MMICC 2009 - 3rd Place - UC Berkeley

Christina Ting | Jenny Cheng | Michael Chen

Golden Bear Consulting

Leading New Opportunities for Growth

3

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

4

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


5

Current Issues and Objectives

Objective:Increase Exeter growth rate and consulting capabilities


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

6

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


7

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


8

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


9

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


Proposed strategy expected to surpass growth goals and lead Exeter on profitable path

10

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


NPV: $361.18 Million



11

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


Education expansion achieved by expanding domestically, and entering India market

12

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:


Utilize experience with prestigious universities to expand to 50% of top 100 schools in US

13

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?


Global expansion into India higher education is the easiest and best opportunity for growth

14

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


Utilize current ESI presence to penetrate top Indian colleges and universities

15

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?


Renewable Energy sector proven to be a lucrative new opportunity, less averse to economy

16

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


Enter Energy sector by targeting renewable energy, hiring a specialist, and marketing vision

17

Economic downturn



Client selection


Capacity constraint



18

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


Investment in new hiresInvestment in new hires

19

Economic downturn



Client selection


Capacity constraint



20

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


21

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


22

Economic downturn



Client selection


Capacity constraint



23

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


24

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


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

25

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


26

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

27

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


28

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


• Net Revenue of $70.38 million in 5 years• More than triple growth rate by 2013• Establish new long-term client relationships

29

Q & A

30

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

31

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

32

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




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

33

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




34

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

35

NPV – without recommendation

2008 2009 2010 2011 2012 2013


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

36

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

37

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



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%


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

38

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



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

39

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

40

India: Current IT Consulting Landscape

Web 2.0/Online Businesses

Financial ServicesHigh Tech

Presence in Education sector

41

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.

42

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

43

Exeter Group Services

• Assessment, Planning, and Strategy• Custom Application Development• System Integration• Business Intelligence and Data

Warehousing• Supply Chain Solutions• Customer Relationships

Management

44

US Spending by Vertical Market

Market CAGR% 2006-11

Utilities 7.6%Government 3.9%Education 6.0%Construction 3.6%Transportation 5.1%

45

Sources

• http://www.studyabroad-cis.com/index.php?country=china&section=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

MMICC 2009 - 3rd Place - UC Berkeley

Business

Transcript of MMICC 2009 - 3rd Place - UC Berkeley