by John M. Covaleski
Peoria, Ill. - Clifton Gunderson, one of the nation’s best-known super-regional accounting firms, wants to garner the same kind of recognition for its tech consulting operations.
The Peoria, Ill.-based CPA firm, ranked No. 17 on Accounting Today’s Top 100 Firms list with $136.7 million in 2002 revenue, has placed all of its technology consulting operations into Clifton Gunderson Technology Solutions, a new business that will manage and market itself independent of the firm’s other practices. Until now, the firm had been marketing technology as one of many services that are available from its accounting and assurance services offices.
“There are many good things that a technology practice picks up by being associated with a CPA firm, but technology is a different business than accounting, and, as we have gotten bigger, we want to stop running technology as a CPA firm, and start running it as a technology business,” said Matt Camden, Clifton Gunderson’s chief technology officer and head of CGTS.
Camden, 40, has been the driving force behind CG’s technology consulting growth thus far. He joined the firm in 1996 from an internal technology management position at KPMG in Chicago, and began building the tech practice after first doing some work on CG’s internal technology processes.
Plans call for CGTS to become a technology services force throughout CG’s market areas, and to be a framework that ensures that all of the firm’s technology services and products are available at all local offices within the unit. CG launched the new business with a total of 150 employees - 100 of whom are consultants - and eight partners.
The combination of offerings could be significant.
Clifton Gunderson’s technology consulting work spans software, hardware and networks, and caters to 11 different vertical industries. It handles products from several leading developers of software for small and midsized businesses, including Best Software, Microsoft Business Solutions, Intuit and Open Systems, and boasts expertise in seven software specialties - accounting, human resources, payroll, manufacturing, customer relationship management, security and electronic commerce.
“CGTS demonstrates our commitment to world-class service and to being able to bring the best solutions to our clients,” said Clifton Gunderson chief executive Carl George. “Combining our technology capabilities gives us more expertise and depth in services.”
Clifton Gunderson’s move is similar to what rival regional CPA firm BKD, of Springfield, Mo. - ranked No. 12 on Accounting Today’s Top 100 with roughly $211 million in revenue - did in creating its technology-specific unit BKD Technologies in 2001. That unit, which handles many of the same technologies as CGTS, has had reasonable success: Despite a general drop in technology consulting nationwide, BKD Technologies reported a 33 percent revenue gain, to $10 million, last year.
The move also replicates the 2001 launch of Clifton Gunderson Financial Services, a separate company that it created as an umbrella organization for its investment and financial-planning services.
Camden and George expect CGTS, which is a wholly owned subsidiary of Clifton Gunderson, to ensure that the firm continues its rapid growth in tech consulting sales. The company, which just entered tech consulting in 1997, racked up $12 million in revenue (fees for services and margins on software sold) last year, and is on track for $16 million in revenue this year, according to Camden.
Accounting software market analyst and consultant Carlton Collins said that CGTS, like BKD Technologies, has a major advantage: being able to reach its parent CPA firm’s existing accounting and assurance client base, while seeking out new technology-specific customers on its own.
“They certainly have a chance to be more successful than e-Partners,” Collins said, referring to the Dallas-based tech consulting firm that has been acquiring and merging reseller/consulting firms nationwide since 1997. It has yet to achieve its original plan to become publicly traded and, by most accounts, its revenue has not been increasing at the pace of either BKD Technologies or the technology sales of Clifton Gunderson.
Collins further said that a multiple-market practice for high-end business applications, such as Best’s MAS 500 and Microsoft’s Navision, both handled by CGTS, is workable because implementation of those products generates enough revenue to warrant having consultants travel to handle engagements. However, implementing low-end, low-revenue generators, like Best’s Peachtree and Intuit’s QuickBooks, would not warrant the costs of travel.
Camden said that he is in the process of “transitioning” the firm’s QuickBooks and Peach-tree work out of CGTS to Clifton Gunderson’s accounting operations.
Selling is a big part of the strategy behind CGTS. While CG’s tech consulting sales, until now, have primarily been to clients already using other services from the firm, CGTS will actively pursue new clients for its offerings. “After five years, we felt that we’ve done a good job of mining the existing client base, and now it’s time for us to bring new clients to the firm,” said Camden.
To that end, 25 of CGTS’s 150 employees are dedicated salespeople. That compares to 50 non-partner “client developers” among CG’s 1,500 employees firm-wide.
Camden theorizes that one dedicated tech salesperson can generate enough business to keep two to three consultants busy. “As we mature, I would expect that number to increase,” he said.
Expansion and acquisition
To be sure, much of CG’s tech consulting revenue growth, thus far, has come from acquiring existing practices. The deals include Telesis Inc., an eight-person firm in Denver; Effective Systems Consulting, a 20-person firm in Tempe, Ariz.; Datahelp Inc., an eight-person firm in Tucson, Ariz.; and Network Technology Solutions Inc., a 22-person firm in Madison, Wis., that was acquired in June.
Camden estimated that CG’s tech consulting revenue growth has been split 50-50 between organic expansion and new business acquired in mergers, and he expects that ratio to continue in the near-term with CGTS. He also expects to add technology practices in CG regions that have either no or limited technology practices, citing Toledo, Ohio; Des Moines, Iowa; Amarillo, Texas; and St. Joseph, Mo., as possibilities.
Clifton Gunderson established CGTS at the same time that it announced the Network Technology Solutions deal, because that acquisition was further indication that the firm has reached “critical mass” in technology consulting, said Camden and George. The NTS deal gave it four separate tech consulting operations in Wisconsin alone.
“We had four separate technology practices in Wisconsin, and now, with CGTS, we have one,” George said. “And by combining operations into one unit, the offices all have more to offer to their clients.”
The four Wisconsin offices now all fall under one CGTS partner, a change from the former practice of having individual partners or senior managers at each office.
Knowledge sharing is another key aspect of CGTS. Camden said that CGTS provides a format for individual technology consulting partners to share their ideas on business with the rest of the organization.
“We will definitely be asking the partners to contribute,” he said. He noted that Alan Hardy, a CPA who joined CG in its acquisition of the former Effective Systems Consulting, has written implementation methods for Best Software’s MAS products, and those methods will be used in all of the company’s MAS engagements.
CGTS will also likely be active in the Information Technology Alliance, a consortium that includes the most successful tech consulting practices affiliated with accounting firms and the vendors of software sold through reseller channels. Camden, an ITA board member, credits much of CG’s technology business growth to his affiliation with the ITA.
“I was very fortunate to become involved with the ITA,” he said. The organization, which provides a platform for vendors and reseller-consultants to network, began building a higher profile at about the same time that Camden started building Clifton Gunderson’s technology consulting operations. Clifton Gunderson is one of the ITA’s elite “Group T” members.
The ITA has also been a source of key management talent for Clifton Gunderson. Michelle “Mickey” Scheffki, a CPA and founding member of the ITA, became CG’s director of technology consulting a few years ago.
More recently, ITA president Ron Eagle, who had been a top executive with Chicago-based accounting and consulting firm Centerprise Advisors, became CG’s Indianapolis-based regional consulting practice leader. Eagle was an outside consultant to CG’s Indianapolis practice for several weeks before being hired.
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