Comment by AtlasBarfed
4 years ago
Arthur Andersen was the largest and most successful accounting firms, as such they had deep business contacts with basically the entire business world.
As mainframes moved from the white glove ivory tower to more access for programmers, then to minicomputers, then especially in the microcomputer revolution of the 1990s, Arthur Andersen was well connected to sell IT and development services to a very very large range of clients. This wing was "Andersen Consulting".
Andersen Consulting's partners got tired of taking all these sweet revenues and shoveling them to the tax partners of Arthur Andersen, so they split off in 1998 or 1997 or so, and became Accenture.
Also around this time, Accenture signed many deals to outsource entire IT departments to them. Stupid companies not seeing IT as one of the primary efficiency and market advantages (see:Amazon) but instead as an annoying cost center jumped at the chance. This made them beholden to Accenture.
Anyway, Accenture had the salespeople and contacts, the size, and the reputation of being able to deliver large projects, or they'd stick them out. Would they be great? No. But they'd stick it out.
All the big 6: CoopersLybrand, Ernst and Young, Deloitte, Price Waterhouse, KPMG, were all in on it at this point. But Accenture had the largest partner-to-workerbee ratio, so they raked in the cash. Accenture had the ability to hire armies of workers, rarely from computer science backgrounds, crash course them in programming over 6 weeks, and then shuttle them off to be vastly overpriced consultants. They even had their own private college for this (St. Charles).
Basically, they had contacts and a good enough pipeline to create worker bee programmers for large projects.
The partners generally came up the ranks so they could speak the IT lingo, and they were promoted/selected based on ability to produce revenue and sales. With the huge size and contacts and labor pool, plus happily jumping into any and all software implementation.
Accenture and their ilk were also key for supplying huge numbers of people for SAP and other package implementations. Basically, these software companies couldn't muster the armies of implementers necessary to install and customize their software. Accenture and their ilk could. These ERP packages likely helped fuel the productivity boom (all of it went to the rich) of the Clinton era as computers went from 10s of MHz to gigahertz processers as well as memory and storage increases and the internet boomed.
You probably can't imagine an executive management team that is ignorant of IT and IT practices, and of course the old enterprises have plenty of these. These execs just wanted to hand off these annoying things to someone, and Accenture was there for them.
Modern executives need to be IT-aware. I'd say this is only very very very recent, with the rise of Amazon. Before then you'd have the CEO that proudly annouced they don't even know how to use Email.
Those CEOs are a dying breed. Your orgs will live and die by navigating the IT landscape. Amazon sucks for many reasons, but they do a lot right, and one of those things is "don't use consultants, build it in-house".
Said another way, I think this covers “how they got so big” but not “how do they provide value.”
I guess I have to admit they provide some value, but capture 99% for themselves?
Makes me wonder if they’re actually destroying value overall?
ERP implementations likely provided value because of the lack of bespoke systems, instead people standardized and gained efficiencies. That was the value I would guess.
Outsourcing? Did it provide value? Maybe immediately on the books, enough to cook to hit the stock options and cash out.
Could companies have built internally? In an ideal world that's definitely a yes. Amazon sucks in so many ways, but one thing they don't is the fundamental value they place on their IT systems and workers.
Old school companies could not handle that culturally. Ugly nerds? Paid more than managers would be several levels up? Treat them respect? Structure the business around them? They couldn't handle it.
Accenture had the organizational gravitas with the execs. Through that came the temporary infusion of valued IT change. Were they vastly overpaying? Yeah. But that price tag meant they needed to take the implemented system seriously.
Ultimately Accenture kept showing up and selling services somehow, despite many many many other options. Should there be a kick-ass IT consultancy that competes with them and embarrasses them? Probably, but ... where are they? If Accenture was charging 250/hr for 50/hr talent, why didn't some leaner org at 150/hr with 100/hr talent (a fundamentally different tier of worker) vastly outperform them?
Well, the world is run by the rich, and they only respect the rich. It might be as cynical as they respect how Accenture rips off its workers and still delivers acceptable product, exactly like the execs in the companies like their companies to be run: extracting maximum value from the plebe workers.
Marketing and connections are so so powerful. As stated elsewhere, Accenture is generally a "safe" choice for an "important" project. And don't forget those "approved vendors" rigamarole that companies have. Because Accenture and their ilk extract so much excess from clients and labor, they can buffer the failure scenarios and throw more labor at the problem.
In large companies where budgets are abstract in relation to value, more that budgets align with how much power and influence a subsection of the org has, cost can become secondary.
And sweet jesus would I like to know how much kickbacks and the like exist in IT procurement. It must be extensive, based on the mystifying decisions I've seen in my career.
Thank you for yet another detailed reply.
Reading the linked article all I could think was: Hertz doesn’t deserve to exist. It just seems like they’re a Frankenstein of 30 years of mediocre to poor decisions.
Ultimately I think a lot of companies that use Accenture don’t deserve to exist, and ultimately will be outcompeted.
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Thank you for this history.
As someone who focuses on being effective and efficient, this hurts my soul.