Apollo Tech Solutions Case Study Part One Apollo Tech Solutions $($ATS$)$ were an established player in the information and communication technologies $($ICT$)$ market. The business was started in the early $1970$s by two brothers, John and Robert Southwell, to sell phone equipment $($handsets and exchanges$)$ to small$-$ to medium$-$sized enterprises $($SMEs$)$ in their local area of the Midlands in the UK$.$ By the end of that decade they had increased their coverage and were supplying equipment to larger firms across England. Their big opportunity for expansion came with the deregulation of the telecom market in the late $1980$s as they started to sell additional products and services, such as infrastructure and maintenance service contracts, to clients. They built a solid reputation for reliability and as a result had excellent customer relationships. This was to be critical as many of these customers remained loyal when new technologies and competitors came on the scene. During the $1990$s$,$ they further diversified by offering their clients the ability to outsource communications with the building of a network of call centres. However, it was the early $2000$s when they began to grow rapidly thanks to the opportunities made possible by high$-$speed Internet $($broadband$)$ connections. This revolutionised communication and also the way that information could be used in the business environment. ATS capitalised on these new markets by acquiring businesses and also developing new opportunities internally. In $2005$ the two brothers decided that they wanted to float the business, having largely stepped away from the day$-$to$-$day running of the business $($although John was still Chairman and Robert sat on the Board$).$ The City was eager for the flotation and the shares were over$-$subscribed leading to a high initial price. The Southwells resigned their positions and a new Board was put in place to reflect the changed status of the company. Stephen Irvine, the Chief Executive Officer $($CEO$),$ also restructured his team with a new Chief Financial Officer $($CFO$),$ Tom McPherson, and the appointment of a new position of Strategy Director. The latter post was filled by Samuel Arnott, who had previously worked for a rival ICT supplier in a similar role and before that had been a management consultant at one of the leading consultancy firms. One of the first actions by Irvine was to restructure the business into two divisions: $$Apollo Comms$,$ which comprised of the original business of supplying telecom$-$related services to businesses and $$Apollo Advance$,$ which brought together all the units offering Internet Protocol $($IP$)$ based solutions to communications and information sourcing. The company thrived until the downturn of $2008,$ when its inherent weaknesses began to show, and by $2011$ the share price was half that of the initial flotation six years previously. While initial investors had seen growth opportunities in the new businesses, the sentiment in City was now quite negative and ATS was seen as a $$laggard$,$ because of the large proportion of its business $($and profits$)$ in $$old$$ technologies. In early $2012$ Irvine asked Arnott to put forward recommendations on how they might address the fundamental issues the business faced. $$ Apollo Comms $($AC$)$ provided $60\%$ of the revenue but contributed $90\%$ of the profits; however, the profit growth rate was only $2\%$ a year in what was a mature market with growth at a similar rate. $$ Apollo Advance$$s $($AA$)$ profits were growing at $5\%$ a year but only contributed $10\%$ of the profits and AA was in a market that was growing $20\%$ a year. A strategy going forward would not be easy, not least because Arnott was faced with two opposing views from Irvine $($CEO$)$ and the equally powerful McPherson $($CFO$).$ The former thought that there were limited growth prospects for AC and it was the opportunities offered by AA that should be pursued. However, the strategy had to be one of organic growth as there were no funds available for more mergers and acquisitions. McPherson had different ideas; he believed the way forward was to increase profits by making cost savings in both divisions. Both men, however, agreed that a new strategy needed to be in place, not least because it would give them ammunition at the next Annual Results presentation to show the investors that they were actively looking to improve the bottom line. This they hoped would encourage positive sentiment and drive up the share price, leading to their incentive share options improving. While the $$safe$$ option advocated by McPherson was not without its merits, Arnott also agreed with Irvine that AA was underperforming but the question was by how much and perhaps more fundamentally why. What was it about the business that was not working? Arnott had his own theories stemming from the fact that AA was in reality a string of smaller businesses bolted together with no central function or coherence. Was it therefore the business model that was being used that was the problem or the processes or the people in the business or a combination of all or some of these? Arnott had been a reluctant user of consultancy in the past, having been a consultant himself and was therefore a bit sceptical of the grand promises that consulting firms make. However, in this case, he decided he wanted to use outside expertise to try and quantify what the upside could be in terms of growth of the AA division. On a personal level, he was curious to see what the current leading global consultancies could offer by ways of solutions and set his sights high. He negotiated a budget equating to $1\%$ of the company$$s profits, so that he could get bids from these leading players. Having prepared a brief $($that did not include his budget$),$ he approached three firms. $$ ITL, the largest non$-$accountancy$-$based management consultancy worldwide with a strong record in strategy development and implementation across a wide range of business sectors$.$ Ferguson & Co$,$ a much smaller operation than ITL but known particularly for its strategy work and with a dedicated division for the ICT market. $$ EuroComms Solutions, the acknowledged expert in the ICT market that worked across many functional areas including strategy and change management. The brief Arnott gave them was to identify the best growth route for Apollo Advance and to offer a degree of quantification of their findings. The target would be a plan to double revenue in five years, while maintaining gross margin, leading to a quadrupling of profits within the AA division. It needed to be achieved on a sustainable basis and give Apollo a long$-$term competitive advantage. It was made clear that the main division $($AC$)$ was not included in the brief and the consultants would only be employed for the first stage $($strategy development$)$ not implementation. Questions $1.$ Was Arnott right to bring in consultants for this project, what else might he have considered? $2.$ Thinking about the brief to the three consultancies, discuss what other options Arnott could have pursued. $3.$ Prepare an initial proposal $$ what questions would you ask Arnott?