When DA Consulting Group (DACG) was formed in Houston, Texas in 1984, its purpose was simply to produce documentation for the oil and gas industry. Just four years later, it expanded its operations to offer a training package for users of one of the first SAP AG enterprise resource planning package to be introduced in […]
When DA Consulting Group (DACG) was formed in Houston, Texas in 1984, its purpose was simply to produce documentation for the oil and gas industry. Just four years later, it expanded its operations to offer a training package for users of one of the first SAP AG enterprise resource planning package to be introduced in the industry. It was a defining moment for DACG. Looking at the industry around them, directors of DACG realized companies were about to strike it rich by ensuring a flow of information between all the different branches of major companies. What DACG was also able to capitalize on was the fact that the largest cost of an ERP installation is not the software but the installation. ERP software sales are predicted to grow to around $19bn by 2001 and DACG reckons that three times that amount will be spent on implementation. DACG focused on one of the most vital and time consuming tasks – staff training. The company quotes SAP as recommending that 12% of the expenses budgeted by its clients for systems integration and implementation services be dedicated to end-user training and tools. It is a sensible priority. The results of DACG’s decision to become specialists in training staff for ERP installations is apparent from its annual figures released this week. Net profits for the year to December 31 leapt by 205.3% to $4.2m on revenues that rose 81.3% to $80.1m. Chairman and CEO Nick Marriner said DACG accelerated revenue growth and improved operating, gross and net margins. Despite evidence of market saturation for large company ERP installations, DACG reckons it is well positioned to sustain revenue growth. It has expanded beyond its original focus on SAP and now offers training packages for those installing systems from JD Edwards, PeopleSoft, Baan and Oracle. DACG, which now boasts offices in ten countries, is still building up its overseas operations, particularly in Europe where it has a small share of a rapidly expanding market. And mirroring the organization of the ERP vendors, it is changing its sales structure to focus on vertical markets in addition to major international accounts. This way it hopes to meet what it sees as strong demand for repeat and maintenance business. DACG is also looking to diversify its revenue streams by partnerships that will take it into the fields of supply chain and customer relationship management software. Its model is its relationship with PeopleSoft where it has been designated preferred vendor to support implementations by PeopleSoft’s international clients. DACG’s anxiety to diversify is understandable. While its initial decision to focus on SAP installations brought it spectacular growth that have seen revenues grow from $4.2m to $80.1m over the past five years, it does leave it vulnerable. SAP installations have accounted for around 80% of revenues. While DACG is expanding its skills base beyond SAP, the company acknowledges that gaining the in house skills for new training packages is an expensive business. This has not so far impacted on margins. It is, after all, in a market with low barriers to entry. Its competitors include all the global consulting firms who manage the big ERP installations. Not least, ERP companies themselves are all too aware that they only get a fraction of the revenues their software generates and have their own training organizations. Moreover, saturation at the top end of the market means that ERP growth is now in the middle layer companies. They often have less money to spend and will be looking at the least expensive solutions to their training needs, especially handling it themselves. Finally, the IT industry itself is generating packages that cut training bills. Computer-based training is driving down costs. DACG has already moved into this field in partnership with CBT Systems Ltd. DACG is both a beneficiary of the rapid change that IT has brought to business and industry – and equally vulnerable to it.
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