The Space Race

While KPMG is the first sizable consultancy to declare PSA its next big consulting practice area, Burns and company will not be alone.
Most industry observers expect all the Big Five consultancies to adopt a unified PSA practice strategy sooner rather than later. "I can't reveal any deals publicly yet," says Kazim Isfahani, analyst with the Giga Information Group in Norwalk, Conn., "but I can tell you that all the major consulting firms are actively involved in developing PSA practices." For its part, Andersen Consulting, though unwilling to designate a stand-alone practice, has made clear its plans to beef up its PSA client services.
The notion of developing a practice around PSA is something of a new twist on things, since initially consulting firms wanted the software strictly for internal use. It should come as no surprise, however, given the maturing relationships between consultancies and various PSA vendors.
Both the KPMG and Andersen initiatives revolve around specific PSA vendors. While KPMG has already teamed up with Evolve, Andersen has linked up with Novient, the same PSA vendor whose products Andersen has recently adopted as part of its own IT infrastructure.
These deals, however, are so far not monogamous. Burns says that KPMG is also partnering with Niku, another PSA vendor and Evolve competitor. "There is potential for a third one as well," says Burns. "Nothing is exclusive — these are partnerships, not marriages."
In fact, the third PSA partner for KPMG could very well be Andersen's partner, Novient, says Burns, who has hard time concealing his bullish outlook on PSA. "I expect this practice to be bigger than our SAP one at its peak — when we ran revenues of over $500 million," says Burns, who headed the firm's SAP practice from 1992 to 1999 and witnessed the rise and fall of a consulting era known for megadeals and project values in the tens of millions of dollars.

For its part, Andersen is far more cautious in its assessment of the market. Steve Hendryx, an alliance director with  Andersen, says the firm has elected not to house its PSA client offerings within a stand-alone practice. "They will be part of our eHP (electronic Human Performance) practice," says Hendryx, who estimates Andersen currenly has about 120 consultants globally within this practice.
 "It all depends on market growth," says Hendryx. "If the market takes off, then yes, we will dedicate a practice)."
Certain analysts are already clearly bullish on the fledgling market, however. "I estimate the size of the [PSA] market now to be about $270 million," says John Haggerty, analyst with AMR Research in Boston. "I think it will grow to $1.8 billion in five years."

Visitors from another world

These lofty numbers explain why ERP vendors such as PeopleSoft are moving into the PSA space. "PeopleSoft, SAP, and Oracle are all trying to get into this space," says Dave Hofferberth, analyst with the Aberdeen Group in Boston. "Of the three, PeopleSoft has the most mature offering. SAP really hasn't done much yet, and Oracle is a little behind PeopleSoft."
So far, PeopleSoft hasn't cut any PSA-specific deals with the Big Five, but John Weston, vice president of PSA strategy at PeopleSoft, says that it could easily happen. "Some of our implementation partners have already started to focus on PSA, and it would not surprise me at all to see several Big Five consultancies announce PeopleSoft PSA practices. We have, in fact, discussed this with several of them already."
Weston also says that PeopleSoft has one big advantage over other PSA rivals. "PeopleSoft already has a large consulting group in house, so we have the luxury of being able to do a lot of this PSA implementation ourselves."
The emergence of PSA practices in large consulting firms appears to be a trend, but there is one reason to treat it with some skepticism. PSA first gained traction as a tool for internal use by professional services firms. Now that these firms are looking to apply these tools outside the shop, some interesting questions arise.

"It is a little surprising to see a firm like Andersen start a PSA practice," says AMR's Haggerty. "Who will their clients be? Certainly not their competitors — I can't see Andersen doing a PSA solution for CSC, for example."
Weston at PeopleSoft agrees that this could become an issue. "If you are a consulting firm, and you have another consulting firm implement your PSA solution, the implementer is going to learn a lot about your business. There are some thorny conflict-of-interest problems here."
But at least one consulting giant is already planning to do just this. Deloitte & Touche hasn't formally announced a PSA practice, but Pat Gantos, senior manager there, says that the company is moving in that direction. "PSA did start out as a tool to improve internal functions," says Gantos. "But now we are looking to help IT organizations and some smaller consulting organizations with PSA solutions."
In particular, Gantos thinks that consulting firms with a strong focus on Internet development are good potential clients. "We are currently looking at several PSA products. Most likely, we will pick one or two of the leading PSA applications for packaging into our set of Solution Prints." These Solution Prints, according to Gantos, would be "PSA in a box" systems for various vertical industries, such as financial services, and smaller, Internet consulting service companies.

Back to Earth

At KPMG, Chuck Burns thinks that the PSA market is big enough to eliminate most conflict-of-interest concerns. "The analysts who track the professional services industry estimate that it is a three-trillion-plus market," says Burns. "We will be targeting clients in architectural, engineering, and construction services — and, yes, even some consulting services, but obviously not our direct competitors."
Burns also thinks that accounting, tax, and audit service companies will make good PSA clients, which raises an obvious question: Now that KPMG Consulting is officially separate from KPMG Tax and Audit, could the latter become a PSA client of the former?
"They already are," says Burns. "We have agreed to implement a PSA solution for them." And, as if to drive home the point that no vendor partnership is exclusive, Burns says that KPMG Consulting, even with the newly announced Evolve partnership, has not decided which PSA product will be best for KPMG Tax and Audit. "We are still in the evaluation phase," says Burns.
At PricewaterhouseCoopers, the attitude is one of active interest, and Richard Stanger, leader of PwC's human resources consulting practice, is clearly feeling some of the heat around PSA.
"We haven't put a stake in the ground yet," says Stanger. "We don't yet have any preferred PSA vendor partners. But we are watching this space very carefully, and if we conclude that the market has potential, we will act quickly. Watch us over the next few months."
For those who remember the ERP craze, the pattern is clear. "It is very consistent," says IDC's Byron. "The various PSA vendors have different strengths, and so you will probably see consulting practices developing around a few of the leading ones in each area."
One PSA vendor that gets high marks from analysts but has kept a fairly low profile as far as partnering with Big Five consultancies go is ChangePoint in Toronto. Chuck Tatham, vice president of marketing there, agrees that PSA consulting practices are coming. "We are certainly not ignoring the Big Five here at ChangePoint," says Tatham. "Every PSA vendor should have at least one."

Sidebar: PowerPoints:

• Not unlike how the Big Five consultancies built practices around enterprise resource planning applications in the 1990s, certain consultancies are now looking to sell their clients services around professional services automation applications.

• KPMG and Andersen are among the first of the Big Five to begin developing their "client-facing" PSA services.

• Certain analysts are clearly bullish on the fledgling PSA product market; one projection predicts it will grow to $1.8 billion in five years.