mmicc 2009 - 3rd place - uc berkeley
TRANSCRIPT
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Christina Ting | Jenny Cheng | Michael Chen
Golden Bear Consulting
Leading New Opportunities for Growth
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Agenda
I. Current SituationII. ObjectiveIII. OptionsIV. RecommendationV. TimelineVI. Impact AnalysisVII.Conclusion
Current | Objective | Options | Recommendation | Impact | Timeline
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Company Background
Current Markets
•Cambridge, MA based IT Consulting firm
•Founded 1984 by MIT grad Jonathan Kutchins
•Operates 10-12 large projects at any one time
•Annual revenue of $15-25 million
US: 80 Consulta
nts
EGS: 80 Consulta
nts
ESI: 80 Develop
ers
PR: 9 Consultants
Financial Services Healthcare Government Higher Education
Staffing
Current business model supports diversity of work
Current | Objective | Options | Recommendation | Timeline | Impact
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Exeter’s SWOT
Strengths• Positioned as high quality service provider• High rate of success in projects• Great customer service
Weaknesses• Capacity constraints• Expansion based on word of mouth and referrals
•Small company relative to competitors
Opportunities• Global Expansion• Offshoring cuts costs• Projects available for expansion
Threats• Competition from key software companies• Affected by economic downturn; several companies cut IT spending
Exeter’s strong business model and credibility allows for large potential of growth
Current | Objective | Options | Recommendation | Timeline | Impact
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Current Issues and Objectives
Objective:Increase Exeter growth rate and consulting capabilities
Current | Objective | Options | Recommendation | Timeline | Impact
Economic downturn
•Companies notably cutting back on IT spending
•Business sector most heavily affected
Client selection
•Unclear vision with which to base project selection
Capacity constraint
•Heavy demand for senior consultants
•Perception that junior consultants lack expertise
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Options and AlternativesBest growth strategy is to expand an existing sector and enter a new sector market
In line with
Exeter values
Potential for
growth
Enter into new sector
market
Expand into new
countries
Hire new senior
consultants
Ease of implementati
on
Risk
Developing larger projects help achieve
revenue growth
Opportunity for Exeter to provide services to new
clients
Several competitors specialize
internationally
Limited growth
Expand through existing clients and referrals
within industry
Large barriers to entry
Stays in existing sectors
Difficulty in entering new market, but
mitigated by sales team
Quality of consultants
not guaranteed
Competition; Exeter cannot excel in new
demands
Competition; Exeter cannot excel in new
demands
Minimal risk given current success
Exeter seeks growth potential in current
markets
New countries provide new
clients
Increased manpower at
high cost
Historical market expansion shows
growth
Poor Good
Expand existing sector
Current | Objective | Options | Recommendation | Timeline | Impact
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Overarching Vision
New Sector Opportunities
Global Expansion
Internal Restructuring
Enter into untapped sectors with large growth potential
Capitalize on the increase in
worldwide IT consulting spending
Revise implementation of business model to
lead to efficiency in projects
Expansion PlansExpansion Plans
Expansion opportunities allow Exeter to surpass projected goals
Current | Objective | Options | Recommendation | Timeline | Impact
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Exeter should expand its educational practice both domestically and
internationally, and create an energy sector to begin servicing renewable
energy companies
Recommendation
Executive Summary
Strategy leads Exeter to expand on sectors with global and innovative potentials
Current | Objective | Options | Recommendation | Timeline | Impact
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Recommendation
• Net Revenue of $70.38 million in 5 years
• More than triple growth rate by 2013
• Establish new long-term client relationships
• Net Revenue of $70.38 million in 5 years
• More than triple growth rate by 2013
• Establish new long-term client relationships
Delivered Results
Current | Objective | Options | Recommendation | Timeline | Impact
Proposed strategy expected to surpass growth goals and lead Exeter on profitable path
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Recommendation
Capture new
projects
EducationDomestic
InternationalExpand
into India
universities
•Exeter for Energy•Target renewable energy firms
Energy
+
Staffing Changes•Current
Offshoring•Develop junior consultants•Hire new staff
Exeter should expand their Education sector, create a new Energy sector, supported through internal restructuring
Other Sectors•Maintain
current with healthcare and government
+
Supported BySupported By
Current | Objective | Options | Recommendation | Timeline | Impact
NPV: $361.18 Million
NPV: $180.61 Million
NPV: $466.08 Million
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Education Expansion
Domestic Global
• Emphasize long term relationship with current colleges and universities
• Expand to goal of 50% of top 100 colleges and universities through word of mouth and sales force
• Expand into India’s higher education institutions
• Utilize ESI to preserve face-to-face interaction and efficiency
Current | Objective | Options | Recommendation | Timeline | Impact
Education expansion achieved by expanding domestically, and entering India market
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Education: Domestic Strategy
• Exeter has worked on 100+ colleges and universities (only 2% of market)
• Education sector IT spending growing at CAGR of 6.0%
• 4,140 colleges and universities in the US
Strategy
• Reallocate 20% of Financial Services Sales Force to focus on Education sector
• Create target goal of servicing 50% of top 100 US colleges and universities by 2013
• Sales force to highlight previous experience with prestigious universities:
Current | Objective | Options | Recommendation | Timeline | Impact
Utilize experience with prestigious universities to expand to 50% of top 100 schools in US
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Education: Global Expansion Strategy
2236 130 59 8225
No No No Yes
$97,530 $129,930 $13,761 $192,790
3.0% 6.1% 8.5% 6.5%
Number of Universities
Presence in the Region
Education Expenditures (as % of GDP)
Total Education Expenditures (in Millions)
Why India?
Current | Objective | Options | Recommendation | Timeline | Impact
Global expansion into India higher education is the easiest and best opportunity for growth
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Education: Global Expansion Strategy
Strategy
• Penetrate the higher education market via Exeter’s existing ESI in India.
• Build a strong blending team in India by hiring more talent:
• US junior consultants
• India service developers
• 8,225 colleges and universities in India:
• In 2007, 13.93 million students were enrolled in the institutions of Higher Education in India and growing at a rate of 32.9%Source: Educational Statistics 2004-2005.MHRD 2007
Current | Objective | Options | Recommendation | Timeline | Impact
Utilize current ESI presence to penetrate top Indian colleges and universities
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Energy Expansion
(1)New & Growing Industry
(2) Obama’s “New Energy for America” Plan
• Potential to lead and specialize in untapped IT consulting for renewable energy companies
• Favorable government spending, less averse to economy• Creation of 5 million “green collar jobs” = growing need for IT support
Why Renewable Energy?
Current | Objective | Options | Recommendation | Timeline | Impact
Renewable Energy sector proven to be a lucrative new opportunity, less averse to economy
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Exeter for Energy Campaign
• Become IT service leader in areas with the highest growth
• Enable Exeter to sustain its long-term growth
• Recruit senior consultants experienced in renewable energy
• Specialized in R&D and CRM IT services to differentiate Exeter
• Redirect VP of sales’ effort towards renewable energy sector
“You’re already busy saving the world, leave your IT problems in our hands”
Focus on Wind & Solar Power Companies
Hire Industry Specialist
Launch a Marketing Campaign
Current | Objective | Options | Recommendation | Timeline | Impact
Enter Energy sector by targeting renewable energy, hiring a specialist, and marketing vision
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Economic downturn
•Companies notably cutting back on IT spending
•Business sector most heavily affected
Client selection
•Unclear vision with which to base project selection
Capacity constraint
•Heavy demand for senior consultants
•Perception that junior consultants lack expertise
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HR Changes
Credibility in all consultantsCredibility in all consultants
New StaffingNew StaffingTraining and New Team StructureTraining and New Team StructureNew Title SystemNew Title System
Rename “Junior Consultant”
Rename “Junior Consultant”
Hire new consultants
each year per growth rate
Hire new consultants
each year per growth rate
Offer mid-level consultants to lead projects
Offer mid-level consultants to lead projects
Offer larger teams at
reduced cost
Offer larger teams at
reduced cost
Dedicate training to
younger consultants
Dedicate training to
younger consultants
ImpactCredibility + Long-term development = Full efficiency of entire company
ImpactCredibility + Long-term development = Full efficiency of entire company
Exeter needs to adjust its staffing structure to ensure full efficiency of entire company
Current | Objective | Options | Recommendation | Timeline | Impact
Investment in new hiresInvestment in new hires
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Economic downturn
•Companies notably cutting back on IT spending
•Business sector most heavily affected
Client selection
•Unclear vision with which to base project selection
Capacity constraint
•Heavy demand for senior consultants
•Perception that junior consultants lack expertise
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Maintain blended
team approach
Expand upon developers
in India relative to
growth
Offshoring
Currently: 10-20% of
project work completed
offsite
Offshoring developers to India provides integration and supports Exeter’s initiatives
Current | Objective | Options | Recommendation | Timeline | Impact
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4 Projects
New Software
Implementation
• Must divert resources•Unfamiliar with project•Can lose business to comp•Low profit case•Unclear objectives•Require team of 20 consultants•Give comp info on Exeter•Hard to convince
• Good relationship & trust•If successful, will lead to referrals•Defeat vendor competition
Assessment and
Software
• Very demanding client•Want very senior people•Disloyal to Exeter•Lose to competitors
System Developm
ent
•Consulting firm has own methodology•Project risks
Type Advantages Disadvantages
New Software
Implementation
•Project similar to Tulane•Large Client•Potential for more projects•All in-house•Large client•Long-term client
•New sector expansion•Good fit and simple project•Get insight on their work•Manager best match to client
Selecting projects in-line with Exeter’s growth leads to future development
Current | Objective | Options | Recommendation | Timeline | Impact
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Economic downturn
•Companies notably cutting back on IT spending
•Business sector most heavily affected
Client selection
•Unclear vision with which to base project selection
Capacity constraint
•Heavy demand for senior consultants
•Perception that junior consultants lack expertise
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Implementation Timeline
2009 2010 2011 2012 2013
Edu
cati
on
En
erg
yH
R
Tulane and Large University Project
Expand existing domestic projects
India Expansion
Develop new client base in US
Research energy IT needs/training
Exeter for Energy campaign
Implement projects
Contract with new clients
Rename titles
On-the-job training
Hire new staff
Industry training
Education, Energy, and Staffing goals to be implemented over 5-year period
Current | Objective | Options | Recommendation | Timeline | Impact
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Costs
The Bottom Line
These costs will drive Exeter’s growth in both the short-term and long-term.
• Talent Pool Expansion
• Marketing Campaign
• Employee Growth & Advancement
Current | Objective | Options | Recommendation | Timeline | Impact
Global expansion into India higher education is the easiest and best opportunity for growth
Expenditure Chart2009 2010 2011 2012 2013
EducationExpand in numbers of Indian developers $172,500 $250,000 $500,000 $825,000 $1,250,000Expansion Plan to reach 50% of top 100 US universities - Salesforce $50,000 $100,000 $150,000 $150,000 $150,000
EnergyHire 1 senior consultant who specialized in the renewable energy sector $150,000 $150,000 $150,000 $150,000 $150,000Marketing Campaign (in-house PR) $50,000 $100,000 $100,000 $50,000 $25,000Additional Research R&D $150,000 $150,000 $135,000 $115,000 $100,000
HREmployee Training Day $30,000 $30,000 $30,000 $30,000 $30,000Hire more junior consultants $448,500 $650,000 $1,300,000 $2,145,000 $3,250,000
Total Expenditures $1,051,000 $1,430,000 $2,365,000 $3,465,000 $4,955,000
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FinancialsSelecting projects in-line with Exeter’s growth leads to future development
Gross Profit | Expansion Costs
0
10
20
30
40
50
60
70
80
Mil
lio
ns o
f U
S D
Oll
ars
Revenue (in millions)
EBIT
2009 2010 2011 2012 2013
Current | Objective | Options | Recommendation | Timeline | Impact
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Financials
EBIT Projections
0.00
2.00
4.00
6.00
8.00
10.00
12.00
1 2 3 4 5 6
Year
Mil
lio
ns
of
US
D
Expected
Worst Case
Best Case
All projections show a higher EBIT than no change
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Impact Analysis
The Ultimate Impact
With our recommendation, revenue growth rate will more than triple in year 2013, and NPV will exceed $738 million.
The Bottom Line
These gains will drive Exeter’s growth in both the short-term and long-term.
Revenue and Profit Growth
01020304050607080
1 2 3 4 5 6
Year
Mil
lio
sn
of
US
Do
llars
Revenue (in millions)
Gross Profit
With recommended initiatives, Exeter is expected to gain substantial revenue growth
Current | Objective | Options | Recommendation | Timeline | Impact
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ConclusionExpanding in education and energy allows Exeter to surpass growth goals
Exeter surpasses goal
Expansion
Education EnergyHuman
Resources
Expand globally Broaden scopeEnsure complete
brand image
•Increase US sales•Expand into India
•Create new sector•Exeter for Energy campaign
•Train young consultants•Increase staff
Current | Objective | Options | Recommendation | Timeline | Impact
• Net Revenue of $70.38 million in 5 years• More than triple growth rate by 2013• Establish new long-term client relationships
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Q & A
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Appendix
Financials
Expenditures Sheet
Expenditure Assumptions
Income Statement w/o Recommendation
Income Statement w/ Recommendation
NPV w/o Recommendation
NPV w/ Recommendation
NPV Education
NPV Energy
Best/ Expected/ Worst Case Scenarios
India’s Higher Education System
India’s Current IT Competitive Landscape
Obama New Energy for America
US Spending by Vertical Market
Risks and Mitigation
Resources
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Financials2008 2009E 2010E 2011E 2012E 2013E
Revenue (in millions) 25 26.725 29.3975 35.277 46.91841 70.37762% growth 6.90% 10.00% 20.00% 33.00% 50.00%
Cost of Revenue 17.5 18.7075 22.04813 26.45775 35.18881 52.78321
% of revenue 70% 70% 75% 75% 75% 75%
Expansion costs 1.001 1.33 2.28 3.45 4.98Gross Profit 7.5 7.0165 6.019375 6.53925 8.279603 12.6144
Operating Expense 2.5 2.8725 2.307825 2.70439 2.510921 3.643881SG&A 2.5 2.8225 2.207825 2.60439 2.460921 3.618881Research 0.05 0.1 0.1 0.05 0.025EBIT 5.00 4.14 3.71 3.83 5.77 8.97
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Expenditures Sheet
2009 2010 2011 2012 2013EducationExpand in numbers of Indian developers $172,500 $250,000 $500,000 $825,000 $1,250,000Expansion Plan to reach 50% of top 100 US universities - Salesforce $50,000 $100,000 $150,000 $150,000 $150,000
EnergyHire 2 senior consultant who specialized in the renewable energy sector $300,000 $300,000 $300,000 $300,000 $300,000Marketing Campaign (in-house PR) $50,000 $100,000 $100,000 $50,000 $25,000Additional Research R&D $150,000 $150,000 $135,000 $115,000 $100,000
HREmployee Training Day $30,000 $30,000 $30,000 $30,000 $30,000Hire more junior consultants $448,500 $650,000 $1,300,000 $2,145,000 $3,250,000
Total Expenditures $1,201,000 $1,580,000 $2,515,000 $3,615,000 $5,105,000
Expansion Costs $1,001,000 $1,330,000 $2,280,000 $3,450,000 $4,980,000SGA Costs $200,000 $250,000 $235,000 $165,000 $125,000
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Expenditure Chart & Assumptions
Assumptions
• Senior consultant:$150,000/year, salary growth rate = 2%
• Indian developers: $25,000/year per employee, 1 new hire per % growth
• Junior consultant:$65,000/year per employee, 1 new hire per % growth
•Employee training day: $5,000/time, 6 times/year
Expenditure Chart2009 2010 2011 2012 2013
EducationExpand in numbers of Indian developers $172,500 $250,000 $500,000 $825,000 $1,250,000Expansion Plan to reach 50% of top 100 US universities - Salesforce $50,000 $100,000 $150,000 $150,000 $150,000
EnergyHire 1 senior consultant who specialized in the renewable energy sector $150,000 $150,000 $150,000 $150,000 $150,000Marketing Campaign (in-house PR) $50,000 $100,000 $100,000 $50,000 $25,000Additional Research R&D $150,000 $150,000 $135,000 $115,000 $100,000
HREmployee Training Day $30,000 $30,000 $30,000 $30,000 $30,000Hire more junior consultants $448,500 $650,000 $1,300,000 $2,145,000 $3,250,000
Total Expenditures $1,051,000 $1,430,000 $2,365,000 $3,465,000 $4,955,000
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Income Statement Projection – without recommendation
2008 2009 2010 2011 2012 2013
Revenue (in millions) 25 27.5 30.25 33.275 36.6025 40.26275% growth 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Cost of Revenue 17.5 19.25 21.175 23.2925 25.62175 28.18393% of revenue 70% 70% 70% 70% 70% 70%
Gross Profit 7.5 8.25 9.075 9.9825 10.98075 12.07883
Operating Expense 4 4.4 4.84 5.324 5.8564 6.44204% 16% 16% 16% 16% 16% 16%
Operating Income 3.50 3.85 4.24 4.66 5.12 5.64
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NPV – without recommendation
2008 2009 2010 2011 2012 2013
Operating Income 3.50 3.85 4.24 4.66 5.12 5.64
plus: D&A 0 0 0 0 0 0
less: cap ex 0 0 0 0 0 0
less: chagne in WC 2.5 2.75 3.025 3.3275 3.66025 4.026275Terminal Value
Unlevered FCF 1.00 1.10 1.21 1.33 1.46 1.61 586.2256Levered FCF 1.00 1.05 1.10 1.15 1.20 1.26 459.32
NPV 466.08
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Best / Expected / Worst case scenarios – with recommendations
Net Income Projections
0
2
4
6
8
10
12
1 2 3 4 5 6
year
(mil
lio
n) Best Case
Expected
Worst Case
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Revenue & NPV Projections – Education
Income Statement Projection (with Education)1 0.952381 0.907029 0.863838 0.822702 0.7835260 1 2 3 4 5
2008 2009 2010 2011 2012 2013
Revenue (in millions) 8 8.8 9.944 11.33616 13.03658 15.12244% growth 10.00% 13.00% 14.00% 15.00% 16.00% 17.00%
Cost of Revenue 5.6 6.16 6.9608 7.935312 9.125609 10.58571% of revenue 70% 70% 70% 70% 70% 70%
Gross Profit 2.4 2.64 2.9832 3.400848 3.910975 4.536731
Operating Expense 1.28 1.408 1.59104 1.813786 2.085853 2.41959% 16% 16% 16% 16% 16% 16%
Operating Income 1.12 1.23 1.39 1.59 1.83 2.12
Terminal Value
Unlevered FCF 1.12 1.23 1.39 1.59 1.83 2.12 220.1827Levered FCF 1.12 1.17 1.26 1.37 1.50 1.66 172.52
NPV 180.61
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Revenue & NPV Projections – Energy
Income Statement Projection (with Energy)1 0.952381 0.907029 0.863838 0.822702 0.7835260 1 2 3 4 5
2008 2009 2010 2011 2012 2013
Revenue (in millions) 2 3.2 5.12 9.216 17.0496 31.54176% growth 60.00% 60.00% 80.00% 85.00% 85.00% 85.00%
Cost of Revenue 1.4 2.24 3.584 6.4512 11.93472 22.07923% of revenue 70% 70% 70% 70% 70% 70%
Gross Profit 0.6 0.96 1.536 2.7648 5.11488 9.462528
Operating Expense 4 3.52 0.8192 1.47456 2.727936 5.046682% 200% 110% 16% 16% 16% 16%
Operating Income -3.40 -2.56 0.72 1.29 2.39 4.42
Terminal Value
Unlevered FCF -3.40 -2.56 0.72 1.29 2.39 4.42 459.248Levered FCF -3.40 -2.44 0.65 1.11 1.96 3.46 359.83
NPV 361.18
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India’s Higher Education System
• Colleges for General Education: 10,377• Colleges for Professional Education:
3,201• Universities: 364• Total Colleges and Universities:
13,942
• Estimated number of colleges and universities Exeter can penetrate: 8,225
• In 2006-07, an estimated 13.93 million students were enrolled in the institutions of Higher Education and growing at a rate of 32.9%
Source: Educational Statistics 2004-2005.MHRD 2007
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India: Current IT Consulting Landscape
Web 2.0/Online Businesses
Financial ServicesHigh Tech
Presence in Education sector
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Obama’s New Energy for America Plan
The Obama-Biden comprehensive New Energy for America plan will
• Create 5 million Green Collar jobs• Help create five million new jobs by strategically investing
$150 billion over the next ten years to catalyze private efforts to build a clean energy future.
• Within 10 years save more oil than we currently import from the Middle East and Venezuela combined.
• Put 1 million Plug-In Hybrid cars -- cars that can get up to 150 miles per gallon -- on the road by 2015, cars that we will work to make sure are built here in America.
• Ensure 10 percent of our electricity comes from renewable sources by 2012, and 25 percent by 2025.
• Implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80 percent by 2050.
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Risks & Mitigations
Risks Mitigations
• Encounter language and cultural barrier in the Indian market
• Limited expansion capabilities based on referrals
• Difficult to meet clients’ demand of star consultants
• Lack expertise in the renewable energy sector
• Unable to differentiate itself as the leader in the new sector
• Leverage on Exeter’s existing blended team approach
• Employ sales teams and reallocate sales force efforts
• Provide clients with incentives to include junior consultants
• Hire experienced senior consultants from energy sector
• Specialize in R&D and CRM for the renewable energy sector
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Exeter Group Services
• Assessment, Planning, and Strategy• Custom Application Development• System Integration• Business Intelligence and Data
Warehousing• Supply Chain Solutions• Customer Relationships
Management
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US Spending by Vertical Market
Market CAGR% 2006-11
Utilities 7.6%Government 3.9%Education 6.0%Construction 3.6%Transportation 5.1%
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Sources
• http://www.studyabroad-cis.com/index.php?country=china§ion=ed_system
• http://energy.sourceguides.com/businesses/byGeo/US/byS/byS.shtml
• http://www.worldwatch.org/files/pdf/renewables2007.pdf
• http://www.indiastudycenter.com/univ/college-statistics.asp