The Hardest Job in Consulting

CM: Is the thought that these former ATK consultants may help better educate other parts of EDS as to what value the ATK unit brings to engagements?
Ostermann: I think we've seen this already in the first few months. The first person to be moved over was in our A.T. Kearney technology practice. … One guy can't make it happen, so we agreed to transfer some 5 to 10 to 15 senior officers, and these are very good people. One of them was Bram Bluestein, who was heading ATK's industry practices. Why? Well, because we came to the conclusion that solutions consulting also needs industry practices. And they can't get there that fast unless they have someone of the caliber of Bram, whom I'd refer to as second-in-command after me. He can build that industry capability faster than anyone else can.

CM: IBM tells us that their marriage with PwC Consulting will not face the same cultural challenges EDS and ATK faced, because their organizations more closely resemble each other. Do you share this point of view?
Ostermann: I would buy into the notion that PwC and IBM Global today are a little closer than A.T. Kearney and the IT outsourcing business of EDS were seven years ago. No question. But that is only one element of the combination. If you want to be in the consulting business, you have to have a partnership mentality. You don't necessarily need to be a partnership anymore, but if you don't have a partnership mentality, you won't be successful.
And this is simply because if you want to be the adviser of a CEO for a large industrial corporation or financial institution, you don't get there by being an employee of a large corporation, who follows the instructions of one.
Every day I am challenged by Dick Brown calling me up and saying he wants me to do this, that, and the other thing. I go out to my partners and tell them this is what Dick wants. They say, "No way." Then I mitigate and do what is the right thing for a management consulting firm that is owned by a large industrial corporation. IBM and PwC have no idea what they're going to get themselves into on that aspect. Now, having said that … Kearney, which is one of the Old School management consulting firms, is probably more challenging in this respect than a Big Five partnership, but PwC was a partnership and partners want to come to their own conclusions and use their judgment to determine what is right.

CM: Part of partnership culture is mentoring. Will mentoring become a larger part of the EDS culture?
Ostermann: With some of the Kearney partners moving over to EDS Solutions Consulting, we will introduce a mentoring program into it — which currently they do not have and need to have. It's clear the mentoring element could not come from the IT outsourcing part of EDS. And most all the people that we are hiring now for the business — senior guys from Accenture and PwC — they come from a partnership and mentor culture.

CM: How has ATK been successful in introducing innovation into EDS services offerings?
Ostermann: We are introducing this innovation drive into the major pursuits of EDS. So where EDS would have normally taken their pursuit and responded to the RFP, we now come in and introduce ways to get to the client objective better or possibly change what they have put into the RFP. That is what we mean when we say we are introducing innovation service offerings into the structuring of normal EDS deals.

CM: Why should we expect the marriage of EDS and ATK to finally produce the dividends management envisioned?
Ostermann: I would say, if anything, that the change in Kearney's top leadership two years ago helped us to embark onto a new road. When I first became CEO we made some pretty strong signs, I moved down here to Dallas. I moved our corporate headquarters to Dallas. I'm sitting probably three days out of five in some joint EDS meeting, which wasn't the case before. We've made a lot of effort to get to that stage.
The much bigger question is how you insert Kearney successfully into an IT outsourcing deal or BPO deal. We can't violate Kearney's role as a trusted adviser to corporate CEOs; if you do that, you're out of business. I needed to figure out how to most effectively do that, and we decided we needed a proactive approach. We tried to insert ourselves into the 12-month-long deals that are running in the outsourcing business, and realized that if we insert ourselves in the beginning of the deal, our financial model doesn't allow us to pursue something for 12 months and not get any revenue.
At the same time, if we wait and insert ourselves in last months of deal, we learned that the deal is often already structured. So, we learned that you insert at the beginning, withdraw, and come back. It took us a while.

CM: So what's the payoff ?
Ostermann: I have $100 million of revenue to show for it. The percentage of deals we've been involved in has been steadily growing. The other metric is how much of Kearney revenue comes out of major pursuit deals together with EDS. I'm committed to increase that number to up to 50% of my entire revenue base. Ideally, it won't be 50% of $1.2 billion, but 50% of $3 billion, because that opens up opportunities that McKinsey does not have.

CM: You arrived as the economy headed downward.
Ostermann: Yes. When I arrived here, I had all these glorious ideas of what I would do as CEO, and in the first months I got the operating results in my hands and I changed all those plans and started to do the right thing that a business leader would do when the business is under pressure — we restructured in the first quarter of 2001. McKinsey just did it recently in 2002. Now, I'm very happy with how our business has developed in the U.S., and we've been able to increase profitably in the U.S. by 50 percent. We are not in the position to grow as much as I want, but we are growing. ATK was at 50 percent for financial year 2002 over the financial year 2001.
The rest of the industry in early '01 was in disbelief over what was happening and didn't respond. I did not have that luxury because I reported to Dick Brown and our results were reported to Wall Street. In the U.S., you can't be a CEO and not react to market conditions. We did it fast and quick, turned around our business, put the right capacity in place, and put leaders in place to focus the market opportunities. So I'm very positive about our turnaround in the U.S. We didn't lay off a single person in the U.S this last year, and we actually hired some people.