Wavestone: ‘AI is an opportunity, but also a threat’

(CercleFinance.com) – The consultancy Wavestone disclosed the results of its 2022/23 financial year ending March 31 at the end of May, allowing it to confirm its growth targets. This publication was an opportunity to discuss with Pascal Imbert, its chairman and founder, the current health of the market as well as the big hot topic of the moment, the rise of artificial intelligence.

Cercle Finance: Your annual results have been well received on the stock market. To what do you attribute this positive reaction?

Pascal Imbert: According to the various feedbacks I have had with investors and financial analysts, these are above all our outlook for the financial year 2023/24 – namely the pursuit of a good level of organic growth of at least 7% with an ongoing operating margin of around 15% – which surprised the market positively. As our sector enters a period that looks set to become more delicate, many of our competitors tend to be more cautious. On the contrary, our outlook shows a degree of confidence.

CF: Don’t you think you’ve also benefited from the recent craze around tech stocks, and especially those most exposed to artificial intelligence (AI)?

PI: No doubt, although it is still too early to know whether AI represents a real opportunity in the long term, or, on the contrary, a threat. Be that as it may, in the next two to three years it is certain that this technological breakthrough will represent a huge opportunity for a company like Wavestone. It is obvious that generative AI can enable our customers to optimize their operational processes or give their own customers a better experience. With the advent of this technology, a new ecosystem will also appear, which will pose a whole series of problems in terms of cyber security, protection of personal data and ethics: this is good, because these are areas where we have strong skills and a excellent reputation.

CF: And what are the risk factors?

PI: In the medium term, we will have to remain vigilant so that our offer does not remain focused on items that in the long term may find themselves reduced to the range of commodities, even if it only concerns, from my point of view, a very small part of our activities. What is clear is that AI will change the landscape of consulting services. We will therefore need to add the right tools to our consultants’ briefcases to ensure that their contribution of value and their effectiveness remain unquestionable.

CF: Some tech groups no longer hesitate to integrate artificial intelligence into their business model. Does this approach make sense?

PI: The essence of the consultancy is to create added value for our clients. The important thing is less to make a ‘business model’ change than to start real work to redesign our tools and our approaches to continue to bring the same level of value. For example, in recent years, consulting firms have frequently been called upon by financial institutions for remedial tasks when cases arise of non-compliance with legal requirements. This work involved handling a large amount of information and documents, a process that is time-consuming and repetitive. We already use machine learning or analytical solutions to help us with these types of tasks, but the advent of AI makes the need to hire a consulting firm almost disappear. Our function will henceforth be limited to helping customers equip themselves with products so that they can become completely independent of these issues, which will necessarily affect our business.

CF: Due to the nature of your company, you constantly take the pulse of your customers’ business. With the specter of recession, have you noticed a shift in their spending plans?

PI: We do not feel that we are in a crisis situation, although we are observing slowdowns in certain sectors and, more generally, more caution when making expenditures. We see an increase in so-called ‘defensive’ investments, which give companies the opportunity to preserve margins, to the detriment of more aggressive development projects, which may relate to the development of new business, among other things. This change in the physiognomy of the projects is accompanied by a greater wait-and-see attitude. At the sector level, energy and luxury are in sparkling form, and demand in insurance remains strong. On the other hand, other sectors such as manufacturing are undeniably going through a more complicated patch, with clouds continuing to accumulate on the horizon. This is also the case for banking, whose environment is becoming less vibrant.

CF: You also have explicit goals regarding mergers and acquisitions (M&A)….

PI: Our strategic ambition for the coming years is to achieve international stature. The share of our revenue generated outside France is only 20% today. We remain very focused on the French market, which is an obstacle to our development: our customers are often large multinationals with a large influence abroad, and the fact that we appear as a company very focused on France can be debilitating . The expansion of our international footprint involves two priority targets: the UK, a market where we have grown significantly recently and where we are successful, and the US, where we have every intention of gaining momentum in the coming years.

CF: How about a more transformative operation?

PI: We know that well-executed mergers of equals can change the size of a company. The acquisition of Kurt Salmon in 2016 enabled us to create a lot of value. We keep this type of operation on the radar, while being well aware that the number of potential candidates remains limited. Also, not everyone is open to voting of this type. But talks have started in this direction, and I hope they can become a reality in 2025. If a similar opportunity were to arise, we would not hesitate to seize it!

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