Business ServicesRichard A. Melcher
In mid-December, Mitchell S. Fromstein, chairman and CEO of Manpower Inc., the world's largest temporary-help company, was visited by senior executives from three U.S. multinationals.
Their mission: to find out whether Fromstein could be their primary provider of temporary employees around the world. He's up to the challenge. With fully 50% of Manpower's business coming from national or global companies, and with a rapidly expanding network of offices in Asia and Europe, the key to Manpower's prosperity, Fromstein says, is matching up with "more and more companies wanting fewer suppliers with geographic reach."
For multinationals, size matters--for their suppliers as well as for themselves. The many corporate behemoths created by the unprecedented wave of mergers and acquisitions across many industries in 1997 means hot opportunities for the array of companies that service them--everything from temporary help to legal, consulting, advertising, and engineering services. Companies with global reach appear best positioned to prosper. That's a key justification for the consolidation in the accounting and consulting industry: In 1997, Coopers & Lybrand merged with Price Waterhouse, and partners are voting on a merger of KPMG Peat Marwick and Ernst & Young.
Across the business-services sector, Standard & Poor's DRI forecasts growth of 7.5%, to $945 billion. But many service outfits believe they'll do far better. With its globe-spanning ad agencies, including McCann-Erickson, the Interpublic Group of Companies figures on growth of 15% in 1998. "It looks strong. We're picking up new business worldwide," says Thomas Volpe, senior vice-president for finance. McCann forecaster Robert Coen figures global ad industry growth will be about 5.5%, down from 1997's 6.3%.
The sheer pace of business restructuring should also play into the hands of service providers. For lawyers, the tough times of the early 1990s seem long gone. "Everyone I know is going full out," says Michael Pope, partner at Chicago's 707-attorney McDermott, Will, & Emery, which plans to hire 45 first-year associates this year. Like legal services, headhunting seems to be on a roll. Upheaval in the executive suite and just below produced 20% growth at the top 10 firms in 1997, and this year should also be quite strong. "It's one of the great bull markets of all time for recruiters," says Egon Zehnder International's John S. Wood.
It won't be all blissful in 1998. While turbulence in Asia may give rise to a need for more advisory services, it might also keep nervous clients from acting on those needs. Meanwhile, the thin pool of talent could limit growth. Manpower's Fromstein reckons 1998 revenues will rise to $10 billion from around $8.5 billion. They could have gone higher but for currency fluctuations, and because "we can't fill all of the orders," he says. There could be worse problems.