Industry Review

Team C

INDUSTRIAL ANALYSIS Kokomo Technology Consulting Company Industry Review

Consulting firms, in general, are among the leading employers of top MBA graduates, it is typically a high-paying, high-profile field which offers the prospect to take on a large degree of accountability right out of school and also provides the opportunity to learn about the business world.

Consultants must be highly educated and skilled, excelling at conducting research and analyzing information. To research, consultants must collect raw data from a range of sources from the client and from various trade associations in the client's industry. Also, consultants must look at surveys and market studies from their prior engagements or practicing interviews to industry experts, executives, and even the company’s middle or lower level employees to gather information and opinions. This data is then analyzed to help identify behavior patterns, production bottlenecks, market engagements and other developments, trends and conditions that could affect a client's business.

Professional consultants are essentially hired guides or advice-givers to individuals and corporations that seize a wide variety of business difficulties and challenges and deliver solutions and results for their clients. These problems consist of examining a new market, or could be as technically perplexing as the design and coding of an enormous manufacturing control system. Consultants could also change the tack of the client's organization and strategy.

2 Specifically, IT Consulting industry includes firms that provide the following services to client companies: writing, testing and supporting custom software; planning and designing integrated hardware, software and communication infrastructure; and on- site management of computer systems and data processing facilities, and this is exactly what our company will do, providing IT Services from the highest quality. (Yucel, 2015)

Ultimately, a consultant’s main goal and objective is to improve the client's business by producing and implementing changes based on the analysis of research conducted and the needs of the business. The difficulties or challenges are convincing the client to accept the consulting firm’s recommendations. Success depends on solid research, excellent people skills and the capability to organized an influential presentation and a going forward plan. A consulting firm and a consultant must also cultivate the ability to handle failures should the client decide not to move forward.

Regulation Review

The consulting firm will operate under the business name of Kokomo Technology

Consulting Company. The firm will run and operate in the city of Chicago, Illinois.

Physical address of the location is 27 N Morgan, Chicago, IL 60607.

Pursuant to Title 4 Article I. General License Requirements of the Municipal

Code of Chicago, all businesses must be licensed to operate in the City of Chicago. If a business license is not obtained before operations commence, Kokomo Technology

Consulting Company shall be fined not less than $250 nor more than $500. Further, each day the violation continues a separate and distinct offense will occur. Additionally,

3 Kokomo Technology Consulting Company will be immediately closed by the commissioner until the business license is obtained. ("Municipal Code of Chicago")

To obtain a business license an application needs to be submitted. Upon receiving the application, the City of Chicago will review and submit the application for approval to the zoning compliance with the Chicago Zoning Ordinance. Chicago Zoning

Ordinance will then conduct an investigation of the business applicants and inspect the business premises. The commissioner conducting the investigation and inspection is authorized to interview applicants under oath and examine the book and records of the firm. Failure to comply with any portion of the investigation or the inspection will result in a disapproval of a business license for Kokomo Technology Consulting Company. Once the investigation and inspection are complete the commissioner will then transmit the application and reports to the Mayor’s office. The Mayor’s office will then determine if the application and all controlling persons are in compliance with all the requirements necessary for the license to be issued. The location of the business and the condition of the premises must also be in compliance with all laws and provisions of state code. If all conditions are met, the Mayor will issue a business license. If conditions are not met, the Mayor will disapprove the application of the business license and mail a letter to the applicants. Kokomo Technology Consulting Company can then make a written request to the Mayor’s office for a public hearing. ("Municipal Code of Chicago")

4 Competitive Analysis

Kokomo’s industry (IT consulting) is composed by firms that service companies by designing and implementing information technology (IT) systems and software.

Entering to the IT consulting business is not too hard due to the low capital requirements; in consequence, the majority of companies are small, non-employing and independent. Since 2010 there has been an increase in demand for all-inclusive consulting services leading to merges and acquisitions between larger players.

However smaller, specialized companies still continued to enter the industry. (Yucel,

E-Business Consulting: The Internet is shifting the way companies conduct business which also changes the type of consulting needed. Numerous traditional consulting firm are vulnerable of becoming less relevant if their consultants do not acquire the different skills needed to keep up with the demands of the changing trends.

Information technology consulting firms constitute one of the fastest-growing sectors of the consulting world. IT consulting firms deliver recommendations and implementations based on the research and needs of the client.

Global consulting industry revenues will be about $449 billion in 2015, according to Plunkett Research estimates. This represents reasonable growth from $415 billion during the previous year. (Plunkett)

After some research, some authors offered some more specific data about the IT consulting industry, for example:

Revenue: $377.4 Billion

5 Profit: $30.6 Billion Annual Growth 2010 – 2015: 2.8% Estimated Annual Growth 2015 – 2020: 3.2% Earnings: $163.5 Billion Number of Businesses: 431,982

Source: www.IBISworld.com

As we can see, it is a fast growing industry and a very profitable one also.

In the following chart we can observe how the IT industry is segmented, our company has decided to focus in four areas: IT technical consulting services, IT computer and network management services, IT support services, and Computer systems design, development and integration. The computer application design and development it is not discarded, but we will go into on this area as we grow in the market.

6 Source: www.IBISworld.com

According to Forbes Magazine, the metrics on Professional Services for computer design and related services are as follows:

 Median Gross Margin: 61.0%

 Median Net Margin: 7.2%

 Median Debt/Equity Ratio: 2.1

 Median Cash/Assets: 17.0%

 Median Payroll as % of Sales: 24.7%

 Median Return On Equity: 16.4%

 Median Advertising as % of Sales: 1.2%

Additionally, the data shown is drawn from financial statements on nearly

300,000 companies, most with under $10 million in annual revenue, and bucketed by four-digit North American Industry Classification System codes. (Nelson, "Benchmark

Breakdown: Key Metrics On 25 Industries")

But what is driving the market? What are the key elements motivating this growing industry? Here are some elements to consider:

- Private investment in computers and software: it embodies the expenditure

by companies on all information processing equipment and software. But also the

investment by private individuals in computer hardware and software generates

demand for implementation assistance and technical support an IT Consultant.

7 - Corporate profit: there is a correlation between a company’s profit grows and

the demand for IT consulting services, because as the profits rises a company

can “take the risk” of making large, long-term investments, encouraging them to

hire IT consultants.

- Government consumption and investment: an important statistic says that the

Federal and state governments constitute almost one-fourth of demand for

industry services. Consequently, if there is a change in government investment

the industry would be affected. Positively or negatively.

- Demand from finance and insurance: even more important than the

government, financial services and insurance companies are the largest market

for IT services, such industries are responsible for large amounts of sensitive

client and proprietary data. Accordingly, these industries rely on IT consulting

firms to determine the appropriate methods of data storage and protection.

(Yucel, 2015)

It is important to mention that even if there are still plenty of opportunities for small- scale IT consultants like us, the industry employment growth is concentrated in larger firms. For that reason, it will be very important that we focus on providing a personalized and unbeatable service to each customer or potential customer, it doesn’t matter the size or financial status; for us each client must receive the best service possible.

In the following chart we can observe the six main segments of the IT consulting market for 2015, as we indicated previously, the government and financial services are the biggest, our company definitely will try to acquire customers from those areas, but

8 we have a special interest in healthcare business, as well as retail and manufacturing companies that also represent a high percentage of the market.

Source: www.IBISworld.com

It is important to mention that there is a growing tendency that is expected to increase even more from small and mid-size business that are embracing and promoting cloud services, network-storage devices, hardware virtualization and other third-platform solution that we will have as a target, because the knowledge of our personnel in that matter and the greater share of medium-sized potential clients that are outsourcing their IT duties consultants. (Yucel, 2015)

9 SWOT Analysis

Strengths:

Customer demand is the greatest strength of this consulting firm. Further, the specific skills, capabilities, and other qualifications of our consultants and staff members gives our firm competitive advantage over competitors.

Weaknesses:

10 Limited access to investment capital is a weakness of this firm. This limits the type of marketing campaign the firm can launch and could impact the overall customer base. A strong financial plan and solid budget will allow the firm to overcome this weakness.

Opportunities:

Emerging markets and new technology present the biggest opportunities. Further, our strong professional network allows us to tap into a growing client base. Continual training, and engaging with a variety of vendors will keep this firm skill up to date.

Threats:

Concentration risks pose the greatest threat. It is vital to obtain multiple clients in a variety of industries. The threat lies in the possibility of a client going out of business, moving, retiring, etc., and having them as the sole client and source of income.

Cybersecurity remains an ongoing threat for all originations. A breach could result in a loss of data and compromise customer integrity. The financial impacts of such a breach could be severe. Continual training, and education by all staff members is essential to overcoming this threat.

11 Bibliography

Industry Trends and Issues. (n.d.). Retrieved July 21, 2015.

Market Research, Business Intelligence, Analysis, Consulting Business, Management

Municipal Code of Chicago. (n.d.). Retrieved August 15, 2015.

Consulting Business, Human Resources Consulting, IT and Computer Systems

Consulting, E-Commerce Consulting, Supply Chain Consulting, Logistics Consulting,

Transportation Con. (n.d.). Retrieved July 25, 2015.

Nelson, B. (n.d.). Benchmark Breakdown: Key Metrics On 25 Industries. Retrieved July

20, 2015.

Yucel, I. (2015). IBISWorld Industry Report 54151: IT Consulting in the US. IBIS World.