Management consulting has gone back to basics. After a whirlwind of activity during the dotcom bubble of the 1990s, when many big accounting firms sold their consulting divisions to technology giants, the industry is seeing a return to traditional consulting practices.
Jeff Thompson, head of performance improvement consulting at Price Waterhouse Coopers (PWC), says: “The nature of consulting changed in the mid-1990s, when management consulting divisions refocused to ride the technology boom. After the sale of those divisions, our clients still wanted help with business functions, change management, training and so on. There was and still is a real demand for operational consultancy to help with that.”
According to a 2005-06 report from the Management Consultancies Association (MCA), which represents 70% of the UK consulting industry in terms of income, the sector is estimated to have grown by 18% last year to £11.9 billion. Fiona Czerniawska, author of the report, says: “Recently there has been a big surge in management consulting. Between 2001 and 2004 it was a tough market, but now there is a lot of business confidence out there. Companies have more money to spend and they are looking for innovative ideas, not just about cost-cutting but ways to increase revenue.”
The consulting spectrum ranges from the high-level “strategy houses” such as McKinsey to the large-scale business service providers including Accenture, IBM, EDS and Capgemini. Offshore consulting businesses, often based in India or China, offer specialised skills in technology and outsourcing. The management consulting divisions of traditional accounting firms such as the “big four” of PWC, KPMG, Ernst & Young and Deloitte, and a range of boutique consulting firms offer expertise in finance, business performance, risk management, human resources and IT systems integration.
“Clients want to get back to more traditional models of consulting, which is getting good advice,” says Czerniawska, “but they want the consultants to be more at arm’s length, more detached and not tied up with software.”
This reverses the trend during the dotcom boom, in which, according to Thompson, “technology was seen as the great salvation of all business problems. It would cut costs, sort out your supply chain and basically be the be-all and end-all. However, the market woke up to see that technology was not the great saviour people thought it was going to be”.
Now the tide has turned and some of the companies that sold their consulting divisions are focusing again on what some call consulting, some operational consulting and others business advisory services. Alan Buckle, head of advisory at KPMG, says: “We prefer not to use the ‘consulting’ word because what we are doing is so different to what we were doing before. We call it ‘advisory’ instead.”
However, Steve Varley, managing partner of business advisory services at Ernst & Young, says: “Business advisory services are one part of the whole umbrella of the consulting industry. Advisory sounds a bit passive, whereas we’re practical — we make changes happen.”
Either way, the industry is firmly focused on helping clients sort out their business problems. David Owen, head of consulting at Deloitte, says: “It is about improving business performance, helping people use technology, managing their customer base — a whole set of issues.”
The consulting market is very diverse in its business processes and the sectors in which it operates. The MCA report found that the sectors with the biggest growth in management consulting last year were financial services, transport and telecoms, while the main areas of growth in terms of business processes included human resources and change management.
While the management consulting firms have been changing, so have those who use them. Varley says: “Clients are more discerning. They are clearer about what they want you to do and what they are looking for.” There was a time when consultants could go into a company, solve a particular problem and then move onto another project, leaving the company none the wiser.
Those days are gone, adds Varley: “We deliver sustainable change. When consultants are in the business making change happen, then everything looks good; but after they leave things can go wrong. It’s like having a fitness trainer in: it is easy to slip after they leave, and companies are the same. So that’s the thing we’re focused on the most — what happens the day, week or year after we leave?”
Kevin Narain, regional managing director, Europe, of boutique firm Parson Consulting, agrees: “Clients don’t want the consultants simply to fix the problem and then leave, taking all that knowledge with them. They want to be more involved and they are more results-oriented.”
The high level of recruiting in consultancy means that there are a lot of opportunities out there, particularly for people with experience. The MCA report says: “A shortage of the right kind of people is unquestionably the No 1 operational problem facing the . . . industry . . . there are plenty of people in the marketplace, there are not enough of the right kind — experts in particular fields and/or those with good relationship-building skills.”
Thompson at PWC is of a similar opinion: “It is a challenge to find people with experience in the marketplace. We need them to communicate well with clients, as clients now integrate into our teams, so we’re looking for technical experts with good social skills.”
With increased competition between firms for the right people, salaries are starting to climb. “At the top end of the market, pay in the big four is going up,” says Buckle.
“But it is always a mistake to throw money to get somebody on board. At KPMG we’re heavily bonus-driven, low basic, which gives a lot of flexibility and it is a good incentive.”
“We have to remain attractive to top-calibre people in a responsible way,” says Owen, “not to create volatility, which would not be sustainable. I’ve been in consulting for 20 years and it has always been a competitive marketplace, but I’ve never seen a time when it is a good idea to compete on pay.”
Nevertheless, Czerniawska warns, a trend of increasing salaries is hard to fight: “Recruitment is certainly a challenge. If you pay more and more to the right people then it can really build up your cost base but it is very difficult for firms to stop and say, ‘we’ll pay this and no more’.
“They are going to be caught by two trends: salary inflation and offshore companies who can provide systems development, project management, all the new models of consulting, at a lower cost.”
As for the future, Thompson believes the industry goes in cycles: “We are doing the same kind of thing that we were seeing 10 or 20 years ago. There are fundamental aspects of running a business, such as the quality of information you have, which come down to the people you have. Sometimes people lose sight of it and go off on a fad. But in 10 years’ time, the core business will still be helping clients sort out their problems.”
Role play
THE OPPORTUNITY to learn and utilise a wide variety of skills attracted Anna Dongelmans, 35, to management consulting. After 10 years working for the German company Siemens, she decided to a study for an MBA and change career.
She joined LogicaCMG as a senior management consultant in April and has since been involved in projects in the shared services arena, which standardises and links business processes, including working with the car giant Lotus.
“Working in consultancy means you are expected to do other things within your role,” says Dongelmans. “You are allowed to study your field as you are moving along to keep up with all the latest trends. I am learning a much broader range of skills.
“You have to be self-motivated and disciplined as well as being a people person. If you set your mind to achieving something, then it is yours.”
