The Transformation of the Management Consulting Market (2021)
Consulting has always followed the ups and downs of the economy. The industry is quite adaptable and has been through rough phases but always recovered. It will probably be the case again after the pandemic crisis
The Transformation of the Management Consulting Market (2021)
But the change had already started before 2010, and the wave will continue to strengthen and profoundly modify the industry.
“Change is inevitable—except from a vending machine.” —Robert C Gallagher
Let’s have a look at what’s happening in the consulting industry right now:
Consulting is a tricky business. And negotiating a consulting agreement is logically complex. This is because so many variables are open for discussion: scope, timeline, deliverables, team composition, price, etc
1- The Consulting Market is Global and Complex –
When you think about direct purchasing, would you source from the local neighbors or take advantage of the global marketplace. Would you always use the same suppliers? You would probably play with some competition to ensure you get the best supplier.
Consulting abides by the same rules, and the supply options are almost unlimited once you get to know the market.
Another good way to approach the complexity of the consulting market is to look at the size of the consulting providers. As a rule, large firms offer a broad range of services, while small firms specialize in a narrow domain.
The bulk of the consulting providers are tiny boutiques with less than 10 employees. In the US, for example, they represent 87% of all Consulting firms. However, the remaining 13% of Consulting firms with over 10 employees generate more than 90% of the total revenues in the industry.
2- The Consulting Industry is Very Active on the M&A Front-
An exciting trend is going on for the past 15 years or more. Since 2006, we observe roughly 500 yearly acquisitions or mergers of management consulting firms of all sizes with more prominent players in the Consulting Industry.
The reasons behind these moves can be to access a new client base, venture into a new capability or a new industry, or strengthen an existing practice. The Consulting Landscape reflects that continuous M&A activity.
It is also a way for partners to monetize their relationships with a nice payday every couple of years. So they sell, continue as part of the new firm and start again a few years later.
Compared to the average, the Consulting Industry has 60% fewer small firms between 10 and 50 employees and almost three times more firms with over 500 employees.
The Consulting Industry is clearly a large market with robust growth.
3- There are different levels of Consulting Offering –
Interesting to note that the scope of “consulting services” continues to expand. The top-level offering is a highly skilled advisory with a proven reputation and higher fees. The 2nd level of Consultancies is made of specialty niche technology services that have a specific price range. And the 3rd level comprises highly skilled niche experts hired on specific projects. Consulting firms are now also venturing into the learning space, offering programs competing with business schools.
4- Digital Disruption is trending –
The consulting industry in recent years was shaped by 3 major trends: Digital transformation, Technological disruption, and Cultural shifts within the industry due to globalization. Right now, the future holds exciting promises as well. The expertise topics offered to Clients expand and multiply even further in niche markets. Digital agencies and Consultants’ capabilities, for instance, further overlap, as they provide converging expertise.
5- Freelance Consultants and Micro-Consulting are on the rise –
We are all familiar with the growing trend of freelance services, but Micro-consulting sounds kind of trendy too. The concept refers to getting expert help, in short, targeted projects for clients. So it differs from a months-long engagement and a team of Consultants working together.
It’s also interesting to mention that according to recent surveys, most Freelance Consultants like to stay independent and enjoy the flexibility of their work.
6- New Billing Models are emerging –
The demand for performance-based billing models is growing as well. More and more clients now have the technological capability to slice and dice every expense. And they can analyze their spending on Consulting while evaluating the ROI. Performance-based billing is also popular among consultants. These pricing styles can prove mutually beneficial to Clients and Consultants alike, reducing the chance for unexpected fees and setting up a well-defined benchmark for Consultants to prove the value they bring.
7- Increased Competition & Continuing Commoditization of Services –
The freelance economy continues to affect the consulting industry as well. Online marketplaces for consultants and available experts offer Clients a multitude of choices when they need expert advice. You can also find methodologies and training on line for do it-yourself models that become non consumption for the Consultants.
8- A never-Ending Need for New Skills & Innovation –
The fast pace of innovation is affecting all industries. Consultants now strive to stay on the cutting-edge of knowledge. But by evolving and enhancing their expertise, Clients are not the only beneficiaries of this trend. Consultants are, too, since they can build better portfolios and ensure long-term success.
Consulting sourcing tips
Consulting is often defined as giving expert advice to other professionals. True, but I think it is a bit simplistic…
Type Consulting Procurement in your browser and look at the results. What do you find? A list of consulting companies that offer their services to help improve your company’s purchasing and/or sourcing capabilities. But is it the same thing as Consulting Procurement?
Sourcing doesn’t start when you select the consultants you want to work with. It starts with a problem you want to solve.
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