Instead of bemoaning the end of the boom time, BearingPoint's Randolph Blazer says to focus on the opportunities that do exist, such as growth in China, in managed services, and in government contracts.
I don't expect, don't need, and really don't want a return to the boom spending on technology that led to the bubble of the late 1990s. Why? Boom spending always leads to excesses that in the long run can hurt the economy. For example, during times of boom spending, so many barriers to entry fall that often too many inexperienced competitors enter markets. As we've seen with the debacle in the telecom industry, more competitors don't necessarily lead to better competition.
We don't see a silver bullet or a killer app that will lead to tremendous growth spurts of technology spending. So, if you want a silver bullet, look to return on investment. Companies will continue to make technology investments but will spend money only where they believe there will be a real ROI from their expenditure, where there's mission criticality, and when they can see measurable, value-added results quickly.
Despite the uncertain economic environment, we urge our clients to stay focused on their business plans and find the most cost-effective way of meeting them. BearingPoint was also affected by the challenging economy in 2002, but we stayed focused on two critical goals: expanding our global footprint and rebranding the company. We accomplished the first goal by acquiring consulting practices in Europe and the Asia-Pacific region and by hiring hundreds of professionals from Andersen Business Consulting in the United States. On Oct. 2, we united worldwide under a new brand, changing our name from KPMG Consulting to BearingPoint.
For 2003, we continue to see stability in our business and opportunities in the following areas:
>> Managed services. To pare costs in a slow economy, many companies will look to companies such as BearingPoint to do what they traditionally have done in-house. I'm not talking about conventional data-center outsourcing work. I'm talking about application-specific tasks. It's a key area of cost reduction for our clients.
>> Federal worker retirements. The General Accounting Office says that more than a third of the federal workforce will be eligible to retire by 2005, with 20% more eligible for early retirement by 2005. The cumulative retirement projection for employees in information technology is 17% from 2001 to 2005. This presents unique opportunities for systems integrators like BearingPoint because, to save money, the government is more likely to use our services in lieu of hiring.
>> Asia-Pacific, specifically, China. The IT professional-services market in the Asia-Pacific region could see as much as 20% compounded annual growth through 2005. The Chinese economy is growing at roughly 8% annually. We recently opened our Global Development Center in Shanghai with the intent of helping Chinese companies and American companies doing business in China implement software from leading enterprise software developers such as Oracle, PeopleSoft, SAP, and Siebel Systems.
There are other possible areas of growth. The new Department of Homeland Security presents a systems-integration challenge unlike anything we've ever seen in government. The reconstruction of Afghanistan, where BearingPoint is implementing an accounting system for the Afghan government, presents a chance to help a war-torn nation regain its footing.
It's important that companies recognize that the economic recovery will one day be characterized by steady growth, as opposed to the fits and starts of last year. To add to the focus on ROI, companies ought to position themselves for the turnaround. This means tightening internal operating disciplines and integration, preparing to increase market share, and focusing on better understanding their clients.
The turnaround in information technology spending, when it comes, will likely only come as a gradual curve, not with a burst of increases. After the boom-and-bust cycle of the past few years, there's nothing wrong with that.
Randolph Blazer is chairman and CEO of BearingPoint Inc. He led then-KPMG Consulting when it became the first of the Big Five consulting firms to separate from its audit and tax parent to be an independent public company.
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