management consulting services based on life cycle of company
Table of contents: The Kazakh-American Free University Academic Journal №9 - 2017
Baitemirova Aidana, Kazakh-American Free University, Kazakhstan
Sarsembaeva Gulnara, Kazakh-American Free University, Kazakhstan
consulting industry has been through severe challenges. For instance, in 2002,
The Economist (2002) wrote that the strategy-consulting industry was “wasting
away” as strategy had become a commodity, as bright business school graduates
were equally available to top corporations as they were to consulting firms for
hiring. Fortune Magazine (2003) concluded that pure-play strategy - consulting
as a business was shrinking, as clients reduced their engagement levels,
shortened project lifecycles, and began demanding concrete, measurable returns
for their investments.
The management consulting
industry is known to operate under a lot of secrecy, to the extent that some
consultants use code-names for their clients, lest someone discover who is
offering what services to them even during informal conversations. The
“big-three” strategy-consulting firms dominate the global consulting industry:
McKinsey & Company (McKinsey), Boston Consulting Group (BCG), and the Bain
& Company (Bain). As The Economist (2013) reported, these three firms grew
by 12.4%, 14.5%, and 17.3%, with revenues of US$5.3b, US$3.1b, and US$2.1b,
earned from 17,000 employees in 50 countries, 6200 employees in 43 countries,
and 5500 employees in 31 countries, respectively, in the year 2011, which was
marked by severe economic downturn. In spite of the increasing convergence of
the processes and practices in the industry, stereotypes persist. As The
Economist (2013) elucidates, McKinsey consultants are perceived to be “vainies”, as they lecture clients on the McKinsey way; BCG
consultants are labelled as “brainies”
as they spout academic theory to sell their services; and Bain consultants have
a reputation for taking responsibility for improving the clients' bottom-line results.
With the maturing of the industry, it is no longer possible even for the
big-three strategy-consulting firms to only provide strategy advice and not
take responsibility for implementation. In fact, as the big-three firms are
expanding their service offerings to include a larger bouquet of services,
other firms like the “big-four” accounting firms (PwC, Deloitte, KPMG and
E&Y) are also expanding their services to step into strategy consulting.
Van den Bosch, Baaij, and Volberda
(2005) propose three strategic options for consulting firms: “follow the herd,”
“become ambidextrous “, or “back to the original focus”, when faced with
decreasing returns to exploitation of prior accumulated knowledge. These
decreasing returns are caused by the entry of new players into the industry, as
well as the clients becoming more capable of solving their own problems.
Christensen, Wang, and
van Bever (2013) identify three steps in disruptions
that can affect the consulting industry, similar to the disruptions they help
their clients overcome. First, new competitors arrive at the industry doorstep
with new/non-traditional business models. For instance, the consulting industry
has seen entry of the big-four accounting firms, forward integration by
technology consultants (such as EDS's acquisition of AT Kearney, or IBM's
services), and the entry of specialized niche consulting firms. The second step
in the disruption is the incumbents' responses - the responses include ignoring
the new entrants or conceding the mass market to new entrants and
segment-retreat into high-margin low-volume activities. The third step in the
disruption process is the maturing of the disruptive entrants' business models
from a “barely good enough” quality to a “generally acceptable” level, thereby
flipping the market into new bases of competition. Christensen et al. (2013)
suggest that consulting firms engage in any of the following six
self-disruptive behaviors, in order to balance their core business model along
with the disruptive models:
an autonomous business unit
leaders who come from the relevant schools of experience
3) set up an independent
(and custom-made) resource allocation process
independent sales channels
new profit models, and
unwavering commitment from the leadership.
another significant challenge for the management consulting industry. When
small firms who differentiated themselves based on local/contextual knowledge
dominated the industry, consulting firms could organize themselves as neo-PSFs (von Nordenflycht, 2010).
However, with the globalization of clients, global management consulting firms
have begun organizing themselves as global professional networks (GPN) (Brock,
Using the institutional
theory and the resource-based view of the firm, Brock (2012) identified five
managerial and organizational challenges for globalizing PSFs.
First, while global market entry provides the opportunity to maintain growth
through acquisitions (a means of quick capability building and
customer-acquisition and retention), the challenge for globalizing PSFs is to accomplish this without compromising on the
reputational capital as their source of differentiation. The second challenge
for globalizing PSFs is the varied governance forms
across borders, especially as firms operate in a combination of emerging and
mature economies, with different institutional norms and legal frameworks.
Third, traditional organizational structures that involved partners (who were
owners of the firm and were considered experts/specialists) and associates (who
did the analytical work and were either on a path to partnership or exit from
the firm in a few years) are giving way to new organizational structures, based
on specialized business functions, such as business development. A key organizational
attribute of these changing structures is the concept of “leverage”, which
denotes the efficiency of the firm's associates to leverage the knowledge of
the partners. In other words, the number of associates per partner denotes the
leverage ratio. The fourth challenge is presented by the high leverage ratios in
specialized firms, which restricts new knowledge creation,
and career opportunities for associates. The fifth and final challenge is to
integrate the global spread of PSFs into learning
from multiple contexts, efficient knowledge transfer within the organization,
and effective leverage of this collective knowledge into revenues and profits
for the firm, which is referred to as “organizational wisdom” (Scott-Kennel
& von Batenburg, 2012).
Efficient management of
the firm's internal tacit knowledge is therefore the key to effective
management and growth of a consulting firm (Scott-Kennel & von Batenburg, 2012). Given that knowledge assets are
multi-dimensional in nature, it is important that consulting firms invest in
various human resources (HR) configurations to manage human, social, and organizational
capital (Swart & Kinnie, 2013). Such firms face
significant conflicts in managing the balance between routines that support
external demands from clients (innovation) and internal utilization of capabilities
(efficient deployment of specialized human assets) (Jensen, Poulfelt,
& Kraus, 2010).
In sum, the challenges
facing the management consulting industry fall into three broad categories:
1. Competition and
differentiation: As competition intensifies with the entry of heterogeneous
players in the market, there is a significant need for consulting firms to
define their unique identities and differentiate themselves from the rest, in
an increasingly fragmented industry.
2. Organizational design
of the management consulting firm: The traditional professional partnership
organizational form is under threat with increasing globalization of consulting
firms as well as their clients. This necessitates that consulting firms
consciously adopt new organizational forms that best suit their contexts and
3. Internal organization
of knowledge flows to serve client needs: High knowledge intensity of
management consulting firms ensures that firms proactively manage their
knowledge flows within the firm, especially tacit organizational knowledge.
Efficient leverage of organizational knowledge is essential for creating and
maintaining the balance between exploitation of existing knowledge and creating
The practical use of the
life-cycle concept by company managers and managers is linked to the need to
determine the stage at which almost all currently known methodologies are in
place to permit such diagnostics to be implemented.
Situations of transition
from one stage to another are particularly difficult, so there is a need to
develop more precise quantitative and qualitative criteria for determining the
stage of the life cycle.
The research is a
consulting company-TOO «ERP-Service» KazTransCom,
founded in 2004 by the efforts of experienced and qualified professionals. At
this time, the company has more than 30 certified specialists in the main
functionalities: FI, CO,
CMS, HCM, MM, SD, PS, PM, bw
/ Bi, bo, BPC,
BC, ABAP, Saphana,
The "ERP-service kaztranscom" (ERP) is a specialization of the SAP
AG-based management systems, from implementation, maintenance and support for
ERP systems to the maintenance of ERP systems through outsourcing:
- Consulting and
- Server equipment;
Classic ERP systems,
unlike the so-called "boxed" software, fall into the category of
"heavy" software products and the correct selection of an integrating
company is an important task.
organizational structure of the ERP service has four levels of management and
refers to the complex multi-level structures that characterize large companies
with a diversified business portfolio.
structure is determined by the distribution of responsibility and authority
within the organization. The organization Chart of the consulting company TOO
«ERP-Service» KazTransCom is shown in Picture 1 .
Picture 1. Organizational structure of TOO
Today, the ERP service
has successful experience with major implementation, development, and
maintenance projects in various enterprises in Kazakhstan.
TOO «ERP-Service» KazTransCom has a rich experience with ERP systems (Enterprisers
source planning) based on the world's leading developer platforms: Microsoft
dynamics ax, SAPERP, 1:1. ERP, etc.
The ERP service cooperates
with several vendors because it realizes that flexibility in choosing a
solution will allow their customers to achieve the highest level of ERP
Over the years,
ERP-service has developed an ERP team for the best in the marketplace,
established a unique expertise, and established a proven methodology for
implementing large, complex projects.
systems Technical Support-TOO «ERP-Service» KazTransCom
technical PODDERZHKUSAP systems in 24 mode (24 hours a day, 7 days a week, 365
days per year).
After the SAP
implementation is complete, the system uses the enterprise's system development
phase. Effective use and further development of the embedded system is possible
only with quality and professional technical support. The company's technical
support team, too ERP-service kaztranscom
(hereinafter-ERP service), helps customers decide how to operate the system,
update versions, reproduce solutions, and extend functionality .
Business Intelligence is
a software program designed to help a manager analyze information about your
company and its environment. Bi is a process of translating data into
information, knowledge, understanding, and, finally, general knowledge into targeted,
applied knowledge that makes decisions. "BI is supported by data from
vaults, data development methods, and decision support technologies." The
functional scheme of the BI platform is shown in Picture 2.
Picture 2. BI Platform functional scheme
SAP Business Information
Warehouse (SAPBW) is a component of my SAPBI that includes an enterprise-wide
storage mechanism, a business information platform, and a set of business information
tools . It was designed initially to provide the most efficient business
modeling tools and methodologies-and the SAP capabilities in this area are now
recognized as the best among these solutions. The SAP Business Warehouse is
presented in Picture 3.
Picture 3. SAP Business Warehouse 7.4
On April 21, 2014, SAPAG
announced the release of version 7.4 of the Sap business warehouse solution
(SAPBW) on the Sap HANA platform with the new "in-memory" data
The key difference from
the latest version of Sap business warehouse based on Saphana
is the in-memory data architecture. Sap business warehouse 7.4 In
an enterprise is used at the semantic level, combining all data warehousing,
business analysis, and management into a single business context.
The TOO «ERP-Service» KazTransCom, together with Too "Alyer",
provides services for installing, using and supporting ARIBASAP applications
for B2B e-commerce .
The use of applications
improves efficiency, efficiency and transparency in procurement, significantly
reduces costs and reduces time for procurement and supply processes.
The consortium between
TOO «ERP-Service» KazTransCom and Too "Alyer" also provides outsourcing of purchasing and
supply functions through the use of ARIBASAP software applications.
A team of qualified and
experienced professionals provides services to develop the structure and
processes of the organization's procurement units, analysis of goods and
services and development of contract strategies, compilation and normalization
of directories, identification of reliable suppliers, solicitation of bids, tenders,
auctions, drafting, contracting and supply management.
The performance of the
company's key performance for 2016 is as follows, as shown in table 1.
Table 1. Key metrics of the company TOO
«ERP-Service» KazTransCom for 2014, 2015, 2016
The financial performance
of 2014-2016 is presented. In Picture 4.
Picture 4. Trends in financial performance
From 2014 to 2016, the
company's revenues rose by 44%, net profit increased by 124%, and the
profitability rate of the EBITDA decreased from 24% to 16%, due to the
- Lower prices for
consultancy services in the face of a trend towards higher prices for suppliers
of goods and services associated with devaluation of tenge;
- Reduction in the
company's provision of services, in particular maintenance. .
In the ERP service,
today, more than forty highly qualified professionals with SAP certificates and
the Ispat-Karma Project Experience AO "Kaztransoil", AO "Zharemsky
Mine", AO "Intergas Central Asia", ao "rd" KazMunayGas,
JSC "NC" KazMunayGas, and others, where the
core functional modules are implemented based on SAP ERP software solutions.
The Coordination Board
for the implementation of ERP systems in the JSC "NC KazMunayGas",
following the successful implementation of the automated management system
based on the decisions of the German company Sapag
range in advance Kaztransoil, it was decided to
expand the scope and set up a consulting company that is outsourcing ERP
systems in Kazakhstan's oil and gas industries. .
In this connection, a
branch of the JSC kaztranscom ("IT
Service") was established in March 2005. In August 2006, the
IT service was transformed into TOO «ERP-Service» KazTransCom
and registered in the Department of Justice. Astana in November 2006, based on
the too "ERP service", which has been in force since April 2004 and
purchased by the AO "kaztranscom" to create
The focus of TOO
«ERP-Service» KazTransCom was consultancy for the
introduction and maintenance of SAP software for automated management systems,
as well as maintenance of ERP systems through outsourcing and the promotion of
best world practices, advanced technology and high standards in the marketplace
As an analysis of the
ERP-service development history has shown from 2004 to 2017, the company has
undergone several stages of the life cycle: the first phase relates to the
period of the organization's formation, since 2004. To this stage, the
following phenomena can be attributed to 2006: creating, preparing to implement
the idea, legal design of the organization, hiring of operational personnel,
and fulfilling the first order to implement SAP products, business solutions,
and information technology to improve business performance.
But thanks to the
skilful and experienced leadership and cohesiveness of ERP staff, it has been
possible to achieve the goals for this period. .
The stage of development
is determined by the rapid growth of the organization and the development
strategy. The company grows and the market is being actively exploited. For ERP
service, this is the period from 2007 to this day. This phase also includes the
formalization of management, the design of the structure, the continuous updating
and improvement of the managed business indicators. Following the selected strategies
will allow you to extend the current stage of the life cycle as long as
The company's business
development is driven by strategic initiatives aimed at expanding the range of
services provided and improving services. The organization lifecycle curve is
shown in Picture 5.
Picture 5. Life cycle curve of the ERP service
The main objective of
the SWOT-analysis (strengths, weaknesses, opportunities, threats, respectively,
are the strengths, weaknesses, opportunities, threats) - research on the
enterprise's strengths and vulnerabilities. This analysis provides a quick
assessment of the strategic position of the company .
The general principle is
that the internal capabilities of the company  must be matched in the
development of the strategy. There was an analysis of the potential threats
from outside factors, and the search for and determination of the company's
It should be noted that
this phase was preceded by a great deal of preliminary work in the company's
external and internal environment. The following is an analysis of the
company's audit results and the market environment study in the table.
TOO «ERP-Service» KazTransCom’s SWOT-Analysis
In practice, SWOT
analysis is often prepared for each leading competitor and for individual
markets. This reveals the relative strengths and weaknesses of the company, its
ability to deal with threats, and to take advantage of opportunities. This
analysis allows the company to examine the market opportunities and to weigh
its ability to pursue them.
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Table of contents: The Kazakh-American Free University Academic Journal №9 - 2017