An In-Depth Study on the Management Consulting Services Industry in the Philippines

An In-depth Study on the Management Consulting Services Industry In the Philippines

Submitted by:

Mr. Edgardo Bolinao Project Head

and Ms. Ma. Theresa Mosquito Senior Researcher

August 17, 2001

1 Table of Contents

page

List of Tables ii List of Appendices iii Executive Summary vi

Introduction 1 1. The industry 2 1.1 Definition 2 1.2 Industry Structure 5 1.2.1 Global Management Consulting Services Industry 6 1.2.2 Philippine Management Consulting Services Industry 20

2. Forward Linkage/Market 46

3. Backward Linkage/Suppliers 52

4. Laws Hindering/Facilitating 55 4.1 Philippine Laws and ADB Policies 55 4.2 Commitments under GATS 58

5. Market Potential/Foreign Market Demand and Competition 60 5.1 Entering Foreign Markets 60 5.2 Extent of Services Rendered Abroad 63 5.3 Foreign Market Demand and Competition 64

6. Supply Capability 66 6.1 Services Offered 66 6.2 Areas of Specialization 67 6.3 Expertise/Technical Competence of Manpower 68 6.4 Existing Association 73

7. Industry Training Needs 75 7.1 Quality and Quantity of Training 75 7.2 Identification/ Listing of Training Needs 75

8. Opportunities and Threats 77 8.1 Opportunities 77 8.2 Threats 78

9. Summary of Issues and Confronting the Management Consulting 79 Industry

10. Action Plan Enhancing Competitiveness 85

2 10.1 Recommendations 85 10.2 Performance Monitoring Scheme 94

11. Directory 97

References 104

Appendices 106

3 List of Tables

Page Table 1 Scope and Definition of the Management Consulting 3 Services Subsector based on UN CPC Provisional Code and Version 1.0 Table 2 Scope and Definition of Business and Management 4 Consultancy Services Subsector Based on the PSIC Code Table 3 50 Largest Management Consulting Firms 6 Table 4 Performance of the World’s Largest Consultancies 7 Table 5 Profile of Major Players in the Global Management 9 Consulting Services Industry Based on Interviews made by Wetfeet.com Table 6 Profile of Various Management Consulting Services 15 Offered Table 7 Contribution of the Business and Management 21 Consulting Services to Business Services Industry, 1994 (values in thousands of pesos) Table 8 Large Multi-functional Consulting Firms or Full-Service 22 Service Firms in the Philippines Table 9 Firms Which Started From Accounting and Audit Firms 24 and Now Offers Major Consulting Services Table 10 General Management Consulting Firms 25 Table 11 Human Resource Management Consulting Services 25 Table 12 Financial Management Consulting Firms 26 Table 13 Marketing Management Consulting Firms 27 Table 14 Production Management Consulting Firm 27 Table 15 Risk Management Consulting Firms 27 Table 16 Management Consulting Firms Involved in Development 28 and Policy Studies/Work Table 17 Franchise Management Consulting Firm 28 Table 18 Management Consulting Firm Involved in Business 29 Recovery and Turnaround Table 19 Management Consulting Firms Which Are Limited to 29 Offering Services for Specific Sectors/ Industry/ Market Table 20 Technology Consulting Firms 31 Table 21 Engineering Consulting Firms 32 Table 22 Business Intelligence Units 32 Table 23 Market Research Firms 33 Table 24 Investment and Financing Companies 34 Table 25 Learning and Academic Institutions and Non-Government 35 Organizations Table 26 Internet-based Service Providers 36 Table 27 Number of Establishments in the Philippines Classified 37 Under Business and Management Consulting Services by Size of Employment

4 Table 28 Nature of Employment in Establishments in the 38 Philippines Classified Under Business and Management Consulting Services by Size, 1994 Table 29 Compensation in Establishments in the Philippines 39 Classified Under Business and Management Consulting Services by Size, 1994 (values in thousands of pesos) Table 30 Financial Indicators for Establishments Classified Under 39 Business and Management Consulting Services, 1994 (values in thousands of pesos) Table 31 Costs Incurred by Establishments Classified Under 41 Business and Management Consulting Services, 1994 (values in thousands of pesos) Table 32 Financial Performance of Leading Business and 42 Management Consulting Services Firms in the Philippines Based on SEC Listing of Top 12000 Corporations (values in thousands of pesos), 1996-1999 Table 33 International Funding Institutions Providing Loans and 47 Grants to the Philippines, 1997-2000 Table 34 Areas of Funding of 128 Local and International Funding 48 Institutions Table 35 Market Linkage of Business and Management Consulting 50 and Market Research Services in the Philippines Table 36 Supply Linkage of Business and Management Consulting 53 and Market Research Services in the Philippines Table 37 Services Offered by Philippine Management Consulting 66 Firms Table 38 Areas of Specialization of Philippine Management 67 Consulting Firms Table 39 Profile of Manpower Competence and Expertise of 69 Employees in Philippine Management Consulting Firms Table 40 Profile of Manpower Expertise and Human Resource 70 Development Efforts in Global Management Consulting Firms Table 41 Possible Groupings of Stakeholders According to Area of 93 Specialization

5 List of Appendices

Page Appendix A Nature and Scope of Research and Development 106 Linkages of the Different Schools

Appendix B Nature and Scope of 127 Consultancy Linkages of the Different Schools Appendix C Nature of Development Assistance Projects, 1998- 131 2000 Appendix D Government Information 143 Systems Plan Appendix E Market Studies on Specific Countries in Asia-Pacific 165

Appendix F Market Studies on Specific Countries in Europe 171 Appendix G Market Study on the United States 178 Appendix H Market Studies on Specific Countries in Other 181 Regions

Appendix I List of International Associations of Management 188 Consultants

Appendix J Strengths and Weaknesses 189 Appendix K General Agreement on Trade in Services 191

6 Executive Summary

The General Agreement on Trade in Services (GATS) had set the move towards further liberalization of international trade in services. It urges governments to identify and reduce barriers related to market access and national treatment. Among the services for which schedules of specific commitments had been set, management consulting services is included. Nevertheless, even before the GATS, the current trend towards internationalization and globalization of the world economy resulted to significant developments in the management consulting sector. The sector is in itself an open and liberal market. Entry, and work into foreign markets, are easy. This is because of minimal legal barriers to management consulting services. There are language and cultural barriers but they do not present serious obstacles to consulting across national boundaries.

According to the United Nations Central Product Classification, management consulting industry includes firms and individuals who offer advisory, guidance and operational services related to general management, financial management, marketing management, human resources management, production management and other management consulting services. It excludes computer activities, legal advice, accounting, auditing and bookkeeping, market research, and technical advisory e.g. engineering and architecture. In the Philippines, the PSIC or Philippine Standard Industrial Classification of the National Statistics office is used as a basis for the classification of industries and the subsectors. It includes not only activities as mentioned in the UN CPC but also includes the activities of management holding companies. The difference in the definition pose problems in estimating the real output and performance of the management consulting industry in the Philippines.

The management consulting services industry, by its very nature is global. The larger consulting firms operate internationally and have offices in various countries. In 1992, it was estimated that the consulting business sold over US $ 28.3 billion of advice, which further grew to US $ 43 billion in 1995. At present, the Kennedy Research Group estimated that the total consulting revenues worldwide is US $ 62 billion and growing between 10 to 30% annually from country to country. Based on services offered, it was estimated that technology planning represents 35 percent of the output, strategic services have a share of 20 percent and enterprise consulting covers around 15 percent . Forty two out of the 50 largest firms are homebased in the US, eight are based in Europe (two are based in France, three are in London, one is in Netherlands and two are in Germany). But even with the dominance of the largest consulting firms that eat a significant share in the market, consulting remains a fragmented business where thousands of small specialty firms prosper. Based on the total revenues of US $ 62 billion, the top ten firms have more than 50% of the share. And the recent growth rate is often more than the industry average of 10% to 30% annually. There is very high competition in the industry as reflected by a market

7 where according to Milan Kubr, “supply has matched and even outgrown demand”. This is indicated by the (1) increasing number of players that enter a market characterized by minimum legal barriers for entry; (2) growing sophistication of clients who become more selective resulting to the development of a number of new and specialized services to address the complexity of new management problems; (3) increase in efforts towards advertising and marketing of consulting services; and (4) continued internationalization of consulting firms. Competition is usually based on the following: (1) skills and expertise of consultant/s; (2) development of new executive management tools and/or services; (3) reputation/track record as an expert in providing the service; and (4) network/s of clients established by consulting firms/individuals; and (5) price. By location, the largest market was estimated to be in the US where a US $ 15.2 billion was spent for management consulting services industry in 1992, followed by Europe with US$ 7.6 billion, and Asia with US $ 3.2 billion. The rest of the world spent an estimated US $ 2.3 billion. The social, technological, economic and cultural environment of business and government is changing rapidly. This corresponds to the changes in the customers and demand for management consulting services. The changes are characterized by: (1) increasingly sophisticated clients who, on their own, can handle present management problems formerly handled by consultants; (2) increase in need for consultants who can handle difficult, risky and new tasks that would require a great amount of information, speed of analysis and action ; (3) an approach to problems with an interdisciplinary, intersectoral perspective, innovative, with understanding of social and environmental implications; and (4) availability of special expertise. Services offered by internet-based consultancies became substitute products for reengineering solutions and efforts of traditional management consulting firms. While some technology firms tie up with management consulting firms to either broaden services or converge with services provided by management consultancies. There is also a rise in the growth of purely e-business consulting firms. And this poses a threat to the management consulting firms.

In the Philippines, the business and management consulting services industry contributed not more than 0.62% to the Philippine economy and 21.24% to the business services industry in 1994. Based on the top corporations in the industry, performance varies widely across the different consulting industries based on the size of the firm and services offered or specialization. Growth rate ranges from -5.27 to 738.52% based on financial performance reports of firms whose main activity is management consulting. Similar to global firms, management consulting firms are diverse in nature and fragmented. It can be classified into two broad classifications, traditional providers of management consulting firms who may offer specialized or full-service packages and non-traditional providers of management consulting services such as software vendors, IT consulting firms, market research firms, engineering consulting firms, non-profit research institutes or centers and academic institutions. There is an absence of reliable data base to properly monitor the performance of the industry, the real contribution to the economy and the number of players in the industry. The small size of the industry as compared to other business service sectors lend itself to be included in “other business services” in the definition of PSIC. The definition of the PSIC is a point of contention since it includes activities of management holding companies therefore making estimates on the performance of the industry unreliable. To add to this is the very

8 nature of the industry of being diverse. There is a very thin line that draws the difference between traditional and non-traditional providers of management consulting services. There is therefore a need to also include the specific management consulting services’ contribution in the business of the non- traditional providers since these may have a significant effect on the estimation of size of the market for management consulting services. Another point to be considered is the existence of small players and individual consultants in the industry. There is more difficulty in monitoring these individual consultants and small players who may come and go because of low entry and exit barriers in the industry.

There is a very competitive environment in the management consulting industry in the Philippines. The competition in the industry is characterized by the following (1) existence of large international multifunctional firms with the capability of offering full-service packages and who have a significant share in the market; (2) increasing number of non-traditional providers of management consulting services; (3) low entry and exit barriers in the industry leading to more players in the industry and poor image of consultants since anyone can just be a consultant; (4) high supply of consultants and consulting firms and low demand for the services in both private and public sector markets. There are recent news indicating a decrease in official development assistance from other countries. For private sector market, it is concentrated on large firms and even large firms have limited demand for consulting services especially if they have internal consultants (corporate planning department); (5) existence of few players with highly differentiated services. Unlike technology consulting or market research firms who were able to offer differentiated services through branded solutions or packages, few consulting firms were able to successfully do so. Switching costs are therefore very low.

Large, new players and non-traditional providers of management consulting services have added significant competitive pressures to the local market . With the blurring of the consulting industry’s boundaries, non-traditional suppliers are adding to the supply of consulting services available to the market. In addition, there is a growth in advisory services offered by public and non-profit organizations such as colleges, universities and non-government organizations. The competition these entities offer can affect management consulting firms of all sizes.

There is a growing threat posed by technology consulting firms among management consulting firms. The emergence and growth of technology consulting firms point out to a growing demand of clients for information- technology related services.

Information technology plays a big role in the businesses of many companies. Slowly, even in government, technology is playing an important role in systems and processes. Technology consulting firms

9 pose a big threat to management consulting firms especially to those targeting private sector client companies. Private companies and government corporations, in the past years have invested heavily on computerization and business process reengineering. The strategy of many consulting firms now is to recruit business graduates to complement their technical expertise. These firms have realized the need to understand business strategy and processes. This led to solutions known as Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), e-commerce and e-business solutions. Since many technology consulting firms are also software vendors which are used in the implementation of the business processes developed, then it is expected that switching costs will be high. Therefore, these technology consulting firms are expected to be there for a longer time to monitor implementation of systems that they placed. This has eaten a significant share in the market of management consulting firms offering services related to business process engineering, systems evaluation and systems audit. It is not impossible that these technology consulting firms can grow and become a full-service consulting firm offering strategic management services and business intelligence. This is not far-fetched since the services they offer now are related to tools to implement strategies and tools to obtain continuous business information to make sound decisions.

The Philippine management consulting community is being challenged to develop new services as a result of rising client expectations and sophistication, changes in the information technology and growing competition. Philippines’ strength in management consulting is the small and sectoral expertise of some players in the industry and it is a particular challenge for these knowledge-based companies to focus significant human resources on new service development.

At present, the industry has numerous small to medium-sized general management consulting firms and consultants but lack of locally-established firms with highly specialized expertise. Global trends as well as available local data shows that differentiation is a factor in the success of many small to medium-sized consulting firms.

The increasingly competitive marketplace dictates that in order to meet the challenges of the knowledge-based economy, firms are required to innovate constantly in order to react quickly to changes. Shortages of time, people and capital are major drivers why firms explore the use of external sources of expertise known as outsourcing. Outsourcing as a practice in the industry ranges from routine, project- based, short-term contracts to cooperative agreements, including partnerships and strategic alliances. This is why many established consulting firms invest to maintain a database of available consultants and

10 experts as well as consulting firm partners to rely on for particularly large projects.

There is a rapid growth in the number of consultants offering management advice, without a widely accepted level of standards, standards of conduct, then the industry is bound to be negatively affected both locally and globally.

Since there are no stiff entrance requirements for practicing inthe industry that are equivalent to other professions. Some of these “ consultants” do not have training in management consultancy processes and do not subscribe to professional code of ethics in consulting.

Accreditation of consultants has long been pushed by some players in the industry and particularly by IMPHIL but there is absence of a legal framework and specific government support to assist in the implementation of accreditation of consultants. This can upgrade the standards in the industry and counter existence of more “fly-by night” consulting firms and consultants.

The accreditation of consultants would help a lot in improving demand and factor conditions in the industry. A reduction in the number of short-term, one to two projects, fly-by night consultants and consulting firms can be made if this is implemented. The poor image of consultants will be addressed. The accreditation would also pave the way to easily market and promote the services of consulting firms and consultants among local and international clients.

There is a limited domestic market for management consulting in the Philippines. Private clients are limited to large players in the industry which are mostly multinational which either have their own internal consultants or would prefer international management consulting firms recommended by their mother companies. Very few small and medium-sized firms seek the assistance of consultants since this is considered an”expense”. The Philippine domestic market is not as sophisticated as the clients found in Europe or United States where small and medium-sized ventures are very much open and encouraged to seek the expertise and assistance of management consulting firms to ensure productivity and profitability.

Projects obtained through international funding institutions and government agencies are limited to the available official development assistance and national budget. There are trends that show a decrease in the official development assistance as well as increasing number of international players to compete with in the projects.

11 The industry is also characterized by lack of industry-wide information on market opportunities abroad. Most efforts with regards to market research related to consulting opportunities abroad are done on a per-company or individual basis. There is no institutional information network to assist management consulting firms in expanding their market. With the expertise and knowledge resident in the small and medium-sized firms, there is significant potential to take advantage of the growing global market. The smaller firms usually cannot compete with foreign firms for large projects, but with the specialized functional and sectoral knowledge, they can take on niche assignments with larger firms.

Absence of a focused marketing strategy aimed at promoting and developing the industry towards preparation for the international market. Along with a growing need to strengthen the management consulting capabilities of the players in the industry, there is also a similar need to market the companies who are capable and willing to compete abroad. In the face of a limited domestic market, there is a need to expand further into other markets outside the country.

In seeking to promote the growth and national development of the Philippines Consulting Industry in general and the Filipino consultants in particular, the proposed action plan will approach the objective at three levels: The government, COFILCO itself (being an umbrella organization that represents Filipino professional consultants) and the other related organizations levels, which includes IMPHIL. Parallel to these approaches will be a legislative approvals of reviving the passage of the proposed National Consultancy Act:

Government Level:

1. To seek a government policy statement that the government supports the engagement of Filipino Consultants and an assurance of a level playing field: a. in loan negotiations b. in project scoping and position c. in national project (should hire consultants instead of hiring employees, as in-house staff of the agency, limit agency capability to contract management

2. Engagement of the Filipinos as prime or lead consultants.

For foreign assisted project, must be at least joint ventures (50-50 min) with the Filipino consultants for two(2) years, then Filipino consultants as lead consultant for the next five (5) years, and then 100% totally Filipino consultants onwards. For locally funded project, only Filipino consultants as lead or Prime consultants.

3. Increasing the fees of local consultants.

Standard rates (minimum) for local consultants, for locally-funded projects. Standard rates for Filipino consultants at international rates for international selection of consultants.

4. It is strongly recommended that the Implementing Rules and Regulations of E.O.164 the procurement of Consulting Services for Government Projects, or the Consultancy IRR which provided a systematic and standard set of procedures in the hiring of local and foreign consultants be strictly and fully implemented. The consultancy IRR was conceived to develop a more orderly, uniform and transparent set of procedures in the selection of consultants and likewise increase the participation of local consultants as well as to provide adequate and fair systems, rules and conditions governing government’s procurement of consulting services many projects. No less than the former president Fidel V. Ramos in 1992 articulated the fact that successful consultancy implies rich project experience and high technical capabilities, as demonstrated by Filipino consultants in a wide and diverse range of fields. “They not only provide needed expertise to plan, build and manage project in the country, but also in foreign exchange from project involvements abroad,” but first track record must be developed. And this was not the general case among local consultants. Their flight was sad and a lonely one. Their experience in obtaining government project since the consultancy IRR was characterized by frustration and disappointment. They have become a second rate citizen in their own country and moved in the shadow of their foreign counterparts as regards to governments projects. The Philippine Management Consulting Industry is a potential giant if given an opportunity to grow and develop its wings to become a force to contend with global management consulting. The industry is now expressive of its remaining hope on the full implementation of the Consultancy IRR to fulfill its four basic principles. These are: first, to achieve maximum efficiency and economy in the development and implementation of development projects and related activities; second, to enhance the growth of the local consulting industry and to optimize the use of local expertise, material and resources; third, to bring about the transfer of new technology into the country; and fourth, to maintain transparency of government procurement processes and procedures. The local consultants are one in the export potential of their craft but a faithful compliance of the consultancy IRR is a necessity whose time has come.

5. Monitor through NEDA, EDC and congress committee on trade and industry the full implementation of the consultancy IRR. In the spirit of the

13 transparency, there is a need to publish in the Web, the list of the government projects for bidding in line with the E-Commerce act.

6. Revive and lobby for the passage of the National Consultancy Services Act which was based on E.O.164. There is no law governing the consulting industry which calls for an organized regulatory body of government that will supervise, control and enhance the industry, and in the selection and hiring of consultants for government infrastructure and other projects giving priority to Filipinos and/or Philippine Consulting firms thus make them globally competitive.

7. Impose penalty for consultants not complying with the NEDA guidelines.

8. To assist the Filipino consultants to penetrate and maximize participation in the international market.

• Policy to support the local consultants in foreign assisted local projects to develop capability and gain experience. • Policy to promote local consultants through trade shows, advertisements by the Philippine government • Policy to support Filipino consultants to obtain software license at reasonable rates and terms. • Provision for incentives such as tax breaks to those who penetrate the international market.

COFILCO Level and other related association level

1. Continuous dialogue with cabinet secretaries involved in policies related to infrastructure and hiring consultants. DTI, NEDA, DPWH, DOTC, DILG, NPC, NHA, PPA and NIA.

2. Capability-building of IMPHIL. IMPHIL, with the support of the government and other non-member players in the industry should be able to build its capacity through an aggressive campaign in increasing membership and developing programs to be able to achieve the objectives for which it was founded. IMPHIL was primarily found to represent the management consulting industry as well as assist in enhancing the competitiveness of the industry. It has a big role to play in competitiveness-enhancement of the industry. Its members are among the well-established and long-existent consulting firms in the country, but with the increasing diversity in size and specialization of management consulting firms, it would have been ideal to have significant representations of the other management consulting firms. IMPHIL should make aggressive efforts to open its doors to more number of members who can commit to its existing code of professional ethics. This can be done through regular press releases, regular updating of its website, organizing professional development programs

14 for management consultants, maintaining a secretariat, developing strong linkages with local professional and industry associations and international associations.

Strengthening the domestic market. The industry is characterized by a competitive environment where the supply exceeds the demand and there are low barriers to entry. To have a well-developed domestic market there are three important stakeholders who will play a role in the strengthening of the domestic market: the customers, the providers of services and the suppliers.

The customer base need to be expanded. At present, there are opportunities that can be developed in the domestic market among small and medium sized firms which are not used to hiring consultants, large firms which have preferential treatment for foreign consultants and government and non-government organizations which have research and consultancy needs in their projects but may not have access to available consulting firms they can tap. Among small and medium sized firms, IMPHIL can spearhead an aggressive awareness campaign to introduce the organization and its member firms along with service capability to some associations of small and medium sized firms like the Philippine Exporters’ Association (PHILEXPORT), for example. The same campaign may be done to Chambers of Commerce (Philippine, American, Chinese, Australia-New Zealand, European) and Non- Government Organizations’ associations. Campaigns can be done through provision of brochures which were already prepared by IMPHIL to these associations. Government can also assist through DTI or DFA in representing the industry to these associations or assisting in establishing linkages between the associations. IMPHIL can also forge linkages with industry associations like PCCI and the like. Presentation and promotion of services among their member firms can be made to make more companies aware of availability of local consultants who can offer the same quality of services as their foreign counterparts as well as strengthen the position of the Philippine management consulting firms locally and lessen the threat of new entrants. Government, as an institution with significant share in the market of consulting firms should give opportunities to consulting companies, specifically those that can be accredited to provide quality services according to their expertise, to be able to assist in building their track record in the industry.

The providers of management consulting services, especially the small and medium-sized players need to strengthen outsourcing capabilities to be able to meet the diverse needs of clients and compete with large multifunctional consulting firms. But at the same time, greater differentiation in core competencies should be developed.

Joint ventures between foreign and local consulting firms should be encouraged to foster technology transfer and training. There is a need for

15 consulting firms to strengthen technology through management tools. But these ventures should be viewed as a long-term partnership for both parties. The contractual agreement should clearly define responsibilites of each firm.

Important suppliers of human resources, information and technology should likewise be developed. Academic institutions and professional schools should be encouraged to offer electives in management consulting services and practices(management services , for accountants) as well as opportunities to conduct practicum training in consulting firms to develop awareness among future business leaders about the role that management consulting play in the economy. This will create opportunities for acceptance of management consulting in the future among these business leaders as an important tool to assist management and not just another “expense or cost” that a company would incur. In the Philippines, unlike in more developed countries like US and Europe where consulting is a standard, expected business practice, Filipino consulting firms, especially the small and medium- sized firms are not used to getting consultants. Cooperation from information suppliers like the government agencies such as NSO, NSCB, SEC, and DTI is needed. This is further explained in the next section of this study concerning performance monitoring scheme. Technology suppliers such as software vendors in the Philippines can assist the industry in developing partnerships with consulting firms to develop branded solutions especially for specialized services offered by management consulting firms. This can be similar to branded solutions developed by market research firms. This is specifically applicable for management consulting firms with differentiated core competencies. IMPHIL can assist in identifying these firms with differentiated core competencies.

Expansion into the foreign market. With a limited domestic market, The industry would have to find ways to enhance competitiveness and expand market into foreign shores. This can be implemented through (1) identification of players with extensive track record in foreign countries and those who are committed towards expanding their market overseas; (2) assist in developing capabilities for international market penetration of these players; (3) monitor performance in foreign markets and continuously provide information on market opportunities abroad.

In identifying the players in the industry with extensive foreign experience, based on the profile of players in the industry, particularly IMPHIL members, it can be gauged that many of the consulting firms who were able to be successfully engaged in international projects or projects overseas are those in the areas of development studies and environmental management, engineering and technology consulting through projects with international funding institutions, or partnerships/affiliation with foreign consulting companies. These are the major areas seen where consulting firms can possibly compete in foreign markets.

To assist in building capacities for international market penetration, these players identified can be tapped to represent IMPHIL in international symposia, conferences, sponsored by international consulting associations to be able to network with possible partners, affiliates and clients. Alliances of the established players with extensive foreign experience with other players who have developed their capabilities well but have not had as extensive opportunities as their counterparts can be a means to foster sharing of information, capability building as well as development of specialists. These are cooperative strategies that may be attractive to organizations with limited financial, technological and human resources to contend with. Alliances and consortia among local consulting firms of various specializations should be encouraged. These firms can complement each others capability and expertise to compete with the international market needs’ for projects. They are not formed to undertake a specific project , but exist as a pool of resources available on demand. The lead firm explores markets in developed or developing countries and identifies the consulting firm (or group of firms) in the consortium best suited to provide the required services

Also, through its international affiliations, IMPHIL can facilitate global collaboration among management consultants. Establishing and strengthening a secretariat for IMPHIL would go along way to implement these collaborative actions. This will build the electronic infrastructure to facilitate formal and informal connections between Philippine members and members of institutes in other countries. The level of association between Philippine consultants and consultants in other countries will measure the progress made on the issue.

Trade commissioners in foreign posts can benefit from informed, immediate support in promoting the industry. The IMPHIL and government- initiated agencies can examine the feasibility of a “secondment” program that would place experienced management consultants in selected number of foreign posts for a specified period, say, for two-year terms. The countries selected would be in which the Philippines has significant business opportunities. The secondees would be involved in formulating and chanelling specific opportunities to Philippine management consultants. The secondees could also build relationships with local consulting firms and contractors of large projects. Such relationships can provide valuable intelligence about required service offerings in the global market.

Also with the ongoing, computerization efforts in the government, if these are successfully implemented through the GISP, management consulting industry can benefit with its access to better information and access to better communication

17 Institutionalize the development of the management consulting services sector. Governments and private sector should recognize that developing the local consulting profession is a long-term process of institutional development. based on the development of human resource, information and technology. These can be done by designating a team as the focal point with responsibility in preparing and monitoring the strategy and plan of action for developing the profession. This can be a combination of representatives from the associations and DTI, universities, professional societies, and national associations of consultants should play a more active and effective role in raising the professional standards and quality of performance of the consulting profession. Formal linkages between professional schools and the consulting industry should be established. This practice is prevalent in other countries especially in the US which paved the way for development of new management tools and specialists, as well as participation of Philippine consulates as institutional marketing arm of the industry in different countries. Consulates abroad should engage in aggressive marketing efforts to market services abroad and conduct follow- through on targeted partners and clients. Targeted clients are those who may want to conduct business in the Philippines and would need consulting assistance or foreign companies who would want to get the services of Filipino consultants/consulting firms

To properly monitor the performance of the industry , the following are the key result areas that need to be addressed:

National Information database. Based on the data presented on the profile of establishments and practicing consultants in the Philippines, it can be gauged that one of the weaknesses of the industry is the weak database it has. There is lack of information to monitor the performance and contribution of the management consulting service subsector to the economy.

In this aspect, there should be a close coordination between the information centers of the National Statistics Office, Securities and Exchange Commission, Department of Trade and Industry and IMPHIL, as a representative from the industry sector to identify the needs of the industry in the performance of growth and opportunities. Specifically, the following improvements can be made:

18 FIDIC, for example, this is regularly done to determine emerging trends in the market. The following are some of the suggested surveys that can be conducted at different points in time: o Survey on the amount/percentage share of sales generated by each company - classified by industry/sectors served - classified by services rendered - classified by source (domestic sales or export sales) This will assist in identifying trends in the market and market performance. It will also support any marketing activities that can be initiated by IMPHIL to improve performance in the domestic and foreign market. o Survey on training needs. This will assist IMPHIL in the design and implementation of a professional development program that can assist capability building in the industry. o Survey on professional designations and expertise of consultants in the Philippines. This will assist IMPHIL in determining outsourcing strategies especially for larger projects where cooperative collaborations are formed to better compete in the market. o Survey on the extent by which information technology is used in the companies. This will again assist IMPHIL in determining information-technology related seminars that can be conducted through the professional development program of IMPHIL.

Accreditation of Consultants. An accreditation system of management consultants may be implemented with the assistance of the Department of Trade and Industry, NEDA and IMPHIL to establish consultancy as a profession and safeguard the quality of consultancy services in the Philippines.

An accreditation system of management consultants may be implemented by DTI and IMPHIL to establish consultancy as a profession and to safeguard the quality of consulting services delivered. It is necessary, that an appropriate legislation , especially of similar measures like the National Consultancy Act may be lobbied by IMPHIL and COFILCO for DTI to implement such accreditation. Accreditation by specialization may provide proper categorization of consultants. The Certified Management Consultant (CMC) designation on practitioners who successfully complete its course of study and practical experience requirements and adhere to uniform code of professional conduct can be given according to area of expertise or specialization.

A tax incentive scheme for companies including small and medium sized firms who will avail of consulting services from accredited consultants may likewise be implemented through proper legislation in order generate more patronage for local consulting firms. This will create additional domestic demand for the consulting profession.

An In-depth study on the Management Consulting Services Industry in the Philippines

“Four issues will shape the consulting industry. Firms that can come to grips with them are likely to be among the largest and most successful: (1) technology; (2) global reach; (3) human capital; and (4) relationship management.” - Ed Pringle

Introduction

In the line of this events, the Philippine management consulting industry is a promising sector that has been identified as one of the priority subsectors where the Philippines can possibly enhance its competitiveness. For this purpose, this paper aims to achieve the following objectives: 1. determine the scope of the management consulting services industry 2. present the industry structure in both the international and local setting 3. identify the laws affecting the trade of management consulting services 4. identify the conditions in entering foreign markets 5. provide information on existing local and international associations and their efforts towards enhancing competitiveness of management consulting industries 6. provide information on the market potential and demand in the Asia Pacific, Europe, North America and other regions worldwide 7. identify training needs that could enhance competitiveness of the management consulting services industry 8. identify opportunities and threats faced by the management consulting services industry 9. determine the degree of competitiveness of the Philippine management consulting services industry 10. propose strategies and plans to enhance the competitiveness of the Philippine management consulting services industry.

20 11. identify areas necessary in the implementation of a performance monitoring scheme for the industry 1. The Industry

1.1 Scope and Definition

An analysis of the industry would require an understanding of its coverage and definition. Management consulting service industry is a subsector of the larger industry of business services. According to Greiner and Metzger, management consulting industry consists of individuals and organizations that offer ”professional advisory services contracted for and provided to organizations by specially trained and qualified persons who assist, in an objective and independent manner, the client organization to identify management problems, analyze such problems, recommend solutions to these problems, and help, when requested in the implementation of solutions”.

Management consulting services is traditionally structured in accordance with the structure of management functions– production/operations, human resource, marketing and finance. The World Trade Organization (WTO) Classification, which is the basis of most international trade agreements, is similarly based on the said structure. The Philippine classification and definition is also presented in this section to aid in the analysis of the Philippine management consulting services industry.

1.1.1 United Nations Central Product Classification (UN CPC)

WTO uses the United Nations Central Product Classification (UN CPC) as a guide in the classification of industries. UN CPC has more than one existing version that can be used in the classification, two of these are the Provisional Code and Version 1.0. The Provisional Code, which was developed in 1989, was the code used during the General Agreement on Trade in Services (GATS). The CPC Version 1.0, on the other hand was the more recent version developed in 1997.

According to the UN Provisional Code, management consulting services industry is among the subsectors classified under business services. Business services industry includes legal, accounting, auditing and bookkeeping services; taxation services; market research and public opinion polling services; management and consulting services; architectural, engineering and other technical services. The UN CPC Version 1.0, on the other hand have more subclassifications as compared to the Provisional Code. Management consulting services industry falls under the subsector

21 of consulting and management services, which falls under other professional, scientific and technical services subsector , which is in turn under the business and production services industry. Consulting and management services include management consulting services, business consulting services, scientific and technical consulting services n.e.c., computer consultancy services, computer facilities management services, systems maintenance services, and other management services, except construction project management services

Management consulting industry includes firms and individuals who offer advisory, guidance and operational services related to general management, financial management, marketing management, human resources management, production management and other management consulting services. This scope and coverage of the management consulting industry presented differences between the Provisional Code version and Version 1.0. The Provisional Code includes public relations consulting services under management consulting industry while the CPC Version 1.0 separated public relations services into a different subsector called the business consulting services. Table 1 presents a detailed outline of the scope and definition of each of the services offered by firms in the management consulting services subsector.

Table 1. Scope and definition of the management consulting services subsector based on UN CPC Provisional Code and Version 1.0 Management consulting services Coverage General Advisory, guidance and operational assistance services concerning business policy management and strategy and the overall planning, structuring and control of an organization. consulting services More specifically, general management consulting assignments may deal with one or a combination of the following: policy formulation, determination of the organizational structure (decision-making system) that will most effectively meet the objectives of the organization, legal organization, strategic business plans, defining a management information system, development of management reports and controls, business turnaround plans, management audits, development of profit improvement programmes and other matters which are of particular interest to the higher management of an organization. Financial Advisory, guidance and operational assistance services concerning decision areas management which are financial in nature, such as working capital and liquidity management, consulting services determination of an appropriate capital structure, analysis of capital investment proposals, development of accounting systems and budgetary controls, business valuations prior to mergers and/or acquisitions, etc. Exclusions: security broking and fund management services, advisory services on short-term portfolio management which are normally offered by financial intermediaries. Marketing Advisory, guidance and operational assistance services concerning the marketing management strategy and marketing operation of an organization. Marketing consulting consulting services assignments may deal with one or a combination of the following: analysis and formulation of a marketing strategy, formulation of customer service and pricing policies, sales management and staff training, organization of distribution channels (sell to wholesalers or directly to retailers, direct mail, franchise, etc.), organization of the distribution process, package design and other matters related to the

22 Management consulting services Coverage marketing strategy and operations of an organization. Exclusions: public relations services, advertising services. Human resource Advisory, guidance and operational assistance services concerning the human management resources management of an organization. Human resources consulting consulting services assignments may deal with one or a combination of the following: audit of the personnel function, development of a human resource policy, human resource planning, recruitment procedures, motivation and remuneration strategies, human resource development, labour-management relations, absenteeism control, performance appraisal and other matters related to the personnel management function of an organization. Production Advisory, guidance and operational assistance services concerning methods for management improving productivity, reducing production costs and improving the quality of consulting services production. Production consulting assignments may deal with one or a combination of the following: effective utilization of materials in the production process, inventory management and control, quality control standards, time and motion studies, job and work methods, performance standards, safety standards, office management, planning and design and other matters related to production management. It also includes services provided by agronomists and agricultural economists. Exclusions: advisory services and design for plant layout and industrial processes which are normally offered by consulting engineering establishments. Public relations Advisory, guidance and operational assistance services concerning methods to services* improve the image and relations of an organization or individual with the general public, government, voters, shareholders and others. Other management Advisory, guidance and operational assistance services concerning other matters. consulting services These services include industrial development consulting services, tourism development consulting services, etc. It also includes logistic consulting services • Public relations services is classified under a separate subsector of business consulting in CPC Version 1.0 but is included under the management consulting subsector in the Provisional Code Source: United Nations Classifications Registry of CPC Version 1.0 and Provisional CPC. http://esa.un.org/unsd/cr/registry/regcst.asp.

1.1.2 Philippine Standard Industrial Classification (PSIC)

In the Philippines, the PSIC or Philippine Standard Industrial Classification of the National Statistics office is used as a basis for the classification of industries and the subsectors. Similar to the United Nations Classification, there are different versions of the PSIC Code, namely the 1977 PSIC and 1994 PSIC. But unlike the United Nations classification where business consulting and management consulting services are separate subsectors, in the PSIC, the subsector is combined in one subsector named as “business and management consultancy services or activities”. The definition of this subsector, for the 1977 and 1994 PSIC codes, coincide and is explained in Table 2.

Table 2. Scope and definition of business and management consultancy services subsector based on the PSIC Code. Coverage

1977 PSIC Inclusion Code 7414 • Provision of advice, guidance or operational assistance to business • Activities involving public relations e.g. through image building and opinion molding,

23 Coverage 1994 PSIC to improve the relations of client with the public, the media or others, other than by Code 85905 paid advertisements, welfare and charity affairs, politics, lobbying • Activities in connection with planning, organization, efficiency and control, management information etc. • Combined management consultancy and actual management e.g. by agronomists and agricultural economists to farms etc. • Arbitration and conciliation between management and labor • Activities of management holding companies

Exclusion • Computer activities, legal advice, accounting, auditing and bookeeping, market research, technical advisory e.g. Engineering and Architecture

Source: 1994 Philippine Standard Industrial Classification, National Statistics Office

The WTO definition and the PSIC definition coincide except for one area: the PSIC includes activities of management holding companies. This important detail will therefore be taken into consideration in the analysis of available government data related to the industry.

In this study, the scope and definition of the WTO will be used to provide the framework for discussion but taking into consideration the unique nature of the industry of being very fragmented and diverse. The industry consists of a group of companies that serve the needs and wants of their clients as specified in the coverage in Table 1 but who may also at the same time belong to related industries excluded in the definition such as accounting, audit and financial service firms, engineering and architecture consulting firms, technology consulting firms, employment agencies, and market research firms.

1.2 Industry structure

The reconstruction after the war, rapid growth of business and economy, technological changes, emergence of new developing economies, and expansion of finance, commerce and industry across different countries are some of the factors that created favorable opportunities and demands for the introduction, development and growth of the management consulting services industry.

The development of management consulting services in different countries are similar yet different in various aspects. This section presents the industry structure of the management consulting services industry in two ways- one is based on the global point of view and the other is based on the situation in the Philippines.

1.2.1 Global management consulting services industry

The management consulting services industry, by its very nature is global. The larger consulting firms operate internationally and have offices in various countries.

In 1992, it was estimated that the consulting business sold over US $ 28.3 billion of advice, which further grew to US $ 43 billion in 1995. At present, the Kennedy Research Group estimated that the total consulting revenues worldwide is US $ 62 billion and growing between 10 to 30% annually from country to country.

Based on services offered, it was estimated that technology planning represents 35 percent of the output, strategic services have a share of 20 percent and enterprise consulting covers around 15 percent .

Location of leading firms. Table 3 provides a listing of the 50 largest management consulting firms according to Consultant News. Forty two out of the 50 firms are homebased in the US, eight are based in Europe (two are based in France, three are in London, one is in Netherlands and two are in Germany). But even with the dominance of the largest consulting firms that eat a significant share in the market, consulting remains a fragmented business where thousands of small specialty firms prosper.

Table 3. 50 Largest Management Consulting Firms Firm Main Office 1. Andersen Consulting Chicago, IL, USA 2. PricewaterhouseCoopers New Yor, NY, USA 3. Ernst & Young Cleveland, Ohio, USA 4. Deloitte Consulting New York, NY, USA 5. Computer Solutions Corporation El Segundo, CA, USA 6. KPMG New York, NY, USA 7. McKinsey & Company New York, NY, USA 8. Cap Gemini Paris, France, EUROPE 9. Mercer Consulting Group New York, NY, USA 10. Arthur Andersen Chicago, IL, USA 11. A.T. Kearney Chicago, IL, USA 12. Towers Perrin New York, NY, USA 13. Booz-Allen & Hamilton McLean, VA, USA 14. IBM Consulting Somers, NY, USA 15. American Management Systems Fairfax, VA, USA 16. Keane Boston, MA, USA 17. Hewitt Associates Lincolnshire, UL, USA 18. Sema Group Paris, France, EUROPE 19. Logica London, United Kingdom, EUROPE 20. The Boston Consulting Group Boston, MA, USA 21. Watson Wyatt Worldwide Bethseda, MD, USA 22. DMR Consulting Group Montreal, PQ Canada 23. CMG London, United Kingdom, EUROPE

25 Firm Main Office 24. Aon Consulting Group Chicago, IL, USA 25. Cambridge Technology Partners Cambridge, MA, USA 26. Arthur D. Little Cambridge, MA, USA 27. Bain & Company Boston, MA, USA 28. Debis Systemhaus Fasanaweg, Germany, EUROPE 29. PA Consulting Group London, United Kingdom, EUROPE 30. Woodrow Milliman Seattle, WA, USA 31. Origin Eindhoven, Netherlands, EUROPE 32. Telecordia Technologies (formely Bellecore) Morristown, NJ, USA 33. Buck Consultants Secaucus, NJ, USA 34. Metzler Group Chicago, IL, USA 35. Roland Berger & Partner Munich, Germany, EUROPE 36. Technology Solutions Company Chicago, IL, USA 37. Whitman Hart Chicago, IL, USA 38. CTG Buffalo, NY, USA 39. CBSI Farmington Hills, MI, USA 40. Renaissance Worldwide Newton, MA, USA 41. Hay Group Philadelphia, PA, USA 42. Mitchell Madison Group New York, NY, USA 43. Perot Systems Dallas, TX, USA 44. INS Sunnyvale, CA, USA 45. McGladrey & Pullen Schaumburg, IL, USA 46. CIBER Englewood, CO, USA 47. Monitor Company Cambridge, MA, USA 48. First Consulting Group Long Beach, CA, USA 49. Horwath International New York, NY, USA 50. Hagler Bailly Arlington, VA, USA Source: Consultant News, http://www.kennedyinfo.com/mc/cn50.html

Financial performance of leading firms in the industry. Table 4 presents the revenue performance of the 1998 leading global consulting revenues for the top ten firms. It can be noted that based on the total revenues of US $ 62 billion, the top ten firms have more than 50% of the share. And the recent growth rate is often more than the industry average of 10 to 30% annually.

Table 4. Performance of the World’s largest consultancies Most recent Previous year’s year’s Growth revenue revenue rate Effective Number of Rank Firm ( $ million) ( $ million) (%) Date consultants 1 Andersen Consulting 8,307.0 6,647.0 24.9 Dec 98 53,416 2 PricewaterhouseCoopers 6,000.0 4,286.0 40.0 Jun 98 39,000 3 Ernst & Young 3,970.0 2,950.0 34.6 Sep 98 16,450 4 Computer Sciences Corp 3,500.0 3,000.0 16.7 Mar 99 20,000 5 Deloitte Consulting 3,240.0 2,310.0 40.3 Aug 98 Not available 6 KPMG 3,000.0 2,300.0 30.4 Sep 98 14,000 7 McKinsey & Company 2,500.0 2,200.0 13.6 Dec 98 Not available 8 Mercer Consulting Group 1,543.0 1,338.0 15.3 Dec 98 Not available 9 Arthur Andersen 1,367.6 952.9 43.5 Aug 98 Not available 10 At Kearney 1,234.0 1,061.0 16.3 Dec 98 2,583 Source: Management Consultant International, June 1999 International Accounting Bulletin

Classification of firms. Management consulting firms cater to diverse problems of management and diverse types of

26 businesses and industry. It is therefore expected that management consulting service firms are diversified in the services they offer, markets they serve, status, and organization. Consulting firms can either be classified based on “service expertise” such as corporate strategy, human resource development, financial valuation or materials requirements planning. However some would be classified based on “industry expertise” such as semiconductors, telecommunications, social services, among others. And furthermore some can be classified based on clients served such as the private sector, government sector or international funding institution. Firms can also be classified based on status in the market and organization.

Firms can also be categorized based on status in the market: the industry elite, the big five, and boutique firms. The industry elite includes the rich and famous of the consulting world. These companies provide advice to executives which are considered as cutting-edge strategy and operations. The best graduates and MBAs are usually in these firms like Arthur D. Little, AT Kearney, Bain & Co., Booz-Allen & Hamilton, Boston Consulting group, McKinsey & Co., Mercer Management Consulting, and Monitor Co., to name a few. The firms known as the Big Five are usually those that belong to the biggest accounting firms that offer also consulting services. These are Andersen Consulting, Price Waterhouse Coopers, Ernst and Young, Deloitte Consulting, Coopers and Lybrand, and KPMG Peat Marwick. Recently, the SEC in US had ordered a separation of the auditing and consulting units of these firms to safeguard conflicts of interest. Ernst and Young sold their consulting firm to a French company named Cap Gemini while Arthur Andersen spun off Andersen Consulting. Table 5 presents a profile of the big five firms based on interviews by webfeet.com. The major players in the global management consulting sector offer a full array of services from strategy management to technology management. These services are rendered to both private and public sectors. Their competitive advantage lies mostly on their ability to develop services into one that meets the changing needs of their clients. They still offer the basic traditional consulting services related to strategy management, financial, operations, marketing and human resource management but packaged accordingly based on new trends in technology. And growth areas, as mentioned by these major players are in the areas of e-business, information technology, change management and in service industry sectors of communications, health and finance. Boutique firms are usually smaller firms that specialize along industry or functional lines. They

27 have more focus as compared to the Big Five. (http://www.kennedyinfo.com).

Table 5. Profile of major players in the global management consulting services industry based on interviews made by Wetfeet.com Consulting Services and Competitive Advantage Growth areas Firm Customers Andersen Consulting Services Continuously redefine Technology and strategy management consulting Technology since the 1950’s e-Economy management Continuous growth of Business Process Management Strategy around 20% per year outsourcing service (which topped management the US $1 billion mark in revenues)

Process management Growth in the Financial Services (33 % growth in 1998; US $ 2.5 Change management billion)

Customers Growth in the Communica-tions Services (30 % growth in 1998; US Top corporations $ 1.2 billion) (Fortune 500) from various industries Growth in the Chemical and Health Services (42 % growth in 1998)

Deloitte Only firm who has been Invesrment and growth in major consulting Services able to combine all transformationa reas – strategy, aspects of enterprise process, technology and change Enterprise transformation services leadership transformation and the unique HR models for each service , Strategy under one roof Management Known for having a very collegial work environment, both with clients and their people KPMG Provision of industry- Consulting Services leading internet based Technology alliances such as those solutions for clients in the with Cisco to develop global tele- Internet integration Fortune 1000 communica-tions services across services companies, the middle industries and with Qwest for amrket and the public internet-based applications Customer relationship sector management, hosting and service management providing Ability to provide rapid Supply chain implementations using management preconfigured , templated solutions Knowledge management Most experienced consulting workforce Financial averaging 13.5 years of management industry experience

28 Consulting Services and Competitive Advantage Growth areas Firm Customers

Human resources Strategic alliances with management Cisco, Microsoft and Qwest Strategy management Revenue growth outpace the consulting industry Branding average

Design/Media

Infrastructure technology enabling

Hosting/ Outsourcing

Customers

From those in the six industry lines of business:

1)Communiications and Content 2) Consumer and Industrial markets 3) Financial Services

4) Health Care 5) High Technology 6) Public Sector Pricewater- Few of the full-service e-business consulting house Services firms around (accounted for 40% growth in Coopers 1998) which will be used for the Training Programs following :

Human Resources building customer loyalty Solutions achieving market leadership Outsourcing optimizing business processes e-business consulting reaching new markets

enhancing human capital

harness technology

manage risk and compliance Ernst & Young Intensive use of internet e-business Services Most Admired Investment in Patent & license Advice on tools in tax, Knowledge Enterprise exchange, the first e-business accounting and (MAKE) awardee marketplace for safe and efficient corporate finance through the Knowledge sale of patents, licanses and other Web that gives access to intellectual property Corporate finance more than 651,000

29 Consulting Services and Competitive Advantage Growth areas Firm Customers documents and 700 Online security Lotus Notes databases

Risk management

Valuation of intangibles

E-business acceleration

Source: http://www.wetfeet.com

According to the International Labour Organization’s reference on Management Consulting, there are seven types of consulting organizations. These are ; (1) large multifunctional consulting firms; (2) management consulting services of major accounting firms; (3) small and medium-sized consulting firms; (4) sole practitioners; (5) consulting professors; (6) consulting services of management institutions; and (7) non-traditional suppliers of consulting services.

Large multifunctional consulting firms are firms referred to as “full-service” management consulting firms which are able to provide “total service packages”. They are usually multinational consulting firms that prefer to serve large and multinational clients. They also usually develop specialized services to make their organizations competitive – specialization in either a sector or service. It is a debatable issue on whether offering a full array of services is a competitive advantage for these firms. Some would argue that the convenience of having a single “one-stop-shop” is worth it if one would not compromise the quality of service provided.

Major consulting services of accounting firms developed as major accounting firms organized their MAS or management advisory services units. Recent years saw the growth of these units which made many big accounting and audit firms move towards the process of separating their auditing units with their consulting units. Ernst and Young sold its consulting unit to European powerhouse Cap Gemini Group for US $11.3 billion. Pricewaterhouse Coopers said that it would also separate its accounting and consulting divisions and KPMG has filed with SEC to spin off its consulting unit. Arthur Andersen and Andersen also has already split. The conflict of interest of the two units also made it proper to separate the two units. Management consulting firms which were developed from audit and accounting firms benefit from the expertise, image, reputation, client , contacts and assignment opportunities that these

30 accounting firms provided. In the beginning, services offered by these firms are in the same lines of accounting and finance. But at present, it can be seen that services of these firms developed into other areas such as human resource, operations, information systems, control systems and even strategy management.

Small and medium-sized consulting firms embraces a variety of organizations which may be limited to a (1) specific geographical area; (2) specific technical areas such as corporate strategy, training, quality control, ISO management, environmental auditing, compensation survey etc.; and (3) specific sectors in the market such as industries (textile industry, telecommunications industry, hotel and restaurant, insurance etc.) or markets (public sector, private corporation sector, government organizations and non-government organizations).

Sole practitioners or independent consultants outnumber consulting firms. In the United States, 45 percent of all consultants are reported to be independents. They have some industry or functional specialization and get hired on a project basis either by another consulting firm or a client company. The existence of a number of sole practitioners point out to an interest of some organizations in the market to work with independent individuals. These consultants may either be a generalist or a specialist. A generalist emphasizes on a broad management experience, or problem solving and behavioural skills, A specialist works in a narrow technical area. Preference for independent consultants may arise from the need of the market for a highly personalized and flexible approach to problems. In addition, costs may also be a consideration. Most often than not, it is less expensive to hire an independent consultant as compared to getting a contract with a consulting organization. Sole practitioners may be able to work with organizations through informal networks. Small organizations may have more preference for individual consultants while larger institutions may prefer sole practitioners for smaller assignments or specialized tasks. In some instances, independent consultants are also able to get projects through formal networks with consulting organizations and firms. Consulting organizations and firms who need specialists in specific projects maintain a database of possible external consultants who can be tapped, whenever necessary.

Consulting professors are also independent consultants. But they are different since sole practioners makes a living from consulting. Consulting professors are involved in consulting on an part-time but fairly regular basis. In the United States, recent years

31 have seen the development of new ideas and perspectives from the university especially in the Professional Schools of Management . The main contribution of the consulting professors are these new ideas through the combined efforts in teaching, research and consulting and not merely routine consulting work. A small group has even evolved to attain the level of “guru” consulting”. Their output can be seen in a number of management books available and read by a number of executives worldwide.

Consulting services of management institutions are usually found in developing countries to foster local management consulting capabilities. These may be in the form of productivity centers or business schools. Some may have full time consultants or would just have some staff and tap consultants from the institution’s teaching or research personnel.

Non-traditional suppliers of consulting services include those whose main function is something other than consulting. The concept of adding value to one’s product led to the development of these group of consultants. Consulting is viewed as a means to add value to the products or services offered by the company. Some of the members of these group are the following: (1) suppliers and vendors of communication, and computer equipment; (2) computer software houses; (3) commercial and investment banks, brokers, insurance companies; (4) suppliers or equipment and turnkey projects in energy, transportation, drinking-water, irrigation, and other utilities; (5) economic, statistical, and sectoral research institutes and information centres; and (6) other organizations that have turned their internal management service groups into external consulting services. These non-traditional suppliers are also sometimes referred to as the “think-tanks” of the organization. Examples of services offered are strategic studies, model building, forecasting of consumer demand, systems analysis and design, and plant and office automation. Services offered are usually research or technology-based. But research should also not be equated to consulting. Research only forms as the basis of ideas in consulting but research itself is an independent process. Even in the classification of firms, a research organization is different from a consulting organization but are mostly interdependent.

Recent years also saw the growth of the number of internal consultants in various organizations. They were formed to provide consulting services to other units in the same organization. There are many who criticize these internal consultants. Many say that they can be useful staff function but does not deserve to be called

32 as management consulting because of lack of independence and objectivity. In some cases, what is done is to make use of both external and internal consultants to work in teams. As early as 1976, the Institute of Management Consultants in the United Kingdom agreed that the term independent practice “shall include consultants engaged as in-house consultants who meet the required standards of knowledge, experience, and competence and are free at all times to offer objective and independent advice”.

Competition. There is very high competition in the industry as reflected by a market where according to Milan Kubr, “supply has matched and even outgrown demand”. This is indicated by the (1) increasing number of players that enter a market characterized by minimum legal barriers for entry; (2) growing sophistication of clients who become more selective resulting to the development of a number of new and specialized services to address the complexity of new management problems; (3) increase in efforts towards advertising and marketing of consulting services; and (4) continued internationalization of consulting firms.

Competition is usually based on the following: (1) skills and expertise of consultant/s; (2) development of new executive management tools and/or services; (3) reputation/track record as an expert in providing the service; and (4) network/s of clients established by consulting firms/individuals; and (5) price.

Skills and expertise of consultants. Consulting is an idea- driven profession. Consulting firms boom and fade as tools such as reengineering go in and out of fashion. But for majority of consultancies, the most important asset is still its people. Over time, consulting firms that do the best work for clients are the ones with the best people. Hiring of consultants is an important factor in the success of management consulting firms. Few consultants today get hired simply by being smart. Both service expertise and industry knowledge based on educational background and experience are prerequisites before being hired.

Development of new executive management tools and/or services. As more and more complex management problems are being addresed by consultants, various services offered by management consulting firms are being developed and serve as one of the factors that drive competition in the industry. There are efforts made to increase long-term benefits derived by clients from consulting projects. Table 6 presents a profile of some of the management consulting services developed by various firms.

33 Price. According to ILO, the basis of price for consultancy charges and fees are based on (1) salaries and fees of consultants which may vary depending upon the specialization, level, and experience of the consultant; (2) marketing policies such as fees charged by competitors, fees for different market segments, promotional fees for new services, subsidized fees for some countries through government financing of consulting services made for small enterprises, fees determined by clients (based on their budget allocation), and congruency of fees with consulting company’s image.

Table 6. Profile of various management consulting services offered Management Consulting Prominent global firms offering the service Description service Strategy Advisory, guidance and operational A. T. Kearney (Chicago, IL) Consulting assistance to companies in the area of Advisory Board (Washington D.C.) strategic planning for the next two to five Andersen Consulting Strategic years. This can involve choosing a strategy for Services (Chicago, IL) growth , making suggestions for restructuring, Arthur D. Little (Boston, MA) providing international expertise, suggesting Bain & Co. (Boston, MA) acquisitions/divestitures and revitalizing Booz Allen & Hamilton (New York, leadership. NY) Boston Consulting Group (Boston, MA) Conner & Company (New York, NY) Braxton Associates (Boston, MA) Coopers & Lybrand (New York, NY) Corporate Decisions (Boston, MA) CSC Index (Cambridge, MA) Dean & Company (Vienna, VA) Delta Consulting group ( New York, NY) Gemini Consulting (Morristown, NJ) GeoPartners Research (Boston, MA) LEK/Alcar Consulting Group (Boston, MA) Linkage (Lexington, MA) McKenna Group (Palo Alto, CA) McKinsey & Co. (New York, NY) Mercer Management Consulting (Lexington, MA) Mitchell Madison Group (New York, NY) Monitor Company (Cambridge, MA) Parthenon Group (Boston, MA) Piper Trust (London, UK) Strategic Decisions Group (Menlo Park, CA) Strategos (Palo Alto, London) Symmetrix (Boston, MA) Vertex Partners (Boston, MA) Systems Advisory, guidance and operational Andersen Consulting (Chicago, IL) Consulting assistance to companies in the area of Arc Partners (New York, NY) optimal configuration of their information Cap/Gemini America (Morristown, systems, integration of information systems, NJ) introduction of client-server computing, Claremont Technology Group participating in software design and (Seattle, WA)

34 Management Consulting Prominent global firms offering the service Description service recommending hardware purchases. CSC Index (Cambridge, MA) CTG Digital Consulting (Maynard, MA) EDS (Plano, TX) Ernst & Young (Chicago, IL) IBM (Armonk, NY) James Martin (Fairfax, VA) Princeton Consultants (Princeton, NJ) Simulate (Philadelphia, PA) Technology Solutions (Chicago, IL) Tower Group (Newton, Ma) Trans-Tech (Chicago, IL) Process- Advisory, guidance and operational A. T. Kearney (Chicago, IL) Oriented assistance to companies in the area of AT & T Solutions (Chicago, IL) Consulting increasing productivity by improving business Boston Consulting Group (Boston, processes. M.A.) Coopers & Lybrand (New York, NY) CSC Index (Cambridge, MA) Ernst & Young (Chicago, IL) Hackett Group (Hudson, OH) JLA Consulting International (Toronto, CA) Price Waterhouse Finance-Related Advisory, guidance and operational Andrew Kalotay Associates (Sea Cliff, firms assistance to companies in the area of finance NY) such as pricing of securities, strategies for A.B. Laffer & associates (Los creating shareholder value, business Angeles, CA) valuation, economic forecasts and analysis or Boston Consulting group (Boston, suggestions for Treaury management, MA) Coopers & Lybrand (London, UK) Hackett Group (Hudson, OH) Houlihan Lokey Howard & Zukin (Los Angeles, CA) Ibbotson Associates (Chicago, IL) LEK/Alcar Group (Boston, MA) McKinsey & Co, (New York, NY) Mitchell Madison Group (New York, NY) Stanford Consulting Group (Menlo Park, CA) Stren Stewart & co. (New York, NY) Treasury Management Associates (Aurora, Co) Wilshire Associates (Los angeles, CA)

Human Advisory, guidance and operational A Foster Higgins resources assistance to companies in the area of making Automated Concepts (Chicago, IL) Services decisions on hiring, compensation benefits and Buck Consultants packages, pension funding decisions, benefits Cambria Consulting (Boston, MA) of a diverse workforce, employee development Forum Corporation (Boston, MA) programs, organizational learning and training. Harbridge House The Hay Group Hewitt Associates (Lincolnshire, IL) HRStrategies (Detroit, MI) Linkage (Lexington, MA) Milliman & Robertson Management Science Associates SIA Consulting Group

35 Management Consulting Prominent global firms offering the service Description service Sibson & Company (Princeton, NJ) Wyatt Group (Chicago, IL) Towers Perrin (New York, NY) Source: http://www.cob.ohio-state.edu

Recent trends in global management consulting, as shown in Table 5, are moving towards the convergence of management and business processes and information technology such as e- business consulting making traditional consulting practices in danger of becoming less relevant in the Internet age specifically for private client companies. Information technology specialists are usually among the fastest growing sectors in the consulting industry. WTO separates IT services in a different subsector, however, some sectors in the industry consider them as direct competitors that eat a share in the market.

Reputation/track record as an expert in providing the service Another source of competition is based on reputation and track record as an expert in providing the service. These are usually gained after years of experience and after handling a number of consulting projects on one’s specialization. Smaller and new players , at times, have difficulty and face stiff competition for lack of experience and track record as compared to larger firms. Clients would usually require a listing of previous consulting projects and clients of the consulting firm or individual together with the profile (academic achievement and working experience) of the consultants directly working with the firm.

In the internationalization of management consulting service firms, the country’s image and reputation as a source of credible consultants with reliable management tools and services for specific clients’ needs also play an important role in the competition. US is now known for most of the management consulting services offered. Europe is known more for economic and financial management services offered.

Network/s of clients established by consulting firms/individuals. Lastly, the network/s of clients established by consulting firms/individuals is a major factor in industry competition. Marketing of services is usually based on personal networks, both formal and informal. These are usually gained through exposure to previous consulting projects and/or work experience of consultants, industry and/or professional associations. Larger firms have recently engaged in advertising to build its brand name and reputation.

Customers . By location, the largest market was estimated to be in the US where a US $ 15.2 billion was spent for management consulting services industry in 1992, followed by Europe with US$ 7.6 billion, and Asia with US $ 3.2 billion. The rest of the world spent an estimated US $ 2.3 billion.

The social, technological, economic and cultural environment of business and government is changing rapidly. This corresponds to the changes in the customers and demand for management consulting services. The changes are characterized by : (1) increasingly sophisticated clients who, on their own, can handle present management problems formerly handled by consultants; (2) increase in need for consultants who can handle difficult, risky and new tasks that would require a great amount of information, speed of analysis and action ; (3) an approach to problems with an interdisciplinary, intersectoral perspective, innovative, with understanding of social and environmental implications; and (4) availability of special expertise.

Trends also indicate that downsizing in recent years in many companies led to increase in demand for consulting firms to carry out activities that companies no longer have the in-house staff to perform. Outsourcing of information systems, market research, human resource planning, sales force development, and strategic planning have been demanded by corporations. At the same time, downsizing resulted to increase in number of former executives who become consultants.

Also, a fresh demand for consultants to install electronic commerce systems and re-engineer business processes to take advantage of internet fluorished in the past years. This type of services is expected to lead to increase revenues to at least 12 percent in 2000 to US $113 billion annually. These trends gave rise to new players who offer purely internet-based services. Some of the biggest consulting firms in this area are Viant and Scient. These two, along with other internet consulting firms had affected the big management consulting firms that lose e-commerce deals with clients. The scenario had led many consulting firms to undergo their own e-business makeovers. They have been either attracting young, technical people into the company or have been forming partnerships with technology firms.

The buyer of consulting firms usually decides on the selection of the consultant based on (1) track record; (2) reputation ; and (3) price. Good consulting remains expensive. Depending on

37 the type of work, fees can range from US $ 100 to US $ 500 per hour. Fees have not risen significantly for 30 years, after adjusting for inflation.

Suppliers. There are two major resources of management consulting firms, these are the human resources and technology.

Human resources refer to quality and quantity of consultants recruited and developed by management consulting service firms. Table 4 presents the number of consultants in the world’s largest firms. These are made up of generalists and specialists. They come from various disciplines. The nature of services offered by the firms determine the type of expertise needed by the management consulting firms. Recruitment of consultants are usually based on the following criteria: (1) personal qualities like confidence, sense of organizational climate, integrity, and interpersonal skills, among others; (2) education which may range from a college level for staff to masteral and doctoral level for consultants; (3) practical experience based on quality and years of experience in the industry; and (4) age at which candidates are recruited.

The two major sources of human resources are business enterprises and universities. Some consulting firms advertise in business and management journals and periodicals. Others also go to schools, particularly professional business schools and recuit MBAs who may start as a new staff and eventually be trained as a junior to senior consultant or even a partner.

Technology refers to development and implementation of new management tools and services based on information and ideas. The suppliers of ideas are basically the consultants. Information is obtained from journals, books, and other publications as well as information resource centers like the government, academic institutions and industry associations. Consulting firms depend on a strong database of information so as to make a good analysis and provide wise recommendations to clients.

In recent years, the movement of the customers towards internet-based technologies also led to increase in the need for technology firms to supply the needed software technology and infrastructure needed by management consulting firms. E- commerce and internet software firms are eager to build long-term support for their products, particularly at the largest corporations. One of their ways is through people like the management and technology consultants who often install and maintain enterprise-

38 level software and processes. Microsoft recently irked a US 1 billion pact with Andersen Consulting to create a new firm called Avanade. It will make Microsoft a preferred vendor for Andersen clients. Twenty-five thousand Andersen employees will receive training in Microsoft products and Avanade will hire 3,000 technologists to work exclusively on Microsoft-related installations. Similar deals have been signed by KPMG and Cisco and KPMG and Qwest. These are seen to strengthen the management consulting firms but on the other hand, it will also limit the consultancies’ customer diversity especially when certain IT platforms or hardware fall out of favor.

Substitute services and New entrants. Management consulting services are as diverse as the problems posed by managers and executives. This very nature of a highly evolving and diversified service makes it difficult for substitute services to come in. But the advent of information technology resulted to the role of IT providers as both suppliers, new direct competitors, and substitutes depending upon the type of IT provider.

Services offered by internet-based consultancies became substitute products for reengineering solutions and efforts of traditional management consulting firms. While some technology firms tie up with management consulting firms to either broaden services pr converge with services provided by management consultancies. There is also a rise in the growth of purely e- business consulting firms. And this poses a threat to the management consulting firms.

1.2.2 Philippine management consulting services industry

The Philippine’s weak database, particularly for a relatively small sector such as management consulting services, makes it difficult to have current and reliable data on this dynamic and evolving industry. Nevertheless, because of the nature of the management consulting services industry of being internationalized, then there are a number of trends in the global management consulting services industry that is also reflected in the local management consulting services industry.

Contribution to the economy Based on the original figures, the business and management consulting services industry, contributed 0.62% to the Philippine economy and 21.24% to the business services industry in 1994. The industry reported PhP 6.7 billion in revenue sales in 1994 which is 20.18% of the total revenue/sales of the business services industry. There are a total of 9,376 employees in the sector. This is 5.01% of the total

39 employment in the services industry and 0.04% of the total employment in the Philippines. Since the PSIC definition followed by NSO includes activities of management holding companies and do not include output of management consulting services rendered in accounting and audit firms, engineering consulting firms, market research and technology consulting firms then these estimated figures would not really represent the real output of the industry. Nevertheless these estimates would give some indications on the size of the industry. This means that the output of firms whose main activity is management consulting contributed not more than 0.62% to the Philippine economy (if the management holding companies’ output is excluded) in 1994.

Table 7. Contribution of the business and management consulting services to business services industry,1994 (values in thousands of pesos) Percentage Percentage Percentage contribution contribution contribution on Revenue/ On on GVA of Sales of the employment Size of firms business business Employ- in the Gross services services ment business Value industry Revenue/ industry services Added (%) Sales (%) industry (%) Small firms 115,617 6.69 243,824 7.77 1,190 4.82 (less than 10 employees) Large firms 4,633,649 22.46 6,456,294 21.47 8,186 5.04 (10 or more employees) Total 4,749,266 21.24 6,700,118 20.18 9,376 5.01 Source: 1994 Census of Establishments, National Statistics Office

To assist in having more reliable estimates in determining the profile of the Philippine management consulting industry, the available government data which primarily used the PSIC definition would still be presented but to be complemented by some data obtained through validation. Validations were made either through telephone survey or through internet research to obtain a listing of firms whose main activity is management consulting.

Sources of data came from the listing of the SEC’s Top 12000 firms from 1996 to 1998 and Top 5000 in 1999, SEC’s listing of registered firms under business and management consulting sector, the Institute of Management Consultants of the Philippines’ directory of members and existing internet and telephone directories. Although limitations of the validation include the following: 1. Data is mostly limited to corporations. Majority of the players as indicated through NSO data are small firms

40 which may have been established as single proprietorships and partnerships but their number and sizes cannot be verified due to lack of available data. 2. Data do not include individual consultants who also are included in the industry. 3. Data is limited to those with working telephone numbers and websites so that their existence is validated.

Classification of management consulting firms and other firms that deliver management consulting services. In the Philippines, management consulting firms can be classified in a similar manner as global management consultants which includes (1) large multifunctional consulting firms or “full-service” firms with the capability to provide total service packages but were able to develop specific core competencies; (2) Firms which started from accounting firms and now offers consulting services; (3) Firms which offer limited/specific areas or services for specific sectors/market in the industry; (4) Sole practitioners or independent consultants; (5) Consulting professors; (6) Internal consultants; and (7) Non-traditional suppliers of consulting services whose main activities are other than management consulting (suppliers and vendors of technical equipment, software, investment houses, economic, statistical and research institutes, and learning institutes)

Some available information on major players in each of these subsectors are shown in the tables that follow.

1. Large Multifunctional consulting firms or “full-service” firms with the capability to provide total service packages but were able to develop specific core competencies.

These firms mostly cater to both public and private sectors of the market. They usually are engaged in delivering consultancy services to the largest players in the different industries, those companies which belong to the Top 1000 in the Philippines. They usually employ people from different fields of specialization and are usually affiliated with globally known and reputable consulting companies.

Table 8. Large multi-functional consulting firms or full- service firms in the Philippines Company Name Description of Firm SGV & Company The company is now considered as the largest multidisciplinary professional services organization in the country. Services are in the areas of business consulting, corporate finance, e-business, risk consulting, human capital development, outsourcing, and tax services. It is an Arthur Andersen company. Louis Berger It offers professional consulting services in the areas of civil,

41 Company Name Description of Firm structural, mechanical, electrical, and environmental engineering, program management, planning, environmental sciences, cultural resources, information services, economics, policy and management analysis, construction management and support. It is part of the global group of Louis Berger companies. Accenture It is formerly known as Andersen Consulting and affiliated with SGV & Company. It offer business consulting and technology solutions. The Business Consulting office offers services in the areas of strategy and business architecture, change management, business processes, customer relationship management, finance and performance management, human performance management and supply chain management. The Technology Business Solutions Center provides solutions engineering, solutions operations , technology research and management services. EDS International The company has the capability of offering services in four business lines: Management consulting, e-Solutions, business process management and information solutions. The Management consulting is provided by AT Kearney, a global player in management consulting which was acquired by EDS.. Manila Execon Group It is an affiliate of the global company Kepner-Tregoe engaged in services related to strategy formulation and implementation, workplace transformation, systems and cost improvement, redesign of human performance system, and skill development. Iberpacific It is the Asia-Pacific consulting subsidiary of Soluziona Internacional of Spain and also gets its experience and expertise from another company which is Meralco. It provides consulting services in the areas of business intelligence, enterprise resource planning solutions, internet consulting services, IT services, and customized services in the areas of public works development, in the energy sector and environmental management technologies. Pricewaterhousecoopers The company offers strategy and general management consulting services, financial amnagement consulting, organization and human resources development consulting, and information technology consulting. Pricewaterhousecoopers It is presently affiliated with Joaquin Cunanan & Company Leverage International The company provides a comprehensive range of research and Consultants consulting services such as strategy consulting and facilities management, management services, project development services , project planning information technology services, and export development services for both public and private sector clients. Neville Clark Phils The company is an affiliate of Neville Clark absed in UK. Services include consulting and assiatnce of executives in the areas of manufacturing systems development, new product introduction, operational performance improvement, business integration, supply chain management, change management, problem centred training, business re-engineering, benchmarking and strategic application of technology. DTT (Deloitte Touche Tohmatsu) The company is presently affiliated with CL Manabat & Co. after its Consultancy (CL Manabat & disaffiliation with Diaz, Murillo and Dalupan. It provides general Company) business advisory services, financial advisory, business development and strategy consulting, tax services, outsourcing services and audit services. AYC Consultants, Inc. The company offers services which includes market research, feasibility studies, country risk analysis, investment assistance, strategic planning, policy research and conference organization.

2. Firms which started from accounting and audit firms and now offers major consulting services

42 Accounting and audit firms usually have management service units to deliver consultancy services to their clients. But as the global industry moves towards separation of the accounting and audit unit with the management services unit to safeguard controls and conflicts of interest, the Philippine accounting and audit firms also has moved towards affiliation with some of the biggest consulting firms which also started as accounting firms to strengthen their management services competence. Initially, core competence remains to be in the area of financial management consulting. But eventually, as what happened to SGV & Company, these companies evolve into companies that are capable of offereing full-package services to its clients.

Table 9. Firms which started from accounting and audit firms and now offers major consulting services Company Name Description of Firm KPMG (Laya- Mananghaya) The company offers general management consulting services. KPMG was formerly affiliated with Diaz, Murillo and Dalupan and is now presently affiliated with Laya Mananghaya. At present activities are mostly concentrated in financial management consulting. DTTI Consultancy Phils (Diaz, The company offers general management services and financial Murillo, and Dalupan) management services. It was formerly affiliated with Deloitte Touche Tohmatsu until its disaffiliation in 1999. Alba Romeo Management The company specializes in auditing but offers consulting services in Consultants human resource, general management, information technology and legal areas. It is presently affiliated with BDO. RM Management Consulting The company offers general management consulting and auditing, accounting and tax services. DTT (Deloitte Touche Tohmatsu) (see previous table) Consultancy (CL Manabat & Company) SGV & Company (see previous table) Pricewaterhousecoopers (see previous table) (Joaquin Cunanan)

3. Consulting firms which are limited to offering services in specific areas or a specific market/sector/industry

There are management consulting firms who remain to offer services in either limited areas or only to a specific sector or market. This may arise as a result of two existing situations. One, the company may not be big enough, therefore lack the resources and capability of expanding its present line of services or hiring other people specializing in different areas of expertise. Second condition is when a company deliberately decided to concentrate on a particular niche in the market through differentiated services or serving a specific sector/industry/sector.

43 a. Firms concentrating in specific, limited areas like general management, human resource, prodiuction, marketing, franchising, financial management, risk management and development or policy studies

General Management

Companies who offer general management services are usually small to medium sized businesses who customized their services according to the needs of their present clients. These companies do not usually require consultants or personnel who have very specialized areas of expertise.

Table 10. General Management Consulting Firms Company Name Description of Firm Inno-Vision Strategic The company was only formed last year (2000) by educators from De Development Consulting Inc. La Salle University-College of Saint Benilde to help Philippine entrepreneurs in the various facets of business. BSA Sales & Management The company offers services that are customized according to the Consultancy, Inc. needs of the clients in the various areas of business such as marketing, human resource, operations and finance. CLRV Neo-Synergy The company is Filipino owned and concentrates on delivering general management consulting and financial services.

Human Resource Management

These companies usually offer services in the field of human resource management. At times certain companies concentrate on executive recruitment consulting, training, organizational development, change management, or employee benefits and compensation.

Table 11. Human Resource Management Consulting Firms Company Name Description of Firm Impact Consultancy Group, The company is a professional human resource and organizational Inc development consulting firm engaged in training and top management consulting.It serves both private and government clients in the Philippines and its ASEAN neighbors.It is affiliated with Strategic Consulting Services nternational, a UK-based worldwide management consulting firm granting IMPACT with the license to use programs and systems developed in its worldwide network of offices. Asia Business Consultants, The company’s core competencies include manpower development Inc. and training programs/services, executive recruitment, strategy formulation, feasibility and industry studies and institutional development Ancilla Enterprise The company is affiliated with Enterprise Development group in US. It Development Consulting offers consulting, training and research studies with its core foundation in human resource and organization development.

44 Company Name Description of Firm Guthrie Jensen Consultants, The company is a training and management consultancy firm that offers Inc. a wide range of programs in the area of organizational development, sales and marketing, sutomer relations, and organizational communication. Services include public and in-house seminars as well as customized training programs for executives, management, supervisors, sales, and service personnel. George Garrett Guillford The company offers executive search and recruitment consulting Management Consultants services. Ward Howell ZMG The company offers executive search and recruitment consulting services. John Clements Consultants, The group has seven companies that specialize in the area of Inc. recruitment. It offers specialized services in the areas of executive, staff and technology employees recruitment. Processing and documentation for the dispatch of employees to other countries is also done by the company. It also has a Human resources Development Consulting Division that provides development and design of training programs for clients and conduct of public seminars for clients from different industries. Asia Partnership Philippines The company is an international executive search/recruitment (APPI) consultancy. The company searches for middle to senior management level professionals. It specializes in “cross-cultural” recruitment giving attention to the corporate culture of its clients that come from different parts of US, Europe and the Asia-Pacific. Amrop International The company is a partner of the international executive firm Amrop International which has 81 offices in 52 countries. Services include executive search , management audit and assessemrent. Watson-Wyatt Phils This global consulting company deliver services in two specific areas that were combined: financial management and human resources management. Services include benefits consulting, investment consulting, insurance and financial services, human capital development, Strategic Rewards® which aligns rewards system to strategy of company and human resource technologies. Solutions, Inc The company provides human resources consulting (job evaluation, development of salary structure and employee communication), employee benefit consulting , risk management consulting and broking services (insurance). Aedan Associates The company offers training services for employees and at the same time engage in the recruitment and testing of personnel for its clients Stream Training It is a training company that offers training development programs for Consultancy supervisory training, team building, improvement of selling skills of sales people and planning skills improvement.

Financial Management

These companies offer advisory services in the areas of investment, cost management, profit improvement and portfolio management.

Table 12. Financial Management Consulting Firms Company Name Description of Firm Capital Strategies The company provides independent corporate finance advice to companies. It is affiliated with Capital Strategies at UK. Equity Managers Asia, Inc The company is a purely Filipino-owned company engaged in offering financial advice to local clients. Incuventure Asset Managers The company is a purely Filipino-owned company engaged in offering financial advice to local clients.

Marketing Management

These companies offer consulting services related to Formulation and implementation of specific marketing strategies such as customer loyalty programs, direct marketing, image building and other areas.

Table 13. Marketing Management Consulting Firms Company Name Description of Firm Motivation Asia Phils The company is affiliated with Performance Asia Group and Motivation Asia Thailand. It focuses on consulting and research services in the area of Strategic Incentive and Loyalty marketing solutions. . TeamAsia, Inc The company is a corporate communications consulting firm with core competencies in events conceptualization and management, direct marketing and promotion, and corporate identity development. The company also organizes public seminars where world-renowned international business leaders and gurus are invited as speakers. It established a company in Hongkong that specializes in training.

Production/Operations Management

Table 14. Production Management Consulting Firm Company Name Description of Firm Asiatech Resource The company addresses the requirement of the manufacturing sector Management Corporation for expert advice and assistance on program, project and technology management. Services include consulting regarding plant and process definition and design, cale up implementation, project feasibility and financial study, process optimization, equipment fabrication and installation, industrial plant set up, contract management, equipment repair and maintenance and other special projects and services.

Risk Management

The companies found to specialize in risk management consultancy are usually affiliated with UK-based companies where risk management consulting is a common practice.

Table 15. Risk Management Consulting Firms Company Name Description of Firm Pinkerton Consulting, Inc. It is a company affiliated with Pinkerton Consulting and Investigation Services UK, the largest and most established commercial investigation agency in the world with over 60 offices globally. The company offers sull service in the area of intellectual property , investigative business and security audit and consultancy. Control Risks The company is affiliated with Control Risk in UK and is engaged in the business risk consultancy service. It includes political and security risk analysis, confidential investigations, pre-employment screening, security consultancy, crisis management and response and information

46 security and investigation.

Development and Policy Studies

There are also a number of companies that concentrate in consulting services in the development work area such as agriculture, fisheries, forestry, environment, gender issues, local governance, agribusiness, economics, industry studies, rural and urban planning and community development. Clients usually are concentrated on government and international funding institutions. Linkages are usually established with non- government organizations, academe and research institutions. Companies in these sector usually gain ground for international exposure. Projects usually require multidisciplinary skills from economics, business, engineering, development studies, social sciences, agriculture and environmental sciences.

Table 16. Management Consulting Firms involved in development and policy studies/work Company Name Description of Firm Madecor Group The group of companies in Madecor specializes in providing consultancy, training and management services to development projects of government agencies as well as the private sector in the Asia Pacific. Orient Integrated The company provides consultancy, training and management Development Consultants, services to development projects of government, private institutions, Inc. research institutions and academe. Services include areas like integrated regional/rural/area development, environmental resource management, institutional development and local governance. Pacific Rim Innovation and The company offers services to both public and private sectors Management Exponents ranging from pre-investment and feasibility study preparation to detailed engineering design, project management, project benefit monitoring and evaluation, design of management information systems, policy review and formulation, design, packaging and conduct of training programs, and organization of national and international conferences.It is presentlyr egistered in the roster of consulting firms of ADB, World Bank and FAO. SEA Consultants The company’s core competencies include institutional strengthening, capacity building, training, policy and planning, and financial management in agriculture, finance, areas of urban and regional development, education, toursim, transportation and forestrty. Economic Development The company was first established to serve as private management Foundation consultancy and training unit for private firms. Eventually it evolved into a company that focuses on project management, implementation, training, organizing, advocacy, and research in major areas of concern like reforestation, environmental and coastal resource management, and environmental training. IDP Consult, Inc. The company is based in US and specializes on development, economic and policy studies. Many of its projects include those in Asia-Pacific region particularly USAID projects. Associated Resources for The company is involved in designing and conducting training Management and programs for micro-enterprises, human resource planning and Development, Inc. development, community organizing and mobilization, installation of micro-finance systems, design and conduct of socio-economic surveys.

Franchise Management

Table 17. Franchise Management Consulting Firm Company Name Description of Firm GMB Franchise Developers The company assists clients to develop their franchise system and and Consultancy Firm assist entrepreneurs who wanted to engage in franchising.

Business Recovery/Turnaround

Table 18. Management Consulting Firm involved in business recovery and turnaround Company Name Description of Firm Business Recovery and The company specializes in restructuring, recovery, rehabilitation and Turnaround, Inc. turnaround of companies and businesses in the Philippines and the Asia-Pacific.

b. Consulting firms which are limited to offering services for specific sectors/industry/market

These companies usually concentrate on specific industries or sectors such as health services, pharmaceutical industry, tourism industry, fisheries sector, construction industry, sugar production, telecommunications or export companies. The consultants in these firms usually have significant years of exposure and experience in these sectors. They also have a wide array of linkages with the different professional and industry associations in these sectors. They play an important role in their specific sector to provide sound advice and information needs.

Table 19. Management Consulting Firms which are limited to offering services for specific sectors/industry/market Company Name Description of Firm Asia Pacific Projects, Inc. The company specializes in providing strategic planning, general management, marketing, economic, and human resource development advisory services for the tourism sector. It also prepares and conducts training programs in hospitality and travel through its training arm, the Asia Pacific Tourism Training Institute.

Meganomics Specialists, The company offers consulting and research services in the area of International, Inc. agriculture (including fishery, natural resources and environment). It has a

48 Company Name Description of Firm distinctive competence in agribusiness, sustainable urban and rural development, food security, financial, sociological, market, production, processing, and post-harvest feasibility studies. Isis Research Phils The company is part of Isis Research with global headquarters in London 16 offices worldwide. The company specializes in providing qualitative and quantitative healthcare market research services. Services include providing informed interpretation of research results and recommendations to clients. Focus is on healthcare services and pharmaceutical industry. Isis Philippines offers an omnibus study run quarterly among general practitioners, internists and pediatricians. Rider Hunt Liacor It offers a number of professional services aptly described as “Cost Management through all stages of the construction process”. This includes preparation of budget estimates, assistance in value engineering, preparation of cash-flow projections, assist in the pre- qualification of contractors and suppliers, preparation of bid documents, issuance of bid bulletins, contract negotiations and finalizing the contract agreement. The company focuses on serving customers in the construction industry. Code Red Consultancy The company is affiliated with the UK-based Code Red Consultancy. It’s focus is mainly on providing consulting for the finance sector to help them maximize their returns through effective use of technology in meeting business goals. Consultancy by Technicus The company works in close cooperation with Deutsche Telekom asia Corporation Pacific regional headquarters in Singapore. It provides technical resources and assistance in the area of telecommunications. Isla Communications Co. is among its customers. CADP Consultancy Service The company is affiliated with Cantral Azucarera de Don Pedro, a major player in the sugar industry. CADP Consultancy Service provides training and consultancy services in the area of sugar operations. Most of its clients are from abroad who are provided with a share of the internationally-recognized management capability, sugar engineering technologies, and processes in sugar manufacturing with start-up sugar operations. Wright Business & The company specializes in assisting clients in procedures involving Management Consultancy setting up business inside any of the Philippine economic zones. The company provides pre-operations and pre-registration assistance to its clients such as SEC and PEZA registration, preparation of project feasibility studies, site selection etc.)

4. Sole practitioners or independent consultants and consulting professors

There are numerous independent consultants and consulting professors in the Philippines. Some of them practice consulting on a full-time basis while many of the consulting professors practice consulting on a part-time basis. These consultants were able to get clients based on previous association with these private companies or public institutions. They are usually known for a specific expertise that they have. Clients are usually obtained through personal contacts, referrals or through their position or status in the institution where they work or teach. There are already some consultants who advertise their expertise and services they can offer through the internet.

5. Internal consultants

In large client companies, they form their own corporate planning units or departments to serve as internal consultants in the company. In some cases, these units are even spinned- off to become profit centers and become management consulting companies themselves by expanding their market to include not only their mother company but other clients as well.

6. Non-traditional suppliers of consulting services whose main activities are other than management consulting (suppliers and vendors of technical equipment, software, investment houses, economic, statistical and research institutes, and learning institutes)

Technology-based consulting

In recent years, technology based consulting firms have emerged out of the need for new business solutions that would adapt to needed technology. These companies usually arise from software vendors and distributors which eventually ventured into offering full-packaged services from information systems planning to systems analysis to systems design to systems implementation and monitoring. At present, the services offered by these firms have eventually have become more sophisticated and more comprehensive to include what is presently known as Enterprise Resource Planning (ERP) and e- business solutions. Whereas before, these firms have targeted only specific units in the company such as the finance and accounting department and the sales department or the warehouse and purchasing departments for their computerization needs, at present, a total company package is offered to client companies. These involves a reevaluation of business strategy and objectives to determine necessary information technology solutions that could assist in achieving these objectives in the various units of the company and a total business process reengineering.

Table 20. Technology Consulting Firms Company Name Description of Firms WeServSystems One of the largest players in the software industry. It is the software International subsidiary of Fujitsu Philippines and provides technology based consulting and solutions related to systems development, implementation and maintenance. IEWorks The company started out as a training and consulting organization. At present it is involved in delivering e-commerce and web site solutions, enterprise data modeling or business process reengineering and staffing services. MisNet The company provides technology based consulting focusing on Customer Relationship Management and E-business solutions to

50 Company Name Description of Firms integrate business processes and technology solutions. Corporate Information A subsidiary of Meralco which was formed from the Accounting and EDP Solutions departments of Meralco in the 1970s. The company provide technology based consulting and solutions related to information systems planning, business reengineering, and systems integration. Headstrong A new company formed after the merger between digital business management consultancy firm James Martin and investment firms Welsh, Carson, Anderson, Stowe and Hambrecht & Quis Asia Pacific. It offers technology based consulting and business solutions in the Asia Pacific. Asian Computer Group The company is affiliated with Systems Standards Incorporated and engaged in customized software solutions, project management, programming services, IT consultancy, facilities management, networking, systems integration and IT education/training. CM Technologies, Inc The only member of IMPHIL concentrating on consulting in the area of information technology. Services include computer programminf and hardware. Ayala Systems Technology A company which was formed as a joint venture of Ayala, BPI, Mitsubishi Corporation, and ST (Singapore Technologies) Computer Systems and Services, Ltd. Services include systems integration, systems development, networking and communications.

Engineering Consulting Firms

Engineering consulting firms usually require project planning, feasibility study preparation and advisory services in the area of project management which is usually the expertise of management consultants.

Table 21. Engineering Consulting Firms Company Name Description of Firm Cedco Incorporated The company offers a complete range of services from project sourcing, conceptualization in the areas of engineering, economics, environmental management, technical management services, and policy sciences. ProConsult, Incorporated The company offers advisory and review services, planning services, design services, project management, environmental impact assessment, and traffic studies. Schema Konsult, Inc. The company offers multidisciplinary services in the areas of engineering, architecture, project and construction management and project economics. SP Castro and Associates The company is a project management and consultancy organization. It is the country’s first 100% Filipino-owned company certified in project management and construction management. Asian Technicon Managers The company offers services in the areas of project management, & Consultants, Inc. construction management, quantity surveying, technical evaluation, feasibility studies and master development planning. SFI Management The company is engaged in consulting services in the area of property Consultancy management, construction and engineering project management, technical services and human resources management.

Business Intelligence Units

These companies usually provides venues for information sharing through printing, publications or through the internet. They also provide technical and trends analysis to assist executives in planning and decision making.

Table 22. Business Intelligence Units Company Name Description of Firms Property Market Intelligence The company is a provider of Asian property market research information (PMI) Asia, Inc. and technical analysis through internet. It is affiliated with PMI based in Hongkong and serves primarily the Asian real estate industry. Economist IntelligenceUnit The company is an associate of the London-based EIU which is engaged Philippines (EIU) in publishing, research and conference organization. The company conducts quarterly roundtable meetings and peer-group meetings among clients to update and assess prevailing economic, political, social and business conditions as well as corporate operating experiences and concerns. It also regularly provides information through its publications such as The Philippine Alert, The Philippine weekly update, On-call Information Service, and annual corporate surveys of MNC performance and CEO salaries and benefits.

Market Research

The expertise of market research firms usually lie on their capability to offer market research studies and information that are based on a well-developed technology of data gathering, analysis and interpretation. In the field of marketing, they provide marketing consulting advisory services in the form of recommendations on specific marketing strategies to be implemented based on the results of the study.

Table 23. Market Research firms Company Name Description of Firms Trends-MBL The company is part of the MBL group worldwide providing strategic planning, research, and consultancy in management and marketing. Services include quantitative and qualitative market and product studies including branded services such as IdeaMap®, and MarketMind Monitor ® AC Nielsen (Pulse) The company is formerly known as Pulse Group which includes Media Pulse, Consumer Pulse and Dealer Pulse. The company affiliated with ACNielsen, one of the biggest global marketing research firms. It provides retail measurement services, market modeling and analytical services, customized researchs ervices, sales development services, merchandising services, media intelligence services, computer industry services, decision support services and ombnibus surveys. PSRC-Research The company is one of the leading market research organizations in the International Philippines. It provides full service market research services through business and research consultancy. It includes customer and product researches, service measurement, and branded solutions such as Equity engine ®, Loyalty Driver ®, Trace®, and SMART® among others. It is affiliated with the Research International group. It is formerly known as Philippine Survey Research Center. Taylor Nelson Sofres The company is formerly known as Frank Small and Associates. It is a full (Frank Small & service marketing and business research firm. It is independently audited Associates) each year by Ernst & young for compliance with QCSI (Quality Control Standards for Interviewing), an ISO 9000 compliant award. It offers omnibus surveys, advertising and consumer research and product testing. It also has branded solutions like Optima®, NeedScope®, and Miriad®. AGL Market Research The company was newly incorporated in 1999 to provide market research services such as consumer and product researches, brand performance studies, advertising research, sales and distribution research, industrial research, feasibility studies, and corporate image research.

52 Company Name Description of Firms FS & Associates Applied Marketing These companies offer market research services such as product and Research, Inc consumer studies, brand performance studies , advertising and product Asia Research Organization testing research. Dynamic Research Feedback Incorporated

Investment and Financing Companies

Table 24. Investment and Financing companies Company Name Description of Firms Walden AB Ayala The company is a joint venture between Ayala Corporation, and AB Management Capital. Its main activity includes managing a US $ 19.7 million country fund in the Philippines. Consulting activities include such areas as assiatnce in the executive recruitment, corporate and business planning, strategic alliances, fund raising and public listing of companies where Walden has an investment portfolio in.

Learning Institutions/Academe and Non-Government Organizations

There are non-profit institutions and organizations such as academic institutions, professional schools and non-government organizations that are also involved in research and consultancy. In non-government organizations (NGOs) are some NGOs whose objectives include provision of training and consultancy to the sectors that they serve. They usually tap local and international funding institutions to implement their projects. There are a number of NGOs who either tap external consultants to do some research and consultancy work for them or there are some who develop their own capabilities for the said purpose. Academic institutions on the other hand is slowly expanding their function not only as learning institutions but as research institutions as well. A study made by Edralin (2000) for the Commission of Higher Education pinpointed that among higher education institutions (HEI), there are 48 existing public and private schools out of the 198 HEIs surveyed nationwide which have research and development linkages with private sectors and local and international funding institutions for various areas of study . Twenty seven (27) are public HEIs and 21 are private HEIs. The details of the nature of their research projects and

53 donor institutions are shown in Appendix A. Some of the research projects are academic in nature but there are also a number which are applied researches and dwell on development studies which are similar research studies prepared by management consulting companies. For consultancy, there are twelve (12) HEIs found to have formal consultancy linkages with private and public institutions. The nature of these consultancy linkages and the institutions they are usually affiliated with are shown in Appendix B. Again, many of these consultancy linkages are similar to services offered by some of the management consulting companies.

Table 25. Learning and Academic Institutions and Non-Government Organizations Institution Description of Firms Center for Leadership and The company is primarily responsible in delivering the Franklin Covey Change Workshops and Programs for business students, professionals and executives. The programs include Seven habits for highly effective People, Time Management, Leadership, Creating Synergy, Building trust etc. Some of these workshops are also made available through the Ateneo Professional School. Integrative Learning The company provides the necessary tools and training needed by International clients through its “organizational development platforms of integrative learning technology” . Workshops and seminars are conducted in Manila and in other Asean neighboring countires. Center for Empowerment & The company is a non-profit organization engaged in development Resource Development consulting, research and work for small fisherfolk and women in the Fiheries sector. Services include project management, monitoring, evaluation, research, education/training, and institutional development. Institute of Public Health The institute is a non-stock, non-profit organization that offers health Management management training programs, promote practitioner-oriented research through research and technical assiatnce, develop health policy frameworks, assist in capacity building, project development and evaluation. They cater to some projects of the government and funding institutions. SEAMEO regional Center The company is involved in agriculture consulting. Clients include both for Graduate Study and local and government institutions. It is based in UP Los Banos. Research in Agriculture Peak Ground Institute of It is an interdisciplinary institution specializing in business, economics and Policy Research, Inc public affairs. Services include business research and consulting, public policy research and consulting, and advanced human development programs such as the Advanced Management and Executive Development Program and Corporate In-house Program. The company is primarily based in Bacolod City. State Universities such as: State universities and colleges are really mandated to conduct researches UP Diliman, and extension work which usually come in the form of advisory, training UP Manila and consultancy work to assist in economic and social development of UP Los Banos the country. Mariano Marcos State University- Ilocos A number of consulting professors as well as research institutes within Cagayan State University, these learning institutions have been able to establish strong affiliation Mindanao State University with the private sector as well as local and international funding

54 Institution Description of Firms MSU-Iligan Institute of organizations enabling them to delvier similar services as consulting Technology companies in the area of development work, agriculture, industrial Central Mindanao University technology, engineering, economics and social sciences Silliman University Private universities and The Commission on Higher education is pushing for further involvement professional schools such as of academic institutions in research and consultancy. These institutions De La Salle University are usually recognized to become Centers of Research in different Ateneo de Manila University regions and more and more professors are engaged in research and Asian Institute of consultancy work as part of their total professional development. Management University of Asia and the Unlike public state universities who have budget allocation for research Pacific through DOST, a number of private schools have to invest heavily on University of Sto. Tomas organizing research centers as well as providing incentives for professors Mapua Institute of to do research work. These research centers conduct their own Technology marketing efforts to bid for research and consulting projects to the University of the East different funding institutions. Notre Dame University- Cotabato St Louis College-Baguio University of San Carlos

Internet-based service providers

There is also an emerging trend with the increase in the use of the worldwide web to reach more customers. There are firms based in other countries which are offering on-line services and pose a threat to similar consulting and advisory services offered by traditional consulting firms. An example of this is the provision of on-line and interactive training workshops and tools. These kind of services replace the traditional workshops conducted by management training consultants.

Table 26. Internet-based service providers Company Name Description of Firms Career Systems The company is a Berverly Kaye company, an industry leader in the International publishing of dynamic training materials distributed worldwide. The company delviers interactive workshops to assist in the development of the organization’s critical business needs and support retention and development of key organizational skills and competencies.

An analysis of the classification of the different management consulting firms would point out to an emerging trend towards greater diversity in the types of services offered, nature and scope of services offered, markets being served and a growth in the number of types of non-traditional suppliers of consulting services.

Number, Size and Location of establishments. There are a total of 435 consulting firms in the Philippines as of 1994 based on NSO’s census of establishments. This represents 4.89% of the total number of establishments in the business services industry. Small firms with less than ten employees dominate the industry.

55 Large firms comprise 37% of the industry. Since NSO also uses the PSIC definition, these figures include management holding companies and would indicate that management consulting companies would number not more than 435 as of 1994.

Since management holding companies are mostly large firms the trend in the management consulting industry in the Philippines would pinpoint that majority of the players in the industry are small firms, with less than ten employees. But even if the market is dominated by a number of small firms, a big bulk of the revenues are shared by the bigger players in the industry.

It should be noted that these firms do not represent the entire industry. There are still a number of individual consultants from academic institutions and independent management consultants.

Table 27. Number of establishments in the Philippines classified under Business and Management Consulting Services by size of employment Size of employment Large establishments Small establish- (10 or more ments (Less than Total employees) 10 employees) Based on 1994 Census of Establishments 162 273 435 Based on 1996 Annual Survey of Establishments 157* Not available - Based on 1997 of Establishments 171* Not available - Source: National Statistics Office * includes firms that offers market research and public opinion polling services

Based on NSO data from 1994 to 1997, the number of business and management consulting establishments has been decreasing based on the 1996 and 1997 NSO figures. The figures even include establishments offering market research and public opinion polling services. Please refer to Table 8.

On the other hand, based on the information gathered from the Securities and Exchange Commission, there are a total of 2,558 firms which registered under the classification of business and management consulting between January 1995 to November 2000. Out of the 2,558 firms, there are 418 that provided telephone numbers. Validation calls were made and resulted to having 318 numbers that are either residential/wrong or disconnected numbers, 6 firms which refused to give information, 51 firms which are still existing (employment agencies, engineering consulting firms, IT consulting firms, training firms and general management consulting firms), 9 firms which have been dissolved, and 34 firms which have

56 been misclassified (these are law firms, retail firms, restaurants, hotels etc.)

Majority of the management consulting firms’ main offices are located in Metro Manila. However, there are also a number of firms and offices in major cities and business centers like Cebu City, Cagayan de Oro, Iloilo City, and Davao City.

Employment in Business and Management Consulting Service firms. NSO figures point out that in the Philippines, the business and management consulting sector generated a total of 9,376 regular employment in 1994. It was estimated that 12.16% of the employees are managers/executives (senior consultants/partners). A large firm has an average of 51 employees and small firms have an average of 4 employees. Not reflected in these figures, are the independent consultants contracted out by the management consulting firms. It was estimated that there are around 25,060 external/independent consultants contracted by business and management consulting activities sector in 1994 based on labor statistics.

According to some consultants interviewed, the nature of the business of being dependent on the projects available e.g. at some point in time ,some firms do not have projects, pushed some firms, especially the smaller ones, to maintain only a manageable number of employees, mostly senior partners/consultants to oversee the projects and some administrative support staff in the office. Independent consultants are just contracted for specific projects when their expertise is needed. The firms maintain a database of independent consultants to tap. These independent consultants may either be retired executives, professors and researchers from the academe, or part-time consultants. In some firms, the database includes both Filipino and foreign experts. The firms usually tap those that the senior consultants/partners personally know or those with whom the firms were able to work with in their previous projects. The independent consultants are selected based on their (1) track record; (2) reputation; (3) expertise; and (4) consultancy fees demanded. The decision of the management consulting firms to decide on the independent consultant to be selected will be based on the nature of the project, scope, expertise required, type of client, budget, and previous experience with the consultant. Therefore, management consulting firms who maintain and invest in building a database of independent consultants to be tapped and establishing networks and relationships with these consultants are also able to build their

57 capability to accept projects, even those that require some expertise that they do not have at present, in their firm.

Table 28. Nature of employment in establishments in the Philippines classified under Business and Management Consulting Services by size , 1994 Employment Unpaid and Working Managers/ Other Paid Total Owners Executives employees Average Small establishments (less than 10 Not employees) 116 available 1,074 1,190 Large establishments (10 or more employees) 100 1,140 6,946 8,186 Total 216 1,140 8,020 9,376 % to Overall Total Average 2.30 12.16 85.54 100.00 Source: 1994, National Statistics Office

The business and management consulting service establishments expended a total compensation of PhP 1.3 billion to its employees in 1994. More than a third of these (38.25%) were allocated for managers/executives (senior consultants/partners) and more than half are for other employees. This allocation is presented in Table 11. Compensation for employees is 19.05% of total revenue/sales of the sector.

Table 29. Compensation in establishments in the Philippines classified under Business and Management Consulting Services by size, 1994 (values in thousands of pesos) Compensation Employers’ Salaries/Wages contributio Managers/ n to GSIS, Executives Others SSS etc. Total Small establishments (less than 10 Not employees) available 61,017 2,301 63,317 Large establishments (10 or more employees) 488,350 681,776 43,168 1,213,294 Total 488,350 742,793 45,469 1,276,611 % to Overall Total Average 38.25 58.18 3.56 100.00 Source: National Statistics Office

Financial performance of Business and Management consulting service firms. About two thirds of the revenue/sales of management consulting service firms were obtained from their main activities. Only a third are from other sources such as rental or property, equipment and other business services. Compensation represents a bigger percentage of revenues of small establishments (36.60%) as compared to large establishments (28.05%). The total costs incurred by the establishments also show that smaller establishments incur a bigger percentage of costs relative to revenues (55.36%), which is more than half of the

58 revenue/sales while large establishments’ costs represent 38.86% of their revenues.

Table 30. Financial Indicators for establishments classified under Business and Management Consulting Services, 1994 (values in thousands of pesos) Large establishments Small (10 or more establishments employees) (less than 10 Total employees)

Revenue Sales from

♦ Main Activity 4,325,252 172,989 4,498,241

% of total 66.99% 70.95% 67.14%

2,131,042 70,835 2,201,877 ♦ Other Activities

33.01% 29.05% 32.86% % of total

6,456,294 243,824 6,700,118 Total

o Compensation 1,213,294 63,317 1,276,611

% of total revenue/ sales 18.79% 25.97% 19.05%

% of revenue from main activity 28.05% 36.60% 28.38%

o Costs 2,508,611 134,983 2,643,594

% of total revenue/ sales 38.86% 55.36% 39.46%

% of revenue 58.00% 78.03% 58.77 from main activity o Fixed Assets 2,600,034 528,108 3,128,142

Capital-Output ratio 0.5611 4.567 0.6587

Source: National Statistics Office

The leading expense items of establishments in the business and management consulting service sectors include (1) Non- industrial services done by others; (2) interest expense; (3) electricity and water; and (4) materials and supplies. There is a similar trend for both large and small establishments in terms of the top major costs incurred except for the item on interest expense. Only large establishments incur significant costs for interest expense. This may be attributed to the very nature of the business and management consulting firms of having to allocate resources for projects in advance, at times leading to a need to

59 avail of loans. One of the difficulties of firms in the business is the collection of accounts from clients especially if these are from the public sector namely, government agencies and local government units. The leading item – non-industrial services rendered by others include building space rental, land rental and other services.

Table 31. Costs incurred by establishments classified under Business and Management Consulting Services, 1994 (values in thousands of pesos) Large establishments Small establishments (10 or more (less than 10 employees) employees) Total Type of Costs % (over % (over % (over Costs total Costs total Costs total costs) costs) costs) Materials and Supplies 209,421 8.35 25,693 19.03 235,114 8.89 Non-Industrial services done by others 824,197 32.85 68,753 50.93 892,950 33.78 Industrial services done by others 94,369 3.76 870 0.64 95,239 3.60 Fuels, lubricants, grease etc. 34,326 1.37 7,127 5.28 41,453 1.57 Electricity and water 342,181 13.64 7,507 5.56 349,688 13.23 Interest expense 600,029 23.92 6,568 4.87 606,597 22.95 Indirect taxes 63,624 2.54 5,901 4.37 69,525 2.63 Cost of goods for resale 170,503 6.80 12,129 8.99 182,632 6.91 Research and 58,122 2.32 - - 58,122 2.20 Experimental Development Others 111,841 4.46 434 0.32 112,275 4.25 TOTAL 2,508,613 100.00 134,982 100.00 2,643,59 100.00 5 Source: National Statistics Office

After validation of the major activities of the leading business and management consulting firms based on the Top 12000 corporations from 1996 to 1998 and Top 5000 in 1999, it came out that there are 34 firms whose main activity is management consulting. Please refer to Table 16. Financial performance of a sample of leading non-traditional providers of management consulting services is also presented.

It can be noted that many of the leading players industry have foreign affiliations. There are also very few who are able to

60 consistently make it to the Top 5000. The profile of the firms if it will be referred back to Table 30 based on services offered is diverse. Except for Accenture and Iberpacific, many of the leading players have specialized niche market or differentiated services.

Among non-traditional providers, technology consulting firms significantly grew in the past four years.

It is to be noted that the financial performance of single proprietorship and partnership companies as well as research and consulting centers in academic institutions is not included in the analysis due to lack of information available.

Table 32. Financial Performance of leading Business and Management Consulting Service Firms in the Philippines based on SEC listing of Top 12000 Corporations (values in thousands of pesos),1996-1999 Rank Gross Revenues Growth Gross Growth Gross Growt Ave Company Rate Revenues Rate Revenues h Growt Rate h Rate 1996 1997 1998 1999 1996 1997 1996-97 1998 1997-98 1999 1998- 1996- 99 99 Firms whose main activity is management consulting Andersen 683 500 328 342 808,079 959,568 18.75 1,471,686 53.37 1,414,211 -3.91 22.74 Consulting/ Accenture Iberpacific 6807 3807 3171 2684 25,066 75,441 200.97 98,377 30.40 121,602 23.61 84.99 Consultancy by - 5811 1921 2694 NA 40,490 - 193,523 377.95 120,734 -37.61 170.17 Technicus Corp IMS Philippines - 5496 3631 2991 NA 44442 - 82,505 85.65 103,652 25.63 55.64 Watson Wyatt 5192 5205 3984 3065 NA 48,059 - 72,691 51.25 100,236 37.89 44.57 Phils John Clements 3961 4062 4392 3907 58,434 69,090 18.24 63,484 -8.11 72,695 14.51 8.21 Consultants Orient Integrated 5080 5009 5303 - 40,014 50,940 27.31 48,143 -5.49 NA - 10.91 Devt Consultants Motivation Asia 5415 10846 5856 - 36,625 13,866 -62.14 39,203 182.73 NA - 60.29 Phils Urban Integrated 7825 8272 6900 - 19,713 22,925 16.29 28,393 23.85 NA - 20.07 Consultants Lazaro, Bernardo, - - 7258 - NA 0 - 25,284 - NA - - Tui and Associates Guthrie Jensen 7144 7123 7259 - 23,222 29,567 27.32 25,284 -14.49 NA - 6.42 Consultants Cest Inc 8219 8254 7398 - 18,114 22,995 26.95 24,415 6.18 NA - 16.56 EDS Intl Phils - 8452 7539 - NA 22,097 - 23,468 6.20 NA - 6.20 Neville Clarke 8662 8722 7735 - 16,452 20,922 27.17 22,305 6.61 NA - 16.89 Phils GCV Mgmt and - - 7882 - NA 2,565 - 21,508 738.52 NA - 738.52 Consulting Hambrecht and - 7686 8113 - NA 26,036 - 20,290 -22.07 NA - -22.07 Quis Phils Madecor Career 8637 9890 8905 - 16,565 16,514 -0.31 16,513 -0.01 NA - -0.16 Systems Economic - - 9249 - NA 14,506 - 15,254 5.16 NA - 5.16 Development Foundation KPMG Consulting - - 10066 - NA 4,609 - 12,703 175.61 NA - 175.61 IDP Consult Inc - - 10082 - NA - - 12,652 - NA - - Enterprise Devt - 10328 10417 - 11,615 15,203 30.89 11,787 -22.47 NA - 4.21 Group Asia

61 Rank Gross Revenues Growth Gross Growth Gross Growt Ave Company Rate Revenues Rate Revenues h Growt Rate h Rate 1996 1997 1998 1999 1996 1997 1996-97 1998 1997-98 1999 1998- 1996- 99 99 Pac/Ancilla ENR Consultants - - 10457 - NA 6,123 - 11,671 90.61 NA - 90.61 Manila Execon 9670 9905 10703 - 13,463 16,474 22.37 11,054 -32.90 NA - -5.27 Group Capital Strategies - - 11639 - NA 5,400 - 9,260 71.48 NA - 71.48 Phils Pricewaterhouse - - 11902 - NA - - 8,861 - NA - - coopers Louis Berger Intl 7328 5431 - - 22,216 45,257 103.71 NA - NA - 103.71 Inc ProSearch 8304 7018 - - 17,828 30,173 69.25 27,074 -10.27 NA - 29.49 Pinkerton 7517 7021 - - 21,140 30,159 42.66 NA - NA - 42.66 Consulting Services SGV- 8103 7945 - - 18,581 24,552 32.13 NA - NA - 32.13 Development Dimensions Control Risks 9404 8979 - - 14,174 19,906 40.44 NA - NA - 40.44 Phils Escaler & Co inc - 10134 - - 7,666 15,753 105.49 NA - NA - 105.49 Madecor Env 9384 10753 - - 14,239 14,080 -1.12 NA - NA - -1.12 Mgmt Corporate - 11007 - - NA 13,505 - NA - NA - - Discretionary Services Isis Research Ltd - 11953 - - 7,129 11,465 60.82 NA - NA - 60.82 DL Lazaro Inc - 9956 - - 4,701 16,323 247.22 NA - NA - 247.22 Subtotal 1,215,036 1,749,005 43.95 2,397,388 37.07 1,933,130 -19.37 20.55

Non-traditional providers of management consulting services whose main activity is other than management consulting Market Research AC Nielsen 2557 2429 2031 1837 111,185 140,023 25.94 182,493 30.33 210,560 15.38 23.88 Dealer Msmst Svcs (Dealer Pulse) AC Nielsen 3268 3049 2972 2859 78,819 102,570 30.13 109,106 6.37 110,016 0.83 12.45 Consumer Res Svcs (Consumer Pulse) AC Nielsen - - 2930 2624 NA 75,593 - 110,706 46.45 125,295 13.18 29.81 Unisearch Res Svcs AC Nielsen Media 6826 7215 6053 - 24,958 28,812 15.44 36,870 27.97 NA - 29.43 Measurment Svcs (Media Pulse) FS & Associates - 4709 - - 27,338 55,602 103.39 NA - NA - 103.39 Phils Taylor Nelson - - - 3655 NA NA - NA - 78,955 - - Sofres Phils (Frank Small and Associates) ResearchPhils- 3923 3801 - - 59,418 75,593 27.22 NA - NA - 27.22 Unisearch Inc Trends-MBL 2672 2712 2623 2467 104,386 121,224 16.13 131,115 8.16 137,606 4.95 9.75 PSRC-Research - - 3767 4202 NA 59,787 - 78,589 31.45 66,039 -15.97 7.74 International Asia Research 6958 9456 - - 24,249 18,031 -25.64 NA - NA - -25.64 Organization Market Research - - 10727 - NA 0 - 10,997 - NA - - International Phils Subtotal 430,353 677,235 57.37 659,876 -2.56 728,471 10.40 21.73

Technology Consulting

62 Rank Gross Revenues Growth Gross Growth Gross Growt Ave Company Rate Revenues Rate Revenues h Growt Rate h Rate 1996 1997 1998 1999 1996 1997 1996-97 1998 1997-98 1999 1998- 1996- 99 99 Asian Computer 10878 11451 9760 - 10,594 12,501 18.00 13,636 9.08 NA - 22.54 Group Ayala Systems 1789 2088 1038 1143 180,911 174,049 -3.79 443,061 154.56 378,630 -14.54 45.41 Technology, inc Code Red 5611 6187 - - 34,643 36,945 6.64 NA - NA - 6.64 Consultancy Corporate 2686 2063 1302 1176 103,709 177,364 71.02 337,544 90.31 366,222 8.50 56.61 Information Solutions IEWorks Inc 10097 11952 9891 - 12,356 11,466 -7.20 13,182 14.97 NA - 0.28 Intercommerce - - 7636 - NA 13,478 - 22,875 69.72 NA - 69.72 Network Services James Martin & - - 2498 1618 NA 101,473 - 140,469 38.43 245,086 74.48 56.45 Co. Phils (Headstrong) Key Consultants - - 10528 - NA 8,432 - 11,447 35.76 NA - 35.76 Misnet 5820 3374 1720 1390 32,607 89,183 173.51 226,173 153.61 298,890 32.15 119.76 Sykes Asia - - 4680 1573 NA - - 57,546 - 253,052 339.74 339.74 WeServSystems - 1425 1499 1074 NA 287,653 - 269,586 -6.28 407,275 51.07 22.40 International Subtotal 374,820 912,544 143.46 1,535,519 68.27 1,949,155 26.94 79.56

Construction/Engineering Consulting

Asian Technicon 8118 7241 7681 - 18,504 28,571 54.40 22,618 -20.84 NA - 43.99 Mgrs & Cons Cedco - 7955 - - 5,280 24,503 364.07 NA - NA - 364.07 Constech Mgmt 10988 10913 - - 10,398 13,745 32.19 NA - NA - 32.19 Group ProConsult Inc 8013 7225 7565 - 18,967 28,713 51.38 23,316 -18.80 NA - 41.99 SP Castro and - - 10613 - NA 687 - 3,574 420.23 NA - 420.23 Associates Rider Hunt Liacor - 9561 - - 15,914 17,640 10.85 NA - NA - 10.85 Schema Konsult 6867 3095 3796 - 75,239 100,516 33.60 77,772 -22.63 NA - 22.28 Inc Planning 6067 4341 6316 - 30,546 62,587 104.89 34,007 -45.66 NA - 82.06 Resources and Operations Systems RN Ferrer & 5693 6170 4761 - 33,843 37,130 9.71 55,854 50.43 NA - 34.93 Associates Pacific Orient - 10098 11078 - 6,793 15,877 133.73 10,241 -35.50 NA - 115.98 Consultants & Mgmt Subtotal 215,484 329,969 53.13 227,382 -31.09 NA - 37.58

Business Intelligence Units PMI Asia - - 11093 - - - 10,213 - -

Investment/Financing Companies

Walden AB Ayala - - 8887 - - 14,981 16,579 - 10.67 Management

Learning Institutions/Non-Government Organization Center for - - 10320 - - 10,406 - 12,054 15.84 - 15.84 Empowerment and Resources Center for - 7584 7931 - - 26,556 - 21,249 -19.98 - -19.98 Leadership and

63 Rank Gross Revenues Growth Gross Growth Gross Growt Ave Company Rate Revenues Rate Revenues h Growt Rate h Rate 1996 1997 1998 1999 1996 1997 1996-97 1998 1997-98 1999 1998- 1996- 99 99 Change Subtotal 36,962 33,303 -9.90 -9.90 Source: Philippines Top 7000 and Next 5000 Corporations, SEC, 1997-2000 editions Note: 1999 includes only the Top 5000 since the Next 5000 is not yet available

Substitute Services

The increase in use of information technology among clients, give rise to the growth of the information technology consultancy. The growth of this subsector presents both opportunities and threats for management consulting firms. Some firms are able to integrate and expand their services to include information technology. This was easy for those with affiliations with global management consulting companies which are also moving towards this direction. As seen in the Top 12000 corporations, there are more companies which have services related to information technology that are among the leading companies as compared to those in financial , human resource, marketing or development studies. However, for some companies who are not able to integrate IT into their services would mean a cut in the market share of the pie when new IT services substitute management consulting services. This is specifically applicable if the consulting company is targeting the private business sector, particularly medium and large corporations. An example of this is the possible growth of the e-business consulting industry. E-business, according to IBM is defined as “enhancing business processes using internet technologies. It encompasses not only e-commerce – the selling of goods and services over the internet – but all the business processes that can be enhanced, streamlined, and (where companies) can put in more value”. Internet technologies include not only the internet but also transactions over electronic data interchange (EDI). And a discussion of business processes and enhancing them is among the services provided by the management consulting services sector.

New Entrants

The barriers to entry in the management consulting subsector is low because of low capitalization required. Ownership of land and equipment is not a prerequisite in the business. Being a knowledge-based industry, what matters in the entry into the

64 industry is the presence of consultants who are specialized in their fields and have made significant investments in education and experience. However, some players in the industry perceive that this low entry barrier may also lead to a perceived poor public image of consultants and consulting companies compared with that of other professional service industries since anyone can be a consultant.

The entry and strengthening of position of the Big Five and other global management consulting companies in the country and the Asia-pacific region through local firms, pose a stiff competition in the management consulting services sector. Especially, in the Philippines where there is colonial mentality. Many clients would prefer to deal with foreign and known management consultants even if similar quality of services can be delivered. This reduces the competitive advantage of existing local firms which have no foreign affiliation, plus the fact that these foreign firms bring with them greater speed to provide services needed with e-business capability and seasoned battery of young, energetic and enthusiastic consultants. On top of this, these consultants have industry-specific-knowledge-base which makes it highly differentiated, attuned to new territory, new language, new social culture, new currency and new laws. They have had the experience of global expansion in other countries and regions as well. But according to one of the major players in the industry, the competitive advantage of Filipino consulting firms and Filipino consultants lie on the pricing of consultants’ fee.

In addition to the mentioned scenario of more global management consulting firms entering the market , the direction of the higher education institutions to improve growth of research centers and extension centers in various colleges and universities results to possible entry of more individual consultants and consulting institutions. The consulting institutions may come in the form of research and extension units that pose a possible threat to management consulting firms especially in the pursuit of grants from international funding institutions and the government as well as a part of the private sector.

2. Forward linkage/Market

Opportunities for management consulting services arise from three major sources. These are (1) international funding institutions consisting of multilateral institutions like Asian Development Bank (ADB), World Bank (WB), United Nations Development Project (UNDP) as well as bilateral institutions like

65 CIDA, JBIC, AusAID, and USAID; (2) Government agencies in the Philippines; and (3) Private firms both local and foreign.

International funding institutions include governments of industrialized countries that provide developmental assistance in the form of soft loans/grants to developing countries. Consulting services are usually multi-disciplinary in nature. Management consulting firms are able to get grants through submission of proposals and/or bids to these funding institutions. Table 31 presents the list of funding institutions and loans/grants provided to the Philippines based on the ODA pipeline of NEDA. A detailed profile of the nature of projects related to the development assistance is shown in Appendix C. It can be observed that many of the areas where management consultants are needed are related to environmental management, sustainable development and institutional development in local government units, government agency and communities. There are a few projects related to entrepreneurship and industry development while there are also some that are related to policy development.

Table 33. International funding institutions providing loans and grants to the Philippines, 1997-2000 1997 1998 1999 2000 Funding Amount # of Amount # of Amount # of Amount # of Institution projects project project project s s s Asian 172.91 12 395.7 10 125 2 192.92 9 Development Bank Australia Aid 23 1 66.04 1 NA 3 Austria 17.4 1 120 1 164.85 4 Belgium 26.96 2 10.04 1 10.04 1 British 76.16 1 76.16 1 Czechoslovakia 210 2 10 1 CIDA (Canada) 16.08 3 56.9 6 European 16.05 2 14.15 1 23.3 1 Community Finland 1.46 2 France 21.96 5 10.85 1 10.85 1 FRG-GTZ 18.57 12 9.62 5 7.84 1 (France) FRG-KFW 38.36 4 12.01 2 35.7 2 154.01 4 (France) Italy 109 1 123 1 Japan-JBIC 706.77 10

66 1997 1998 1999 2000 Funding Amount # of Amount # of Amount # of Amount # of Institution projects project project project s s s Japan-JBIC- 85 1 SYLP Japan- OECF 1051.1 13 1054.2 13 1318.7 13 7 7 Japan-SAPROF 47.92 2 JICA (Japan) 37.5 5 51.74 5 15.88 6 16.36 2 Korea-EDCF 26.04 1 26.04 1 NA 1 KOICA (Korea) 0.96 1 0.96 1 Kuwait 33.2 1 33.2 1 New Zealand NA 4 OPEC 10 1 10 1 Spain 111.57 7 5.65 8 142.34 4 162.96 5 Switzerland 5.4 1 5.04 1 UN System - 12.94 18 18.3 16 0.52 4 1.38 4 UNDP UN System - 1.55 3 0.37 2 1.17 5 0.37 2 UNDP (GEF) USAID 19.3 1 World Bank 357 6 90 2 197 3 94 2

TOTAL 2,080.2 102 1,862.0 71 2,460.4 58 1,726.8 53 2 3 0 1 Source: NEDA, ODA Pipeline, 1997-2000

There are also 128 locally-based donor and funding institutions in the Philippines (which also includes some of those listed in Table 33 like World Bank and ADB). These funding institutions also have a need for management consultants especially in certain research-based and technical assistance projects. The nature of these 128 funding institutions is shown in Table 34. Those funding institutions which may not require consultancy assistance since they are either scholarship institutions or libraries or donors of school/hospital buildings are not anymore included in the table.

Table 34. Areas for funding of 128 local and international funding Institutions Areas for funding Frequency Percentage Sustainable Development and environment 63 49.22 Micro-Credit/Micro-Finance 53 41.41

67 Areas for funding Frequency Percentage Health and Nutrition 60 46.88 Livelihood and Enterprise Development 51 39.84 Gender Development/Women Development 50 39.06 Agriculture, Agrarian Reform and Rural 50 39.06 Development Cooperative Development 43 33.59 Educational Training and Resource Development 36 28.13 Science and Technology 26 20.31 Local Governance, Institutional and Policy 22 17.19 Development Student and Volunteer Formation 14 10.94 Arts and Culture Heritage 13 10.16 Urban Development and Housing 13 10.16 Peace and Human Rights 12 9.38 Disaster Response 12 9.38 Indigeneous People’s Development 11 8.59 Population and Development 8 6.25 Community and Social Development 8 6.25 Children/Youth Development 6 4.69 Philanthrophy and NGO Development 5 3.91 Early Childhood Education training 3 2.34 Education Infrastructure, Energy and Transport 3 2.34 Communication Prevention of Child Abuse 3 2.34 Fair trade advocacy 3 2.34 Mass Media, Visual Arts and Performing Arts 2 1.56 Economic Policy reform 2 1.56 Private Sector Development 1 0.78 Labor and Employment 1 0.78 International relations 1 0.78 Energy 1 0.78 Industry and Non-fuel minerals 1 0.78 Social Infrastructure 1 0.78 Source: Association of Foundations Phils., Inc., “Donor Trends: A Resource Book of Development Assistance in the Philippines” Note: Frequency may not add up to total since a number of funding institutions have more than one area for funding

Government sector consists of various departments and agencies of the National Government that need consulting assistance. The guidelines are mandated by the Policies and Guidelines issued by the National Economic and Development Authority (NEDA). Government agencies hire consultants or acquire the services of consulting firms either in line with the implementation of projects granted them or implementation of projects that are included in the national budget. Appendix C gives a detailed profile of government agencies implementing ODA

68 pipeline projects. Leading government agencies with development assistance include DPWH, DENR and DOH. Based on the profile of the clients listed by some of the management consulting firms, it was also observed that government agencies have been hiring consultants or consulting firms to assist them in the areas of training and computerization

Private agencies consists of private firms and non- government organizations in need of specialized expertise related to internal restructuring, search for growth opportunities, staff and training development, and strategy formulation, among others. Based on the listing of management consulting firms, companies that usually hire consultants or consulting firms are large, many are multinational corporations and in growth industries of Telecommunications, Electronics manufacturing and Semiconductor assembly, Retail industry, Consumer products manufacturing and marketing, Banking, and Insurance.

Table 35 shows that in 1994, 40 industries share 90% of the total output of business and management consulting and market research services. The primary markets which comprise 50% of the total output include Construction, Wholesale and Retail Trade, Banking, and Investment, Financing, and other non-banking services excluding pawnshops.

The other leading markets include the government (public administration and defense) which comprise 5.86% of the output, private education enterprises (2.12), other social and community related services (1.77), and public education services (1.76).

The business, management consultancy and market research services account for 1.64% of the output. These includes projects where firms where able to render subcontracted services to other firms within the sector.

An analysis of the market linkage indicates a wide array of businesses where business management, consultancy and market research activities was able to render services to. Businesses range from manufacturing to services sector.

Table 35. Market Linkage of Business and Management Consulting and Market Research Services in the Philippines Market Linkage Value (P’000) % Share Construction 2,998,372 27.10 Wholesale & retail trade 1,411,508 12.76 Banking 852,794 7.71 Investment, financing & other non-banking services exc. pawnshops 794,424 7.18

69 Market Linkage Value (P’000) % Share Public administration and defense 648,455 5.86 Private education services 234,460 2.12 Other social and related community services 195,660 1.77 Public education services 194,300 1.76 Business mgt & consultancy and market research services 181,240 1.64 Mfr of parts and supplies for radio, TV & communication (semi- 162,759 1.47 conductors) Agricultural services 148,771 1.34 Real estate development 144,442 1.31 Engineering,architectural & technical services 138,496 1.25 Mfr of radio and TV receiving sets, sound recording & reproducing 126,761 1.15 eq. incl records and tapes Mfr of communication and detection equipment 125,012 1.13 Gold and silver mining 120,245 1.09 Copper mining 113,696 1.03 Petroleum refineries 109,285 0.99 Life insurance 108,031 0.98 Mfr of plastic furniture,plastic footwear & other fabricated plastic 103,010 0.93 products Banana 99,113 0.90 Bookkeeping, acctg., and auditing services 86,993 0.79 Softdrinks & carbonated water 86,085 0.78 Textile, spinning, weaving, texturizing and finishing 75,326 0.68 Mfr of appliances and housewares 74,204 0.67 Non-life and other insurance activities 66,392 0.60 Mfr, assembly of motorcycles & bicycles 65,090 0.59 Telegraph service 56,133 0.51 Telephone 53,487 0.48 Custom tailoring & dressmaking shops 50,168 0.45 Mfr of drugs and medicines 47,284 0.43 Interisland shipping including inland water 46,598 0.42 Mfr and repair of wooden furniture incl upholstery 44,914 0.41 Shipyards and boatyards 44,243 0.40 Mfr of primary cells and batteries and electric accumulators 42,225 0.38 Mfr of perfumes, cosmetics & other toilet preparations 40,527 0.37 Letting, operating real estate, residential or non-residential,other real 39,878 0.36 estate activities Sugar milling and refining 38,489 0.35 Others 1,095,002 9.90 TOTAL 11,063,872 100.00 Source: 1994 Input-Output Table, National Statistics Office

The selection of consultants by the different institutions may vary. Some would require a bidding process to be conducted, others may require proposals to be submitted, and some may ask for presentations to be made, while some would have personal preferences to guide them in their decision. But whatever is the selection process, criteria for the selection is almost the same. Clients look for (1) track record; (2) capability/ expertise; (3)

70 reputation; (4) price; and (5) relationship/s established with the client.

Track record is based on the nature and scope of projects conducted, type of institutions dealt with and years of experience of the consultants and the consulting firms. Firms are often trapped in a vicious cycle: “without experience, they cannot qualify for assignments; and without assignments, they cannot gain experience” (Baum and Kirmani, 1991). This is the dilemma of most small and medium-sized consulting companies in the Philippines. Capability/expertise is based on the fields of specialization and areas of discipline that the company and consultants are known for. Reputation refers to the respect and image that the company and consultants possess in the industry. Pricing is a factor that may be influenced by the reputation of the consultants and/or the consulting firm. There are no set fees for consultancy services. Since the services are mostly based on the clients; needs, they are priced on a case to case basis, and are most often negotiable. Some of the major factors considered in pricing are (1) scope and nature of project; (2) consultants’ fees; (3) client (developing long term relationship, prospects for future opportunities, size of company; familiarity with the company culture; payment practices).

In the Philippines, aside from track record, reputation, expertise, and price, relationships play an important role in the business. This was confirmed in all the interviews made with different consultants from various companies. Many of the firms, especially the small and medium-sized management consulting firms rely on personal networks to get accounts and clients. Client companies are said to be more confident in getting consultants that they personally know or those that their managers know very well. Relationship marketing is used to develop long-term relationships with clients. Even the costing of fees is based on existing relationship or potential relationship with client companies. Since relationships, play an important role in the business, changes in management or leadership in major client companies of a business and management consulting firm may also affect the potential of getting more projects/accounts from the client company in the future. But for large management consulting firms, since they have been able to establish a name and reputation for the company, relationships still matter but the ability to gain clients is dealt with more ease using other marketing strategies.

Philippine management consulting firms are mostly catering to a number of institutions across different industry sectors. But there are also some management consulting firms that specialize in

71 particular sectors such as agriculture or tourism or the public sector. The client firms and institutions are also usually medium and large in size. Small firms rarely hire consultants since hiring consultants is seen as an expensive venture. There are a number of management consulting firms who also have preferences on customers they are most likely to deal with depending on their image and reputation as well as capability. Those firms with impressive track records and capability prefer to deal with funding institutions for large projects. Limits are usually set on the amount of project they will most likely bid for. As for private institutions, preference is for large institutions and multinational corporations. There are also a number of companies interviewed who try to avoid getting projects from the government because of problems and delays in the release of payment . Smaller management consulting firms are not very selective of their clients and the projects they handle. Their objective is to build a track record and reputation for bigger projects in the future.

Going back to the premise that consulting is an idea-driven profession, the consultants remain as unique as the clients they serve, and they underscore the myriad of conflicting personalities, management styles, and conflicting visions. With this, consulting business is continuously viewed as completely differentiated catering to clients with unique requirements, putting them on a position of greater influence over their clients.

3. Backward Linkage/Suppliers

Based on Table 36, bulk of the resources provided to the business and management consulting and market research services in the Philippines are those that belong to the service industry. This coincides with the NSO figures where it was shown that bulk of the costs incurred by firms in the business and management consulting sector are those related to non-industrial services such as land and building rental.

Table 36. Supply Linkage of Business and Management Consulting and Market Research Services in the Philippines Supply Linkage Value (P’000) % Share Radio and TV programming 1,562,075 46.55 Restaurants, cafes & other eating and drinking 188,727 5.62 places Business mgt & consultancy and market research 181,240 5.40 services Letting, operating real estate, residential or non- 148,868 4.44 residential,other real estate activities

72 Supply Linkage Value (P’000) % Share Telephone 89,557 2.67 Busline operators 89,197 2.66 Mfr of stationers', artists' and office supplies 87,730 2.61 Electricity 75,847 2.26 Mfr of articles of paper and paperboard 71,873 2.14 Road freight transport & supporting services to 70,298 2.10 land transport Other lodging places 69,999 2.09 Other business services, n.e.c. 68,673 2.05 Air transport 58,226 1.74 Hotels and motels 52,263 1.56 Non-life and other insurance activities 51,663 1.54 Commercial & job printing & other allied industries 50,046 1.49 Detective & protective services 45,579 1.36 Jeepney and autocalesa operation, trycycle and 44,598 1.33 other road transport operation Public utility cars and taxicab operation 44,598 1.33 Machinery and equipment renting and leasing 38,653 1.15 Wholesale & retail trade 36,241 1.08 Petroleum refineries 25,355 0.76 Mfr of misc chemical products 24,348 0.73 Postal,Messengerial and other comm services, 21,516 0.64 n.e.c. Legal services 20,037 0.60 Employment/recruitment agencies 17,074 0.51 Advertising services 16,804 0.50 Construction 16,343 0.49 Mfr of other fabricated wire & cable prods exc 15,043 0.45 insulated wire & cable Water 12,869 0.38 Repair shops for motor vehicles 12,200 0.36 Investment, financing & other non-banking 11,733 0.35 services exc. pawnshops Bookkeeping, acctg., and auditing services 9,451 0.28 Other repair shops, n.e.c. 6,146 0.18 Mfr, assembly & repair of office, computing and 5,152 0.15 acctg machines Mfr of asphalt, lubricants and misc prods of 5,000 0.15 petroleum and coal Newspapers and periodicals 4,861 0.14 Banking 3,130 0.09 Telegraph service 2,060 0.06 Other social and related community services 256 0.01 Storage & warehousing 28 0.00

73 Supply Linkage Value (P’000) % Share TOTAL 3,355,357 100.00 Source: 1994 Input-Output Table, National Statistics Office

Almost 50% of the resources in the industry is supplied by radio and TV programming. This may be attributed to the fact that in the 1994 data, the market research services sector is included which requires inputs through radio and TV programming. Those that also offer public relations services is also included in the sector and this is another sector that requires inputs from radio and TV programming.

Aside from the inputs specified in Table 36, knowledge- based resources, technology-based resources, and human resources are three other important resources of management consulting firms that need to be supplied in the industry.

On knowledge-based resources, many consultants interviewed mentioned that the industry is suffering in terms of weak database coming from the government. Uniformity of information from different sources is most wanting in the industry. Globally, the change is towards greater speed in obtaining information. An important input that was not reflected in Table 34 is the database information coming from the government. The accuracy, timeliness and reliability of the market and feasibility studies are dependent upon the availability of timely and reliable data. However, at present, there is lack of current official statistics to base decisions from. There is usually a lag in the compilation of data. Moreover, often information gathered from different sources on the same variable does not coincide. Knowledge, technology and human resource are also obtained through academic institutions. Professional schools play an important role as institutions that train most of the consultants. Many of the independent and part-time consultants are also based in academic institutions like the Asian Institute of Management, De La Salle, Ateneo de Manila, University of the Philippines, and University of Asia and the Pacific. But unlike large management consulting firms in other countries like the US and Europe where intensive recruitment is done among different professional schools of business, among MBA graduates, it is not a popular practice in the Philippines. Consultants are mostly hired based on experience and specialization not just the educational degree they have. But junior consultants who are hired in consulting firms are also usually required to have their MBA degree. This does not mean, however that the consulting profession in the Philippines is limited to those with management background or those with MBA or MS degrees. MBA programs in professional schools are becoming more diverse,

74 and consulting firms are now recruiting people from other fields such as law, engineering, and information technology, Technology- based resources such as internet and business softwares are also becoming important inputs to keep consulting companies abreast with the latest trends and information.

4. Laws, Policies and Commitments under GATS

There are minimal legal barriers in the field of management consulting services sector. In the Philippines, the following are some of the legislations and administrative policies affecting the access of foreign markets in the country as well as an overview into the different commitments of different countries under GATS that affects access of the country to different foreign markets.

4.1 Philippine laws and ADB policies

• Republic Act No. 8181 or the ODA Act of 1997 . Its implementing rules and regulations, govern projects funded through the ODA. The law states that foreign consultants participating in ODA-funded projects should associate with local consultants and/or hire Filipinos in carrying out the projects. Consultants engaged in the feasibility study and design aspects of a project may not participate directly or indirectly in any subsequent phase of project implementation. The latter is a controversial provision and there are moves to amend the law.

• The Guidelines on the Procurement of Consulting Services for Government Projects (Implementing Rules and Regulations of Executive Order No. 164). Government may only conduct direct selection/negotiation in times of emergencies or when time is of the essence, e.g., natural calamities; failure to award the contract after open competitive selection process for valid cause or causes; and take-over of rescinded or terminated consultancy contracts. These guidelines contain the selection process, consultancy costs, agreement provisions and implementation procedures. ODA- funded projects use an open and competitive procurement process.

• Government Information Systems Plan (Executive Order No. 265). This covers the framework for computerization efforts of the government. The plan would initiate changes in data management, access to information and communication within the government and to the public. The said changes will greatly affect the flow of information and access to information in the management consulting industry. As a knowledge and information-based industry, the industry would benefit in this plan as there is more access to information and markets, both foreign and local. The

75 proposed and ongoing projects under the Government Information Systems Plan as shown in Appendix D would contribute much in the areas of delivery of services of management consultants to its clients because of access to important information and database as well as opportunities to expand and have access to both domestic and local markets. • Omnibus Investment Code (Executive Order No. 226)-IPP. The government identifies priority areas of investment every year which are embodied in the Investment Priorities Plan (IPP) The goals of this IPP, among other goals are: 1. “To explore other activities/areas that can aid in increasing the country's exports; 2. To further the growth of agricultural productivity and increase countryside development by attracting investment focused at providing adequate industry support and infrastructure system; 3. To focus on sustainable development by supporting activities and technologies in line with the country's commitment to environmental protection; and 4. To develop industries/sectors aimed at maintaining competitive advantage”.

Government provides incentives to those who invest in the identified priority areas. Entities who would like to avail of the same should first be registered with the Board of Investments (BOI). In the IPP 2001, the management consulting sector was not specifically mentioned to be eligible for registration with the BOI and avail of incentives from the government, however a very closely related sector, the information technology services (ITS) can avail of these incentives.

“IT Services covers projects offering services both in the domestic and international market, in the following activities are eligible for BOI registration:

a.) Software development projects that may be divided into three categories: • Application software products refer to the development of packaged software programs that provide solutions to problems specific to an industry or business (such as banking, manufacturing, research and development works, etc.). These also include programs that could address problems and functions across industries (such as human

76 resource management, payroll system, project management and other officer related activities). • Middleware products are computer programs that are used: a) as interface among disparate application systems (e.g., web-based applications and mainframe-based or legacy applications; or b) to develop and manage new applications that are robust, scalable and highly available. • System Software products pertain to the development of operating system-type and software tools-type packaged programs. Included are Operating Systems and Internet browsers and search engines. b.) IT – enabled services cover providers of services related to data encoding, digital directories, digital catalogues, legal records, financial and accounting records, hospital and medical records, engineering and design (e.g., computer-aided structural design), customer-interaction services (e.g., message handling, call centers, help desk), unified messaging services and voice over IP. c.) Support & knowledge – based services refer to other types of IT-related professional services, including but not limited to, provision of application or systems as in application service provider or ASP, consulting services, software maintenance services, information systems planning, computer and systems audits and other similar services. d.) Business Process Outsourcing (BPO) services form a significant part of the major business process or operating function in a business enterprise where the services are performed by another enterprise which is located remotely from it and the services are rendered regularly and continuously, mainly at the service providers’ site and are delivered electronically to the client and/or to other recipients of the services on the clients’ behalf.

Individuals, partnerships or corporations interested to engage in Information Technology Services (ITS) not yet registered and the expansion of existing BOI-registered projects may qualify for registration under E.O. 226 and shall be eligible for incentives thereof.

All ITS projects will be considered preferred areas of investments for the next four years starting from the effectivity of the 2000 IPP.

Since the activity is listed in the IPP, for Filipino entities (at least 60% Filipino – owned), export commitment is not required.

77 For foreign entities (more than 40% foreign – owned), at least 70% of total services rendered must be exported. If pioneering, 100% of services may be rendered to the domestic market. Provided, however, that the firm complies with the requirement under the Foreign Investments Act that the paid – up capital is at least US $200,000 which will be lowered to US $100,000 if (1) the project involves advanced technology as determined by the Department of Science and Technology or (2) hires at least fifty (50) direct employees.

To be eligible for pioneer status, a project must comply with any of the following:

1. It must utilize new or untried technology. 2. It must have substantial venture capital. 3. It will introduce a major innovation in software development. 4. The project cost should be at least P100 million.”

Another existing policy which may not directly affect all players in the management consulting sector but would particularly affect those who bid for projects in an international funding institution like the World Bank is expressed in the following terms based on the ADB Guidelines on the use of Consultants:

“Section 1.04 . Consultants to be financed by the bank from its ordinary capital resources must be engaged from any of the Bank’s member countries. Consultants to be financed by the Bank from its Special Fund Resources must be engaged from any of the eligible source countries specified by the Bank from time to time.”

4.2 Commitments under GATS

The Philippines has not made any specific commitments for the management consulting services subsector but in any case, outlined is an overview of the commitments under GATS.

There are horizontal restrictions that summarize broad measures affecting commercial presence and investment, real estate transaction restrictions, government subsidies or taxation, and temporary movement of natural persons. In addition to these restrictions, developing countries have also established preferences for firms that offer the best terms for transfer of technology. The horizontal commitments supersede any sector- specific commitments. To assess the full extend of trade liberalization, horizontal commitments have to be examined in conjunction with the sector-specific commitments.

• Commercial Presence and Investment Restrictions

The acquisition and control of a domestic business by a foreigner may be subject to investment ceilings, restrictions as to the type of assets that may be held, local incorporation and presence requirements, and government approval.

• Real Estate Transaction Restrictions

Many countries restrict the purchase of real estate and the acquisition of land. Nationality restrictions and deposit requirements are relatively common. Often, these regulations are established by sub-federal levels of government and as a result tend to be extremely complicated. Rather than impose restrictions on domestic real estate regulations, the GATS rules require transparency and access to information about these rules.

• Government Subsidies or Taxation

To clarify issues related to domestic taxation and access to subsidies, member countries provided specific comments in their schedule on this issue. Foreigners may not be eligible for certain subsidies or may, under special circumstances, have to pay a different tax rate. For example, the United States reserves the right to impose higher taxes on a national, resident or corporation of a foreign country where a national, resident or corporation of the United States is being subject to discriminatory or extraterritorial taxes. All countries maintain sovereignty over domestic issues of taxation and subsidization.

• Movement of Natural Persons

Generally, the GATS does not prevent a Member from applying measures to regulate the entry of natural persons into, or their temporary stay in, its territory. The movement of natural persons is unbound under most GATS schedules. However, many Members generally committed to allowing temporary entry for measures concerning intra-corporate transferees (managers, executives and specialists), personnel engaged in the establishment of a business, and service salespersons.

Permanent entry is not dealt with in the GATS and remains under the authority of local immigration authorities.

79 Specific commitments made by different countries in Asia (Singapore, Hongkong, Japan, Indonesia, Korea, and China), European communities and United States of America are shown in Appendix B. It specifies commitments based on the four modes of supply namely:

Cross-border supply which is defined to cover services flows from the territory of one member into the territory of another Member (e.g. banking or architectural services transmitted via telecommunications or mail);

Consumption abroad which refers to situations where a service consumer or his/her property moves into another member’s territory to obtain a service (e.g. tourism, ship repair or aircraft maintenance);

Commercial presence which implies that a service supplier of one member establishes a territorial presence, including through ownership or lease of premises, in another member’s territory to provide a service (e.g. insurance companies or hotel chains); and

Presence of natural persons which consists of persons of one member entering the territory of another member to supply a service (e.g. accountants, doctors or teachers).

5. Market Potential/Foreign Market Demand and Competitition

5.1 Entering Foreign Markets

There is a high degree of concentration as a consequence of the volume of capital and complex and interdependent organizations needed to maintain technological advantage., exploit several products simultaneously, and to maintain economies of scale. Similar to auditing and advertising firms, for management consultancy firms, relations with customers are established on a worldwide basis, making it difficult for enterprises from developing countries to compete and gain access to world markets.

80 As mentioned in section 2.3 access to foreign markets can be seen based on the four modes of supply namely cross-border supply, consumption abroad , commercial presence, and presence of natural persons. Based on interviews made, there are numerous management consulting firms in the Philippines who had in one way or another gained experience working in foreign markets. Many local business and management consulting firms were able to gain access over foreign markets through the following :

• Growth of partnerships and joint ventures with foreign consulting groups. The partnerships and joint ventures usually bring mutual advantage. The foreign partner bring greater experience, professionalism, technically-skilled staff, and financial resources as well as opportunities for exposure in foreign markets. The local consulting firm brings familiarity with the domestic environment, physical conditions, , culture, regulations, expertise of consultants and lower costs. These can either be in the form of formal and long-term partnerships or short-term subcontracting agreements Cross border supply and presence of natural persons were made possible in instances when some specific projects or work are subcontracted with the Philippines-based firm. In the Philippines, because of availability of skilled technology professionals and competitive fees charged by consultants, some technology-related work are subcontracted by affiliated firms. These professionals either do the work in the Philippines or they are sent overseas to do the job. Consumption abroad was also made possible especially for client companies of partners based in other countries. These client companies are referred to the Philippine affiliate company whenever they would want to expand and establish office in the Philippines. There are also few Filipino management consulting firms which were able to establish their commercial presence through an overseas office (SGV and TeamAsia). • Overseas expansion of domestic clients also enabled Filipno consultants to have access to foreign markets. This was made possible since some domestic clients trust the expertise of their consultants so they would not want to get another consultant in another country. Other reason is that Filipino consultants charge lower fees as compared to their foreign counterparts. • Funding of institutions like ADB, World Bank, USAID, AusAid, Japan Foundation, Ford Foundation , among others also enabled some Filipino consultants to gain access through foreign markets especially for projects to be accomplished in other countries. Expertise of Filipino management consultants and some Filipino management consulting companies (PRIMEX, OIDCI, among others) is known by these institutions. As one of the developing countries in Asia, having the competencies and track record of Filipino consultants together with

81 fluency in the English language, and competitive costs are among the reasons why these companies are awarded these grants.

But inspite of efforts to gain more access to foreign markets by Philippine management consulting companies, there are still very few companies who are able to compete successfully in the foreign market. Some difficulties and limitations cited by some players in the industry in entering foreign markets are as follows • Rigid competition in the global market. There is a strong presence of global management consulting companies in different countries across the globe and they pose very stiff competition with smaller players in the global industry. This is even made more difficult since many management consulting companies in the Philippines have not established any brand name or brand recognition in the global industry. Most of the experiences gained in foreign markets are only through subcontracted agreements with bigger players in the industry. • Needs of market in different countries, especially in Asia, are localized. This was specifically mentioned by a consultant from a marketing consultancy firm. There is a need to thoroughly study the culture, regulations and industry in foreign markets, especially the neighboring Asian markets. • Difficulty in promoting the company in foreign markets due to a poor image projected by the country. This brings prejudices on the competencies of the company. • Difficulty in access to information centers and cooperation in getting information from institutions abroad, especially in areas where there is no Philippine consulate. Access to information centers is important for consultants. Even with the presence of Internet, there are certain information needed by consultants that are only available through other institutions, government or private. • Limitations set related to access to foreign markets when partnerships are formed with foreign consulting companies. Philippine-based consulting firms affiliated with foreign partners gain access to foreign companies who are coming in and investing in the Philippines through referrals of foreign consulting partners. However, there are some restrictions in entering foreign markets, especially countries where there are established offices of the foreign partners. Although, companies with foreign partners mentioned that this is part of the agreement and the advantages outweigh the disadvantages in the partnership. • Low fund base/financial capability to undertake full-scale marketing on an international scale or establish an office overseas. Marketing management consulting services would entail preparation of proposals for bidding purposes as well as conducting presentations and visiting different countries to establish networks . These efforts require a big budget.

82 • Low fund base/financial capability to finance operations for huge projects granted by institutions where consultancy collection of fees are classified as “fees contingent on results”. Fees are paid only after specific results are achieved. This results to limitations as far as selecting only the smaller projects to bid for. • Great disparity in the professional fee structure of Filipino consultants as compared to the foreign experts/expatriates. Some consultants report that the difference is from 50 to 100%. Although competitive pricing is deemed by some as a competitive advantage of Filipino consultants and consulting firms, others deemed it to be discriminatory especially when the Filipino and foreign consultants deliver the same kind and quality of work.

5.2 Extent of services rendered abroad

A larger number of global consultancies are now able to provide for the international needs of clients. Many consulting firms in the Philippines have vast international experience which were either gained through the foreign partner firms or through work experiences of consultants employed from abroad. But these are usually smaller projects implemented in cooperation with other agencies.

Some of the countries where some of the Philippine management consulting firms extended services are Indonesia, Afghanistan, Beijing, China, Malaysia, Japan, Egypt, Brunei, Singapore, United States, Singapore, Hongkong, Sweden, Bulgaria, and Mexico, among others.

These projects were usually made possible through partner agencies (from the United States, Europe, Australia) and multilateral or bilateral institutions.

In spite of availability of expertise in some of the Philippine management consulting firms, rendering of services abroad are at times not pursued due to difficulties encountered. There is lack of interest among many qualified local consulting firms to pursue overseas work due to limited chance of success compared with the high cost of developing such markets and difficulty in obtaining registration with overseas clients.

There is also a perceived absence of focused marketing approach aimed at promoting and developing the industry’s capabilities in the international market. There is lack of financial, technical and administrative capability to compete in international markets, particularly in International competitive Bidding Projects.

Another factor that is left undeveloped is the development of strong and long-term linkages with overseas business groups and other

83 consulting firms/associations. To guide the firms in establishing linkages Appendix H presents a directory of management consulting associations in different countries. 5.3 Foreign Market demand and Competition

5.3.1 Asia and the Pacific

Asia-Pacific is the region that many countries, including the US and Europe are looking into for their expansion. The leading global management consulting firms are specifically positioning themselves in this area knowing that this region is where most of the expansion would take place and would most likely necessitate assistance from consulting firms. Demand for management consulting services is growing in the region. This is attributed to a similar growth trend in investments and the economy. Appendix D presents some of the available market studies on specific countries in the Asia-Pacific such as Thailand, China and Laos.

Demand in Thailand are more related towards finance-related consulting services such as financial restructuring, mergers and acquisitions, debt collection and privatization of state-held transportation, communications and energy enterprises. China is a fast growing market for consultancy services. The industry only took off in 1996 and expanded from zero to over one billion dollars in revenue. Sixty-five percent of the consulting firms are foreign which captured 85% of the market. Sectors where a high demand for consulting services lie are finance, information technology/telecommunications, and health care/pharmaceuticals. It was said that management consulting that can deliver locally tailored solutions sensitive to local culture, political dynamics, and the legacy of socialist economics will be in the best position to gain market in China. The big foreign consulting firms are already present in China while others formed joint ventures with China-based consultants. There are limited market studies available in other countries, but since most of the funding institutions have allocated funds for Asian growing economies like Cambodia, Laos, Vietnam, and Sri-Lanka then it is expected that development management related consulting services are needed in these countries. The Philippines, with the presence of consultants with previous work experience in these countries is in a good position to vie for these projects. It was cited by one of the consultants that, Filipino consultants would know more of the economy, culture and management trends and even language in Europe and US but not much in its neighboring Asian countries. The proficiency in the use of the English language and some similarities in the economy and culture of its Asian neighboring countries provide opportunities for Filipino consultants in the region to set up overseas offices, form partnerships or compete for projects with funding institutions concentrated in the Asia-Pacific region. And since many of the largest consulting firms in UK and US are focusing

84 on Asia, there are also opportunities to develop partnerships with these firms to become an entry point in the region.

5.3.2 Europe

Western and Central & Eastern Europe are two distinct markets in Europe. Western Europe comprises 27 to 30% of the total world market for management consulting services. The integration of the economies and culture of acceptance of the management consultants in businesses make Western Europe a big market for the services. However, there are various cultural differences and preferences in some areas for certain businesses in their selection of consultants. Appendix E presents a summary of market studies for Germany, Italy, Switzerland, United Kingdom and Bulgaria. The market and the market needs in Germany, Italy, Switzerland, and United Kingdom is very sophisticated. The market is very receptive of consultants but Philippines may have difficulty in entering the market. A possible opportunity are joint ventures, partnerships or affiliations with the large firms in these countries who have interests in expanding to the Asia-Pacific but have not been able to establish their footing in the area. Bulgaria, along with Central and Eastern Europe is moving towards a capital economy. This presents opportunities for management consulting firms which are needed in the transition of the economy. Philippines, with its capability to affiliate with foreign partners in these areas or resources to set up overseas office in these areas will present potentials for management consulting firms. Needs of the market will be concentrated more on setting up and entry strategies.

5.3.3 North America

Eversince the development of management consulting services, USA remained to be the leader in the industry in terms of revenues, innovation in the operations of consulting firms, and development of service technology. It was estimated that the region accounts for almost 40% of the world market of consulting services. The US market is very receptive to management consultants. The benefits derived from consultants and consulting firms have been proven time and again by different firms in the region. Appendix F presents the available market study about the region. Like Europe, US is an established market where competition is very rigid. Opportunities for the Philippines lie on developing joint ventures, partnerships and alliances with the larger firms in the country.

5.3.4 Others

Other regions, such as the Middle east also represent some market potential and prospects for the industry. Refer to Appendix G for available

85 market studies on different countries such as Kuwait, Panama, and Argentina. In these three firms, American firms dominate the market. Managers are also mostly US-educated. This presents stiff competition areas for Philippine management consulting firms.

6 Supply Capability

6.1 Offered Services

The services offered by management consulting firms in the Philippines are not very far from those offered by management consultants abroad. There is also a trend towards integrating information technology into the services that are offered. In the Philippines, the integration of information technology is mostly seen with consulting firms with foreign affiliations. There are also other services offered apart from the strategy, finance, marketing, operations and human resource-related services. There are specialized services based on either the sector a company focuses in (e.g. tourism) or specific services like franchising, change management etc. As a developing nation, there is also a significant part of the industry which specializes in development consulting. IMPHIL, as a matter of fact, is mostly made up of development consulting firms (OIDCI, PRIMEX, Madecor, SEA Consultants, and SEARCA) and the big players in the industry which mostly started as accounting and audit firms and later affiliated with global management consulting firms (SGV with Andersen, Laya Mananghaya with KPMG, and J. Cunanan with Price Waterhouse).

Table 37. Services offered by Philippine management consulting firms Management consulting services Specific areas of service General and strategy management Strategy management services Business Planning Economic and Feasibility studies Country risk analyses Human resource management Corporate reorganization Human resource development Organizational development Training Needs Analysis and Design Executive Recruitment Marketing management Market review and strategy management Market strategy and conceptualization Corporate Communication Customer Satisfaction Checks Events Management – organizing conferences, exhibits, seminars, workshops Public relations Production/operations management Production analyses and Optimization Total Quality management International Standards (ISO) Operations and management audit Financial management Financial Planning and evaluation Mergers, acquisitions and investments Corporate valuation and analyses

86 Management consulting services Specific areas of service Investment assistance Technology Management Enterprise Resource Planning (ERP) Solutions Internet based technologies/Market solutions Systems Analysis and Design Management Information systems design/ Strategic Information systems Technology applications Software Package Development and evaluation EDP Training systems development Specialized services Franchising consulting Tourism-related consulting Compensation survey Benefits and insurance Health-services related consulting Risk management consulting Development consulting Environmental and natural resource management (forest land use, environmental management, solid waste management, impact assessment) Integrated Area Development planning (Ecozone and Industrial area development planning, Land use planning) Policy Review and Formulation Micro-enterprise development

6.2 Areas of Specialization

Consultancies’ and Consultants’ specialist knowledge remains to be the prime attraction for clients. For management consulting firms in the Philippines, specialization is based on expertise of consultants that make up a firm (CPAs, agriculturists, engineers, economists etc.). For management consulting firms which evolved from accounting and audit firms, financial management remains to be their expertise, however, slowly they are offering services other than those related to finance. Most of them offer a wide array of services so they are considered as “full-service” firms. Finance and human resource are two major areas where most firms in the Philippines specialize. In finance, because of the number of accounting, auditing and bookkeeping firms which also offers management services, these firms were able to offer finance-related consulting. In human resource, specialization is mostly in the areas of training and organizational development. There are also some firms that specialize in particular sectors such as agriculture, tourism, hotel and restaurants, and development consulting. Refer to Table 38.

Table 38. Areas of specialization of Philippine management consulting firms Area/s of specialization Company General and strategy management Innovision Strategic Development Consulting services AYC Management consultants Leverage International Human resource management Integrative learning (training) Intellectron (training) Stream Training (training) Ancilla Enterprise development Group John Clements consultants

87 Area/s of specialization Company Asia Business consultants Guthrie Jensen Marketing management TeamAsia Motivation Asia Production/operations management Asiatech resource management Financial management Business recovery and turnaround (company turnaround) Manabat-Deloitte Touche Tohmatsu (Finance, tax advisory) J. Cunanan-Price Waterhouse Laya-Mananghaya -KPMG C, Valdez Company Ernst & Young Alba Romeo Management Consultants DTTI Consultancy CLRV Neo-Synergy Equity Managers Incuventure Asset EM Management Consulting Technology Management Iberpacific (ERP/e-business) Corporate Information Solutions Andersen (ERP) Workgroup connection Specialized services Change consultants (change management) Enterprise development group (change management) GMB Franchise Developers (franchising) Solutions, Inc (benefits and insurance) Asia-Pacific Projects (tourism) Meganomics Specialists (agriculture) SEARCA (agriculture) Watson Wyatt (compensations survey) Development consulting OIDCI PRIMEX ARMDEV Economic Development Foundation

6.3 Expertise/Technical Competence of Manpower

Only a manageable number of personnel is maintained by management consulting firms. According to interviews made, there is a need to maintain low overhead costs, especially because of the seasonal nature of the business. Projects may not be there at specific times. Most of the small and medium-sized and a few large management consultancy firms, instead maintain a database of local and foreign consultants who can be tapped for specific projects. Only the senior managers and/or partners together with some administrative staff are maintained in the regular operations. Nevertherless, the expertise and competence required from these consultants do not differ as much.

Senior consultants and partners in small and medium-sized firms are given privileges such as flexibility in time since many of them are also consulting professors. In larger firms, they are maintained to perform administrative and marketing functions in the firms.

No specific course or school trains consultants. They are also from different fields of study. This is the reason why most recruitment of junior

88 and senior consultants is not done in schools. They are most often referred personally and are preferred if they have a significant number of years of experience and exposure. Table 39 summarizes the expectations of firms from their employees.

The academic achievement and work experience of consultants in the Philippines is vast. Many of the consultants gained their masteral and doctoral degrees abroad either through scholarship grants or through personal subsidy. Many were also exposed to international training and symposia at the expense of their firms or through individual subsidy.

Objectivity and knowledge of best practice is another reason why consultancies are chosen to solve client problems. Majority of Filipino consultants are retired civil servants who has acquired long years of experience and expertise. The country has a large pool of managers and planners with masteral and doctoral degrees gained locally and abroad. The consultants are known for high trainability and high computer literacy. In addition, consultants also have proficiency in the use of the English language.

Table 39. Profile of Manpower Competence and Expertise of employees in Philippine Management Consulting firms COMMON POSITION/S ROLE COMMON QUALIFICATIONS Research Assistant, Research Employed to do number Academic achievement Associate, Analyst, Business crunching (if area of consulting is (graduates of BA or BS degrees) Analyst, Research Analyst, quantitatively oriented), data related to services offered by the Associate Consultant, Junior collection, and/or assistance in firm (Human Resource, Consultant report preparation . After a year Engineering, Management, or more, analysts are more likely Computer) to take a responsible role with With 3 to 5 years relevant work problem solving and client contact experience

Other qualities:

Maturity Problem solving skills Logical reasoning Business acumen Team orientation Writing skills Presentation skills Ability to cultivate relationships Facility with computer software Quantitative and statistical skills Energy/stamina Pattern of leadership

Senior Managers, Senior Oversee projects, deal directly Academic achievement Consultants, Partners with client and conduct meetings (graduates of MBA or PhD and presentations, supervise staff degrees) related to services in the implementation of the offered by the firm (Human project, makes decisions and Resource, Engineering, recommendations to the client Management, Computer)

89 COMMON POSITION/S ROLE COMMON QUALIFICATIONS With 10 to 40 years relevant work experience

Other qualities:

Can work independently Maturity Leadership Problem solving skills Logical reasoning Business acumen Team orientation Writing skills Presentation skills Ability to cultivate relationships Facility with computer software Quantitative and statistical skills Energy/stamina

The technical competence and qualities looked for by firms in the Philippines do not differ with those looked for by the global management consulting firms as shown in Table 40.

Table 40. Profile of Manpower Expertise and Human resource Development efforts in Global Management Consulting firms Consulting Firm Human Resource development Andersen Consulting Profile

Employment increased from 21,355 in 1989 to 65,000 in 1999

Workforce is diverse and professional

New graduates and MBA levels start as analysts or consultants

Offers the following for employees:

Recognized leader in training and invests nearly US $ 600 million annually in the professional development of their people

Developed “communities” made up of 100 to 150 individuals . They are intended to provide a consistent home for employees and influence almost every aspect of an employee’s career including professional development and mentoring

Introduced in US and Canada the Women’s Mentoring Program which aims to improve retention of women managers by pairing Manager-and-above proteges with Associate Partner or Partner mentor.

Offers flexible work arrangements such as part-time and leaves of absence in a case-to-case basis. Request is evaluated based on the reasons for request, work performance and potential success with the firm

Implemented the Andersen Consulting at Your Service” Concierges based on employee feedback that the number one barrier to doing their job more effectively was handling chores that had to be done during business day from walk the dog

90 Consulting Firm Human Resource development to pick up from dry cleaning to shopping gifts. The service is offered at nominal cost to employees and Andersen Consulting picks up bulk of expense.

Competencies looked for:

Need people with strong ecommerce skills, understands internet technology, and potentials of eEconomy

Specialization in the industry typically begins after a few years on the job

Cater also to professioals with experience who have strong ecommerce skills

Qualities such as being Well-rounded Strong academic Performer A lifelong earner Committed to developing a Career Interested in and understands what is done in the consulting Skilled at written and oral communication Interested or skilled in ecommerce Team and results oriented

Deloitte consulting Profile

New graduates join as business analysts or a systems analysts

MBAs with significant work experience were also taken in as Senior Consultants which leads to Manager, Senior Manager and Partner

Offers the following for employees:

There is a great opportunity for rapid professional growth

Competencies looked for:

Focus of recruitment are in the areas of package implementation which requires expertise with PeopleSoft, Oracle and SAP. There are also tremendous needs in the Client/Server Solutions area

Ability to think clearly, logically and with insight Quick mind and high level of energy Common sense and judgment Ability to secure the cooperation of others and persuade them to act Flexibility and sense of humor Desire to broaden one’s career focus beyond a specific technical or functional skill With self-confidence to work effectively with people at all management levels With initiative, drive and persistence

KPMG Consulting Profile

Graduates join company as management analysts or consultants. They work closely with senior managers and managing directors

91 Consulting Firm Human Resource development

Employees receive an initial grant of stock options.

Offers the following for employees:

Flexible hours Telecommuting Employee and team performance bonuses Recognition awards Departmental outings Fitness club membership discounts Reduced rates for day care child facilities Happy hour occasions

Competencies looked for:

Technical skills Industry knowledge Innovative thinking Dedication to continuous learning and development of skills

Pricewater-house Coopers Offers the following for employees:

Offers training and career development programs for new graduates and MBAs

Competencies looked for:

Hire peole who have a proven track record at the best organizations across all industries and functions

Those who have demonstrated initiative and success in their education and previous work experience

Good communicators

Passionate about their work

Provides best service to clients

Top grades

Creative thinking skills

Analytical skills

Ernst & Young Profile

Employs 77,000 people in more than 130 countries and 689 office locations

New graduates’ entry level are staff accountants, tax consultant and advisers

Offers the following for employees:

Offers innovative continuous learning process

Support people to earn masters in accounting

Competencies looked for:

92 Consulting Firm Human Resource development

Well rounded Strong leadership skills Strong business acumen Strong communication skills Ability to be flexible in the continuously changing e-economy Ability to work well with others High performance individuals Team-oriented

6.4 Existing Association

To organize and enhance the competitiveness of the industry, the Institute of Management Consultants of the Philippines (IMPHIL) was established in 1985 as a professional association of management consultants in the Philippines. It is under the umbrella of the Confederation of Filipino Consulting Organizations (COFILCO), which represents Filipino professional consultants from eight member associations, mostly from the fields of engineering and architecture.

IMPHIL has an existing membership of 19 management consulting firms and one (1) individual member. The members represent some of the more established management consulting firms in existence for a number of years in the Philippines.

In its charter, IMPHIL had specifically set the following objectives for its existence:

• “Enhance and encourage the development of the art and science of management consulting to its highest standards through the provision of professional services and the organization of appropriate activities by Institute’s members; • Work towards making the profession of management consultants recognized; respected, and accepted as providing a valuable and often indispensable service to private business and industry and to government and public services; • Serve as forum for the exchange of information and as a center for cooperation and collaboration on matters relating to management consultancy; • Foster and encourage professional, social, and friendly ties among the members of the Institute; • Foster the highest standards of personal integrity and competence in the profession of management consulting,

93 and towards this end, endeavor to set the requirements and standards for the exercise of the profession; • Seek the advance of the profession of management consultancy by extending its frontiers of knowledge through involvement in study, research, and similar activities; and • Consult, cooperate, affiliate with groups, associations, organization or institution, whether local or international, having similar or identical objectives with a view of advancing these same objectives.”

IMPHIL has made efforts to enhance the competitiveness of the industry. Recently, it spearheaded the efforts to come up with an integrated marketing brochure for IMPHIL members which will be used to market the member firms and their services especially to foreign clients. It was also able to initially develop its own website at www.imphil.org to provide information regarding their organization. It is also active in its efforts to see the passage of the National Consulting Act which aims to help Filipino consultants. According to Mr. Viado, other endeavors that IMPHIL aims to achieve for the past years but was not able to gain grounds and be successful in it are the (1) establishment of an accreditation system in coordination with NEDA ; and (2) linkage with the Bureau of Export and Trade Promotion of the Department of Trade and Industry. Although, initial meetings were conducted between the government agencies and IMPHIL, there are a lot of areas that IMPHIL and these government sectors would still need to work on.

There were difficulties encountered by IMPHIL specifically with regards to forming a secretariat to really focus on efforts and work on the organization’s plans. The officers of the organization have to face the demands of their own businesses and projects, there is a need to really have working group to focus on the issues confronting the industry. The costs involved in forming a secretariat is also another area of concern with only 20 members to support the said endeavor.

In a position paper by COFILCO on the development and growth of the Filipino consultants, there is no doubt about the consulting industry’s dollar earning potential. However, COFILCO stand witness that most of the major consulting contracts are not by Filipino consulting firms. Large consulting works are undertaken by foreign consultants vis-à-vis foreign assisted projects. It is not difficult to show that the local consulting firms are actually subsidiaries of international consulting firms operating through majority owned Filipino corporations. Under these conditions, the Filipino consultants are not the prime and lead consultants in his own country. The unfortunate result is that the Filipino consultant could not develop into a world-class consultant that can penetrate the international market.

94 The COFILCO recognizes that the present state is already at an alarming stage of deterioration and stagnation that may stunt permanently the growth of the Filipino consultants. COFILCO has identified CIAP as the government agency that can support consultants to address the problem of the local consultants.

7. Industry Training Needs

7.1 Quality and Quantity of Training

As seen in Table 38, the global management consulting firms to manage growth, and maintain staff and quality of service, place emphasis on development of its people. Support is given to those who pursue further studies, and offers training and development programs for a continuous learning process to take place. Consultants, due to the nature of their work are people who would have a high need for a learning environment. But minimization of stress and strain in the workplace is also done like offering concierge services, part-time work options, sabbaticals, and restricting travel to weekdays.

For management consulting firms in the Philippines, a recent survey made point out to the following practices of firms in the training and development of its employees: • Firms develop their senior consultants, managers from within the company rather than hiring from outside • Firms provide job-specific training and training on integrative skills to their managers on the job • Training and development of technical staff or junior consultants are usually done either through in-house training or by hiring other private training firms. • Training given to junior consultants are usually in the form of group planning activities, on-the-job meetings, decision-making courses, and system analysis • Development of both junior and senior consultants are also made possible through the use of e-groups through which relevant articles are distributed to employees • A few firms have very stiff training and development program for their consultants which were carefully planned and implemented

7.2 Identification/Listing of Training Needs

Representatives from different management consulting firms all agree that training and development of human resources (consultants) is a prerequisite to enhance the competitiveness of Philippine management consulting firms. Consulting is a knowledge/idea game and the human resource development requirement is quintessential. Filipinos are very

95 adaptable professionals, culturally, they can co-exist with different cultures, and learn different languages fast. To add to that is the fluency in the use of the English language. There is therefore only the basic needs for further education and exposure that is needed by Filipino consultants. Below are some of the training needs mentioned that would assist in this pursuit.

Education and exposure abroad. Support through government assistance or availment of necessary information on private scholarship grants that can be availed by management consultants for further exposure on new management tools and services. Multilateral agreements can also be made in sending management consultants for education and exposure abroad. In doing this, the industry can be assured of growth and would necessarily result to a corresponding multiplier effect on the different clients and businesses that the management consultant would deal with. Trends worldwide and needs of private sector, public sector and multilateral institutions are mostly geared towards a need for specialists in various fields of discipline. This can only be done through assistance in the training of specialists.

Training on the use of information technology. Some management consulting firms also expressed the need for training on maximizing the use of information technology such as the internet to get information and updates, use of database softwares for clients and other data , as well as softwares that could enhance in the packaging and presentation of services to clients. This was also seen as a need especially for senior consultants who need to get updated in recent trends in technology. Companies with international and foreign affiliations have very good training and infrastructure related to information technology. However, management consulting firms without these infrastructure should be able to upgrade themselves as well to keep abreast with their competitors. Philippine software associations can provide valuable input on how management consulting firms can develop and integrate information technology into their operations and services.

Training on international market development. The numerous small and medium sized management consulting firms have ahd not much experience in the international market. To develop their capabilities, the more experienced players in the industry can share some of the things that the small and medium sized players would need to know to develop international market.

96 8. Opportunities and Threats

8.1 Opportunities

8.1.1 Socio-cultural

Asia-Pacific is a growth region where the market for consulting industry is seen by many, including the major global management consulting players from US Europe, to possess a high potential because of its developing economies. The Filipino consultants’ characteristics of having a combination of a strong background and exposure on western education and management as well as familiarity with some neighboring Asian countries’ culture obtained through exposure in these countries in previous work experiences pose an opportunity for partnerships with global consulting firms in their plans (for those who still have not set-up office) to expand in the Asia-Pacific. The Filipino characteristic of being able to build good interpersonal relations, value for higher education, proficiency in the use of the English language and ability to learn fast are also important factors that can contribute to increasing opportunities for success of Filipino consultants and consulting firms.

8.1.2 Technological

Technological changes related to information technology results to development of new services and new sources of revenue for management consulting firms. Recent trends show the interrelationship between management consulting and information technology. The Philippines, therefore, being one of the leading countries in Asia, together with India, is among the most promising source of human resources and software technology . This present opportunities for the management consulting services sector to take advantage of these available resources to strengthen their capabilities.

8.1.3 Economic

The Philippines is on a stage towards development. It has learned from it past economic experiences and these experiences are the ones that can be used to present opportunities for consulting in the developing economies like Vietnam, Cambodia, Eastern and Central Europe.

Filipino consultants charge relatively lower fees as compared to their foreign counterparts. This is seen by some as a competitive advantage especially in the submission of bid proposals.

97 8.1.4 Political-legal

As one of the developing countries in Asia, the Asian Development Bank and other bilateral and multilateral institutions provide opportunities for local management consulting firms through grants provided. It is however, limited to those with the necessary skill, expertise, track record and reputation to be accredited and be included in the shortlist.

Government , particularly in the areas of public administration, rural development, education, community, social, and health services present opportunities for the consulting industry.

Privatization efforts in different countries in Asia like in Thailand lead to a need for consulting groups to assist the public sector in its transition.

8.2 Threats

8.2.1 Socio-cultural

Foreign and Brand mentality of clients who prefer foreign and known consultants over local consultants. Colonial mentality of clients is a threat for Filipino consulting firms especially wit h the entry of more foreign firms who form joint ventures with existing accounting and management consulting firms.

There is difficulty in marketing management consulting to foreign markets since there is a perceived poor image of Filipinos abroad as cited by consultants who had previous experiences in marketing services abroad.

Very few small firms seek the assistance of consultants because of the perception that consulting is expensive. The market therefore is limited to large enterprises.

8.2.2 Technological

Technological changes bring about growth of information technology consultancy firms which also eats up a share in the market of management consulting firms.

Many Filipino firms are in a dilemma of “without experience, they cannot qualify for assignments; and without assignments, they cannot gain experience”. There is inability to develop services and track record of consultants if there are no opportunities given.

98 8.2.3 Economic

The economic crisis leads to cost cutting in many companies, including costs related to consultancy services.

8.2.4 Political-legal

In spite of availability of government projects, many consulting companies try to avoid getting projects from the government due to difficulties in collecting payments. In other instances, there is also difficulty in getting government projects because of the stiff competition and at times preference over foreign consultants.

There is a weak national database on management consulting industry to be able to assist in the monitoring industry performance, accessing information on market opportunities, and making decisions based on reliable and updated information.

9 Summary of issues confronting the Management Consulting industry

The Philippine marketplace is expanding from domestic to global horizons and its economic base is changing increasingly from resources to knowledge.

The Philippine objective is to foster the competitiveness of the management consulting industry through the client-focused delivery of innovative products, services, and policies. But before specific recommendations are made, this part of the paper summarizes the issues that confront the industry based on the information gathered as presented in the previous sections of this paper. These issues will form as bases, along with the strengths and weaknesses of companies in the industry as shown in Appendix I and the opportunities and threats in the industry as discussed in section 6.

Issue 1: There is an absence of reliable data base to properly monitor the performance of the industry, the real contribution to the economy and the number of players in the industry. A reliable database is necessary to properly monitor performance and identify the key areas that would establish significant development of the industry.

The small size of the industry as compared to other business service sectors lend itself to be included in “other business services” in the definition of PSIC. The definition of the PSIC is another point of contention since it includes activities of management holding companies therefore making estimates on the performance of the industry unreliable. To add to this is the very nature of the industry of being diverse. There is a very thin line that draws the difference between traditional and non-traditional providers of

99 management consulting services. There is therefore a need to also include the specific management consulting services’ contribution in the business of the non-traditional providers since these may have a significant effect on the estimation of size of the market for management consulting services. Another point to be considered is the existence of small players and individual consultants in the industry. There is more difficulty in monitoring these individual consultants and small players who may come and go because of low entry and exit barriers in the industry.

Issue 2: There is a very competitive environment in the management consulting industry.

The competition in the industry is characterized by the following (1) existence of large international multifunctional firms with the capability of offering full-service packages and who have a significant share in the market; (2) increasing number of non-traditional providers of management consulting services; (3) low entry and exit barriers in the industry leading to more players in the industry and poor image of consultants since anyone can just be a consultant; (4) high supply of consultants and consulting firms and low demand for the services in both private and public sector markets. There are recent news indicating a decrease in official development assistance from other countries. For private sector market, it is concentrated on large firms and even large firms have limited demand for consulting services especially if they have internal consultants (corporate planning department); (5) existence of few players with highly differentiated services. Unlike technology consulting or market research firms who were able to offer differentiated services through branded solutions or packages, few consulting firms were able to successfully do so. Switching costs are therefore very low. Large, new players and non-traditional providers of management consulting services have added significant competitive pressures to the local market . With the blurring of the consulting industry’s boundaries, non- traditional suppliers are adding to the supply of consulting services available to the market. In addition, there is a growth in advisory services offered by public and non-profit organizations such as colleges, universities and non- government organizations. The competition these entities offer can affect management consulting firms of all sizes.

Issue 3: Absence of a legal framework and specific government support to assist in the implementation of accreditation of consultants so as to upgrade the standards in the industry and counter existence of more “fly-by night” consulting firms and consultants.

The industry, through IMPHIL, has been lobbying and working for the implementation of the accreditation of consultants for the past ten years but have faced a lot of difficulties in the process of doing so.

100 The accreditation of consultants would help a lot in improving demand and factor conditions in the industry. A reduction in the number of short-term, one to two projects, fly-by night consultants and consulting firms can be made if this is implemented. The poor image of consultants will be addressed. The accreditation would also pave the way to easily market and promote the services of consulting firms and consultants among local and international clients.

Issue 4: Lack of industry-wide information on market opportunities abroad. Most efforts with regards to market research related to consulting opportunities abroad are done on a per-company or individual basis. There is no institutional information network to assist management consulting firms in expanding their market.

Issue 5: Existence of numerous small to medium-sized general management consulting firms and consultants but lack of locally-established firms with highly specialized expertise. Global trends as well as available local data shows that differentiation is a factor in the success of many small to medium- sized consulting firms.

The Philippine management consulting community is being challenged to develop new services as a result of rising client expectations and sophistication, changes in the information technology and growing competition. Through research and study of the current advances in the industry, the Philippine management consulting community can differentiate and customize them to specific client needs. Philippines’ strength in management consulting is the small and sectoral expertise of some players in the industry and it is a particular challenge for these knowledge-based companies to focus significant human resources on new service development.

Issue 6: There is a need to develop the limited domestic market for management consulting in the Philippines. To enhance the competitiveness and capability of management consulting firms, there is a need to expand opportunities for management consulting in the domestic market.

Private clients are limited to large players in the industry which are mostly multinational which either have their own internal consultants or would prefer international management consulting firms recommended by their mother companies. Very few small and medium-sized firms seek the assistance of consultants since this is considered an ”expense”. The Philippine domestic market is not as sophisticated as the clients found in Europe or United States where small and medium-sized ventures are very much open and encouraged to seek the expertise and assistance of management consulting firms to ensure productivity and profitability.

101 Projects obtained through international funding institutions and government agencies are limited to the available official development assistance and national budget. There are trends that show a decrease in the official development assistance as well as increasing number of international players to compete with in the projects.

Issue 7: There is a growing need for more sole practitioners and small to medium-sized management consulting firms to be export-ready. Global market information point out to internationalization of the market and need to strengthen the players in the various industries including management consulting.

With the expertise and knowledge resident in the small and medium-sized firms, there is significant potential to take advantage of the growing global market. The smaller firms usually cannot compete with foreign firms for large projects, but with the specialized functional and sectoral knowledge, they can take on niche assignments with larger firms.

Issue 8: Absence of a focused marketing strategy aimed at promoting and developing the industry towards preparation for the international market. Along with a growing need to strengthen the management consulting capabilities of the players in the industry, there is also a similar need to market the companies who are capable and willing to compete abroad. In the face of a limited domestic market, there is a need to expand further into other markets outside the country.

Issue 9: There is a growing threat posed by technology consulting firms among management consulting firms. The emergence and growth of technology consulting firms point out to a growing demand of clients for information-technology related services.

Information technology plays a big role in the businesses of many companies. Slowly, even in government, technology is playing an important role in systems and processes. Technology consulting firms pose a big threat to management consulting firms especially to those targeting private sector client companies. Private companies and government corporations, in the past years have invested heavily on computerization and business process reengineering. The strategy of many consulting firms now is to recruit business graduates to complement their technical expertise. These firms have realized the need to understand business strategy and processes. This led to solutions known as Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), e-commerce and e-business solutions. Since many technology consulting firms are also software vendors which are used in the implementation of the business processes developed, then it is expected that switching costs will be high. Therefore, these technology consulting firms are expected to be there for a longer time to monitor

102 implementation of systems that they placed. This has eaten a significant share in the market of management consulting firms offering services related to business process engineering, systems evaluation and systems audit. It is not impossible that these technology consulting firms can grow and become a full-service consulting firm offering strategic management services and business intelligence. This is not far-fetched since the services they offer now are related to tools to implement strategies and tools to obtain continuous business information to make sound decisions.

Issue 10: There is a rapid growth in the number of consultants offering management advice, without a widely accepted level of standards, standards of conduct, then the industry is bound to be negatively affected both locally and globally.

Issue 11: IMPHIL, as an industry association needs to build its capacity to meet the challenges posed by the growth in the industry.

The mission of IMPHIL is to support and promote the development of professional management consulting, advance the excellence of practice of professional management consulting, achieve recognition of the value-added by professional management consulting and IMPHIL’ s designation as the standard for the profession. As the national voice of management consulting, IMPHIL is an important vehicle for strengthening the management consulting industry. However, there are efforts that need to be taken for more players in the management consulting industry to be more aware of IMPHIL’s role in the industry and to also participate in similar efforts taken by IMPHIL.

Issue 12: The increasingly competitive marketplace dictates that in order to meet the challenges of the knowledge-based economy, firms are required to innovate constantly in order to react quickly to changes. Shortages of time, people and capital are major drivers why firms explore the use of external sources of expertise known as outsourcing. Outsourcing as a practice in the industry ranges from routine, project-based, short-term contracts to cooperative agreements, including partnerships and strategic alliances. This is why many established consulting firms invest to maintain a database of available consultants and experts as well as consulting firm partners to rely on for particularly large projects.

Outsourcing of non-core competencies and government privatization are also emerging as growth areas for expansion of market of consultants. Some information technology, human resources, and financial management

103 consulting firms have the capabilities to become involved in managing outsourced operations.

Companies agree that outsourcing enhances access to innovation and strengthen company linkages to the national system of innovation. They are no longer concerned that by outsourcing they will lose their in-house expertise or ability to learn. On the contrary, they are eager to learn as much as possible from the experience of the contractor. Outsourcing will continue to expand because it is a global phenomenon reflecting changes in the marketplace in an environment of freer access to knowledge and the rapid pace of technological change.

104 10. Action Plan enhancing Competitiveness

10.1 Recommendations

Based on the analysis of the issues confronting the industry, factor, conditions of the industry as well as corresponding opportunities and threats that players face in the emerging global market, below are the recommendations and action plan to enhance competitiveness of the Philippine management consulting services industry.

Government Level:

2. To seek a government policy statement that the government supports the engagement of Filipino Consultants and an assurance of a level playing field: a. in loan negotiations b. in project scoping and position c. in national project (should hire consultants instead of hiring employees, as in-house staff of the agency, limit agency capability to contract management

2. Engagement of the Filipinos as prime or lead consultants.

3. Increasing the fees of local consultants.

Standard rates (minimum) for local consultants, for locally-funded projects. Standard rates for Filipino consultants at international rates for international selection of consultants.

105 4. It is strongly recommended that the Implementing Rules and Regulations of E.O.164 the procurement of Consulting Services for Government Projects, or the Consultancy IRR which provided a systematic and standard set of procedures in the hiring of local and foreign consultants be strictly and fully implemented. The consultancy IRR was conceived to develop a more orderly, uniform and transparent set of procedures in the selection of consultants and likewise increase the participation of local consultants as well as to provide adequate and fair systems, rules and conditions governing government’s procurement of consulting services many projects. No less than the former president Fidel V. Ramos in 1992 articulated the fact that successful consultancy implies rich project experience and high technical capabilities, as demonstrated by Filipino consultants in a wide and diverse range of fields. “They not only provide needed expertise to plan, build and manage project in the country, but also in foreign exchange from project involvements abroad,” but first track record must be developed. And this was not the general case among local consultants. Their flight was sad and a lonely one. Their experience in obtaining government project since the consultancy IRR was characterized by frustration and disappointment. They have become a second rate citizen in their own country and moved in the shadow of their foreign counterparts as regards to governments projects. The Philippine Management Consulting Industry is a potential giant if given an opportunity to grow and develop its wings to become a force to contend with global management consulting. The industry is now expressive of its remaining hope on the full implementation of the Consultancy IRR to fulfill its four basic principles. These are: first, to achieve maximum efficiency and economy in the development and implementation of development projects and related activities; second, to enhance the growth of the local consulting industry and to optimize the use of local expertise, material and resources; third, to bring about the transfer of new technology into the country; and fourth, to maintain transparency of government procurement processes and procedures. The local consultants are one in the export potential of their craft but a faithful compliance of the consultancy IRR is a necessity whose time has come.

5. Monitor through NEDA, EDC and congress committee on trade and industry the full implementation of the consultancy IRR. In the spirit of the transparency, there is a need to publish in the Web, the list of the government projects for bidding in line with the E-Commerce act.

106 6. Revive and lobby for the passage of the National Consultancy Services Act which was based on E.O.164. There is no law governing the consulting industry which calls for an organized regulatory body of government that will supervise, control and enhance the industry, and in the selection and hiring of consultants for government infrastructure and other projects giving priority to Filipinos and/or Philippine Consulting firms thus make them globally competitive.

7. Impose penalty for consultants not complying with the NEDA guidelines.

8. To assist the Filipino consultants to penetrate and maximize participation in the international market.

COFILCO Level and other related association level

1. Continuous dialogue with cabinet secretaries involved in policies related to infrastructure and hiring consultants. DTI, NEDA, DPWH, DOTC, DILG, NPC, NHA, PPA and NIA.

107 linkages with local professional and industry associations and international associations.

Regular press releases, possibly in publications like government newsletters, professional and industry associations’ newsletters, client companies’ newsletters, newspapers’ business sections, business magazines, academic newsletters and community newsletters are possible means for the industry to become aware of the existence of the organization. IMPHIL may not need to invest much in this if it can use its network linkages with the government (like DTI, NEDA), its clients, professional and industry associations where some of the consultants or key employees of IMPHIL’s member firms are associated and linkages with academe where some of IMPHIL member firms’ part-time consultants are connected. The regular press releases may contain any announcements of upcoming actitivities of IMPHIL, trends in the industry based on regular mini-surveys that can be conducted by IMPHIL, publishable success stories with IMPHIL members’ clients, management consulting practices, among others. Through regular press releases, IMPHIL may build its image and reputation to attract other consultants, and consulting firms to join the organization.

IMPHIL’s website should also be updated regularly which can contain the information mentioned to be made available in newspapers and/or newsletters (publishable success stories, management consulting practices, trends and upcoming activities). The website should offer vast array of information and guidance that can assist the management consulting community to stay competitive. If possible, the website can also be developed to become interactive to be able to give a chance to clients and prospective clients to inquire about the consulting firms and the available services that they can offer. This website can link with DTI’s PhilTINS “one- stop” system once it is fully operational to for potential domestic and foreign clients to have access to management consulting service providers and promote IMPHIL to non-members.

A professional development program can be developed by IMPHIL with two objectives, one is to give quality training for management consultants and their employees so as to upgrade standards of excellence in the practice of the profession, and another objective is to promote IMPHIL among non- member consulting firms who can also avail of the training and development programs. IMPHIL’s member firms have proven experiences in organizing conferences and conventions so this may not pose problems for IMPHIL, fees may be charged to members and non-members. IMPHIL’s professional development program should include workshops/seminars on new trends in management consulting practices such as result-based practice, virtual organizations, cross-discipline practice, boutique operations, brand marketing, information technology applications, and other topics that will build interests for members and non-member firms who are enjoined to

108 attend. The extensive professional development program will assist in attracting more members to IMPHIL as well as defining the standards, code of ethics and higher level of assurance to industry’s clientele , thereby, raising the industry’s image to both domestic and international environment. These conferences, conventions and seminars can serve as a means to promote IMPHIL as well as ensure a cooperative competition among the players in the industry.

But for all of these activities to be implemented, IMPHIL would need to form a secretariat to really work for the achievement of IMPHIL’s objectives. IMPHIL officers cannot do the work on their own, there are a lot of things that would need to be acted upon to help the industry become competitive.

IMPHIL needs to build tighter linkages with all stakeholders and industry cluster in order to have a wider coverage for its program for achieving excellence in management consulting. IMPHIL can forge stronger linkages (through joint-sponsored programs and events) with important local organizations especially those of non-traditional providers of management consulting firms, suppliers, and customers. Some of these associations are the Marketing Opinion and Research Society (MORES), Philippine Institute of Certified Public Accountants (PICPA), Philippine Software Association (PSA), Personnel Management Association of the Philippines (PMAP), Public Relations Society of the Philippines, associations in the printing and publishing industry, other professional organizations in engineering, economics, statistics, environmental science as well as associations in the field of printing and publishing, association of non-government organizations and association of foundations in the Philippines and other relevant industry associations based on services offered and markets served by players in the management consulting industry. Cooperation and information sharing between firms in the business advisory services, professional services and management consulting industry should be initiated. This would bring about not only creating a better image for management consultants and IMPHIL but also develop new markets for the industry.

Likewise, establishing strong linkages with international associations like those shown in Appendix H is necessary as trends towards globalization of markets increase. IMPHIL can initiate attendance of representatives in international conventions, conferences and symposia sponsored by these associations to build networks for market development as well as update local players with new trends in the global market.

109

Joint ventures between foreign and local consulting firms should be encouraged to foster technology transfer and training. There is a need for consulting firms to strengthen technology through management tools. But these ventures should be viewed as a long-term partnership for both parties. The contractual agreement should clearly define responsibilites of each firm.

110 awareness among future business leaders about the role that management consulting play in the economy. This will create opportunities for acceptance of management consulting in the future among these business leaders as an important tool to assist management and not just another “expense or cost” that a company would incur. In the Philippines, unlike in more developed countries like US and Europe where consulting is a standard, expected business practice, Filipino consulting firms, especially the small and medium- sized firms are not used to getting consultants. Cooperation from Information suppliers like the government agencies such as NSO, NSCB, SEC, and DTI is needed. This is further explained in the next section of this study concerning performance monitoring scheme. Technology suppliers such as software vendors in the Philippines can assist the industry in developing partnerships with consulting firms to develop branded solutions especially for specialized services offered by management consulting firms. This is can be similar to branded solutions developed by market research firms. This is speicifcally applicable for management consulting firms with differentiated core competencies. IMPHIL can assist in identifying these firms with differentiated core competencies.

111 are cooperative strategies that may be attractive to organizations with limited financial, technological and human resources to contend with. Alliances and consortia among local consulting firms of various specializations should be encouraged. These firms can complement each others capability and expertise to compete with the international market needs’ for projects. They are not formed to undertake a specific project , but exist as a pool of resources available on demand. The lead firm explores markets in developed or developing countries and identifies the consulting firm (or group of firms) in the consortium best suited to provide the required services

Trade commissioners in foreign posts can benefit from informed, immediate support in promoting the industry. The IMPHIL and government- initiated agencies can examine the feasibility of a “secondment” progam that would place experienced management consultants in selected number of foreign posts for a specified period, say, for two-year terms. The countries selected would be in which the Philippines has significant business opportunities. The secondees would be involved in formulating and chanelling specific opportunities to Philippine management consultants. The secondees could also build relationships with local consulting firms and contractors of large projects. Such relationships can provide valuable intelligence about required service offerings in the global market.

Institutionalize the development of the management consulting services sector. Governments and private Sector should recognize that developing the local consulting profession is a long-term process of institutional development. Based on the development of human resource, information and technology. These can be done through the following:

• A team should be designated as the focal point with responsibility in preparing and monitoring the strategy and plan of action for developing the profession. This can be a combination of representatives from the associations and DTI.

112 • Universities, professional societies, and national associations of consultants should play a more active and effective role in raising the professional standards and quality of performance of the domestic profession. Formal linkages between professional schools and the consulting industry should be established. This practice is prevalent in other countries especially in the US which paved the way for development of new management tools and specialists. • Participation of Philippine consulates as institutional marketing arm of the industry in different countries. Consulates abroad should engage in aggressive marketing efforts to market services abroad and conduct follow-through on targeted partners and clients. Targeted clients are those who may want to conduct business in the Philippines and would need consulting assistance or foreign companies who would want to get the services of Filipino consultants/consulting firms. • In management consulting, clustering can initially be done by identifying clusters that can be grouped according to classification of firms based on specialization. This enables the industry to better identify specific trends and issues within the cluster, and these may differ across the different classifications of firms. Genuine interest and commitment from those identified to work for competitiveness enhancement should then be assured. These will become agents of change , they are key agents who may be players in the industry, suppliers, customers, who can attract the participation of key business and government leaders. Key representatives from the public sector should be enjoined in the cluster. Table 41 below shows possible groupings according to areas of specialization.

Table 41. Possible groupings of stakeholders according to area of specialization Area of Specialization Stakeholders Human Resource Institute of Management Consultants of the Management/Training/ Philippines (IMPHIL) Executive Recruitment Personnel Managers’ Association of the Philippines (PMAP) Department of Trade and Industry (DTI) Department of Labor and Employment (DOLE) Philippine Industrial Relations Society (PIRS) Development Academy of the Philippines (DAP) Printing and publishing industry associations Conference/Convention/Training Centers/Hotels and Restaurants Colleges and universities Staff Recruitment Agencies

113 Financial Management Institute of Management Consultants of the Philippines (IMPHIL) Philippine Institute of Certified Public Accountants (PICPA) Bankers’ Association of the Philippines (BAP) Department of Trade and Industry (DTI) Department of Finance (DOF)/Department of Budget Management (DBM)/Commission on Audit (COA) Philippine Software Association (PSA) Colleges and Universities Printing and publishing industry associations Tax consultants and auditors Production/ Operations ISO consultants Management Certificate International Phils., Inc. Professional Engineers’ associations (Mechanical, Electrical, Industrial) Philippine Software Association (PSA) Department of Trade and Industry (DTI) Colleges and unievrsities Printing and publishing industry associations Marketing Management Institute of Management Consultants of the Philippines (IMPHIL) Marketing Opinion and Research Society (MORES) Philippine Marketing Association (PMA) Association of Marketing Educators (AME) Philippine Software Association (PSA) Department of Trade and Industry (DTI) Colleges and universities Printing and publishing industry associations Television, Radio/Broadcasting industry Development Studies and Institute of Management Consultants of the Environmental Philippines (IMPHIL) Management Environmental service providers Non-Government Organizations’ associations Association of Foundations in the Philippines Philippine Software Association (PSA) Department of Trade and Industry (DTI) Research organizations Colleges and Universities Printing and publishing industry associations

10.2 Performance Monitoring Scheme

To properly monitor the performance of the industry , the following are the key result areas that need to be addressed.

114 lack of information to monitor the performance and contribution of the management consulting service subsector to the economy.

• through the government, the PSIC should be harmonized with the UN CPC classification/definition to have a common framework by which management consulting industry is monitored. Specifically, exclude the activities of management holding companies in the PSIC definition • through IMPHIL, regular surveys through e-mail can be conducted among its members and possibly, other non-members to establish a database that is necessary and useful in establishing specific strategies that IMPHIL can take in addressing new issues and challenges in the market. This should be done on a regular basis to confront the changing market conditions and ensure competitiveness of its members and the industry, in general. In other organizations like FIDIC, for example, this is regularly done to determine emerging trends in the market. The following are some of the suggested surveys that can be conducted at different points in time: o Survey on the amount/percentage share of sales generated by each company - classified by industry/sectors served - classified by services rendered - classified by source (domestic sales or export sales) This will assist in identifying trends in the market and market performance. It will also support any marketing activities that can be initiated by IMPHIL to improve performance in the domestic and foreign market. o Survey on training needs. This will assist IMPHIL in the design and implementation of a professional development program that can assist capability building in the industry. o Survey on professional designations and expertise of consultants in the Philippines. This will assist IMPHIL in determining outsourcing strategies especially for larger projects where cooperative collaborations are formed to better compete in the market. o Survey on the extent by which information technology is used in the companies. This will again assist IMPHIL in determining information-technology related seminars that can be conducted through the professional development program of IMPHIL.

115 Accreditation of Consultants. An accreditation system of management consultants may be implemented with the assistance of the Department of Trade and Industry, NEDA and IMPHIL to establish consultancy as a profession and safeguard the quality of consultancy services in the Philippines.

A tax incentive scheme for companies including small and medium sized firms who will avail of consulting services from accredited consultants may likewise be implemented through proper legislation in order to generate more patronage for local consulting firms. This will create additional domestic demand for the consulting profession.

It is also perceived as necessary to provide the accreditation system a verification framework (through forms verified by third parties). The scheme would work to expose consultants, local or foreign who are not qualified; not allowed by immigration and labor laws to engage in consultancy; and expose dummy corporate fronts of foreign consultants.

The accreditation scheme should work for on-line, simple, transparent and reasonable accreditation standard as well as ethical standards.

COFILCO forwarded some proposals on this issue of accreditation standards worthy of consideration: • Management capability, office space, equipment and administration support • Resources such as hardware, software, vehicles, laboratory equipment, etc. • Manpower resources, regular staff, temporary staff, consultants, cadd staff, support staff • Key staff • Completed projects • Third party verification and audit of consultant’s accreditation statements. • Accreditation to be recommended by recognized accredited organization

116 11 Directory

A. Member Firms of the Institute of Management Consultants of the Philippines

Asia Business Consultants (ABC) Cesar Virata and Associated, Incorporated 3rd Floor, Basic Petroleum Building G/F Development Academy of the Philippines Carlos Palanca Street, Legaspi Village, Makati City San Miguel Avenue, Pasig City Telephone Numbers 8100038/8100043 Telephone Numbers 6312173/6335560 Fax Number 8164137 Fax Number 6312161

Associated Resources of Managemnet and Cm technologies, incorporated Development (ARMDEV) 114 samapaguita Street , Valle Verde 2 1-C Corner Masunurin Street and Anonas Extension Pasig City Sikatuna Village, Quezon City Telephone Number 6310836 Telephone Numbers 9244821/4331431 E-mail [email protected] Fax Number 4331088

AYC Consultants, Incorporated DTTI Consultancy, Phils, Incorporated 14th Floor Sagittarius Building HV dela Costa Street, 3rd Floor Don Jacinto building Legaspi Village, Makati City Dela Rosa cornerSalcedo Streets Telephone Number 8109606 to 10 Legaspi Village, Makati City Fax Number 8108007 Telephone Numbers 8170031 to 34 Fax Number 8160649

Carlos Valdez & Company Economic Development Foundation Carlos valdez Building, 108 Aguirre Street 12th floor Tower II, Cityland 10 Legaspi Village, Makati City HV Dela Costa corner Valero Streets, Telephone Numbers 8925932/5278491 Salcedo Village, Makati City Fax Number: 5273538 Telephone Numbers 8100674/8100669 Fax Numbers : 8189269/8100833

J Cunanan & Company/PricewaterhouseCoopers SEA Consultants, Incorporated 14th Floor Multinational Bancorporation Centre 2nd Floor Concorde Building A, Benavidez corner 6805 Ayala Avenue, Makati City Salcedo Street, Legaspi Village, Makati City Telephone Numbers 8452728 to 29 local 445 Telephone Number 8158790 Fax Numbers 8452806/8450354 Fax Number 8156587

Laya Manangahaya Salgado & Company SEARCA Consulting S ervices 22nd Floor Antel 1000 Corporate Centre SEAMEO Regional Center for Graduate Study and 139 Valero Street, Salecedo Village, makati City Research in Agriculture Telephone Numbers 8189470/8938507 College, Laguna Fax Numbers 8166595/8941985/8166595 Telephone Numbers 5362914/5362363 to 65 Fax Number 5362914

Leverage International Consultants, Incorporated Sunrise Industries Development Incorporated Suite 84 Legaspi Suite, 178 Salcedo Street Suite 1113, 11th Floor National Life Building Legaspi Village, Makati City Ayala Avenue, Makati City Telephone Number 8101389 Cellphone Number 09188285507 Fax Number 8101594 Pager Number 141722676

117 Website: http://www.leverage- international.com

Mandala Agricultural development Corporation (MADECOR) Sycip Gorres & Velayo Company Unit 302 Prestige Tower SGV Building 6758 Ayala Avenue, Makati City Emerald Avenue, Ortigas Center, Pasig City Telephone Numbers 8910307/8910517 Telephone Number 6381600 Fax Numbers 8174193/8190872 Fax Number 6384185

Orient Integrated Development Consultants, Inc. Urban Integrated Consultants FSS Building 1, 89 Scout Castor Street 4th Floor Columbian Building Quezon City 160 west Avenue, quezon City Telephone Number 4132187 Telephone Numbers 9285481/9297902 Fax Number 4132326 Fax Number 9325787

Pacific Rim Innovation and Management Exponents (PRIMEX) Ward Howellzmg 502 Manila Luxury Condominium Pearl Drive 5th floor Athaneum Building Pasig City 160 Alfaro Street Salcedo Village, Makati City Telephone Number 6339052 Telephone Number 8162466 Fax Number 6347340/6347339 Fax Number 8172543 e-mail Address: [email protected] Website: http://www.primexinc.com.ph

B. Partial list of Non-Member Management Consulancy Service Firms in the Philippines

Traditional providers of management consulting services

Finance and Investment Management Consulting Incuventure Asset Managers Hambrecht and Quis Philippines Makati City 22F PCI Bank Tower II Makati Avenue cor. H.V De La Costa Telephone Number: 8999641 Makati e-mail Address: [email protected] Telephone Number 8195776 e-mail Address: www.jpmhq.com

Walden AB Ayala Management CL Manabat & Co./ Deloitte Touche Tohmatsu 22F 6750 Ayala Avenue Makati City Penthouse Salamin Building 197 Salcedo Street Telephone Number 8135253 Legaspi Village, Makati City Website:http://www.wiig.com/main/philippines.htm Telephone Number 8120535 Fax Number 8105047 Website: http://www.deloitteap.com/practices/prac_phil.html

Equity Managers Asia Inc. Jollibee Plaza, Ortigas Center, Pasig City Telephone Number 830200 e-mail Address: [email protected]

Development, Environmental and Policy Studies Center for Empowerment and Resources ENR Consultants

118 2-A San Pablo Road, Phil-Am Homes, Quezon City 2nd Flr., FSS Bldg., 89 Scout Casto Brgy. Laging Handa, Telephone Number 4117337/9287775/9251641/ Q.C. e-mail Address: [email protected] Website: http://ww.philngo.com/cerd1.htm Cest Inc. Louis Berger International Inc. 10th Flr., Strata 200 Bldg., Emerald Ave., Ortigas TM8910 Milelong Center, Amorsolo cor. Herrera Sts. Center, Pasig City Telephone Number 81234556/8121646 to 49 e-mail Address: [email protected] Website: www.louisberger.com

Meganomics Specialists International Inc. Peakground Institute of Policy Research, Inc. Suite 512 Pasda Mansion 77 Panay Avenue cor Tapulanga Street Espinos Village II Timog Avenue Quezon City Bacolod City Telephone Number 3730618/ 4101355 Telephone Numbers (034) 29597 and (034) 7085173 e-mail Address: [email protected]. Manila Number 7233043 [email protected] Email Address: [email protected] Website: http://meganomisc.com.ph Website: http://www.wbi.ph/pgipri

Human Resource Management Center for Leadership and Change Enterprise Development Group, Asia Pacific G/F Hoffner Bldg., Ateneo de Mla. Loyola Hts. 402 Vicente Madrigal building Quezon City 6793 Ayala Avenue, makati City, Philippines Telephone Number 9207216 Telephone Number 8922896 Fax Number 8922902 Email-Address [email protected] Website: http://www.enterprisedevelop.com

Guthrie Jensen Consultants Manila Execon Group 5/F Glass Tower Bldg., 115 Palanca Legaspi Village, 5F Maripola Bldg., 109 Perea St., Legaspi Village Mkt Makati City Telephone Number 8942865 Telephone Number 5161610 Website: guthrie_jensen.com.ph

Philips Associate Management Consultants Integrative Learning International Website:http://phillipassociates.net/welcome.html Website: http://www.integrativelearning.com

Impact of Consultancy Group Aedan Associates 2F Comfoods Building, Sen Gil Puyat Avenue cor. 6 Buencamino St. Alabang Zapote Road Muntinlupa Chino Roces St. Makati City Telephone Number: 8074784 Telephone Number: 8434071/ 8432167 e-mail Address: [email protected] http://www.philone.com.ph/~impact/profile.htm

Alba Romeo Management Consultants Stream Training Consultancy 7F Don Chua Lamco Building Alfaro St., Salcedo 42 East Capital Dr., Bo. Kapitolyo, Pasig City Village, Makati City Telephone Number 6314807 Telephone Number: 8159086 e-mail Address: [email protected] e-mail Address: [email protected]

John Clements Consultants ProSearch 2F RCI Bldg., 105 Rada Street Legaspi Village 5301 Cristina Condominium 143 Herrera Legaspi Vill. Telephone Number 8171650/ 8176730/ 8178949 Telephone Number 8140243 e-mail Address: [email protected]

Amrop International Asia Partnership Phils. (APPI) 1704 Antel 2000 Corporate Center 121 Valero St. Website: http://asiapartenrs.net

119 Salcedo Village, Makati City Telephone Number 8453463/ 8871620 e-mail Address: [email protected] Website: www.saxbam.com/contact/philippines.htm

Watson Wyatt Phils. Motivation Asia Phils. Website:http://www.watsonwaytt.com 602 One Corp. Plaza 845 Pasay Rd. Makati Telephone Number 8404061

Specialized Services Consultancy by Technicus Corp Isis Research Ltd. 7F Crown Plaza Bldg., North Reclamation Area Telephone Number: 8931002/8924518 Mandaue City e-mail Address: [email protected] Telephone Number 4120732 Website: http://www.isisresearch.com

IMS Philippines Business Recovery and Turnaround, Inc (BRTI) 2F DPSI Business Center 210 N. Garcia St. Suite 2105 Philippine Stock Exchange Centre Telephone Number 8900111 Tektite East Tower , Exchange Road Ortigas Center Pasig City Telephone Numbers 6340741 to 45/6340319 Fax Numbers 6340736/6348881 Email Address: [email protected] Website: http://www.brti.net Asia Pacific Projects Incorporated Solutions Inc. 8 St Peter street Cubao, quezon City 1650 Penafrancia St., Santiago Village, Makati Telephone Numbers 7253209/7254372/ 4132892 Telephone Number 8978689/8902737/ 8970729/ Fax Numbers 8134781/4132892 8909078 E-Mail Website:http://www.geocites.com/wallstreet/Exchang Address: [email protected] e/3855

Website: http://www.asiapacificprojects.com

Wright Business & Management Consultancy Asiatech Resource Management Rm 301 Sunrise Center 488 P. Ocampo Sr. Street Suite 315 National Life Building 6762 Ayala Avenue Malate, Manila Makati City 1200 Telephone Number 5266291 Telephone Number: 81500585 e-mail Address: [email protected] Website: www.webspawner.com/users/pezaconsultant GMB Franchise Developers & Consultancy Firm TeamAsia, Incorporated Website: http://wwwgmbfranservice.com.ph # 3 Lanuza Bay Southbay Garden Sucat, Paranaque City Telephone Numbers 8076370/ 5460908 Fax Numbers 8423308/ 5460914 E-mail Address: [email protected] Website: http://www.teamasia.com.ph

CAPDP Consultancy Service Institute of Public Health Management 6F Casho Gonzales Unit 338 Eagle Court Condominium #26 Matalino St., Central District Quezon City Building, 101 Aguirre St. Telephone Number: 4359254 Legaspi Village, Makati City e-mail Address: [email protected] e-mail Address: [email protected] Website:http://www.iphm.org Website: http://www.cadp-sugar.com

Escaler & Co. Inc. 504 National Life Bldg., Ayala Ave., Makati City Telephone Number 8187661/046-4140613

120

Multi-functional Consulting Firms IDP Consult Inc. DTTI Consultancy Website: http://www.intlpros.com 3F Don Jacinto Bldg., Dela Rosa corner Salcedo Sts. Legaspi Village, Makati City Telephone Number 8174346/ 8170031 to 33 e-mail Address: [email protected]

Neville Clarke Phils. SGV-Devt. Dimensions Suite No. 3004-C, PSE Center, East Tower, 3F SGV II 6738 Ayala Ave. Mkti City Exchange Rd., Ortigas Center Pasig City Telephone Number 8910307 Ernst & Young Consulting 19F Tower 1 The Enterprise Center, 6766 Ayala Avenue , Makati City Telephone Number 8109741

General Management Aizen Enterprises BSA Sales Management Unit C-13 G/F Olympia Mansion 7912 Makati #5 Bagtican Road, Pilar Village, Las Piñas City Avenue., Makati Telephone Number 8015921 Telephone Number 8102597/ 5152912/ 8152940 e-mail Address: [email protected]

Innovision Strategic Dev’t Consulting Group CLRV Neo-Synergy Rm 205A Manila Midtown Hotel Telephone Number 9248896 Website:http://www.innovision.homestead.com.ph e-mail Address: [email protected]

RM Management Consulting #6-D Matapat St., Diliman, Quezon City Telephone Number 7259518

Non-Traditional Providers of Management Consulting Services AC Nielsen (Pulse) FS & Associates 15th Floor, The Columbia Tower, Ortigas Ave., Republic Glass Bldg., Salcedo Village Makati City Greehnhills, Mandaluyong Telephone Number 8181150

Taylor Nelson Sofres Phils. (Frank Small and Research Phils-Unisearch Inc. Associates) 41F Gloria Bldg., 109 Aguirre Legaspi Vilage Makati GF Republic Glass Bldg., 196 Salcedo corner City Aguirre Sts., Legaspi Village Makati City Telephone Number 8109057 Telephone Number 8181150 e-mail Address: [email protected] Website: www.tnsofres.com/about/asiapacific/philippines Trends-MBL PSRC-Research International Kalayaaan Ave. Quezon City 10F One Magnificent Vile Bldg., San Miguel Ave., Telephone Number 9253169/9253170/ 4358466/ Ortigas Center, Pasig City e-mail Address: [email protected] Telephone Number 6384528/ 6384525 Website: http://www.trends-mbl.com e-mail Address: [email protected]

Asia Research Organization Market Research International Phils. 21F Jollibee Plaza Bldg., Emerald Avenue, Ortigas Telephone Number 9264427 Center, Pasig City Telephone Number 63113511/ 6313454 e-mail Address [email protected] /[email protected]

121 Website: http://www.aglmr.com

122 Technology Consulting Andersen Consulting/ Accenture Asian Computer Group Telephone Number84101111 3rd Flr. Republic Glass Bldg., 196 Salcedo Village., Website: www.arthurandersen.com Makati City Telephone Number 8125122 Ayala Systems Technology, Inc. Code Red Consultancy 3F Ayala Life Bldg., 6786 Ayala Avenue, Makati Website: http://www.code-red.co.uk/index.html Telephone Number 8132494 to 2496 Website: www.astech.com.ph Corporate Information Solutions EDS International Phils. Telephone Number 599-33-01 to 14 W702 PSE Centre Exchange Rd. Ortigas Center Level II (515 Bldg., Meralco Cmpd Ortigas Ave., Pasig City Pasig City Telephone Number 6370433

Iberpacific IEWorks Inc. 9F Taipan Place, Emerald Avenue 14F Tower B Gold Loop Tower Ortigas Center, Pasig City Amber Avenue, Ortigas Center, Pasig City Telephone Number: 6370957 Telephone Number: 6339013 Website: http://www.iberpacific.com Website: http://www.ieworks.com

WeServSystems International James Martin & Co. Phils (Headstrong) 6th Flr. United Life Bldg., 837 A. Arnaiz Avenue, 15F Urban Bank Plaza, Sen Gil Puyat corner Legaspi Vilalge, Makti City Chino Roces Avenue, Makati City Telephone Number 8124001/ 8121311/ 8121308 Telephone number: 8130861 Website:http://www.fujitsu.com.ph/weserv.htm Misnet Unit 304 heart Towe 108 Calero Street, Salcedo Village, Makati City Telephone Number : 8673587 Website: www.com.ph/misnet

Business Intelligence Control Risks Phils. Pinkerton Consulting Services 12F 1st e-bank Tower 8737 Paseo de Roxas 1259 4F Thomas Jefferson Cultural Center 359 Sen Gil Makati City Puyat Aveneu 1200 Makati City Website: Telephone Number 8993934/ 8959404 http://www.crg.com/offices/manila/manila.htm

Construction/Engineering Consulting Asia Technicon Mgrs. & Cons Cedco Suite 603, The PEAK 107 LP Leviste St., Salcedo Telephones: (032)253-9321 * 253-2679 * 253-2683 * Vilalge Makati City 253-9319 * 253-9310 Telephone Number 8482947 to 49 3rd Floor, GMT II Buiding, corner P. del Rosario and e-mail Address: [email protected] Junquera Sts., Cebu City Website:http://www.asiatechnicon.com Website: http://www.cecophil.org./cedco.htm Constech Mgmt. Group ProConsult Inc. 2F Belson House Bldg., 271 Edsa Mandaluyong Penthouse Taft Office Center, 1996 Taft Avenue. Telephone Number 7276620 to 27 Pasay City Telephone Number 8321533/ 8322110 e-mail Address: [email protected] Website: http://www.cecophil.org/procon.htm SP Castro and Associates Rider Hunt Labor Sutie 601 Globe III Condominium San Miguel 5F Oppen Bldg., 349 Sen Gil. Puyat Avenue Makati Avenue, Ortigas Center Pasig City City Telephone Number 6334277/ 6355763/ Telephone Number 8905686/ 8905728/ 8971686 to 6375951 to 2 87 e-mail Address: [email protected]. e-mail Address: [email protected] Website: http://www.cecophil.org/spca.htm Website: http://www.riderhuntliacor.com

123 Schema Konsult Inc. Planning Resource and Operations Systems 7F JMT Corporate Condominium ADB Avenue 2/F Prudential Bank Bldg., Ortigas Ave. San Juan Ortigas Center Pasig City Telephone Number 7211661 Telephone Number 63111691 e-mail Address: [email protected] Website:http://www.cecophil.org/schema.htm

RN Ferrer & Associates Pacific Orient Consultants & Mgmt. 5/F Padilla Bldg., Emerald Ave., Ortigas Center 7484-A Dao St. SAV Makati Telephone Number 6311541 Telephone Number 8908115 e-mail Addres [email protected]

SFI MgmtCOnsultancy Complete listing of Engineering consultants can be 105 West Avenue Quezon City provided by: Telephone Number 3711321 Council of Engineering Consultants of the e-mail Address: [email protected] Philippines (CECOPHIL) http://www.cecophil.org

124

References

Association of Foundations Philippines. (2000). Donor Trends: A Resource Book of Development Assistance in the Philippines. Manila.

Baum, W. and Kirmani, S. (1991). The Consulting Profession in Developing Countries: A Working Paper. The World Bank.

Bureau of Export Trade Promotion-Department of Trade, Various articles provided by Philippine Special Trade Representatives and Past Industry Studies onProfessional Consulting Industry and Management Consulting Industry

Hoekman, B. (1999). Towards a More Balanced and Comprehensive Services Agreement. Seattle: USA.

Kubr, M. ed. (1996). Management Consulting: A Guide to the Profession (3rd edition). International Labour Organization. Geneva.

National Economic and Development Authority. ODA Pipeline by Donor from 1997- 2000.

Porter, M. (1990). Competitive Advantage of Nations.

Quinn, J.B. (Summer 2000). Sloan Management Review. Sumemr 2000.

Reimus, B. (1997). Knowledge sharing within management consulting firms. http://www.kennedyinfo.com

Securities and Exchange Commission. (2000). Philippine Business Profiles 1999-2000: Top 7000 Corporations. Manila

SGV and Co. (1999). Doing Business in the Philippines. Manila.

Whichard, O. (2000). Measurement Classification, and reporting of Services Activities:An International Perspective. Bureau of Economic Analysis;Washinton DC. http://www.filipinolinks.com/business/consultants.html (Web directory of Business Consultants, December 9, 2000) http://www.kennedyinfo.com/er/ekrgstud.html (Books on Management Consulting Firms, November 30, 2000) http://www.kennedyinfo.com/mc/cn50.html (50 Largest Management Consulting Firms, November 30 2000)

125 http://www.adb.gov (Asian Development Bank)

http://www.neda.gov.ph (National economic and Development Authority)

http://www.dti.gov.ph (Department of Trade and Industry)

http://www.usatrade.gov (Country Commercial Guide, November 21 2000) http://www.strategis.ic.ga (Candaian Consulting industry, November 21 2000)

http://www.itd.org (World Trade Organization, November 20 2000)

http://www.apmforum.com (Asia-Pacific Forum, November 20 2000)

http://www. philexport.com (Philippine Exporters Confederation, December 8 2000)

126 ANNEX A-1 - ONGOING GOVERNMENT ICT PROJECTS

Project Title Description Proponent Duration Project Cost /

Agency/Office Funding Source

AGRICULTURE/AGRARIAN SECTOR

Agriculture Information This project will put Department of 4-5 years PhP1.520M Network (Agrinet) together all agricultural- Agriculture (DA) (PhP800M 1st related information year; PhP720M generated by government succeeding years) and non-government organizations on production, post-production and marketing activities of farmers and fishermen. This will likewise involve the setting up a wide area network that will interconnect the regional field units (RFUs), bureaus, attached agencies and Research Outreach Stations (ROS) of the department. Computerization of the This involves Land 13 years PhP3B Land Titling System computerization of the Registration processing and issuance of Authority (LRA) land titles to improve the land management record system in the country. COMMUNICATION SECTOR National Telephone Establishment of 13,728 DOTC/CPMO- FRF 144,674,252 Program (NTP) Tranche digital telephone lines NTP 1-2 or PhP655.474 I-2, ROT Stage II covering fourteen (14) (FRF4.5=PhP1) municipalities in Regions VI, VII & VIII. National Telephone Establishment of 32,800 DOTC-CPMO US$43M or Program (NTP) Tranche digital telephone lines to 31 PhP1,443.136 1-3 cities/municipalities in ($1=PhP28) regions IX, X, XI & XII including high density 140 Mb/s backbone network. National Telephone Project involves the DOTC US$123.00M or Program (NTP), 1-3 provision of a total of PhP4.92B Phase 4 45,000 telephone lines to ($1=PhP40) 80 localities surrounding the NTP tranche 1-3 backbone in Mindanao areas and the establishment of a digital transmission network, thereby extending to

127 underserved areas. Regional Establishment and DOTC-CPMO Y 3,803.00 or Telecommunications expansion of 6,200 digital PhP242.10 Development Project telephone lines to 30 (PhP1=Y5) (RTDP) Phase C localities in regions I&II including establishment of backbone network to loop the RTDP communication network in CAR, Region I & II. Telecoms Component of AGILE is an action-oriented DOTC/NTC 1998-present US$1.0M of Accelerating Growth, activity to support economic US$27.0M or Investment and policy liberalization and Php40.0M of Liberalization with enhance competition in the PhP1.08B Equity (AGILE) Project Philippines. It will ($1=PhP40) restructure and consolidate the USAID/Manila approach to improve the Philippine economic policy environment. Data Communications Individual Expert Dispatch DOTC-TTI August 1997- Engineering March 2000 Advanced Improved Technical and DOTC-TTI 1998-2002 Telecommunications Technological Outside Plant Education/Training for 16 Technology – Fiber people. Optics DOST Bicutan Fiber This project is an Department of 2 years P8,625,400 DOST Optic Backbone project FDDI/Switched Ethernet Science and Fund backbone. This backbone Technology is a 100Mbps Fiber (DOST) Distributed Data Interface (FDDI) network, a high performance fiber optic timed token ring LAN running at 100Mbps over distances up to 200Kms with up to 1000 stations connected, that connects a ring of thirteen Switched Ethernet hubs operating at 10Mbps. This electronic backbone is expected to improve communications within the DOST Bicutan campus, provide faster access to S & T information and support interactive applications such as video- conferencing. The network will provide dedicated high- speed and highly reliable connections among agencies in Bicutan. Strengthening DOST- Nov. 1998- PhP9.9M Information Networking PCASTRD thru present

128 in Catanduanes- a Catanduanes GISTNET Pilot Project, State College Phase II: Setting-up a Fiber Optic System Loop in the Mun. of Virac Connecting People and The project aims to develop DOST-CARAGA PhP14.0M Organizations for Rural and pilot-test an information Dev’t. Through Multi- and communications Purpose Telecenters in system in rural Selected Barangays communities. Computer Assistance to The project aims to develop DOST-CARAGA PhP1.0M Selected Schools in and pilot-test an information CARAGA and communications system in rural communities. Establishment of an The project aims to provide DOST II 1997-present PhP0.65M Internet Service Provider connectivity services to the in the Province of Nueva provice Vizcaya Science and Technology The project has established DOST XI PhP3.0M Information Network and a PSTC-based rural Technical Services telecom backbone for (STINTS) sectors that do not have Internet access with Y2K awareness and information technology appreciation activities on the first phase. EDUCATION SECTOR Upgrading the IT The project aims to DOST-SEI 1999-present PhP1.17M infrastructure of the upgrade the IT facilities of Science Education SEI for Y2K compliance as Network for Year 2000 provided for by the law. and beyond Strengthening of SEI The project aims to DOST-SEI 1999-present PhP0.71M Electronic Linkages strengthen and improve the through the connectivity of SEI to the Establishment of an different network institutions Institutional Internet and to the Internet. Backbone Establishing a Philippine The project aims to collect DOST-SEI 1995-present PhP0.34M Database in Science and systematize data on Education science education through electronic networking of data such as thesis, dissertations, publications and other research materials. It will put up and develop structures that would allow said information or data to be stored as databases and accessed by different users. A basic feature is to establish linkages among concerned institutions via

129 computers. Development of The project aims to develop DOST-SEI Started 1999 PhP0.16M Database for S&T databases that will update Manpower and Science students, teachers, Culture and researchers, policy Strengthening decision-makers, and other Institutional Capabilities interested individuals on current and future development in S&T education. Several data from the different SEI divisions were identified and will be encoded into the databases to be developed which will be transferred eventually to the SEI website. Mobile Information The project aims to develop DOST-CARAGA PhP5.92M Technology Classroom an information culture and a technology-literate public preparatory to modernization. It promotes information technology awareness through hands- on computer activities. The MITC is an airconditioned bus equipped with the latest in education technology facilities and interactive instructional/learning materials in science/mathematics. Teacher facilitators were trained to man the MITC. Establishment of a The project’s aim is to put DOST II 1997-present PhP0.24M Computer Center at up a computer center in the Isabela State University northern part of Isabela with the objective of increasing/improving computer literacy of elementary and secondary public school teachers. Modems are provided, thus, the center also serves as an Internet workstation. Establishment of a The project’s aim is to put DOST II 1997-present PhP0.23M Computer Center at up a computer center in Nueva Vizcaya General Nueva Vizcaya with the Comprehensive High objective of School increasing/improving computer literacy of elementary and secondary public school teachers. Modems are provided, thus, the center also serves as an Internet workstation.

130 DOST-CIT Basic The project aims to provide DOST VII & CIT 1995-present PhP10.0M Multimedia Training and a venue to train IT Development Center professionals in multimedia production techniques in order to develop a pool of multimedia experts that will lure foreign investors in the IT to invest in the Philippines. The center will also provide a venue for the development of local multimedia products. DOST-CIT Computer The training center serves DOST VII & CIT 1994-present PhP2.5M Software Training and as a venue to promote the Development Center development of the IT industry in the region and to enhance the skills of IT graduates and professionals in software development. Upgrading To enhance the existing UPLB PhP281.2 M Communication and capability of the UPLB in (foreign cost) Information Technology communication and for Education and information technology in its Sustainable Agro- vision of making significant Industrial Development contributions to education and sustainable, agro- industrial development in the Philippines and surrounding region. This entails upgrading of communication and information technology hardware. A minor component of the requested grant aid will be building renovation to accommodate staff and facilities to be displaced by the addition of new equipment. FINANCE SECTOR Budget Execution and Strengthen DBM’s DBM 5 years PhP400M Accountability Tracking expenditure management (BEAT) System capability; streamline budget release procedures and improve front-line service; improve budget administration and accountability; and update budget analysis and decision making. Government Purchases Is a computer based price Commission on Started 1997 Information System monitoring system Audit (COA) (for expansion) (GPIS) principally intended to facilitate government

131 procurement and discourage overpricing. GPIS basic concept is built on the thesis that procurement is at the same time an economic activity and an administrative process. Physical Assets Formulate Physical Assets DBM 1 ½ year Management and Standards and Guidelines; Information System install Physical Assets (PAMIS) Administration System; provide a computerized Agency Physical Assets Monitoring System; and develop and install Agency Module on: Inventory Management, Maintenance Management and Executive Information System. GSIS Computerization Phase I (1996) project aims Government 4 years (1999- Project to establish a wide area Service 2002) network (WAN) connecting Insurance GSIS’s 27 branches System (GSIS) nationwide and to develop and implement the Membership Services and Information System. Business Recovery Multi-million project aims to Social Security 5 years (1997- PhP179.2M (Cost Center “ensure nationwide System (SSS) 2002) for succeeding availability of SSS’ years is subject to Information Systems should changes) the Main Data Center and/or any of its regional branch hub data centers become inoperative” due to disasters. GOVERNANCE SECTOR Advisory Network for the To establish electronic NEDA/OP PhP8M Government Executive linkages among the and Legislature executive and legislative (ANGEL) offices involved in Legislative-Executive Development Advisory Council (LEDAC). NEDA Information To improve development NEDA PhP63.6M Network Project (NINP) planning, investment programming and project monitoring activities in support of the Medium Term Philippine Development Plan (MTPDP) and to a large extent, IT21 through the use of IT resources. The project is divided into three

132 (3) major components: 1) Development and Institutionalization of Mission-Critical Information Systems; 2) Establishment of IT Resources (hardware and software) Infrastructure; and 3) IT Manpower Capability Building. Government Information To formulate an Integrated NEDA PhP3.4M DOST Systems Plan (GISP) Government Information Fund Project Systems Strategic Plan for the medium-term which will be called the GISP. The GISP will set the vision and framework for computerization efforts in government over the next 5-6 years. It aims to provide for seamless and more efficient electronic governance, consistent with the goals and objectives of Angat Pinoy 2004 and the National Information Technology Plan for the 21st Century (IT21). Data and Information The project seeks to create PIDS 3 years 1998- PhP7.7M Resource Program in a user-friendly economic present Support of Policy database system (EDS) to Research and Decision store and maintain Making databases from various sources. It is intended to facilitate networking among government and private sector institutions through Data and Information Resource Program (DIRP). With the project, it is envisioned that policymakers and researchers will enjoy easier access to international databases as well as the regular Philippine data series. LABOR SECTOR DOLE Computerization Involves the establishment Department of 3 years (1997- PhP100M Project of a wide area network that Labor and 2000) will link all DOLE offices Employment and the creation of several (DOLE) modules that will run on the network. Also included is the development of a Labor Market Information System

133 (LMIS). MILITARY SECTOR PRC Marine Officers The project aims to PRC PhP15.8M Licensing and accomplish: 1) Online Certification System and Transaction Processing and Networking Project faster service completion time; and 2) Better and Improved Quality of Products and Services. The project intends to benefit not only the marine professionals but also the other professional groups under the supervision and jurisdiction of the Commission. The networking system that will be establish shall ensure a smooth and efficient communication between and among the systems currently existing and being maintained by the Commission. SCIENCE AND TECHNOLOGY SECTOR Strengthening/ The project aims to develop DOST-FNRI 1998-present PhP2.54M Upgrading of FNRI a specialized library to meet Library Information the research information Database needs of policy-makers, researchers and other nutrition workers; to promote and coordinate the development of the libraries in the field through trainings/seminars and conferences; encourage the exchange of food and nutrition information within the country, and to maintain links with national and international organizations engaged in food and nutrition services. Upgrading of FNRI IT The objectives of the DOST-FNRI 1998-present PhP2.10M Facilities project are: To improve and standardize the computerization in the Institute including both hardware and software; to adopt and make use of the new trends in software and hardware technology ; to support DOST’s and the government’s program of using IT to improve government processes; and

134 to expand the institutes network and improve connection to the internet to prepare the Institute to e- commerce. Software on Energy The project aims to develop DOST-FNRI Started 1999 PhP0.22M Equivalent a user-friendly computer software which shows the estimated amount of energy to burn off calories from some food items in excess of requirement and to serve as a guide to implement control of maintenance program. Technology Delivery The project aims to develop DOST-FPRDI Started 1994 PhP0.50M Information and Referral a database on technology System transfer activities of the institute and other related information. Activities included are: technology piloting and commercialization, technical assistance/consultation and advisory services, trainings conducted, socio- economics, and technology assessment. FPRDI Publication This project involves DOST-FPRDI Started 1995 PhP0.05M Abstract Information development of a database System on abstract of journals, manuals, books, articles and related literature published by FPRDI. Market Information This is a database on DOST-FPRDI Started 1997 PhP0.10M Generation for FPRDI market information for FPRDI technologies. Philippine Trees This is a database DOST-FPRDI Started 1996 PhP0.10M Information System management system on the properties and characteristics of Philippine trees which have been studied in the institute. These properties include: anatomical, physical, chemical and mechanical properties. Bamboo Information This is a database DOST-FPRDI Started 1998 PhP0.05M System management system on the anatomical, physical, chemical, and mechanical properties and characteristics of bamboo which have been studied in the institute.

135 Rattan Information This is a database DOST-FPRDI 1998-present PhP0.05M System management system on the anatomical, physical, chemical, and mechanical properties and characteristics of rattan which have been studied in the institute. Metalworking Industry The project involves DOST-MIRDC 1999-2004 PhP0.52M Information Database gathering of detailed information on the metalworking industry, specifically the general profile of the firms which include plant capacity, product lines, number of workers, equipment and machinery’s capacity and precision and types of metal working processes employed. Supplemental Support The project aims to develop DOST- PhP4.5M to the Strengthening of manpower capabilities in PCASTRD thru IT Capabilities in networking and to catalyze Catanduanes Catanduanes R&D activities in the area. It State College also aims to improve access to information by residents, thereby expanding their opportunities for accelerating economic and social growth. Algebraic Algorithms for The project focuses on DOST- PhP0.20M Certain CAD/CAM designing new efficient and PCASTRD thru Problems infallible algebraic methods UPD-CS for certain problems in CAD/CAM, particularly those related to rational parametric surfaces. Mango Information MIN is a world wide web- DOST- Started in 1996 PhP19.8M Network (MIN) based information service, PCASTRD as well as an interactive system geared to expedite the formation of strategic business alliances among small and medium scale (SMEs) and other stakeholders. Six services were made available and accessible through the MIN website. Development of The project involves the DOST-PCHRD 1998-present Php0.50M Specialty Database and creation of the e-Health Internet Resources on component site on Medicinal Plants medicinal plants. Information on medicinal

136 plants will be gathered and processed in addition to what is currently available in HERDIN database. The resulting database shall contain information on research , researchers, research organizations, market and business information. Development of The project aims to develop DOST-PCHRD Started in 1996 PhP0.38M Specialty Database , a one-stop shop information CD-ROM, and Internet resource on malaria. At Resources on Malaria present, full-text documents are being scanned into a Hypertext Markup Language (HTML) format. The website that will be developed for this project will contain articles in HTML format and will contain articles, graphics, profiles, statistics, and other relevant information about malaria. Establishing a National The project aims to harness DOST-PCIERD Started in 1999 PhP6.93M Engineering Information I.T. in advancing and Systems and Services promoting the level of (NEISS) in the learning, awareness and Philippines productivity of engineers, students, faculty, researchers, and others involved in research and development. Extending support to the nineteen (19) engineering network schools throughout the country, the project provides access to Engineering Information through the World Wide Web. Support Operations: The project provides for the DOST-PTRI 1998-present PhP1.92M Information Services development of effective information systems for efficient delivery of relevant and timely information that will assist the textiles and garment industries to be on top of new textiles advances and development. Through the systematic collection, organization, storage and retrieval of textiles and textiles related information

137 materials for the development and improvement of the PTRI Technical Library Service, it will assist the researcher in the conduct of their research activities. Textile Information The dissemination of up-to- DOST-PTRI 1999-present PhP2.19M Management and date information on the Awareness Service textile processes, raw materials, products technology, and developments and fashion trends will continuously help the textile and garment manufacturers in improving the quality of their production. Information Packaging The project involves the DOST-STII (under agency production of regular STII budget) publication, The Philippine Journal of Science in electronic version. Establishment of ECOTECH LINK is a meta- DOST-STII (under agency Philippine Database in database or organized and budget) Science Education exhaustive pointer (ECOTECH LINK) database that includes brief descriptions of different organizations carrying technology and economic information and links to other groups carrying related information. S&T Info Web The S&T Info Web is a DOST-STII (under agency virtual system which budget) connects the institute to the entire DOST system and to the rest of the world. Created in 1997 and made available on-line in 1998, the S&T Info Web is home to ten databases, six publications and eight home pages. As of July 1999, the S&T Web has been accessed 206,166 times by various internet searchers and surfers. Establishment of This project is conceived to DOST II Started 1999 PhP0.10M Cagayan Valley provide the public relevant Information Network and updated information about Region II Operation of the The project aims to DOST VII 1998-2004 PhP12.0M Regional Metals and establish a center for the Engineering Service production of highly Centers precisioned metal products

138 using CNC technologies. Establishment of Cebu The project aims to provide DOST VII 1999-2004 PhP2.0M Design Engineering a center for the Center development of machine design engineers and product design capabilities using CAD/CAM/CAE technologies. Data Acquisition The project aims to provide DOST VII 1996-present PhP1.25M Training and a center which will develop Development Center local capabilities in CITE, San Jose, automated manufacturing Talamban, Cebu for enhancing product quality and productivity of SMEs in Central Visayas TOURISM SECTOR DFA Machine Readable The project aims to Department of 10 years P2 Billion Under Passports and Visas streamline and modernize Foreign Affairs BOT scheme (MRP/V) Project the issuance process, (DFA) introduce security features in passports and visas and ensure compliance with the international standards on travel documents. The system will also create a database where all applicant information will be stored for easy access, and feature an interface that will allow the department to streamline verification procedures with other government agencies. TRADE SECTOR Philippine Trade and A locally funded project, Department of 1999- PhP18.9M Investment Network PhilTINS is a computerized Trade and Preparatory System (PhilTINS) “one-stop system” linked to Industry 2000-System DTI’s regional and (DTI/BETP) Development overseas offices and trade associations for the storage and retrieval of timely information on trade and investment. This central facility will lessen the man- hours needed for research and make DTI services more accessible to the public, boosting eventually exports and investment. TRANSPORTATION SECTOR LTO Information The project is in line with LTO/DOTC 10 years US$49.7B or Technology (Build-Own- the IT21 which calls for PhP1.988Trillion Operate) Project intensive diffusion and use ($1=PhP40) of IT in government operations. The project

139 involves the development, operation and maintenance of an integrated IT system by way of the BOO scheme over a concession period of 10 years in accordance with R.A. 7718, the Amended BOT Law. The project will interconnect LTO's more than 200 offices nationwide, enable on-line transaction processing and integrate critical processes.

Source:http://www.neda.gov.ph

140 ANNEX A-2 - PROPOSED GOVERNMENT ICT PROJECTS AGRICULTURE/AGRARIAN SECTOR Nationwide The project supports the DA/NCC Four PhP2.9B Information implementation of RA 8435 years Network for the which is known as the Department of Agriculture and Fisheries Agriculture Modernization Act (AFMA) of the DA. The goal is to make available to the people the basic agricultural data or community information in the country.

The project is composed of three areas of endeavor, namely: information systems/data requirements, connectivity requirements and the organizational requirements.

COMMUNICATION SECTOR

Computerization Involves local area House of 1 year PhP75 - Program networking of offices as Represe PhP80M well as upgrading of ntatives existing PCs and eventual linkage to the Internet (including establishment of a web page). Creation of This project is geared NCC Four PhP250M Regional towards the eventual years Information interconnection and Resource Centers mainstreaming of all the (RIRC) local government units Nationwide (LGUs) to the existing internet technology. It is presented in three phases to maximize the existing technologies using the most efficient and effective strategies. The first phase will include selected provinces and cities with existing ISP connections; the second phase include all remaining provinces and cities and adopting a mixed-technology approach

141 and the last phase will involve all municipalities and adopting a more varied technology mix as the geographical location will require. Breaking This project is composed of NCC Geographical five (5) modules each can Barriers and be implemented Enhancing Local individually. However, it Governance would be best to implement through all these 5 projects to Information selected local government Technology (IT) units for easy monitoring and assessment of its possible contribution to the overall economic status of the chosen LGU.

This proposal will use RPWeb as its backbone. The essence of development is focused on the interconnection among LGUs and NGAs. However, to fully support operation, NCC proposes to supply the required infrastructure, which is composed of data/information, manpower requirement, policies and plans.

EDUCATION SECTOR

Computer The proposed plan of the CHED/NC Three PhP1.56B Networking of Philippine Association of C years State Colleges State Universities and and Universities Colleges (PASUC) is to interconnect the 109 State Universities and Colleges (SUC). The project aims to interconnect its operations with the support of computer networks, Local Area Network (LAN) and Wide Area Network (WAN). Every institution will have a basic LAN, which will be installed, in the library to automate information transaction and to provide

142 facility for communication locally to improve the administration in the institutions. These will be interconnected to provide regional and nationwide area networks. Connectivity with the INTERNET will be incorporated in the system so that information can be shared by all SUCs and provide vital information to major agents of progress, both local and foreign. Equipment for the The project is for the pre- DOST- PhP1.12M Mobile production of the MITC SEI Information units. Equipment/facility will Technology be purchased as basis for Classroom the measurement dimensions of computer tables, storage facilities, notebook computers, multimedia projector , projector screen, and generator in the three (3) MITC units. Development and The project aims to provide DOST- PhP1.12M Replication of 110 S&T-oriented high SEI Computer-based schools and RSTCs with Teaching (CBT) computer-based teaching Modules on modules on selected topics Selected Topics in in biology, chemistry, Biology, mathematics and physics. Chemistry, Mathematics and Physics Operation of The project is aimed at DOST VII PhP4.0M Mobile IT Literacy providing pupils and Program students from remote areas access to computers. IT Training The project aims to DOST VII Program for the introduce a program that Disabled and will provide opportunities for Vulnerable the disabled and vulnerable.

GOVERNANCE SECTOR

Cooperation The project was established DBM Cdn$265T Agreement: DBM to improve the systems that Systems support the delivery and Development services of programs under Support DBM’s Mandate. One of the (proposed services provided to

143 Support services provided to through government agencies by CIDA DBM is procurement, PTTAF) through the Bureau of Procurement Services Sub Project: (BPS). Procurement System Design Project

A SubProject grant will provide the services of experts who will conduct a policy review and assessment of the Philippines as a Regional Center for Shared Services. Enhancement of The project is proposed to DOST VII PhP0.65M DOST VII Intranet improve Region VII’s System existing networking infrastructure to be able to render better quality service to its clientele. Improvement of This project aims to NCC PhP60.0M Poverty develop an inter-agency Alleviation thru integrated monitoring and Speedy Access of management information Modern Age system that will harmonize Services & the mandate, plans and Assistance (IPA- programs of the different SA-MASA) offices task to alleviate the poverty condition of the country. This system be the vehicle to inform on the different projects being undertaken by the different line and attached agencies. G-Wish The Project is a nationwide NCC Three PhP580.5 infrastructure envisioned to years M support the decentralization of operations of the government and to share information between and among government agencies and the public. It is made up of Information Providers, Public Information Service Points and government field units interconnected by a common nationwide network. It consists of several network hubs composed of hardware and software devices containing multiple independent but

144 connected modules if the network and internetworking equipment. These will be located in the different regions and provinces. Cooperation The project aims to improve NSCB Cdn$115T Agreement: PSS the capability of the five Service statistical agencies under Improvement and PSS in data analysis and Data Accessibility report writing. The five (proposed Program statistical agencies were through the: NSCB, NSO, SRTC, PTTAF) BAS and BLES.

Sub Project: PSS Training on Data Analysis and Report Writing Civil Registry CRS Project covers the National 84 mos. PhP318.11 System (CRS) development of an Statistics M Improvement Information Technology Office Project (IT) Solution for the Civil (NSO) Registry System through a Build-Transfer-Operate (BTO) acquisition scheme as provided for by RA No. (subject 7718 (BOT Law) that aims to to: (a) enhance and Malacan improve public service ang’s delivery; (b) efficiently approval) organize, manage and maintain a complete and accurate database of civil registry documents and information; (c) overcome attempts on falsification and fabrication of civil registry documents; (d) enhance the computing capability of the NSO; and (e) provide for the establishment and perpetuation of a unique individual-referencing Population Reference Number (PRN).

LABOR SECTOR

Pinoy Watch “Pinoy Watch” is a NCC One Year PhP10.0M database of all Filipinos working abroad. This project will integrate and

145 harmonize the databases created by similar agencies and non- government organizations. The database will capture all Filipinos who leave with a working permit as well as those with a tourist visa permit.

MILITARY SECTOR

Automated Project aims to develop and National PhP87.4M Fingerprint operationalize a state-of- Bureau Identification the-art, fully-scalable of System Project Automated Fingerprint Investigat Identification System (AFIS) ion (NBI) solution that will have the following features: a) reliable, user-friendly, flexible, modular; b) high degree of accuracy; c) combines high quality image-scanning with fast image processing; d) possess the capability to interface with other AFIS or forensic systems; and e) successful worldwide track record, e.g. Federal Bureau of Investigation.

SCIENCE AND TECHNOLOGY SECTOR

Design and This project aims to DOST- PhP3.96M Development of a develop a prototype of a ASTI Standalone standalone MPEG audio MPEG Audio decoder and its supporting Decoder hardware and software from the host PC side. In pursuit of this goal, research on modem perceptual audio encoding techniques will be done and standard audio encoding and decoding algorithms will be implemented on embedded hardware. Asynchronous ATM is a technology that DOST- PhP3.96M Transfer Mode will have a significant ASTI (ATM) Project impact in the areas of

146 networking, data communications, and telecommunications. It has the potential to hasten the convergence of data, voice, and video into a unified transport mechanism/protocol. Establishment of The project aims to DOST VII PhP50.0M IT Zone Park in establish an IT park where the Central local and foreign IT Visayas in companies invest in IT Cooperation with industry and maybe jointly Local Export Zone undertake IT innovations of developing new products and services.

TRADE SECTOR

Virtual Centers for A component of the DOSTs DOST- 4 years Technology project COMPETE ASTI Innovation (Comprehensive Program (VCTIs) to Enhance Technology UP-Dept. Enterprises), the of establishment of VCTIs was Electronic proposed with the idea of s and giving small and medium- Elect. sized companies (SMEs) in Eng. the country the opportunity to develop a competitive advantage in export markets.

Source:http://www.neda.gov.ph

147 Appendix D Government Information Systems Plan

MALACAÑANGMANILA

BY THE PRESIDENT

EXECUTIVE ORDER NO. 265

APPROVING AND ADOPTING THE GOVERNMENT INFORMATION SYSTEMS PLAN (GISP) AS FRAMEWORK AND GUIDE FOR ALL COMPUTERIZATION EFFORTS IN GOVERNMENT

WHEREAS, the government is committed to carry out, in pursuance of “Angat Pinoy 2004”, or the Medium-Term Philippine Development Plan, 1999- 2004, wide-ranging administrative reforms to enhance government efficiency and effectiveness in government operations and in the delivery of basic services to the public;

WHEREAS, these reforms are being pursued particularly in fiscal and financial management, procurement, education and manpower development, personnel welfare, organizational effectiveness, and service delivery;

WHEREAS, the wider use and application of information and communications technology offer tremendous opportunities for government to ensure the success of these reforms;

WHEREAS, the National Information Technology Council (NITC), the policy advisory body on information and communications technology in the country, has formulated, in close consultation with concerned government agencies, the private sector, local government units, academe, and members of Congress, and accordingly endorsed a government information systems plan that will serve as blueprint for the computerization of vital government operations and key front-line services for more effective governance;

WHEREAS, the NITC and the Electronic Commerce Promotion Council, created pursuant to Executive Order 468, dated 23 February 1998, have been merged into the Information Technology and Electronic Commerce Council (ITECC);

NOW , THEREFORE, I, JOSEPH EJERCITO ESTRADA, President of the Philippines, by virtue of the powers vested in me by law, do hereby order as follows:

Section 1. Approval of the GISP. The Government Information Systems Plan (GISP), also to be known as “Philippine Government Online” hereto

148 attached, is hereby approved and adopted as framework and guide for the computerization of key frontline and common services and operations of the government to enhance overall governance and improve the efficiency and effectiveness of the bureaucracy.

Section 2. GISP Implementation. To ensure the full and effective implementation of the GISP, all government agencies and instrumentalities, including local government units, shall align their respective computerization projects with the priorities identified in the GISP. The ITECC shall prepare a consolidated annual program of expenditures for government computerization, which shall become part of the President’s Annual Expenditure Program for submission to Congress.

Section 3. Implementing Rules and Regulations. ITECC shall issue such guidelines as may be necessary to implement this Executive Order.

Section 4. Repealing Clause. All orders, directives, issuances, resolutions, rules and regulations or parts thereof that are inconsistent with the provisions of this Executive Order are hereby repealed or modified accordingly.

Section 5. Effectivity. This Executive Order shall take effect immediately.

DONE in the City of Manila this 12th day of July, in the year of our Lord Two Thousand.

JOSEPH EJERCITO ESTRADA President of the Philippines

By the President:

RONALDO B. ZAMORA Executive Secretary

149 Appendix E Market studies on specific countries in Asia-Pacific Demand conditions Industry Structure Factor conditions THAILAND Market Statistics (millions of Market leaders in Reflecting the need for US$) management consulting are finance related advisory Business Services in Thailand: already present in Thailand. services, a new committee These are :Andersen was set up by the Bank of Consulting, Boston Consulting Thailand and already lists 98 1997 1998 1999 Group Price Waterhouse, financial advisors doing 2000* restructuring work through that A. Total Market Size: Demand is expected to remain committee. The Royal Thai 670 800 920 particularly high for expertise Government should continue 1050 in financial restructuring to push the recapitalization of B. Total Local Production: related activities, mergers and the financial sector and 268 320 368 acquisitions, debt collection, privatization of many state- 450 and due diligence work. owned enterprises. Standard C. Total Exports: & Poors estimates that the 7 8 9 financial sector alone needs 30 over $30 billion in new capital, D. Total Imports: and under $10 billion has been 408 488 561 raised so far. In addition, 630 potential privatization E. Total Imports from U.S. candidates for divestiture are 204 244 280 state-held transportation, 360 telecommunications, and energy enterprises. *estimate

Notes: The above statistics are unofficial estimates,

Business services include accounting, legal, management consulting and advertising services

Exchange rate: US $1 = 37 Baht

CHINA China's management More than 100,000 companies Premier Zhu Rongji consulting industry essentially are active in the Chinese highlighted China's ambition to took off in 1996. The market consulting market of which 65 develop a modern has since then expanded from percent of them are foreign management consulting almost zero to over one billion firms with over 85 percent of profession during his visit to dollars in revenue. The total revenues. Some of these the Massachusetts Institute of industry's growth rate foreign firms have dramatically Technology in 1998. Although surpasses 200 percent each expanded their number of some parts of the Chinese year. employees from just a handful government and many state- of consultants to more than a owned enterprises (SOEs) still hundred. Their clients now view the emerging also include large Chinese management consulting companies. industry with skepticism, more and more Chinese have come China's management to accept the fact that China

150 Demand conditions Industry Structure Factor conditions consulting firms come in a needs world class variety of forms. In addition to management experience to the traditional management transform its moribund state consulting firm, financial sector and integrate it into the advisories, brokerages, world economy. In the near universities and even research term, tremendous arms of ministries offer opportunities for consulting extensive consulting services. firms will arise from SOE Many of today's domestic reforms, financial system management consulting firms restructuring, and the have grown out of these expanded use of information unconventional types of technology. organizations. The implications of accession China's management to the World Trade consulting sector is bereft of a Organization (WTO) for clear regulatory structure. Both China's management licensed and unlicensed firms consulting industry would be compete in the market. In the two-fold. First, foreign late 1980s, four foreign management consulting consulting companies were companies that now operate granted licenses from the with representative offices State Council with the backing could gain official status to of Zhu Rongji, then Mayor of engage in a broader scope of Shanghai. The four companies business. Second, and more -- BCG, Arthur Andersen, importantly, WTO entry could China Consulting Association speed up the restructuring of and the Hong Kong Lei-Da the nation's industries, which Group – are still the only will need advice on how to foreign consulting firms with adapt to change. A more open official licenses. The only environment spurred by WTO difference between them and accession could also foster their unlicensed competitors is greater acceptance of foreign that they have certain tax management consulting. advantages. Information technology The three-tier market structure consulting is becoming evident in many other increasingly important. The industries is also applicable to decision in August 1999 by the China's management Communist Party and the consulting sector. The high State Council to support end segment is dominated by fledging high-tech industries, foreign consulting firms with which will also benefit about 20-30 percent of the consulting firms, has been market. These firms focus on followed by a series of serving multinational and large material incentives: domestic clients. o Business tax would be waived on income from The second layer is composed technological transfers, of joint ventures and Chinese technological development companies with significant and related technological foreign background (such as consultancy and services. graduates from overseas schools or former consultants o Priority would be given to the at foreign companies). They companies to list on both

151 Demand conditions Industry Structure Factor conditions tend to have a wider client domestic and overseas base because of their intimate markets. Secondary boards for local knowledge and more high-tech firms would be set competitive prices. Their up on the Shanghai and market share is expected to Shenzhen stock exchanges grow from one-third to half in once conditions are ripe. the near future. o Risk funds and venture- At the bottom is the home- capital development grown consulting companies companies for high-tech that are meeting the mounting industries would be domestic requirements for established to help finance management consulting during start-up operations. China's economic transition. Over the long term, the third group of companies could only survive by converging with the second and transform the competitive landscape into multinational vs. domestic- foreign alliance.

The combination of China's particular culture and extensive planned economy has meant that many of the principles developed in the west have to be modified before they can be applied to the local environment. In particular, the following factors must be considered: o Strategy implementation -- Domestic clients are still ill- prepared to absorb the types of sophisticated structural changes commonly proscribed by consulting firms in the west. They often seek strategies that can be implemented without great difficulty. If changes work against SOE leaders, they will often resist any ideas proposed by consulting firms. Sometimes these leaders are not at all interested in change as their average tenure is only three to five years. o Project scope -- Local clients have a tendency to address and ever widening spectrum of problems as projects move ahead and, therefore, easily expand the scope of a project. This has to be managed

152 Demand conditions Industry Structure Factor conditions carefully to keep the project within budget. o Policy initiatives -- Many of the regulations directed at other industries can have a significant impact on the management consulting sector. For example, a recently released regulation restricting market research by foreign companies could substantially disadvantage foreign consulting firms operating in China.

Market Trends

Organizational change and performance improvement is needed throughout China's economy. The three top sectors on the reform agenda of China's leadership are finance, information technology/telecommunication s and health care/pharmaceuticals. These are the same areas with the fastest growing demands for consulting services. Strategy and marketing services are the most needed, followed by organization consulting and industry/economic analysis.

Many multinationals used consultants to help enter the market, seeking advice on joint-venture formation, partner identification, market assessment and risk analysis. These companies now look to improve overall operations and business processes, focusing on more traditional consulting services such as systems integration, business-process re-engineering, strategy formation and implementation, and supply-chain management.

For domestic companies that are seeking outside consulting services, they are more

153 Demand conditions Industry Structure Factor conditions interested in the role of information technology and business strategy formulation. These companies are usually large and profitable state- owned enterprises or fast- expanding private companies. Although state-owned enterprises have started reaching out for consulting services, most of them still drag their feet as few of them are making money and various limitations prevent them from fully implementing any proposed structural changes. Industry analysts estimate that domestic companies listed on the stock market will need the most management consulting services in the future.

While the overall management consulting industry in China is undergoing significant change, the clients' needs are also changing as their operations evolve. Among multinational clients the focus is shifting from entry level strategy consulting to growth and operations strategy. For domestic clients, there is a shift from technical and engineering consulting to management consulting. With continuing economic reform, consulting services on mergers and acquisitions as well as joint-venture dissolution and formation will be on the rise.

Another area of change in the management-consulting market is the appearance of domestic competitors, especially in the areas of IT consulting and systems integration. New local players are competing largely on the basis of price and , because of their intimate knowledge of the mainland business environment, they seem to

154 Demand conditions Industry Structure Factor conditions have an added advantage over many foreign firms. Therefore, partnering with local firms could become a trend as the consulting market develops.

For consulting companies on a lookout for opportunities in China, the development in China's management consulting sector has demonstrated several key success factors. Consultants must select the right types of clients. Targeting domestic enterprises and government organizations as the primary market has, in general, not been successful, leading many firms to return to their multinational clients. This has made competition in the high- end market intense and has left fewer opportunities for newcomers to be successful. Therefore, new-to-market firms are best advised to incorporate local clients in their expansion plan in the early stage and start partnering with local consulting firms.

It is crucial to develop a good rapport with key central and local government officials and business community leaders. This takes time. Localizing services may assist in such outreach efforts. Hiring local graduates and experienced managers may also increase profitability because local salaries are significantly lower than expatriate pay packages.

Value should be delivered quickly and decisively, using global best practices. The price of the service has to also be price-sensitive. Chinese business people are becoming increasingly savvy and are aware of what to expect from

155 Demand conditions Industry Structure Factor conditions management consulting and at what price.

Finally, foreign management consulting firms have to be able to meet the unique demands of Chinese clients arising from their particular local environment. Management consulting that can deliver locally tailored solutions sensitive to local culture, political dynamics and the legacy of socialist economics will be in the best position to gain a following in the marketplace.

LAOS Growth of private investment and commerce will necessarily generate increasing demand for banking, insurance, accounting, communciations, and consulting services. In 1998, the services sector grew by 4.8%, and now constitutes more than 25% of GDP.

156

Appendix F Market studies on specific countries in Europe Demand conditions Industry Structure Factor conditions GERMANY Management Consulting is Estimates report that there are Further expansion of the one of the most thriving almost 10,000 one- sector is obstructed by a service sectors in Germany. man/woman operations, severe lack of qualified The total market continues to which, account for a very small personnel. grow by more than ten percent fraction of the total market in per year and does not show terms of billings. Today, clients any sign of stagnation or of management consultants decrease in Germany. To typically integrated solutions obtain reliable statistical is from their consultants.. extremely difficult. Increased internationalization and technical developments 1998 1999 almost guarantee further 2000* growth potential. A)Total sales 10,650 12,680 Andersen Consulting 13,950 Unternehmensberatung GmbH B) Sales by local firms 5,440 5,990 Andersen Consulting's 6,200 turnover for Germany and C) Sales by foreign-owned Austria amounted to DM804 firms million in 1998, representing 5,440 5,980 an increase 6,200 of 23.5% on the previous year. E) Sales by U.S.-owned firms 4,560 4,700 The company employs a 5,000 workforce of 44,000 worldwide in *estimate 137 offices in 46 countries.

Worldwide turnover for Andersen totaled US$8.3 billion in 1998, up around 25% for the third consecutive year.

The company offers a range of consulting services divided in four branches: strategy, change management, business process management and technology.

The technology side of business is becoming more and more important to Andersen Consulting.

157 Demand conditions Industry Structure Factor conditions

The company recently teamed up with the world's largest ERP-provider SAP in order to improve the service in this area.

The German branch of the international consulting company was formed in 1989 and has 5 offices employing 1100 people.

Source: Euromonitor

ITALY The Italian market for The market in Italy is Issues such as e-business, management consulting was comprised of about 800 firms implementation of ERP estimated at USD 1.8 billion in with 22,000 people, and is systems, 1999 (excluding earnings divided among global globalization/internationalizatio additional to fee income, such competitors (most of which are n, mergers and acquisitions as revenues from outsourcing of U.S. origin) offering a full- are said to be key drivers for activities, software licenses, range of state-of-the-art management consulting etc.). Consulting is having an products, a few "national services in the near future. unprecedented period of champions", and a number of Both private and public growth in Italy, with yearly local or niche players and organizations offer increases of 15% or more. "gurus". Concentration is high, opportunities. Public service Corporate strategy consulting with the top 20 firms making companies and government accounts for about 40% of up about 40% of overall fee agencies are slowly but total fee revenues (with revenues. Multinational firms steadily re-organizing and strategic planning and are said to make up as much reviewing their operations to organization development as 60% of the market. achieve higher efficiency. In totaling 15% and 13% particular, utility companies -- respectively). Information Most big multinational which used to hold monopoly technology consulting follows consulting firms are well positions in the with 32% of total revenues established in the Italian telecommunications, energy, (with "pure" IT consulting market. The largest consulting and transportation sectors -- totaling 13% and IT systems firm in Italy is Andersen are now faced with challenging development/integration 16%). Consulting, which recorded liberalization and privatization Operations management and sales in excess of USD 370 processes. human resources consulting million in 1999 and employs total respectively 20% and 8% over 3,000 people. In addition A solid knowledge of the local of total revenues. In 1999, the to consulting, Andersen regulatory environment and manufacturing sector was the Consulting (like other market conditions, as well as biggest purchaser of important consulting firms) unique know how in management consulting provides solutions and specialized sectors/functions services (32%), followed by technology in the area of and adequate international the banking and insurance information services, as well experience have become pre- sectors (29%), the as outsourcing services in the conditions for effectively communication and area of administration and competing in this market. transportation sectors (19%), financial control. The top American consulting firms and the central & local Italian firms include Consiel, considering entering the Italian

158 Demand conditions Industry Structure Factor conditions governments (8). Praxi, Soges, Elea, Monitor, market should therefore Value Partners, and GEA. explore the possibility of (USD Millions) teaming up with Italian 1998 1999 2000* partners. Total Market Size 1,580 1,750 1,850 Sales by Local Firms 700 770 815 Exports by Local Firms 60 70 75 Sales by Foreign-owned Firms 940 1,050 1,110 Sales by U.S.-owned Firms 660 740 780 Exchange rate used: 1737 1818 2000

The above statistics are unofficial estimates. SWITZERLAND Hardly another market is . The consultant density in Globalization and deregulation booming as much as Switzerland - the number of challenge management more consulting. In Switzerland the consultants per one million and more. To a modern business consultants book a inhabitants - is the highest economy based on division of yearly growth of around 15%. worldwide. From 1984 until labor, it is not unusual to In 1999, Swiss companies 1998, the total number search for services (which one spent around $1.5 billion for increased 65% to reach a total does not have in house) from business consulting of 2,700 consultants. outside. The upcoming e- In their statutes, Consultants are a power business, with its associated segment in the Swiss structural changes, will also economy. Regionally the give added impetus to Consultants are often hired for consulting business tends to consultants. problems and challenges that concentrate in the economic companies cannot do or do metropoles: around 60% in Broad general knowledge of not want to direct themselves: and around Zurich, the rest in the economy and present personnel search and Geneva, Bern, Basel, Luzern management methods as well recruitment (58%), legal and St. Gallen. as life experience and advice (44%), software knowledge of human nature development and Asco (Swiss association of are success factors in this implementation projects business consultants) defines business. Successful (42%), strategic questions business consulting as follows: consultants not only have (40%). Business consulting is a expert competence but also project related interaction the capacity of understanding In the age of global change process between people of a and sensibility, excellent there is a high demand and client system and people of a communication skills and continuous need for consulting system. The independence in judgement. management and business consulting system is consultants. More and more independent, helps Structural changes with the consultants want to join this professionally, viewing a upcoming e-business, System race and open new offices in problem in its entirety, to Based Marketing and IT Switzerland optimize the success potential solutions call for diversified of the client system. Classical consulting teams consisting of business consulting is not a company and technology standardized service, but a developers, strategists, custom tailored solution and marketing specialists,

159 Demand conditions Industry Structure Factor conditions the consultant can only help information specialists, etc. and support. The translation These specialists have often into action of the measures to be hired from the USA, has to be executed to a great Germany and Far East. Fast extent by the client himself and more precise results who is also responsible for it. concerning effectiveness of marketing measures and client The competition on the Swiss care thanks to data market is accordingly fierce. warehouses, data mining, The internationally leading internet/intranet or call centers consulting companies also are demanded. The have a firm base in information field seems to Switzerland and they occupy have the best growth potential the first six ranks in terms of for new entrants in the turnover. In Switzerland there consulting branch. A new is free competition in the trend is also becoming evident consulting business and in the knowledge management therefore the range of fees is consulting. Important world wide. The consulting fee organizations, governments system differs between daily and world enterprises count on fees and success fees, which this expertise. Since are paid after successful Switzerland is home to many implementation. The pressure such organizations and from clients oriented towards a entities, the potential is fee system depending on significant. success. Top consultants enjoy yearly fee turnovers of over $640,000; the absolute top can amount to $1,120,000 and more. Such returns are obtained by the "stars" of single consultants, smaller consultant companies, so- called "boutiques" (highly specialized) as well as by the giants from the premium segment of the big international consulting companies. Also auditors, who more and more are advancing into the business segment of consulting, can book considerable rates.

Business Consultants Fee turnover 1998

McKinsey Pricewaterhouse Coopers $120-160 million

Andersen Consulting ATAG Ernst&Young CSC Ploenske $48-118 million The Boston Consulting Group

160 Demand conditions Industry Structure Factor conditions KPMG

Arthur Andersen Arthur D. Little Bain & Company $24-46 million St. Gallen Consulting Group

The business consulting branch is very complex. From monolithic consulting companies they have developed to specialty networks in order to be able to cover the range of requests completely. They offer a wide range of services and support their clients in all questions concerning strategy, organization and often also in special fields like logistics or technical problems. Also the small and middle-sized companies distinguish themselves with attractive specialties in this complex environment. Their focus is more on particular fields such as company culture, corporate identity, brand building, and technology and innovation management.

Consultants enjoy high acceptance in Switzerland.

On many "executive floors" the consultants are considered indispensable, continual helpers, available on call. All the big companies work with consultants. Also small and middle-sized companies trust in consultants and regularly engage one or more consulting companies to assure the success of their enterprises. The consultants are expected to have the latest knowledge which they bring to bear to analyze and handle problems. They are also able to benefit from the realization of other company projects. They have the time to go into

161 Demand conditions Industry Structure Factor conditions details, which the own company people do not have. Big companies often work with international top consultant companies and highly specialized consultants. Small and middle-sized companies tend more to small owner managed consulting companies where they have the possibility to negotiate directly with the owner in order to work out fast and pragmatic solutions.

UNITED KINGDOM 70% of Britain's $1.21 trillion Total advertising spendings in annual GDP is now the UK management generated by services. consultancy market amounted Transportation, to £5.3 million in 1998, an telecommunications, finance, increase of 19% on the and insurance are the best- previous year. known sectors, dominated by big business and established The majority of advertising companies. These important (74%) is channeled through sectors and the leading the press, in particular trade companies within them have journals, reflecting its status proved to be flexible and as a business to business innovative, responding quickly service. to market conditions and regulatory change, but tending The other significant to exclude small and medium- advertising channels are sized firms. The most television, radio and outdoors productive of those adverts accounting for 20%, professional and technical 5% and 1% of the total services sectors are adspend respectively. architecture and design, advertising and publicity, The most prolific advertiser management consulting, was Business Link, which research and development, accounted for over 37% of the and international legal and total adspend. accounting services. Business Link is sponsored by the Department of Trade and U.S. professional services Industry and is organized by companies generate annual local government to provide fees business counseling and of approximately $13.5 billion management consulting to from the U.K. With insight local into market conditions, means industry. of access, and potential for exports, U.S. firms have Andersen Consulting already achieved a significant maintained a high profile in

162 Demand conditions Industry Structure Factor conditions market share. 1998, predominantly through television advertising, and in Market Data ($ billions) 1998 its budget was 9% 1997 1998 1999(est) higher than in 1997. A) Total Market Size 875 880 885 B) Locally Billed Services* 892 892 895 KPMG UK C) Total Services Exports 383 385 389 KPMG produced its best fee D) Total Services Imports performance for a decade in 366 373 379 1998, with gross fees up 19.4% since 1997 at £867 * It is not possible to million. differentiate the services billed by majority-owned affiliates of It was also a profitable year U.S. firms established in with net profit up by 20.6% Britain from those of British- since 1997 at £179 million in owned firms. 1998.

Its performance in management consulting spearheaded the firm's growth as fees rose by 51% to £216.9 million.

In December 1998 the UK chiefs of KPMG said they were considering floating a portion of their fast-growing consulting business.

Calling off the merger with Ernst & Young had a limited effect on the company, as few people as necessary were involved in the merger talks.

Around two-fifths of KPMG's income came from auditing and accountancy, with a further 21% from tax, 17% from management consultancy, 22% from corporate finance and insolvency services.

Cap Gemini Group

Turnover increased by 28.6% since 1997 to FF25.9 billion in 1998.

Net profit in 1998 amounted to FF1.2 billion, an increase of

163 Demand conditions Industry Structure Factor conditions 62% on the previous year.

The Cap Gemini Group is established in two core businesses: information technology services and management consulting which it provides through its subsidiary, Gemini Consulting.

The company has recently gained a £600 million contract with Carlton Television to run their IT systems, monitoring annual sales of television advertising.

Outsourcing services include applications management, distributed computer services, central computer services, network management systems and business process management. BULGARIA Investors in Bulgaria need the services of consultants to help them with market entry. In addition, small and medium sized Bulgarian companies unfamiliar with how to prepare a business plan to attract investors or obtain a loan need consulting services to help them. They also need assistance from consultants in doing research to help them find and acquire new and used machinery. Source:http://www.usatrade.gov/ccg

164

Appendix G Market study on the United States Demand conditions Industry Structure Factor conditions UNITED STATES Management consulting was Accounting, Auditing and the largest sector in the bookeeping sector Accounting, Auditing and Bookkeeping market As the management in 1998 with a value of consulting sector begins to US$35.4 billion. mature, companies are expected to begin As auditors face decreasing differentiating their services demand for their traditional along those practices in which tax and auditing services, high they have a competitive margin consulting services advantage. assumed a greater role in the market. Consulting divisions should become more specialized to Reflecting this trend, the particular client needs as this management consulting sector trend develops. Grew 105% over the review period, from 40% of market To be competitive CPAs are value shifting their focus toward In 1994 to 47.5% in 1998. helping clients understand all areas of business US$ million sectors performance rather than 1994 1998 financial matters alone. This Management Consulting trend is expected to continue. 17,223.6 35,360.9 Management, marketing and Consulting services sector Source: Euromonitor As numerous consulting firms Management consulting is experienced difficulty finding expected to account for 56.1% skilled worker during the of review period, extensive the market in 2003, growing employee

165 Demand conditions Industry Structure Factor conditions 92.5% in current terms from training programs became an 1998 to a value of US$72.5 integral part of the billion. development strategies of key players. SECTOR FORECASTS 1999-2003 Numerous management consulting firms improved US$ million sectors employee compensation 1999 2003 packages, shared governing Management Consulting power, and combined and 42,000.0 72,500.0 redefined jobs in an effort to Source: Euromonitor ameliorate employee relations between 1994 and In the same manner, the 1998. strategic management consulting sector was the Key players relied on largest technological advancements during the review period, to accounting for 54% of total enhance their quality of management and marketing service and more effectively consulting services market meet the needs of their revenues in 1998. clients during the review period. Management consulting revenues grew 84% from 1994 Major management consulting to a firms increased global value of US$29.3 billion in operation activity during the 1998, with companies review period as they increasingly seeking continued to provide service to professional advice regarding internationally-expanded international expansion and clients. internal restructuring strategies. Many key players sought to become comprehensive, Fueled by rapid technological seamless professional advancements, the computer advisory organizations during and software consulting sector the review was the most dynamic during period, offering consulting the review period, increasing services in conjunction with 146.9% from 1994 to a value professional services, such as of US$ 7.8 billion in 1998. accounting.

The tax consulting sector was CORPORATE OVERVIEW the least dynamic during the 1998 review period, decreasing 17.1% from 1994 to a value of Companies US$868.9 million in 1998, with avg. sales growth market companies increasingly share handling such matters internally. Andersen Consulting 23.6 12.2 Accounting for 13% of total PricewaterhouseCoopers management and marketing 2.0 8.0 Consulting revenues, the Deloitte Touche Tohmatsu public relations consulting Internat

166 Demand conditions Industry Structure Factor conditions sector 12.6 6.7 increased 38.7% from 1994 to Ernst & Young International a value of US$7.1 billion in 18.2 6.7 1998. KPMG International 5.3 4.8 1994-1998 Source: Euromonitor US$ million 1994 1998 PricewaterhouseCoopers net Management consulting sales grew 2% from 1997 to a 15,862.0 value of US$15.3 billion in 29,326.8 1998. Computer and software 3,145.0 As one of the leading global 7,766.2 Public relations auditing, consulting, and 5,091.0 accounting firms, 7,060.2 Other consulting and PricewaterhouseCoopers, was design formed by the 1998 merger of 3,459.0 two of the top management 6,136.9 consulting firms, Engineering and design Pricewaterhouse and Coopers 2,444.0 & Lybrand. 3,149.9 Tax 1,048.0 PricewaterhouseCoopers 868.9 operates 850 offices in 150 Countries, allowing the Source: Euromonitor company to serve a wide range of local, global, and international companies as well as public institutions. The strategic management consulting sector is expected The company range of to services includes auditing, continue to be the largest accounting and tax advice, during the forecast period, business process outsourcing, accounting for 54.4% of total information technology, human US management and resource consulting, and marketing legal services through a consulting revenues by 2003. worldwide network of affiliated law firms. Strategic management consulting revenues are During fiscal 1999, forecast to increase 64.8% PricewaterhouseCoopers between 1999 and 2003 to a agreed to join forces with value of US$54.8 Methodfive, a company billion. formed to help firms design their web presence, in The sector will benefit as firms an effort to expand their e- seek corporate restructuring business service offerings. advice in an effort to improve profit margins in highly competitive market environments.

Rapid technological

167 Demand conditions Industry Structure Factor conditions advancements should continue to fuel sales in the computer and software consulting sector during the forecast period.

Computer and software revenues are forecast to grow 69.9% from 1999 to a value of US$15 billion in 2003.

The tax consulting sector is expected to continue to be the least dynamic during the forecast period, increasing 41.7% from 1999 to a value of US$1.3 billion in 2003.

Increasing 59.7% from 1999, the public relations consulting sector should reach a value of US$12.7 billion by 2003.

SECTOR FORECASTS 1999-2003

US$ million 1999 2003 Management consulting 33,220.6 54,773.8 Computer and software 8,814.3 14,974.0 Public relations 7,930.6 12,663.4 Other consulting and design 6,885.5 11,055.4 Engineering and design 3,704.2 5,828.7 Tax 922.1 1,307.0 Source: Euromonitor Source:http://www.usatrade.gov/ccg

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Appendix H Market studies on specific countries in other regions Demand conditions Industry Structure Factor conditions KUWAIT To increase the efficiency of The frequent discussions its indigenous manpower and about privatization, Foreign management to rationalization of consulting companies reduce reliance on expatriates, Expenditures, and the pursuing governmental Kuwait needs management Kuwaitization frequently projects in Kuwait must be consulting firms for the associated with discussions registered with the Ministry of organization of the about replacement of Planning. The Consultant administrative and financial expatriates in the public sector Department screens all sectors. It also needs by Kuwaiti nationals, resulted registered companies for consultants for defense in the creation of a few projects and recommends the planning and major project management consulting firms most qualified to handle a management. in Kuwait to take advantage of particular project. these opportunities. According to the World Bank's Engineering consulting offices report on privatization in are numerous in Kuwait and There is a higher Consulting Kuwait, have existed for a long time. Committee that approves the an efficient and low cost International firms created joint list of qualified companies. financial sector is necessary if ventures with local agencies This committee comprises Kuwait for management advisory as representatives wants to meet objectives of divisions of auditing or From the following increasing economic efficiency accounting offices like Arthur government agencies: and overall productivity. To Anderson, KPMG Peat achieve this, Kuwaiti banks Marwick, Coopers & Lybrand, Ministry of Public Works need the services of Price Waterhouse, and Ernst Ministry of Communications management consulting firms. & Young. Ministry of Electricity & water Ministry of Planning The Ministry of Finance and Department of Legal Opinion Ministry of Communications in Local firms play a small role in and particular require the services this sector. The successful Legislation of management consulting ones associated themselves Kuwait Municipality firms to with U.S. firms, such as Council of Ministers help them proceed with their Coopers & privatization programs which Lybrand with Bader & Co., have Ernst and Young with Ahmed been approved. There is also Al-Eiban & Partners, Price privatization talk involving Waterhouse with International information, electricity and Audit Bureau and KPMG with Management consultant water sectors, the Ports Masoud & Co. companies do not require an Authority, agent in Kuwait. If a the Kuwait Airways, and the Most U.S. management management consulting firm is Free Trade Zone. consulting companies have selected for a established themselves as certain governmental project, it reputable organizations with is necessary to associate itself The following government widespread knowledge with a local management

169 Demand conditions Industry Structure Factor conditions agencies are expected to be and experience in the consultant. The relationship privatized, though partially, international and Kuwaiti may be one of partnership or a within the next few years: Oil markets. Since most Kuwaiti joint venture. Sector: Kuwait National decision-makers and Petroleum Company (KNPC) managers are U.S. educated, For the private sector, foreign announced it U.S. management consulting firms should contact will privatize about 33 gas firms have an edge over other institutions stations this year. This will be countries. directly to market their carried out as soon as studies services and expertise. for this move are completed. The major competition to U.S. Other sectors of the oil sector consulting firms comes from like transportation, British companies who are Foreign firms are also international sales and present in some sectors like reminded that foreign partnership agreements, etc. the power and health sectors, companies doing Three large American firms though on a small scale. business in Kuwait are subject are currently providing to an income tax of up to 55% management consulting In other sectors such as of services to the oil sector: construction, civil aviation, the net profit. The government Parson International for Kuwait information management is planning to reduce this high Oil Company (KOC), Stone & systems and technology, percentage to about 30-35%. Webster for the Kuwait financial National Petroleum Company services, educational systems, (KNPC), and Fluor Daniel for university education, etc. Kuwait has a modern banking the Petrochemical Industries American firms dominate. The system and local banks have Company (PIC). real competitive factors which correspondent banks in the American firms should United States. There are no The Ministry of Information will consider include technical restrictions in Kuwait on the launch the first cable TV merit, transfer of currency. project after the final approval reputation and price. Past is obtained from the Council of experience in similar projects, Minister's Finance Committee. preferably in the region, is also Several factors play a vital role The feasibility study has been an advantage. in shaping the market's completed. a sahreholding demand company will be funded at Revenues of management for management consulting U.S.$33 million. 65% of the consulting services in 1996 services in Kuwait. shares will be open to the amounted to approximately $ public and the remaining 35% 70 million. The local will be distributed to company companies share was about Kuwait is a small country with founders. The cable TV 20%; U.S. firms was an a total population (1997) of system will be implemented impressive 70%; British firms 1.75 through a multi-video took 10%. This figure is million. More than 60% of the distribution system, described expected to grow by a total are non-Kuwaitis. as a micro-wave wireless minimum of 20% each of the Kuwaitis cable. To initiate next three years if the constitute 93% of the total this project an international government goes ahead with labor force in the public sector management consultant is its plans to but required. privatize, Kuwaitize, reducing form only 3% of the labor force the number of expatriates in in the private sector. The the number of Kuwaitis seeking Free Trade Zone: Kuwait has public sector. Management jobs is increasing and the sanctioned the establishment consulting services are Ministry of of a needed to Planning and Parliament warn free trade zone. A local assist the government in against a forthcoming company has been awarded achieving its objectives. unemployment the contract problem. To create jobs for

170 Demand conditions Industry Structure Factor conditions to manage the zone. This American consulting firms are Kuwaitis, the government: company requires the services doing very well in this service of an international consulting sector. American consultants -- Decided to replace 10% of firm for the management of the in Kuwait include: Turner, the expatriate public sector project. Parsons, labor Synergy, Ernst Young, KPMG force every year with Kuwaitis. To create jobs for the Peat Marwick, DMJM This will create about 5,000 increasing numbers of Kuwaiti International, AMIDEAST, Inc., jobs for Kuwaitis every year. graduates Arthur Anderson, Booz-Allen & This also means, at least and to reduce dependence on Hamilton Inc., Chevron, theoretically, that the public expatriates, the public and Coopers & Lybrand, Stone & sector will be Kuwaitized private Webster, Merz &McKlenan, within sectors need to hire currently etc. the next ten years. This is a inexperienced local staff to fill very challenging target and jobs occupied by expatriates. needs, Government end-users to materialize, the advice and include: expertise of consultants in human resources development and --Ministry of Defense training. U.S. companies are -- Ministry of Education advised to include, in any -- Ministry of Finance together proposal to governmental with its Kuwait Investment agencies or public companies, Authority methodologies on --Ministry of Health management development --Ministry of Planning and training. --Directorate of Civil Aviation --Kuwait Petroleum Corporation --Enacted a law forcing local --Kuwait University companies to have a minimum --Public Authority for Applied of 10% Education Kuwatis in their workforce. -- Public Authority Companies that comply with for Industry this law --Public Authority for the will be given incentives in the Protection of the Environment form of tax cuts and subsidies. - Civil Service Commission

Management consulting --Announced a privatization services are needed to help program for certain sectors reduce the number of and will expatriates who impose a introduce a privatization law to heavy burden on the create new employment government's budget opportunities for nationals in and their services are also the private sector. The required to upgrade concerned capabilities of government agencies seek Kuwaitis in performing their job management consulting responsibilities. Management services to help consulting services are most them absorb those nationals in needed for the following an effective and productive sectors: way. major projects, health care services, human resources development, banking and --Will impose health care

171 Demand conditions Industry Structure Factor conditions financial services, computer insurance on expatriates in the technology; information near services, organization analysis future because it wants to end and development, project more than 40 years of free management consulting medical services, and quality control. treatment for expatriates to offset some of the heavy The end users of the basic expenditures on medical management consulting services. Health insurance services include various service is governmental entities and new in the country and the institutions. task will be assigned to four national insurance companies which lack experience. This policy will also encourage construction of private hospitals that can offer competitive medical care through modern equipment, good doctors, and good management teams. It will create significant opportunities for American management consultants in these fields.

-- Established a new Public Authority for Industry which paid US $670,000 to the Arab Development Center for its administrative organization. Similarly, the Public Authority for the Applied Education & Training paid the same local consulting office US $3.35 million to assess the needs of ministries and governmental entities for technical labor force by the year 2010. Kuwait Petroleum Corporation (KPC) approached our office recently requesting addresses of U.S. consulting firms in finance and administrative organization. Other larger institutes like Kuwait Airways, the Ports Authority and investment companies will

172 Demand conditions Industry Structure Factor conditions require the assistance and expertise of management consulting firms in the near future.

Major projects that cost over $3 million require international consultants to establish designs and specs for these projects before they are announced to local or/and international contractors. Some of these projects that contracted management consultants include:

--The Oil Sector Complex (KPC/Ministry of Oil Headquarters): $83 million: The construction manager of the project is the British Bovis with the local Projacs. Costs are US $3.5 million. The project consultant is the local Salem Al Marzouk and Sabah Abi Hanna (SSH) together with the Canadian firm Arthur Erickson. The project will be completed in March 2000.

--The New Al-Zoor Power Plant: This plant will generate 2400 MGW of power and 48 million imperial gallons of drinking water. The project has been assigned to American companies. Two consultants are required: one for the power plant and another for the desalination plant. The consultant will be selected in November 1997.

--The Central Prison Complex

173 Demand conditions Industry Structure Factor conditions (Rehabilitation and Deportation Center) which will cost more than US $40 million. An American consultant will most likely be selected for the project.

--Sulaibiya Water Distribution Project: The Ministry of Planning is in the process of selecting a consultant.

-- The Ministry of Communications contracted with the Swedtel Consultant to develop and improve the telephone network in Kuwait. Costs were US $452,000.

--Kuwait Airport Control Tower and Radars: the U.S. DMJM International was appointed the Project Manager at a cost of $7.14 million.

--Frederic Harris, Inc. was awarded the consultancy work for the Ahmadi north pier.

Consulting firms do not need local agents; they do need to associate themselves with a local consulting office to work as partners because Kuwait wants to transfer expertise to its national companies through collaboration with international establishments.

American companies are reminded that they are subject to a 55% tax on their net profits in the country. The

174 Demand conditions Industry Structure Factor conditions Government is considering reducing that to 35%.

WEST BANK Public and private institutions Several local firms provide the seek a variety of consultings services but demand is ervices for product growing rapidly, particularly for development, quality control, municipal and public amrketing, setting up administration offices. corporate administrative Inetrnational donor financing systems, financial analysis, of technical training should and use of information continue to promote a demand systems technology. for these services.

Competitive pricing is a factor in obtaining public and private contracts

PANAMA The government's decision to According to local liberalize the economy and the procurement laws, contracting implementation of a major of consulting services is done privatization program through public bids. Bidders increased the market potential are pre-qualified with regards for consulting services in to their international Panama. reputation, with a subjective evaluation by a panel as to Future consulting general expertise. Financial requirements will focus on key strength and experience are sectors such as the also taken into consideration. environment. The preservation In the public sector, consulting of the Panama Canal contracts are usually financed watershed is a priority. Also, by international development cleaning of Panama bay, banks, supporting structural another multi million dollar reforms in the economy. environmental project will USAID is also involved in require a substantial amount financing projects dealing with of consulting services. Other the environment and promising areas for consulting administration of justice. services are public health, financial management for the Consultants initiating work in government, information Panama typically enter into a technology, justice joint-venture agreement with a administration, and urban local firm, so as to simplify development. start-up by sharing resources.

Market Data ($ millions) The market for consulting 1997 1998 1999) services has been clearly Total Market Size dominated by U.S. firms, and 23.0 27.0 33.0 is expected to remain so in the Total Local Production foreseeable future. 6 8 10 Total Exports 0 0 0

175 Demand conditions Industry Structure Factor conditions Total Imports 17 19 23

ARGENTINA The executive training market Market is dominated by US fluorished in the 1990’s. firms . The Argentine taste for Today, it is a large market with US management style 60% of all professionals taking provides a competitive some type of executive advantage to US subsidiaries training course. Projections in in the country. 1999 and 2000 indicate a total growth of 16 percent. Source:http://www.usatrade.gov/ccg

176 Appendix I List of International Associations of Management Consultants

Africa Latin America Federation of African Consultants (FEAC/FECA) Federacion Latinoamericana de Asociacionoes PO Box 1387 De Consultores (FELAC) 01 Abidjan Suipacha 552 , Piso 4 Of. 1 1008 Buenos Aires Argentina

Europe Interregional European Federation of Management Consulting International Council of Management Institutes Associations (FEACO) (ICMCI) 1-5 Avenue de la Joyeuse entrée 32/33 Hatton garden 1040 Bruxelles London EC1N 8 DL United Kingdom

Europe European Foundation for Management Development (EFMD) 40 rue Washington 1050 Bruxelles

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Appendix J Strengths and Weaknesses

Strengths Weaknesses Firm Infrastructure ♦ Local consultants offer services at ♦ Many of the local consultants competitive costs as compared to their either focus only on a foreign counterparts particular niche or a small ♦ Growing number of local firms that portion of the market, so develop partnerships and affiliations business gets affected when with reputable foreign consultants they compete with foreign who are interested in establishing an companies that offers full- office and entering the Philippine service. market ♦ Funds are not adequate to ♦ Availability of information technology enable local consultants to resources which enables consultancy market services abroad where firms to access information on market personal presence and opportunities worldwide networking is needed. ♦ Relatively few linkages with inernational groups, associations abroad that would enable firms to ease entry of Filipino consultants in foreign markets ♦ Lack of financial capability to maintain regular staff Human Resource ♦ Management consulting firms attract ♦ Great disparity of rates Development competent people, whose work is on a provided for Filipino part-time or per project basis. These consultants as compared to people are mostly attracted to the firm their foreign counterparts because of exposure to companies ♦ Lack of qualified individuals in and projects and flexibility of time specialized areas rather than the salary ♦ Lack of full-time management ♦ Presence of Filipino consultants who have a very strong educational background, relevant industry experience, and international exposure/training ♦ Trainability of Filipino consultants ♦ Computer literacy of Filipino consultants Technology ♦ Integration of information technology in ♦ Slower growth and Development the services of large players development of smaller firms to integrate IT into their services ♦ Too star-struck by academic fads and fashions, which are usually based on ideas that have some merit but whose value and applicability in the local setting may be different as compared to countries in the West, where these ideas usually come from Procurement (People ♦ Hiring of some consultants, especially ♦ Some of the employees hired,

178 Strengths Weaknesses and Information) experts, are on a per project-basis use management consulting which leads to lower costs of firms as a training ground and maintaining people eventually leave the company ♦ High turnover of people who may eventually be employed by client companies or by other consultancy firms ♦ Difficulty in access to updated and reliable information especially those data related to the Philippines

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