Thursday, September 10, 2009
THE FUTURE OF CONSULTING FIRMS
Over the years, the consulting industry has come up with the creative and innovative solutions to the ever changing demands of the clients. It’s a well proven fact that –Consulting companies are inventors and creators of their own markets and their own future. The future of consulting companies has readily shrunk or grew in response to client’s demand. Some of the famous consulting gurus derive an analogy by saying - Consulting is similar to banking. Just as banks provide the financial capital, consulting provides intellectual capital. As inventors and creators of their own markets and future, consulting firms rely on their knowledge base and economic conditions. Yet sometimes, even after being the best in the domain may not fetch the business to a consulting company. Undoubtedly, the future of consulting companies is at client’s mercy. It is a customer focused industry where client is the God.
The real outburst of the success of the consulting companies was clearly visible in the year 2006. The M&A market was suddenly in so much action and the “consulting firms” were the hot cakes for the taking. In fact, 2006 saw a 40 percent increase over 2005 in acquisitions of consulting companies, and the market was more active than it’s ever been. Based on the market research, the average pre-tax profit (EBIT) multiple in 2006 was 10, this compares to an average of 7 over the previous five years. So the market was quite hot for sellers at that time with lots of demand.
Post 2006, the global economy started dipping with the US economy shrinking to its worst by 2009, the world is now clearly suffering from global economic recession and slowdown. The consulting industry is at no spare to the wicked recession. Suddenly, the all competitive industry of “Consulting” became far more competitive to win a business in an adverse situation of crisis like this. Now the clients want greater specialization and a clearer view of what consultants do. The client pressure has become so enormous that the consulting firms are worried about being under priced. Clients are much more interested in getting the most value for the price than anything else.
Though, the competition and the global economic recession are giving the dark pictures of consulting business yet it has opened several doors for it. Now when the world is in economic crisis, the companies across the world are looking for better solutions to not just only sustain the slowdown but to come up with better ideas to grow and again for that reason, the phone-bells are ringing hard at the offices of consulting firms. Yet the clients are not at so much of ease with the consultants. The main reason for this is – Clients worry that consulting firms are trying to sell them things they really don’t need. But this is something which the consulting industry has to take blame for, as with the given competition and greed, consulting firms have tried to sell too many services to client which were not required.
It is a need of an hour that consulting companies provide the specific specialization to the clients with utmost expertise. The client’s who require multiple expertise in various domains are looking for consulting firms who has some similar alliance as partner group. This is a situation which is kind of hard to come in consulting industry because of two reasons:-
1) Due the competition within the consulting firms, they don’t want to work with each other.
2) Even if they are working together, they hardly trust each other and that further creates more problems.
So, in a present scenario it’s very much required that consulting firms having expertise in different domains form an alliance and together provide services to the clients. In the future, this is only going to be a win-win situation for both client and consultancy. In the era of competition and with the need of getting the business, consulting firms are trying to make all its consultants billable. By making a consultant billable it means consultancy is getting money from the client. While doing so, consultancies are over looking the quality and fooling the client’s by placing a consultant with different or no expertise. In the long run such practices are going to cost business to the clients.
It is crystal clear that the future of consulting companies will depend upon its focus on maximizing their clients. Additionally, those firms which are willing to and able to partner with clients in the common interest of both the parties will survive. Today, if the consulting firms keep the momentum of aligning with the other firms providing the complimentary services will boost the business to a good extent. Again, the consulting firms which have set the example for the same are doing well.
It is also very firmly believed that consulting industry is like a one family under a single glass roof and if something has hit the glass then it’s going to affect everybody under it. So, if a single consulting firm is engulfed in a scandal it affects everybody else too. To avoid a situation like this it’s very essential that each consulting firm should try to differentiate itself from the others. In other words, it’s the only possible way by which a consulting firm can put a barrier between their brand and the wider industry brand.
Now the question arises, how a consulting firm can distinguish itself from others in the market? Practically, there can be only one answer for it, which is- the value of work done by the consulting companies. By value of work means it’s the consulting inputs provided to the clients with full innovation and creativity. The core is consulting companies need not do the talking about it but they have to actually provide it.
It’s visible that after the over hype of business and post global recession the consulting business is in phase of reconstruction and restructuring. Since, the industry purely revolves around one word called “Innovation”, it requires a special studies, research and well qualified people to be part of it. It is required to grow deep practices where there is enough market penetration to create an unrivaled critical mass of skills in that area.
This is the time when the large brand names of consulting industry need to buckle-up to avoid loosing business to the mid or small sized companies. The clients are in dilemma whether to have a less experienced resource at low cost with more in numbers or a highly experienced resource at high cost. If a consulting company is able to provide the panacea to the client’s dilemma then it’s their project. Basically, it requires for consulting firms to generate that confidence in client that they can do their business in the best possible way, once this happen the client is not bothered if it’s a big consulting brand or some small consulting firm.
In current global scenario, gone are those days when the team of business consultants will fly to client sites. All clients want to cut the cost incurring in travels but still they want their problems to be resolved at ease. Consulting firms are coming up with new ideas and one such solution is consulting through WEB applications. There are almost all the application and tools available which are vastly helping in consulting in some of most critical areas like – Proposals (tools like BigMachines, Access Commerce), Project Planning and Collaboration ( tools: BaseCamp, QTask, Microsoft Live Meeting, Skype), Research ( tools: Web Harvesters, Mozenda, Fetch, Google Docs), Consulting Methodologies ( Tools: RapidBI, NetMBA) and Presentation Builders ( tools: Presentia, XCelsius, NetXpression).
There was a survey on the European consulting industry a few months ago, which brought in limelight on of the most ignored area of consulting industry called Change Management. The survey revealed that Change Management is a very big market that is inadequately addressed. The clients have shown very serious concerns on consultants leaving them with projects causing the difficulty to the organization in integration and assimilation. The clients want help on a wider scale i.e. with organization wide-change. There are people working in the change too but the numbers are niche. It’s in small scale and consulting firm should try to up their best foot forward in this direction, as it will be very handy for them in the future. This is one area which can bring the fruitful results for the consulting firms in the future.
For securing the future of consulting companies, it’s an essence for companies to invest more in studies and research activities. They have to bench mark their practices and exercises to really prove that consultants are pretty much the part of this Industry and the economy. They have to demonstrate that consultancy really raises the standard and productivity of the economy. Consulting companies need to prove a point that without the consulting firms, the activities like – market analysis, research and solutions will never be at par to what economy demands.
It’s clear that though the economic conditions and global environment is in bleak state but yet there are several doors opened for the consulting companies. Hence, there are several areas which are unaddressed and waiting to be capitalized in the market. The future of consulting companies is for sure in their own hands and its all revolving around how beautifully can the innovation be put into practice. Innovation is the key to prosperity.