Does the world really need consulting firms?

Just like Rick and Louis, as they walk into the grey fog in Casablanca, the relationship between consultants and business has been one that promises a beautiful friendship. Businesses have traditionally relied upon consultants to provide them with expertise and insight, but just like Rick and Louis, in the advent of the share economy the nature of this friendship is changing.

A love-hate relationship

Engaging consultants is not a new phenomenon. Management consultants have been around since 1890 when Arthur D Little established his consultancy specializing in a field of consultancy that became known as “management engineering”. While it took nearly 25 years for Booz Allen Hamilton to establish the first management consultancy practice, it wasn’t long until other big guns like McKinsey & Company and Arthur Andersen & Company followed suit. By the 1980s the large accounting firms had entered the market for specialized services such as IT, competing with firms like Accenture. Management consulting is now a global industry worth over $125 billion that continues to grow at a pace of 6.1% according to Gartner. The industry is dominated by large players like Deloitte & Touche and Boston Consulting Group, with the top 10 consulting providers continuing to grow at a pace above the overall market.

Over the years businesses have turned to consultants for many reasons. They provide manpower and expertise for one-off engagements saving companies both time and money, and provide ongoing insight and new perspectives into industry trends by leveraging their broad networks and relationships. Consultants also provide reassurance and objectivity to executives hesitant to make a controversial decision, and can add leverage when navigating internal politics. While they are external contractors, management consultants have become an integral part of the day-to-day operations for large business.

While flexible labor is one of the key advantages to employing consultants, it has also provided the biggest opportunity for disruption in the industry. Many would argue that consulting has been ripe for disruption, with small players flooding the market offering little differentiation in terms of service offerings. But critics of consultants not only point to the commoditization, but also the limited experience of “subject matter experts” fresh from graduate school and fee structures that are open to inefficiency and over-charging. The lack of transparency and false expectations set for project deliverables are other reasons businesses have questioned engaging consultants. Even within the internal structure of consulting firms there are complaints of poor people management and overworked staff.

The changing face of consulting

With these issues within the industry and the rapid growth in the shared economy, it was only a matter of time before management consulting was disrupted. While everyone has heard of the impact Uber and Airbnb have made on their respective industries, in fact it was online staffing that was one of the first industries to lend itself to the shared economy, according to research conducted by PwC. It estimates that online staffing will see growth of 37% revenue CAGR between 2013 and 2025, making it a prospect too big too ignore.

Businesses such as elance and freelancer.com have allowed businesses to by-pass costly firm structures and employ individuals for discrete projects. For the individual, this model offers flexibility and work life balance. While the disruptive model addresses some of the benefits and disadvantages of the traditional consulting model, it fails to meet all the needs of business, yet. For example, it doesn’t necessarily enable the need for reassurance or large-scale project management.

However, this too may change with some consulting firms seeking to tackle the issue head-on. For example, KPMG in Australia recently announced that it would disrupt itself by offering its own experienced staff to its clients at a discounted rate. The objective was to alleviate the ebbs and flows of employee downtime while taking advantage of business’ desire to embrace the online market. The trial is still in its infancy, but the business has signaled it’s keen to see how else it can be part of the change.

The friendship continues

While the industry has shown signs of commoditization and disruptive markets continue to grow, business continues to need consultants and specialist services that offer them expertise and flexibility. The business need remains, it’s just the format in which it’s provided that is changing. Rather than standing on the tarmac, consultancy firms will need to walk side by side into the mist and redefine their friendship with business, thereby ensuring their ongoing prosperity.

I will enjoy hearing from the TIA community about their consulting market expectation.

It is an enormous pleasure to have you read my post and provide some feedback. Here, at TIA, I regularly write about IT, Innovation, Leadership and Management with a personal touch. Please feel free to connect. 🙂