The consulting division – which generates almost $1 billion, or about 40 per cent of KPMG’s estimated $2.5 billion revenue – will shift to doing more work installing new computer systems and helping clients adapt their operations to upgraded software.
This type of work involves the firm’s experts installing and configuring software systems from Microsoft, Salesforce, SAP, ServiceNow and Oracle, along with “change management” consultants helping clients adapt their processes to the new ways of working. Put another way, this is the classic type of system implementation work that turned Accenture into a global professional services powerhouse.
Tech consulting to rapidly grow
Mr Howes said the changes included “looking at org design, understanding working behaviours … [and] organisational psychology in terms of the way in which you actually get different bits of quite a large sprawling company to talk to each other”.
He wouldn’t comment directly on competitors, but the shift is an endorsement of the business model of consulting giant Accenture, which has long split its powerhouse business between tech-related consulting and outsourcing and had a global approach to delivering its services.
Another big four consulting firm, Deloitte, has also emphasised its technology-related consulting division over generalist advisory work.
The restructure presents a major challenge for Mr Howes, a former Australian Workers Union official who has effectively become the second most powerful partner at KPMG after chief executive Andrew Yates.
He said the aim was to entirely change the way KPMG’s local consulting generates income. This would mean having about 60 per cent of the firm’s consulting revenue come from tech-related consulting, up from 40 per cent; about 30 per cent to come from general “assessment and advice” services, down from 60 per cent; and the remaining 10 per cent to come from clients outsourcing work to the firm on an ongoing basis.
The firm forecasts that tech consulting business and managed services business will be fast-growing in the years to come, while the general advice business will be flat at best.
COVID-19, remediation booms end
Driving the change has been the end of two “booms” that have fuelled growth in the consulting sector.
“During the past three to four years, a lot of consulting sector growth has come off the back of what you’d call a COVID boom, as organisations needed that extra capacity and that rapid digital transformation during the early stages of the pandemic. It’s also come off a remediation boom that, in Australia, was triggered principally off the back of the Hayne royal commission.”
The major consulting firms have also been hit by a pull-back in demand by the telco, consumer products and retailing sectors – in addition to the financial services sector – and lower demand from the public sector, caused by the furore around the PwC tax leaks scandal and as the Labor government looks to rebuild skills within the federal bureaucracy.
This has led to consultants heavily promoting their cost-cutting skills to clients. Partners at the big four consulting firms have also been told to expect their profit shares to be down this financial year, by double-digit percentage points in many cases.
Mr Howes said the firm had recently won two major projects – one with a global financial services company and the other with a global hospitality company – that exemplified the type of multi-year consulting work that he wants the firm carrying out.
In both cases, KPMG’s advisers are being called in to install a significant new software system and help the companies switch over effectively to using those systems.