Analysis of the Economy as Relevant to the Axon Company - Case Study Example

Background Axon Global is a business transformation consultancy where they apply their expertise to the challenges faced by most industries today. They design, implement and support solutions to issues faced by large organizations that have adopted SAP as their strategic enterprise platform. The positive outcome experienced by their clients includes cost reduction, service improvement and effective corporate restructuring. Axon employs the best consultants in the market and they deliver programs using a small team of experts. In the SAP market space Axon were the first to implement Business Warehouse, Strategic Enterprise Management and eBusiness solutions in the UK. In 2001 they leading business consultancy Bywater and broadened its offering in the management consultancy space, delivering strategy, process and organisational transformation programmes. In the US also they have acquired several SAP consultancy firms including TUI Consulting Inc, Premier HR Solutions Inc and Zytalis Inc. Axon now has offices in the US, Asia Pacific and Europe and turned over more than £137.5m in 2006 and their clients include Transport for London, The AA, Xerox, Birmingham City Council, BP, Pratt & Whitney, Sikorsky, Goodrich Corporation, Air Canada and Aquarion. Their three lines of business include business consulting division, solutions implementation division and applications management division. They cater to sectors ranging from aerospace to retail and telecommunications to oil and gas. They address emerging issues like address emerging global issues such as electronic commerce, industry convergence, worldwide alliances, virtual organisations and corporate citizenship. The market environment for such consultancy firms is robust with growth but not all succeed due to the prevailing market forces. An analysis of the industry, the market forces and the economy relevant to the company would help to determine the future prospects for Axon. Besides, any company is also governed by the regulatory issues and this too contributes to the success of the organization. Industry analysis The consulting industry has experienced sizeable growth and enviable profits. Consulting services generated approximately $120 billion worldwide during 2004 and the future is promising as well (Mark, 2006). This is due to various factors that govern the industry. Industries like health care, financial services, energy, retail and IT have all exhibited phenomenal growth. In the competitive environment firms are increasingly hiring consultants and offering excellent compensation packages. They are outsourcing most of their strategic areas where expertise becomes essential. Since SAP contributes cost reduction, corporate restructuring and service improvement, all of these sectors require the services of consultants. Even though the requirement for consultants is on the upswing, the rates charged by the consultants have to be competitive. Today firms compete for contracts that are short-term or less profitable than in the past. The clients specify their goals in the beginning of the contract awarded to the consultants. They are being more specific in the returns they expect on their investment. Smaller niche companies have come up offering excellent service and they are providing touch challenge to the larger firms. Consultancy firms are now specializing in one or two sectors forensic consulting and healthcare. This helps to add value to their services and boost profits. There are global consulting firms like IBM, Anderson Consulting and PriceWaterhouseCoopers while there are many national firms also (Dahlen & Elfsson, 1999). Axon is in direct competition with the larger firms as it has offices across different continents. The amount of consulting firms has increased rapidly and everyone wants to take advantage of the booming market. This has led to many inexperienced consultants entering the market and hence the market lacks quality consultants. Hence the demand for quality SAP consultants remains high. The rise in offshore outsourcing has led to a challenge for the business consultancy firms (Danielsson, 2006). Corporate downsizing is another reason which has led to the growth of consulting companies. The most interesting area is business process and functioning and this is what Axon is into. Consultants engaged in SAP projects with knowledge transfer meet with success. Upgrades are expected in SAP in 2009 and this would lead to more action and activity for those who want to break in. Market analysis In this age of competition and technology advancement there is no room for costly information technology. The critical processes have to be delivered on schedule. SAP is a state-of-the-art, industry-specific and cross-industry applications designed to deliver on schedule and enhance the way companies execute their business. Mere software installation does not suffice and it requires expert knowledge and experience to derive the maximum benefit out of the process. This demonstrates the demand for the consultancy firms engaged in offering business solutions to large and small firms. The worldwide market for consultancy is over $100 billion and one tenth of this is generated by UK based consultancy firms (MCA, 2008). There has been some consolidation among the largest players and this has led to the emergence of a number of niche consultancy firms working in specific sectors or offering a particular type of consultancy. The larger firms are able to offer competitive rates and deep vertical expertise. SAP has emerged as one of the world’s largest consulting and training centers for information technology. It enhances customer relationship management, e-commerce, business intelligence, supply chain management and B2B and B2C commerce (Kao, 2002). SAP services twenty eight different industries and compliance, risk management and governance are of utmost importance across each of these industries. The recent acquisition of Virsa Systems Inc. by SAP demonstrates the importance that companies are giving to the governance issues. The customers are exited about this issue because this will result in better governance environment for SAP customers. The customers view the standards solutions as concentrating on cost avoidance but this alliance would help in solving the non-regulatory issues as well. Virsa will be used as a sub-ecosystem on which new products can be based. The SAP community is looking for new partners to develop this new platform. The SAP user community is continuously growing and things are expected to become still better feels Greenbaum (2006). There is a global shortage of SAP consultants and it is envisaged that Indian firms could derive benefit from this situation. It is expected that will be a shortage of about 40,000 SAP consultants by 2008 (Rao & Kulkarni, 2007). The demand and the shortage reflect the success of the software being used by consultants. The competitors are Oracle and PeopleSoft. Initially it was only the large companies that used SAP for business success and efficiency but both SAP and Oracle has targeted the small and medium companies which has led to an increased demand for SAP consultants. There is a strong demand for consultants who can advise companies on specific business issues from improving the supply chain to various outsourcing functions. There is also a demand for consultants who can navigate their way through the new corporate governance introduced by the Sarbanes-Oxley Act 2002. Analysis of the economy as relevant to the company The fact that the SAP consultants are able to see their paychecks rise is evidence that the market has shown an upward trend (Westervelt, 2004). Companies are searching for consultants with skills in RFID, portals and web services. This demand now dictates the payroll for jobs and all this can be attributed to the recovery in the economy. Small and medium-sized firms and public sector companies spend more on technology in a booming economy (Reuters, 2008). The expansion of the Indian economy has given a boost to the business consultancy utilizing SAP. The Indian economy, Asia’s third largest has grown at an average 8.8 percent in the last four years and is posed for more growth. The economy of China is also robust with growth and there are many flourishing SAP consultants in China. The Chinese enterprises feel the need for becoming more competitive through better management and process design (Kao, 2002). The success of SAP consultants in China too has been enhanced due to the efficiency demonstrated by SAP consultants. China has been importing advanced management practices and concepts. The Dutch economy is promising as the government is looking at gradual transformation of the country into a dynamic knowledge-based economy with innovative and long-term business models (Jalvi, 2005). For greater cost efficiency, they have been looking at consultants to implement efficiency through the use of SAP. Analysis of regulatory issues The only license required to start a business consultancy firm is a business license. The consulting industry is not regulated. Nevertheless, public companies with more than $75 million in market capitalization must comply with the Sarbanes-Oxley Act (Savich, 2006). Complying with these regulations requires comprehensive internal controls and other processes for maintaining auditable business transactions, financial transparency and operational controls. Regulatory compliance is a core part of the business which ensures a competitive supply chain, promotes customer confidence and enables profitable growth. Due diligence has to be practiced in the field of consultancy and more so since the incorporation of the Sarbanes-Oxley Act 2002. Sarbanes-Oxley is a major legislation focusing on corporate governance and enterprise risk management (Paisley, 2008). This calls for stringent record keeping and accounting as well as increased responsibility. This has had a tremendous impact on the business community. The new requirements have led to the need for new software solutions. This regulation provides that consultants would be penalized if found guilty of corporate fraud. Companies now have to invest in Sarbanes-Oxley solutions because businesses are likely to find thousands of loopholes that need to be filled in their corporate governance practices. While equipment risks are common, companies have to understand, predict and prevent corporate-wide risks originating from operational, environmental, legislative and financial interactions. There are a number of regulatory issues that have to be complied with – Kyoto Protocol, Clean Air Act, ISO 14064, and the EU IPPC Directive (SAP, 2007). The operations have to be managed and monitored to comply with regulations, to reduce green house gases and other emissions, and improve management of licenses and other permits. There are certain guidelines and regulations related to digital signatures and records. Implementing digital signatures helps achieve compliance with regulatory requirements and while improving the company’s workflow and document processing efficiency (Dunlap, 2004). As per the regulations, the signed digital records have to contain information associated with signing that clearly indicates the printed name of the signor, the date and time when the signature was executed, including the local time if multiple zones are involved, and the meaning associated with the signature like a review, approval or responsibility. Consultants would have to abide by such guidelines when they implement SAP based projects for their clients. The digital signature ensures that the signed transaction can only be carried out by users with a special authorization, and the signatory identification has to be unique and forgery-proof. Security is another major issue that consultants have to comply with as they are the custodians of valuable data of their clients. An appropriate system access and functionality have to be ensured and there has to be proper segregation of duties (Capjon, 2007). It has to be periodically monitored to address the issue of storage of sensitive data. Thus the environment in which Axonglobal operates is promising on the one hand but is bound by strict regulations on the other. The market for consulting business globally is lucrative due to downsizing, restructuring and offshore outsourcing. most firms are faced with cost-reduction pressures and efficiency in productivity. These have allowed small and large firms in consulting to emerge where the larger firms have a stringer position as they are able to beat competition. They also have greater expertise due to deep vertical integration. Nevertheless, at times the smaller firms do have an edge in prices but smaller firms have also been known to dissolve after a fear years of existence. Consulting is sought in every sector be it the financial services, IT, retail, energy or health. The fact that there is a shortage for SAP consultants globally demonstrates the increase in demand for consulting. Axonglobal uses SAP as their strategic enterprise platform and cater to firms in providing business solutions. Hence, the prospect for the industry is very bright while Axonglobal holds a good market position having global operations. 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