TWENTY FIRST CENTURY CONSULTING:
VIRTUAL NETWORK FIRMS
A WHITE PAPER BY:
KAREN HAWKS
EXECUTIVE CONSULTANT
NAVESINK LOGISTICS INC.
© Copyright Navesink Logistics, Inc. 2003.

All rights reserved. No part of this documentation may be reproduced or transmitted in any form or by any means without the written permission of Navesink Logistics, Inc.

Virtual Network Consulting (VNC)

There is currently a revolution occurring within the consulting industry. It’s called Virtual Network Consulting, and it is the wave of the future for the consulting industry at large. These firms are the result of several business and economic downturns over the past decade. Not to be confused, Virtual Network Firms are not “old Big 5”, nor are they the new niche “boutique firms”.

There have long been “niche” consulting firms specializing in engineering or manufacturing and other unique industries. These will continue to exist. But it was the original accounting firms that dominated the consulting realm for many years, such as Anderson, Coopers & Lybrand, Ernst & Young, Pete Marwick and Price Waterhouse, that became the natural link between businesses they already audited for accounting purposes and other needs for analysis. Hence the Big 5 all created consulting arms of their practices; it was a natural progression and a convenience to clients. But it was a symbiotic relationship just waiting to be exploited by too many clients. In exchange for lucrative contracts for the consulting arm, the audit practice too often overlooked serious accounting violations committed by the same client. Many companies ultimately collapsed evaporating shareholder equity. (see “The Economy” in this article).

The technology boom brought about an even greater need for consulting. Businesses of all types were analyzing growth potential and how best to utilize all the new technology to competitive advantage. Along with rapid growth was Y2K and the need to quickly deploy updated systems technology. As a result of this dramatic consulting need merger mania ensued and the economy began to see the first shifts in the Big 5 consulting firms. Coopers & Lybrand merged with Price Waterhouse to become PWC (PriceWaterhouseCoopers); Pete Marwick became KPMG, and Cap Gemini, heretofore a specialized firm, merged with Ernst and Young to form Cap Gemini Ernst & Young (CGE&Y). Furthermore, the big consulting firms were hampered by adhering to SEC (security and exchange commission), regulations since they were arms of the accounting practices.

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The Technology Boom

With the explosion of a global economy, enterprise software became the mantra for businesses everywhere. A whole host of new systems were emerging to further nurture the consulting industry. ERP (Enterprise Resource Planning), WMS (warehouse management systems), RF (radio frequency), TMS (transportation management systems), and CRM (customer relationship management) software were no longer obscure terms within business markets of all types. These systems were not only necessary for competition and survival, but also the knowledge capital for implementation; resources, analysis and processes lied mainly within the big consulting firms.

So the consulting firms embarked on a whole new level of wealth which encompassed Y2K, legacy system replacements, and an avalanche of new phrases and technologies, such as ‘supply chain management’ and ‘collaborative forecasting’. Not only were legacy systems being replaced, the Internet was allowing a much broader base for business.

The technologies experienced their next big strike with the dot com “gold rush”. As the Internet seemed to be the wave of the future, IPO’s (initial public offerings) became daily practice. This was also true within the consulting industry. The Big 5 realized the constraints and pressure of SEC (Securities and Exchange Commission) regulations, as well as the money to be made by spinning off consulting and going public. Thus KPMG spun off its consulting practice, sold most of it to Cisco Systems and became Bearing Point. Andersen consulting broke away and eventually became Accenture (after long battles of financials and name ownership), and then went public. Likewise after multiple attempts to spin off their consulting, PriceWaterhouseCoopers finally merged with IBM and became the new consulting arm for IBM.

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The Internet Gold Rush

The Internet brought vendor and customer, supplier and customer, Business to Business (B2B) and Business to Consumer (B2C) a vast broad way of doing business in the 21st century. This medium allowed for customers and vendors to immediately view orders, shipments in transit, and a host of other information. In addition, the Internet allowed companies, which were previously only “brick and mortar” to become “e-commerce” driven and allow opportunities for a new market segment. Mom and Pop businesses suddenly could play in market spaces of larger companies just by virtue of Internet access.

However, along with these new found opportunities came the misguidance and misdirection of what could really be achieved. In a matter of just a few short years, initial public offering (IPO) craziness had abounded and consultants from all levels of the Big 5 firms had jumped ship to become the new wizards of Internet companies. Again causing a restructuring within the consulting industry.

And almost as quickly as the “gold rush” e-commerce bandwagon had begun, it was gone. Stocks plummeted, would be executives out of work, high tech skilled educated persons with nothing but time now on their hands. This in turn began to prompt further investigations as to stock misconduct.

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The Economy

Just when the economy seemed gloomy due to the end of the “gold rush” an unforeseeable event of tragic proportion was about to occur. 911 happened and families, businesses and the economy would take even a further than anticipated nose dive into despair. It could not have been predicted as to the far reaching impact the tragic event would have on American values let alone the economy in general. Now there had been back to back heavy blows to the stock market, the job market and the economy as a whole.

On the heels of all this tragedy and bleakness came the unbelievable scandals within the telecom industry. Giants such as Sprint and MCI were branded for accounting violations and inappropriate use of funds. But of course the biggest giant to fall was Enron. Never before had the practices of its greedy insiders been seen in the marketplace before. With the fall of Enron the accounting firm of Andersen was also obliterated.

These events sparked yet another round of layoffs, job and economic uncertainty, and grave mistrust throughout the entire business sector. Unemployment was at the highest levels in years with the majority of the unemployed being in the white-collar sector made up of technical professionals, senior personnel of all types and consultants in droves.

Since the giant consulting firms were heavily tied to technology, telecom industries, and the like, it was only natural that thousands of consulting jobs were eliminated. With the job market flooded with technology workers, white collar educated workers and all types of consultants, something had to give.

First was the emergence of the “Boutique” consulting firms. These firms are typically made up of displaced technical and/or consulting persons specializing in a specific niche, whether that niche is industry specific such as forecasting and planning, or whether the knowledge is software specific such as SAP or PeopleSoft. However, boutique firms are often hard to find and once on a particular project engagement do not usually have the staff to take on additional work.

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Virtual Network Consulting (VNC)

In the wake of all the technology, Internet and economic emergencies there appears a little silver lining. Out of all downturns something of enormous value usually emerges. This is after all the American way and the way of the undying entrepreneurial spirit.

If the professionals in consulting, technology, and technology consulting are out of work without hope for industry absorption or reinstatement to a now defunct Big 5, what were they to do? Alas, the emergence of the Virtual Network Consulting firm, which was born out of a necessity to work and stay productive members of society.

Many believe that Virtual Network Consulting is the ultimate way of the future of consulting and will not be replaced. How do these networks operate? What are the advantages to hiring a Virtual Network firm?

There are numerous benefits to the Virtual Network Consulting firm for both individuals who choose to work in this manner as well as clients gaining expertise at lower costs, i.e. the best bang for their buck. An examination of these benefits from this perspective is in order:

Individual Consultant Benefits:

1. Work within trained or specific skill sets

2. Work as subcontractors

3. Work on projects of all sizes

4. Work in geographic areas conducive to their lifestyle

5. Work to fit work-life balance preferences

Client Benefits:

1. Obtaining a seasoned professional staff vs. recent graduates

2. Depth of industry and technology experience vs. textbook methodology

3. Contacts within vendor groups, professional organizations and numerous industry contacts vs. on the job training (OJT).

However, the number one benefit to Virtual Network Consulting is the COST SAVINGS over traditional consulting firms’ fees. Virtual Network Consulting firms have no buildings, infrastructure or overhead capital expenses. These firms have no permanent full time employees, and do not pay traditional type benefits. Therefore the client receives a deeply discounted rate structure. In addition to fees, the client will pay actual expenses incurred, but not an arbitrary blended rate or a percentage assumption built in to the actual fee structure. By all accounts, client, consultant and virtual network firm, it is truly a winning proposition.

How does a Virtual Network Consulting firm operate? Through tightly weaved personal and professional networks of industry, technology and consultants. Some of these highly skilled persons own their own firms; some partnering is established with boutique firms or very specialized technology firms. The bottom line is there are literally thousands of Virtual Network consultants ready to assist a business need within a matter of days.

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Conclusion

The revolution known as Virtual Network Consulting is upon us and here to stay. The value proposition is flexibility for the workforce, deeply discounted rate structures for the client, while acquiring years of experience and breadth of highly educated professional personnel.

To inquire how a Virtual Network Consulting firm may be obtained or to receive further information on Virtual Network Consulting contact:

Thomas McKenna tel: 732-671-5746 or Karen Hawks tel: 214-405-6100
Navesink Logistics, Inc.
32 Marcshire Dr. Middletown, NJ 07748-3105