This section contains Monadnock Research Notes and feature articles, providing research findings and timely details on substantive consulting industry developments.
HP $55 Million Settlement with U.S. DoJ for Alleged Procurement Process Violations Highlights Stiff Penalty for Denial of Allegations Monadnock Research (VIII N39) - 3 September 2010 MR - The U.S. Department of Justice (DoJ) has reached an agreement with Hewlett-Packard where HP will pay $55 million to settle allegations that it defrauded the General Services Administration (GSA) and other federal agencies. Previous guidance by HP estimated the amount at $47 million. HP has denied that it violated any laws in its settlement. The agreement, and the recent $87.5 million settlement involving EMC in an associated case, highlights the stiff penalty the DoJ is imposing on firms when they deny their failure to comply with Federal procurement guidelines for products and services. Research Note includes: HP settlement details; Summary of allegations and settlements involving numerous other consulting firms in associated litigation; Copies of civil complaints, related documents, and results of government study on whistle-blower lawsuits. (1,515 words) . . . More
Capgemini to Purchase 55 Percent of Brazil's CPM Braxis for €233 Million Monadnock Research (VIII N38) - 2 September 2010 MR - Capgemini has reached an agreement with the shareholders of Brazil's CPM Braxis to acquire a 55 percent interest in the consulting and IT services firm for 517million BRL (€233 million). Capgemini also has an option to buy the remaining 45 percent within 5 years. CPM Braxis is the largest Brazil-based IT services firm, serving more than 200 major domestic and international clients, with a concentration in financial services, telecom, manufacturing, and utilities. The deal will allow Capgemini to expand its presence in Brazil to around 6,200 from approximately 700 today. (1,055 words) . . . More
Marin County Push to Replace Problematic SAP Implementation May be Premature Monadnock Research (VIII N37) - 27 August 2010 MR - California's county of Marin has completed a study that recommends the County cut its losses on what it views as a failed SAP implementation, and to pursue "New ERP System" options. But Marin may want to step back and take a closer look at the findings of the report it is using to support that conclusion. An 11 page document published by Marin's Information Systems and Technology group, including findings from independent consultancy Phoenix Business Consulting, concludes that any of the options that involve keeping SAP would be more costly than throwing it out and starting over. Analysis of those findings, however, appears to offer clues into apparent unrealistic expectations similar to what got Marin into its current predicament. This is the same system at the center of a dispute that resulted in a $30 million civil fraud action filed by Marin County against Deloitte Consulting in June. Research Note includes analysis of report findings and report PDF. (1,795 words) . . . More
Consulting Client Insights: Vault Top 50 Consulting Firms Monadnock Research (VIII N36) - 24 August 2010 Vault has just published its latest list of the top consulting firms, the "Vault 2011 Consulting 50." This year's ranking is not based strictly on the "prestige" factor, which is a ranking of perceptions by consultants of firms other than the one they work for. That listing is still published, but as a separate ranking. Vault's overall 2011 ranking weighs culture, work/life balance; compensation; prestige; business outlook; and transparency. While the Vault rankings might help firms with their college recruiting efforts, the utility for clients is limited. But taking a contrarian view provides some interesting perspective. This Research Note offers insights into what clients can learn from these rankings, and why high scores in some categories aren't necessarily good for your business or your project. The top 10 firms for the current ranking are: (1) Bain, (2) BCG, (3) McKinsey, (4) Analysis, (5) Cambridge Group, (6) Deloitte, (7) Oliver Wyman, (8) A.T. Kearney, (9) Triage, and (10) Conseo. (2,210 words) . . . More
Diamond to be Acquired by PricewaterhouseCoopers for $378 Million Monadnock Research (VIII N35) - 24 August 2010 MR - PricewaterhouseCoopers LLP has entered into a definitive merger agreement where it will acquire all of the outstanding shares of Diamond Management & Technology Consultants for $12.50 per share in an all-cash deal. The transaction represents a premium of 31 percent to Diamond's closing share price of $9.54 on 23 August, valuing Diamond at around $378 million. The acquisition is expected to be completed in the fourth quarter, pending shareholder approval and anti-trust clearances. The deal has already been approved by the boards of both firms. Diamond will be absorbed within PwC's Advisory group following the acquisition. (Research Note includes acquisition details; Diamond client industries, service areas, and geographical focus; staffing and operational metrics; transaction risks and motivation; PwC/Diamond Merger Agreement; and MR consulting client perspective. 1 chart. 1,600 words) . . . More
URS Settles Minneapolis Bridge Collapse Litigation Monadnock Research (VIII N34) - 23 August 2010 MR - Survivors and those who lost loved ones when the Minneapolis I-35W bridge collapsed have settled their cases against URS Corp., a multinational engineering services firm. URS says the entire $52.4 million settlement will be paid by its insurance carriers. The families sued URS asserting negligence when it failed to properly evaluate the bridge's structural integrity after being hired by the State of Minnesota to provide engineering services. The settlement includes a provision that URS will contribute $1.5 million toward the construction of a memorial honoring those who died. According to the Associated Press, the settlement calls for $48.6 million of the funds to go to victims. Robins, Kaplan, Miller & Ciresi (RKMC) led a team of 17 law firms in Minnesota representing 103 clients. RKMC says that more than 130 of its attorneys and staff contributed over 20,000 hours pro bono in the last 3 years on related cases, making it the largest pro bono effort in the firm's history. (Research Note includes copies of 3 original complaints and exhibits; 1,200 words) . . . More
UK's Independent Offers Scathing Editorial on Management Consulting Practices Monadnock Research (VIII N33) - 20 August 2010 MR - Johann Hari has offered a scathing report of management consulting in an opinion piece in the UK's Independent entitled, "The management consultancy scam." We cite it here to offer a heads-up to readers that might find themselves fielding questions about the assertions proffered by Hari as notorious norms, and not isolated examples of dubious firm practices. The Hari piece quotes "Ripoff" author David Craig and "Management Myth" author Matthew Stewart. The article also refers to Craig's recommendation that clients should tie fees to outcomes. MR's perspective reiterates highlights of our past recommendations and what to look out for with performance-based alternative fee structures, and how to structure those agreements. (440 words) . . . More
Apple Global Supply Manager and Accomplice Indicted in Alleged $2.5 Million International Kickback Scheme Involving Six Suppliers Monadnock Research (VIII N32) - 19 August 2010 MR - Paul Shin Devine, a California-based Apple Computer Global Supply Manager, and Andrew Ang of Singapore, were charged in a 23 count indictment that alleges the two orchestrated a procurement kickback scheme. Devine worked on the side as a consultant, most recently through his consultancy CPK Engineering, selling trade secrets and favorable treatment to prospective Apple suppliers. One of Devine's alleged clients, Cresyn Co. of South Korea, claims that it was under the impression its consulting agreement was directly with Apple. Devine, who is facing wire fraud and conspiracy charges and lives in Sunnyvale, Calif., was arrested and made his initial appearance in U.S. Federal Court on 13 August. In addition to wire fraud and conspiracy, the grand jury charged Devine with money laundering and engaging in monetary transactions with criminally-derived property. The alleged kickback scheme dated back to February 2007 or before, through August 2010. The charges hold stiff penalties for Devine, which could be up to 430 years in prison, $6.75 million in fines, and additional restitution and damages realized by Apple. (Research Note includes copy of complaint. 710 words) . . . More
British Gas Key Issues Upheld On Accenture Appeal Monadnock Research (VIII N31)- 10 August 2010 MR - GB Gas Holdings Limited (Centrica) received favorable rulings on 7 of 8 preliminary issues on appeal by Accenture from lower U.K. Commercial Court rulings on contractual language interpretations and issues to be heard at trial. The appeals court also found that nothing much was likely to turn on the difference between its interpretation and that of the lower court on the issue found in favor of Accenture. The net affect of the contract language interpretations upheld is that material defects could combine to create a "Fundamental Defect" that would trigger greater Accenture liability, if proven. The case is scheduled to begin on 3 October 2011. Centrica filed its £182m lawsuit on a problematic SAP implementation in May 2008. Research Note includes case background and analysis of issue not upheld on appeal, and court decisions. (930 words) . . . More
Former Deloitte Vice Chair and Son Charged in SEC Civil Complaint Monadnock Research (VIII N30) - 8 August 2010 MR - The U.S. SEC has brought and settled civil charges for insider trading, and violating auditor independence rules, against former Deloitte LLP partner and Vice Chairman of Clients and Markets, Thomas P. Flanagan. His son, Patrick T. Flanagan, was also charged in the scheme. The Flanagans agreed to pay more than $1.1 million to settle the charges. The former Deloitte partner has also lost his right to practice as an auditor before the SEC. Both Flanagan and his son reached the agreement without admitting or denying the charges. Deloitte was granted a summary judgment on its liability claims against Flanagan in late December 2009. Research Note provides settlement details and information on the Deloitte consulting client and nine audit clients affected, and also includes copies of the SEC complaint and administrative order. (1,075 words) . . . More
SAP Accepts Liability in TomorrowNow Services Litigation with Oracle Monadnock Research (VIII N29) - 6 August 2010 Monadnock Research Note - There has been a surprising twist in the Oracle v. SAP litigation over SAP's former TomorrowNow (TN) third-party application services operation. SAP is now accepting liability for copyright infringement alleged by Oracle, and will accept financial responsibility for any judgment awarded against it. But SAP will continue to assert that Oracle's damage claims are vastly overstated, and appears to be focusing on taking the wind out of Larry Ellison's sails in the area of punitive damages. The trial is scheduled to begin 10 November 2010, and will last around 6 weeks. At this point the U.S. Federal Court for the Northern District of California has issued 100 Rulings and Orders since 9 May 2007, almost certainly making this one of the most costly examples of technology services civil litigation in U.S. history. Research Note includes MR perspective and rationale on settlement probability prior to trial and case strategy; historical perspective; case documents, including original complaint and 4 amended complaints; and TomorrowNow client list. (1,635 words) . . . More
Hewlett Packard Settles with U.S. Justice Department Over Alleged GSA Contracting Violations Monadnock Research (VIII N28) - 2 August 2010 Monadnock Research Note - Hewlett-Packard has reached a settlement in principle with the U.S. Department of Justice to resolve an investigation into HP's GSA Multiple Award Schedule contract and civil charges associated with the "Rille" complaints and alleged kickbacks involving HP. The settlement awaits approval of the U.S. Justice Department, the Arkansas Federal Court, and Federal agencies involved in associated procurements between 1997 and 2007. Several other firms also charged in Rille complaints that resolved their matters years ago, settled for aggregated amounts that were 7 times less than the amount HP appears poised to pay. HP admits to no improper conduct in the settlement. Research Note includes a copy of the HP complaint, filed under seal in April 2007. (635 words) . . . More
Willis Stands Firm; Refuses Contingency Commissions from Insurance Carriers for Brokerage and Advisory Work Monadnock Research (VIII N27) - 29 July 2010 Monadnock Research Note - Willis Group Holdings, the global insurance broker and advisory services firm, has sharply criticized Aon and other HR services firms for their decisions to resume acceptance of contingent commissions. This Research Note explores the issues associated with contingent commissions, including the potential conflicts of interest they may pose to providers of services in the areas of insurance risk management, financial, and human resource consulting, and actuarial services. (1,220 words) . . . More
Consulting Client Insights: Navigant Consulting Monadnock Research (VIII N26) - 29 July 2010 Monadnock Research Note - This Research Note analyzes Navigant Consulting's business from the firm's Q2-2010 conference call and provides extensive detail on trends and operating metrics from one of the most transparent consulting firms. Navigant says this quarter marks its shift from "defense to offense." Revenues before reimbursements were $155 million, up slightly from $154 million in Q1 and down slightly from $157 million in Q2 2009. EPS was $0.16, up from $0.13 in Q1 2010 and $0.07 in the same 2009 period. This note provides analysis of Navigant's business segment profitability; average rates, utilization, attrition, and staffing by practice; organization and integration of acquisitions; and business trends and growth areas. (includes 5 charts, 1,454 words) . . . More
Consulting Client Insights: Booz Allen Hamilton Monadnock Research (VIII N25) - 15 July 2010 Monadnock Research Note - The holding company for Booz Allen Hamilton hopes to raise up to $300 million in an IPO. This research note presents a current profile of the firm and summarizes numerous facts, stats and insights contained in Booz Allen's registration statement, including details on its 31 July 2008 acquisition by Carlyle; statistics on the U.S. federal consulting marketplace and procurement trends; details on Booz Allen's strategy; and the terms and conditions of the Booz&Co. spinoff. (includes 2 charts, 1,330 words) . . . More
Maverick Spend: Strategies for Controlling Unauthorized Consulting Expenditures Monadnock Research (VIII N24) - 1 July 2010 MR (VIII N24) - Capturing and managing by-pass spending ("maverick spend") on consulting services is a significant challenge for most global sourcing and procurement organizations. But controlling spend in other procurement categories is generally met with much less resistance. Complexity of this service area combines with a dynamic participant marketplace, and the political influence of decision stakeholders, to set consulting apart from other procurement areas. Understanding the consulting category and its many facets and history is crucial to building an effective program to minimize maverick spend on services. This Research Note presents our perspectives and observations on best practices, and our findings from a recent Monadnock Research study on the practices of twelve organizations representing an estimated $7.6 billion in spending on consulting services annually. (5 Charts, 4,425 words) Link to purchase White Paper for non-subscribers: http://www.monadnockresearch.net/products/item37.cfm . . . More
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