Standard & Poor's credit downgrade and the subsequent Wall Street gyrations notwithstanding, many of the largest US-based consulting firms are growing well.
Big Blue's Backlog Bounce
For example, IBM reported that its global services' backlog was up $15 billion (to $144 billion) through the first half of 2011 verses the same six months of 2010. In the most recent quarter, revenue for the firm's global business service practice is up just one percent after adjusting for currency and gross margins are also up slightly. Split by industry, the bulk of the growth came from general business, distribution and communications clients.
Public sector advisory work is down year over year; the firm blamed it on declines in government spending. The most significant improvement came from the 40 so-called "growth market countries", the largest of which are Brazil, Russia, India and China. The most recent quarter marked the fourth consecutive quarter of double-digit revenue growth (even after adjusting for currency affects).
HR Firms Face Continued Challenges
Despite the success of the big multi-service firms, HR consultancies continue to struggle. For example, Aon Hewitt recently reported, "the challenging global economic environment and competitive pricing pressure continues to provide headwinds for our Risk Solutions and HR Solutions businesses." Specifically, the firm warned investors that pricing pressure remains intense because of a lack of demand relative to the number of HR consultants employed in the marketplace. Meanwhile, "clients are actively looking to reduce spending in order to meet budget reductions and/or decrease discretionary project spend."
Huron Provides Profitability Benchmarks
Meanwhile, Huron reported mixed results: significant growth in its Health & Education and its Legal Consulting units, but declines in Financial Consulting. In each business unit, utilization rates slipped but hourly fees climbed a bit. The Health & Education practice's 966 full-time professionals billed out at an average of $269/hour, up 12 percent from a year ago.
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