Andersen Consulting revenues at record $5bn

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The Independent Online
The growing trend for businesses to outsource non-core activities helped boost world-wide annual revenues at Andersen Consulting to a record $5.3bn (pounds 3.3bn) last year.

Though the firm reported "vigorous growth across all global areas", the region including Europe, the Middle East, Africa and India saw the biggest gain, up 32 per cent at $1.9bn. Staff numbers in that region rose 21 per cent, to 16,128, compared with an overall 18 per cent rise to 44,801.

Business process management, as the US-based firm calls outsourcing, was the area with the biggest rise - fees rose 46 per cent to $582m in the year to 31 December 1996. Among the clients contributing to that income were the industrial group DuPont, investment bank JP Morgan and troubled retail group Sears. At the same time, British Petroleum has extended a contract under which Andersen runs accounting and related administrative functions in the North Sea to other territories.

Vernon Ellis, European managing partner, explained that the firm was deliberately moving away from the provision of the straightforward information technology services for which it was well-known in the past towards helping organisations with all sorts of activities that, while essential, were not central to their businesses.

Although Andersen is seeing its business growing at well above the industry average, the whole market for outsourcing is expanding rapidly, driven by organisations' awareness that the business climate is changing so fast that they can survive only by concentrating on their strengths. What started in such areas as security, cleaning and canteens has expanded into finance, logistics and even spare parts distribution as well as IT. Andersen says "business process management collaborations are as varied as the firm's clients and their needs".

Last week, both Capita, the business support services group that specialises in public-sector contracts, and Anglo-French computer services group Sema reported strong profits growth on the back of the increasing popularity of the concept.

Richard Holway, an independent computer industry analyst, attributed some of this to the fact the market was "in its infancy at the moment". But he predicted rapid expansion over the next 10 years. Industry sources forecast that the total world-wide business process outsourcing market will grow from about $110bn in 1995 to more than $282bn in 2000.

Organisations that focus on activities "further up the value chain" than mere IT outsourcing are expected to do particularly well, he added.

Mr Ellis added that organisations seeking to transform themselves to meet increasing competition were looking to Andersen in particular because of its "ability to operate across borders and the ability to bring world- class knowledge and experience to bear".

Such breadth of knowledge and of geographical coverage also helped the firm, run as a separate unit from the accounting and business advisory arm since 1989, in other areas, he added.

For example, communications saw revenues rise 32 per cent to $756m on the back of the firm's ability to transfer knowledge from the US telecoms market - which was deregulated earlier than others.