CXO

The Big Five's future: Consolidation or fragmentation?

The Big Five consultancies continue to change, or do they? Columnist Tom Rodenhauser predicts that while firms move toward merger, they'll continue to operate separately.


Another Big Five consulting division—namely PricewaterhouseCoopers—is about to be swallowed, of that we’re sure. The wags will talk about industry consolidation, citing PwC, E&Y/Cap Gemini, and the various pure-play rollups like marchFIRST.

Far from consolidation, though, we may be entering a period of further fragmentation in consulting. Consider this: Most of the major firms have been busy deconstructing the mega-monolithic organizations that defined the industry’s last decade. Gone are the ERP armies that called for thousands of like-minded souls. Today we have incubators, accelerators, venture capitalists, and hundreds of micro-consultants—teams that may share a common name but operate autonomously, if not independently.

Andersen Consulting can talk about the “new” moniker it will embrace come January 1. But the new AC will not be the 65,000-person army of old. Rather, tomorrow’s AC will be a General Motors-like collection of brands that bring different capabilities to the client. Deloitte Consulting has embarked on the same mission. Its “mother ship-pod” philosophy creates free-floating entities connected through thin umbilical cords to the mother ship.

Consultants love to talk about wealth creation, and what we see now is nothing more than the industry’s largest players undertaking that same exercise. The big boys are betting the sum of the parts is truly greater than the whole.

Sure, some white-knight computer maker may take a hankering to a big consultancy and buy the whole pie. But if you’re looking to sell, particularly the remaining Big Five, it’s more profitable to chop yourself into bite-size pieces for the buying public.

Heard on the street
Is McKinsey going public? Perhaps it’s just a sign of the times, but we’ve heard from enough folks to think that something is afoot. There is a plausible case for trotting the firm into the public arena: namely, McKinsey’s panache becomes that much stronger as “e-strategists” drop like flies. Since an outright sale is unfathomable (nobody will meet McKinsey’s price), the IPO theory gains much credibility.
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 2000, Consulting Information Services, LLC. Reproduction is prohibited. Quotation with attribution is encouraged.

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