27 March, 2010

Minding the minders - professional services firms

Melbourne Herald Sun 27 March 2010

When the world is in turmoil, who minds out for the minders? All those experts that companies depend on, where do they go when business slows to a crawl?

They call themselves the Professional Service Firms. The accountants, lawyers, engineers and architects. They depend on a thriving economy too. Though many of them will always make a good quid, whichever way the wind blows.

Futurologist Phil Ruthven's firm IBIS has done a study on these PSFs. It shows that behind the dark suits and grey bookcases there's a revolution going on.

Take the accountants. For two years now they have seen revenue falling. But not by much. Like the banks, the Big Four (Deloitts, KPMG, Ernst & Young, PWC) have taken the opportunity to do a bit of cherry picking.

They have snapped up smaller rivals with strategic portfolios, and used their ample war-chests to buy into new markets like Brazil, Russia, India and China.

Of course, whether you're winning or losing, the accountant will always have a way to make money out of you. Companies that are struggling to stay afloat need them. And this helps to make up for the dip in other business areas, managing takeovers and new-company launches.

As a bonus, they have been given a flood of business from new requirements in the areas of environment, terrorism and fraud - these are guaranteed growth markets.

Law firms of course share this bonanza. Though business slowed in 2009, the demand for lawyers continues to grow. The post-Copenhagen world is creating a whole new 'green' market, regardless of politicians' waffling; and the economic scares have seen flourishing business in crime and divorces.

There are professions that have felt the pain more than others. Take the engineers. Suddenly hundreds of big engineering projects have been put on the shelf. After years of seven per cent growth, they are now looking at a downturn of six percent.

The larger firms are finding relief in China and India and the rest of the booming Asian market. But it isn't easy pickings. The big shots in Europe and North America have also been lusting after these contracts so the competition gets pretty fierce. Even worse, these firms are also looking for pickings in the booming parts of Australia.

Every time you see the skeleton of an unfinished building or a weed-grown fenced-off wasteland in the middle of a city, there is an architect somewhere weeping into his gin. Building has slowed down all around the world and that has severely cut the returns of architecture.

But IBIS has good news for them. From next year the building market is expected to rebound by five per cent a year. However the successful firms are the ones that expand the range of their activities. They are moving into the business of building project management.

Finally there are the management consultants. Everything from executive training to HR, from marketing to IT. After a very flat year they can expect increases of over four per cent a year. Once again it's the big firms that will flourish. Some of the smaller ones will need to attach themselves to accounting and law firms, others will have to look overseas.

Now China's a good opportunity for them, with this niche business expected to grow 12 per cent in the next five years. But you can only work there if you partner a local firm.

So you can expect to see our professionals moving further from their Collins St and Macquarie St towers into a big scary world where competition is intense but the rewards are huge.


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