Consolidation is on everyone's minds - whether they are banks, car
manufacturers or, indeed, management consultants.
Until recently, economies of scale associated with size were
amongst the key objectives of the big six consultancy firms. Now,
these are being hit, the six have become five and will eventually
become two or three.
There is more than a whiff of concern, however, in the hallowed
boardrooms of the big firms. Are there conflicts of interest? There
are accountants, auditors and management consultants all advising
on "separate" areas of a business, offering different advice, but
from under one roof.
Certainly, global end-to-end management consultancies associated
with multinational companies do provide a broad range of services -
from the development of strategy, to its implementation, and
eventually to post-implementation support services. It is true that
the big firms hold substantial appeal to such companies which feel
secure in the knowledge that advisers - known as management
consultants - will always be there.
With each successive merger in the sector, experienced partners
with specialist knowledge developed over 15 or 20 years have been
"let go". This has given rise to a range of specialist niche firms
known as "category killers". These companies believe that no-one
can beat them in their particular field or offer anything like
comparable experience.
Obviously the impact of the recession in the US and 11 September in
particular has had a significant impact on the consultancy
business, particularly the IT side. Projects have been delayed or
cancelled and corporate management in general has become more
cautious, more averse to taking risks, and more aware of security
issues.
But in many respects this is a valuable stimulus to our business.
In the past, company directors and those in charge of corporate IT
have not been good at calculating, and subsequently justifying, the
return on a particular IT investment. These costs have often
spiralled out of control making IT a frequent target for the grey
accountants.
The cautious approach, however, has resulted in a more diligent
approach to investment. Buyers have become more canny and are
expecting more from their suppliers in the form of guarantees and
post implementation service.
The pace of change in IT is increasing and is being fuelled by the
Internet. Five or six years ago, most staff simply took at face
value the advice from the IT department. They believed that what it
recommended must be best. Now, staff may not be so compliant. They
may believe that they know better - indeed, they may have more
powerful equipment at home.
As to the future, outsourcing is the next big event to take the
industry by storm. But the complexities of outsourcing will require
careful management.
Outsourcing comprises various elements. Historically, the benefit
of outsourcing a particular activity was obvious: payroll
management and other non-core activities could be handled more
cheaply by a third party, off site.
Then came offshore outsourcing: companies turned to India and the
Philippines where there is a ready supply of highly skilled and
relatively low cost, reliable labour.
For clients that are reluctant to go fully offshore, there are
onshore/offshore arrangements where the buyer has a project manager
based in the UK who, in turn, oversees the offshore operation. This
is an expanding area and another refinement in the outsourcing
process.
The structure of the management consultancy business is undergoing
a fundamental change. Large firms have wider global reach than
before, but they lack the depth and experience which niche firms
provide and which clients require. Clients are also becoming more
specific in their requirements.
This is undoubtedly good for the industry and good for business,
particularly if your firm is able to demonstrate domain expertise
and flexibility to meet a client's rapidly changing needs.
A focus on experience, a focus on skills to deliver and a levelling
of the playing field in favour of the small firm - and for all this
we owe the downturn. Who says big is beautiful?