The massive restructuring of consulting services is giving rise to a new class of “solutions integrationists,” according to a new collaborative report from Alpha Publications and Consulting Information Services. But there are too many large or would-be large firms to survive in a sector that has moderate rather than exciting prospects.
The report—Management Consultancy Services in the U.S.A.; 2001-2006—benchmarks a tumultuous period for consultancies, while forecasting a brighter future for those that adapt. First-half aggregate growth for 2001 is a measly 3 percent, a head-snapping turnaround to the prior eight-year period when annual growth averaged 20 percent.
While some claim the industry is merely at the bottom of its regular roller-coaster cycle, the report chronicles a much more massive restructuring. Technology, which dominates service-line market breakouts, has caused firms to align ever more closely with hardware/software vendors. These product companies, meanwhile, see the juicy services business as an Eden of earnings.
Both sides have heightened clients’ expectations regarding “integration of everything.” And the race to the middle has caused clients to become increasingly sophisticated and demanding regarding returns on consulting investments.
The resulting supply structure in consulting has changed in response to consultants’ perceptions of events as much as from the events themselves. A new hierarchy of firms is emerging, led by the integrationists. It’s a crowded space, with everyone from the IBMs and EDSs to the Compaqs and Hewlett-Packards vying for client attention.
All the companies want to occupy that upper-right square in the magic quadrant, where global scale meets high margins. In the a la carte world of consulting services, some companies seem intent on building the ultimate buffet.
But clients have yet to exhibit that kind of gorging mentality.
After the merger of Price Waterhouse and Coopers & Lybrand, the newly minted PricewaterhouseCoopers (PwC) embarked on a strategy of global relationship management. In short, global clients that spent a minimum amount annually with the firm—rumored in the $75 million neighborhood—were assigned global account teams. The concierge-like service was intended to efficiently sell through all the firm’s services. Instead, the firm struggled to streamline the commingling of vastly different audit and consulting services.
Remember that PwC was a pure services firm. Imagine the complexity of mixing hardware/software/solutions and services. Despite the marginal long-range prospects—after all, there are a limited number of global clients who find the idea appealing—companies seem intent on re-creating the all-you-can-eat service giant.
Will clients gorge themselves or will firms find themselves famished? The question will answer itself over the next few years, and we’re betting that consulting will never be the same.
About the author
Inside Consulting is written by Tom Rodenhauser as a free weekly supplement to The Rodenhauser Report. The report informs senior advisors and business executives of consulting trends and best practices. Subscription cost is $295 per year for 10 issues. Copyright 2001, Consulting Information Services, LLC. Reproduction is prohibited. Quotation with attribution is encouraged.