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>Consulting can scale [...], sell bodies (Accenture) That's true but "scale" in the context of HN is often shorthand for "scales exponentially" instead of "sca

by jasode 9y ago

>Consulting can scale [...], sell bodies (Accenture) That's true but "scale" in the context of HN is often shorthand for "scales exponentially" instead of "scales linearly". The Accenture revenue scales with headcount via labor billable hours. That's not the same magnitude of platform scaling that Paul Graham, Marc Andreessen, and others are talking about. (E.g. WhatsApp platform scales to ~900 million users with just 50 employees.)

Retric 9y ago
Accenture can increase billable hours for it's lower level workers though optimizing the entire process. Executed well they can get 4-5x increase in profit per person which is much better than a linear improvement. Consider all those people with 7 figure salaries and compare it to a 5 person consulting shop in India where Accenture has 130,000 employees. What makes this less obvious is small consulting shops tend to include the salary of top people as part of their profits, where big companies pay well and still have a lot left over.
- philipodonnell 9y ago
  That's true, but saying that its "better than linear" is not really the same as "exponential growth" that the poster is talking about that you get from self-reinforcing network effects.
  - Retric 9y ago
    X ^ 1.01 is still exponential. But, I understand your point.
    - matlabradoodle 9y ago
      Super-linear* ;)
    - deleted 9y ago
      [deleted]
    - philipodonnell 9y ago
      Ha, I was in consulting for a while (not Accenture but close enough) and ran projects where we did this type of project-level profitability analysis. We wouldn't have called it "exponential", because even though you're right that we made a multiple on a person's salary that's > 1, that multiple is pretty much fixed after a certain point in the size of the company. 3x would be typical for a mid, but if I add one more incremental mid I will still expect to make 3x my total salary, so that is still a linear revenue=3*totalsalary. If that 3x because 3.1x or something as I hired more people, then yes, you get some exponential effect there, but it would only do that in extremely small consulting shops.
- jmalicki 9y ago
  Accenture isn't evidence of scale. It has revenue per employee of only $88k, nearly the lowest in the S&P 500, close to Starbucks and McDonald's, but with much higher paid employees. That's a complete clusterfuck of a business, and exactly why you don't want to do consulting. https://priceonomics.com/which-companies-have-the-highest-revenue-per/ https://priceonomics.com/which-companies-have-the-highest-re... Whereas Facebook has $2M of revenue per employee, and nearly $200k in profit per employee, which is more than Accenture's revenue per employee. There's not remotely a comparison.
  - Retric 9y ago
    Facebook can't use 200,000 workers making that a meaningless comparison. Really, Facebook has more limited growth potential without becoming a different company as they can only make so much money from social media. On the other hand you can have 1,000,000 people working for you if you are simply managing work outsourced by others. Foxconn has 136.12 billion in revenue and 1.3 million workers. Facebook has 27.64 billion USD Revenue and plenty of profit but fewer ways to grow Revenue.
    - deleted 9y ago
      [deleted]
    - jmalicki 9y ago
      You usually want to scale revenue, not costs....
      - Retric 9y ago
        Ideally you scale costs to increase profit. If you could increase retinue from thin air then you're not actually scaling anything. But, in a scalable model you invest more in your leverage be that advertising or whatever and you get more revenue which assuming a good cost structure directly results in profit. Facebooks problem is they can't scale because they already own the market and there are profitable new customers available. If they spend more on advertising they simply get less profit because their costs go up without increasing revenue.

by jasode 9y ago

Retric 9y ago

Accenture can increase billable hours for it's lower level workers though optimizing the entire process. Executed well they can get 4-5x increase in profit per person which is much better than a linear improvement. Consider all those people with 7 figure salaries and compare it to a 5 person consulting shop in India where Accenture has 130,000 employees. What makes this less obvious is small consulting shops tend to include the salary of top people as part of their profits, where big companies pay well and still have a lot left over.

philipodonnell 9y ago
That's true, but saying that its "better than linear" is not really the same as "exponential growth" that the poster is talking about that you get from self-reinforcing network effects.
- Retric 9y ago
  X ^ 1.01 is still exponential. But, I understand your point.
  - matlabradoodle 9y ago
    Super-linear* ;)
  - deleted 9y ago
    [deleted]
  - philipodonnell 9y ago
    Ha, I was in consulting for a while (not Accenture but close enough) and ran projects where we did this type of project-level profitability analysis. We wouldn't have called it "exponential", because even though you're right that we made a multiple on a person's salary that's > 1, that multiple is pretty much fixed after a certain point in the size of the company. 3x would be typical for a mid, but if I add one more incremental mid I will still expect to make 3x my total salary, so that is still a linear revenue=3*totalsalary. If that 3x because 3.1x or something as I hired more people, then yes, you get some exponential effect there, but it would only do that in extremely small consulting shops.
jmalicki 9y ago
Accenture isn't evidence of scale. It has revenue per employee of only $88k, nearly the lowest in the S&P 500, close to Starbucks and McDonald's, but with much higher paid employees. That's a complete clusterfuck of a business, and exactly why you don't want to do consulting. https://priceonomics.com/which-companies-have-the-highest-revenue-per/ https://priceonomics.com/which-companies-have-the-highest-re... Whereas Facebook has $2M of revenue per employee, and nearly $200k in profit per employee, which is more than Accenture's revenue per employee. There's not remotely a comparison.
- Retric 9y ago
  Facebook can't use 200,000 workers making that a meaningless comparison. Really, Facebook has more limited growth potential without becoming a different company as they can only make so much money from social media. On the other hand you can have 1,000,000 people working for you if you are simply managing work outsourced by others. Foxconn has 136.12 billion in revenue and 1.3 million workers. Facebook has 27.64 billion USD Revenue and plenty of profit but fewer ways to grow Revenue.
  - deleted 9y ago
    [deleted]
  - jmalicki 9y ago
    You usually want to scale revenue, not costs....
    - Retric 9y ago
      Ideally you scale costs to increase profit. If you could increase retinue from thin air then you're not actually scaling anything. But, in a scalable model you invest more in your leverage be that advertising or whatever and you get more revenue which assuming a good cost structure directly results in profit. Facebooks problem is they can't scale because they already own the market and there are profitable new customers available. If they spend more on advertising they simply get less profit because their costs go up without increasing revenue.