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April 14, 2004

Cap Gemini aims for arrogance-free consultancy

Clients are fed up with "arrogant" consulting firms, admits Paul Hermelin, the chief executive at IT services provider Cap Gemini SA.

By CBR Staff Writer

Hermelin, who was unveiling the re-branding of the Paris-based company as Capgemini, said: There is a real fatigue about the arrogance of consulting firms. We told clients to beware of Y2K, and they are still waiting for something to happen. We told them not to miss the Internet wave and they spent a lot of money. There is a need for a more modest approach. Consultancies need to be more credible.

Hermelin cited Cap Gemini’s capture of a $5.2bn outsourcing contract with the UK Inland Revenue last year, against competition from incumbent suppliers Accenture Ltd and EDS Corp, as proof that clients are willing to ditch big-name vendors if they are unhappy with their service.

Pierre-Yves Cros, the company’s strategy director, said: We did not win that contract because we are the biggest outsourcer or because we have the biggest data center in Europe – we aren’t and we don’t.

Cros said that there seems to be little or no correlation between the amount of revenue made by services vendors and the satisfaction of their clients. A recent survey by Forrester Group of 300 client companies found that 15% were unhappy with their current services supplier, with one of the largest services vendors in the world achieving a 30% dissatisfaction rating.

Cap got a 92% satisfaction rating in the survey, but admits it has to make changes to its way of doing business.

Joe Thomas, who has been given responsibility for implementing a new code of working guidelines at the company to encourage a more collaborative approach of working with clients, said: We have not done a good enough job in asking the client what are their key areas of priority. Clients get frustrated when consultants think that they do not have anything to bring to the table, when the consultancy should be looking to leverage what the client has already invested in.

This message of collaboration is being pushed by Cap as part of its latest 60m euros ($71.6m) re-branding which sees it drop the Ernst & Young name, four years after its 11bn euro ($13.1bn) takeover of Ernst & Young Consulting. The company will now be known as Capgemini, having agreed with accounting giant Ernst & Young LLC in 2000 that it would stop using the E&Y brand after a four-year period.

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Hermelin said that the company had been under pressure from its US operation to drop the Ernst & Young name due to the implementation of the Sarbanes-Oxley regulations that forbid accounting firms from selling consulting services to their clients. He said: Using the Ernst & Young name caused confusion, particularly in the US. Ernst & Young had been Coca Cola’s auditor for 100 years, and they told us that they would not buy consulting services from us until we dropped the Ernst & Young name – even though Ernst & Young only owns 2% of our equity.

The 60m euros ($71.6m) figure seems like a lot of money to cover the removal of a single space and two words from the Cap moniker. Hermelin said that after toying with names such as ‘Vivendo’, the company decided to stick with a name that clients had got to know over the last twenty years through the Gemini Consulting operation. Cap will also advertise on television for the first time as part of the initiative.

Consulting firms have a recent history of comical re-branding programs. PwC Consulting spent in excess of $100m renaming itself ‘Monday’ in 2002, just months before the whole move was rendered obsolete when IBM acquired the company. Deloitte Consulting has now shelved plans from July 2002 to rename itself ‘Braxton Associates’ and continues to use the Deloitte name.

Hermelin said that the re-branding is timed to better position the company for growth as parts of the IT services market show signs of recovery. He said: Our staff utilization rate is OK but our operating profit margin [2.7% in full-year 2003] is not what it should be. I would not say that the overall market is getting better, but there is upward movement in price points in the US for the first time since 1999, particularly in consulting. Most of this growth has been driven by defense and federal spending, but telcos have also started to spend again. In Europe, prices are no longer going down and demand is stabilizing.

This article is based on material originally published by ComputerWire

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