the variety of projects that I get to work on. I like the people we work with. And I think it’s very hard to get that same calibre of people, consistently, elsewhere. And so ... there’s just never been a better option.”
She also likes the types of clients she encounters in her specialist area, a sector “that might not be seen as the sexiest around”.
“I personally, actually, really like the clients I get to work with because [they are] typically down to earth, they are often very passionate about their job.”
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Edmund Tadros leads our coverage of the professional services sector. He is based in our Sydney newsroom. Connect with Edmund on Twitter. Email Edmund at edmundtadros@afr.com.