Consolidation has dominated the wider engineering consulting sector for some years; we have all watched as some of the industry’s longest established names have merged and morphed into ever bigger entities, numbering in the tens of thousands of employees and counting revenues in the billions of dollars. So how do smaller firms wishing to maintain their independence hope to compete on an even footing? The Inogen alliance way perhaps...
It might appear as if the sector - and the EC specialism within it - is being reduced to just a couple of dozen names which are increasingly dominating the map. But that's not true.
In fact the EC sector comprises a long, and actually very healthy, tail of SMEs operating typically on a smaller geographic scale with often highly niche service offerings. And what they may lack in financial clout and geographic and/or sectoral spread, they more than compensate for with in-depth local knowledge, long-standing personal relationships with local clients and, above all, sheer determination to run their businesses no matter the wider economic conditions.
Faced with ever growing competition from the industry’s encroaching giants, this was the resource that three EHS players set out to harness on a global level at the start of the millennium, whilst presenting it under a single recognisable brand, offering consistently high quality professional services. And their vision has seen the creation of a global 6,400-strong partnership that today encompasses 69 like-minded associate firms across 75 countries, offering the full range of environmental, health, safety, energy and sustainability solutions: the Inogen Environmental Alliance.
How does the alliance model work?
Above all, it’s based on mutual respect and trust, and a belief in the fundamental advantages that this model brings to its associates and its clients. Of course, there are contracts and fees involved, but beyond that, personal connections are the glue that holds the alliance together, as Inogen president and CEO Paul Durkee and Alliance EMEA steward Angelique Stagg explain to Environment Analyst.
But let’s go back to the beginning.
In 2001 three firms set out to form an alliance of independent associates in order to offer a better service their multinational clients with a wider geographic reach, attracting more work beyond their own respective markets which would ultimately be undertaken primarily in the project country by a local associate in residence. The three founding firms were: US-based Delta Environmental Consultants (the original component of what was ultimately to become Antea Group), UK-based Delta-Simons (a JV formed between Delta Environmental Consultants and Simons Group) and Germany’s HPC AG.
"The objective was to offer clients a single point of contact delivering a competitive, cost-effective service on a global scale, managed from a nearby office, by people speaking the same language," says Durkee.
With the concept in place, the challenge was to make it a reality: "Our remit was to go and find new companies all over the world; initially we focused on the major markets like China, Australia, Singapore, India and Mexico whilst simultaneously following our existing clients into new geographies. Having identified potential targets in those markets, we carried out due diligence on them as if we were going to acquire them; so we knew what their financials were, who their clients were, how they wrote reports, who the key people were and each firm’s ownership structure.
"We would often run a pilot project with them to see how responsive they were and whether we were comfortable working with them. Then, if all looked good, we brought them in as associates, giving them access to the wider Alliance whilst they retained their independence."
Initially, the alliance was based on a two-tier system: a ‘premier tier’ of between 12 and 16 Inogen-marketed/co-branded associates (paying annual fees up to $200,000) and a much larger ‘second tier’ of associates (paying much smaller fees and without the visibility from a listing on the Inogen website).
But whilst the alliance was growing rapidly behind the scenes it was becoming increasingly apparent to Durkee that Inogen wasn’t getting the exposure it deserved, with four times as many tier-two associates working unseen and unacknowledged.
This prompted a major rethink about the alliance’s structure, resulting in something of a reinvention over the past twelve months with its new model – and all of its associate members - proudly unveiled back in September. All of a sudden what looked like an alliance of just a dozen or so members ballooned into something five-times the size.
And the fee structure is now based on a headcount, ranging from $1,000 to $26,000 per country of operation.
Inogen itself doesn’t have any clients, it doesn’t hold any contracts, nor does it do any work, says Durkee. In fact, all in, it counts the equivalent of less than two FTE staff on its books (of which Durkee is a good chunk)! The six staff that ‘run’ Inogen (all of whose primary roles are within Antea Group, the alliance’s largest single member) simply provide the framework and administrative functions through which work is secured and allocated across its members.
Stagg explains how the process works: "Let’s say an alliance member, Antea Group for example, has a multinational client that needs an ergonomic assessment in Greece (where it does not have a presence). We, at Antea Group, go to our Inogen contact in that country and outline the work requirement. Our local Inogen colleagues will help us clarify scope and cost based on local factors, and fine tune our proposal to the client. Once we are all in agreement, the lead company will ensure that the work is completed and delivered to the client’s expectations and that we work as a seamless team on their behalf.
"Alternatively, a potential client based in, for example Singapore, comes to Inogen direct through our website needing a waste audit study; the ‘Inogen’ staff will make contact with the local associate in Singapore, give them the details of the client, perhaps even make a phone call together with the associate to that client, and then step back. So, to all intents and purposes the client, wherever they are, is serviced locally by what appears to be a single company, with access to a huge network of diverse companies with different experts all over the world."
Meanwhile, on the flipside the advantages for the associate are just as compelling, as Durkee explains: "We have a 12-person firm in Lima, Peru, which, as an Inogen associate, suddenly has global visibility through the website. Now, via Inogen, it can go to its global mining clients in Peru and offer them a parallel service in Africa, and whilst they won’t be doing the work themselves – that will be done by the local associate partner – but our Peruvian associate holds the client and manages the contract. And that can only be good for their client’s satisfaction and ultimately bring in more work both to our Peruvian and potentially other associates worldwide."
Resilience built in
But perhaps most important, Durkee stresses, is the inherent resilience of this model. Going back to the example in Peru, the mining sector in Latin America has taken a hammering in recent years and there have been more than a few instances where some of the biggest names in the EC industry have had to up sticks because the downturn has made keeping their office outposts there untenable. But Inogen associates are made of sterner stuff, precisely because these are SMEs, often family-run businesses, with deep roots that are wholly committed to making the business work and maintaining a presence; they haven’t been "parachuted in" on a project by project basis. Although they may have had to make cuts in order to survive inclement economic conditions, they’re still there and still operating.
Conversely, those SMEs are provided greater security precisely through their membership of Inogen, and the potential workflow that it can bring.
So, with this ready-made global network of offices and staff, why not just hoover them all up (ie acquire them all) and package them into a single entity like… ERM or Arcadis? (Antea Group itself already owns a majority stake in Brazilian Inogen associate, now Antea Group Brazil, and clearly has its own acquisition strategy…) Durkee concedes it’s something that has crossed their minds in the past but it all comes back to the importance of a network of independent firms, based on mutual trust, the sum of the parts etc…
"These are often firms built up by a couple of people who want to live and die with their company. Oftentimes they may well have already been approached by one of the big US or European players but acquisition doesn’t enable them to stay independent," says Durkee. [He knows that because his associates will tell him so… ‘families’ gossip!]
And Stagg adds: "They have their own identities, their own clients, their own histories. And they’re fiercely proud of that. Simply becoming a cog in a huge corporate machine is not what they want. Nothing is guaranteed in business, but the alliance boosts their chances of retaining their independence, by potentially bringing new work and clients to them, particularly in challenging times."
That said, when the time does come and hypothetically an associate is ready to move on, perhaps retire, more acquisitive-minded fellow associates like Antea Group, are ideally placed. As Stagg says, they have first right, with the added benefit of knowing exactly what they are buying.
And of course, associates are free to come and go as they please (though happily this has happened in just a few occasions so far). As Durkee reiterates, they are wholly independent to continue growing their own businesses and securing their own clients as they see fit - in fact they are positively encouraged to do so because Inogen isn’t there just to hand them work, they still have to stand on their own two feet. And if acquisition by one of Inogen’s competitors is what they choose, then so be it. However, this has only happened twice and he puts this down to the strong links between Inogen associates, not least thanks to the biannual meetings which are built into the alliance membership where they get to meet, socialise and foster those relationships with their peers (most recently in Malmo, Sweden, with the next planned for Vancouver, Canada).
In addition, clients are invited to the Inogen WorldView®Conferences which are focused on clients and EHSS topics. The Alliance makes no apologies for the fact that its associates are 'together by choice'.
"Most global companies don’t get together in the same way," says Durkee. "It's generally just the business leaders who benefit from face to face meetings. But we encourage more than just the MDs or CEOs to attend our meetings; we want the people who are actually doing the project work to attend."
Friends with benefits
But there are other benefits to membership: associate members are supported by three Inogen stewards [of which Stagg is one, covering EMEA, alongside two more covering APAC and Americas] whose job it is to provide mentoring and support to associates: preparing them for future work; providing training on how to transact with multinationals; how to manage workflow; and foster collaboration with nearby associate partners. Another key task for the stewards, who spend a considerable amount of time visiting associates (and their clients) in between the biannual alliance meets, is ensuring that associates are all singing from the same hymn sheet so to speak, no matter where they are.
Also, at any point in time, Inogen generally has two or three key focus areas that the stewards help to promote. Currently, Inogen has focused practitioner groups working around EHS services for the real estate market, infrastructure and engineering services for multi-lateral development organisations and RiskRight EHSTM, a suite of services for low-risk environments (think retail and office space). "Training our practitioners across the alliance and communicating client expectations globally has been key to achieving a consistent and high-quality customer experience," says Stagg.
"And in a world where too many competitors are consistently inconsistent, that’s a key differentiator," says Durkee.
So now that they have honed the structure and unveiled the Inogen ‘family’ in its entirety (with a revamped website), what are the priorities for the 11-strong Inogen board (which includes four members from Antea Group and representatives from associates from Australia, Brazil, Canada, China, England, France, Germany, India, Netherlands, Singapore, and the USA) going forwards?
"With the new structure we’re now in a position to promote the true scale of Inogen," says Durkee.
In numbers, that scale equates to more than 200 offices worldwide, approaching 6,500 staff (of which over 5,000 are classed as environmental consultants) and projects to date in 120 countries across a wide range of markets including: automotive; chemical; consumer products & retail; financial; food & beverage; healthcare; insurance; manufacturing; oil & gas; real estate; technology; transportation….the list goes on! That’s not insignificant! In fact, the sheer scale came as a surprise even to Inogen members themselves once they had done a full 'headcount’ last autumn as part of the restructure.
But there’s no time to sit back, and plenty more work to be done for example identifying and securing new associates in certain key under-represented regions, including Central America and parts of Africa, confirms Durkee. All alliance associates are quite clear on the shared - and publicly-stated - goal, namely to 'become the dominant EHSS service provider to the multinational organisations in their respective geography’.
And looking ahead, the alliance has some fundamental decisions to make, as Durkee admits. Does it want to move beyond its current sectors of operation, for example expansion into infrastructure or water? "And do we want to become as big and bad as some of our competitors....or at least bad in a good way," he muses...watch this space!