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Consulting Industry Market Research

Consulting Industry:

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Introduction to the Consulting Industry

Global consulting industry revenues (including HR, IT, strategy, operations management and business advisory services) will be about $415 billion in 2013, according to Plunkett Research estimates. This represents reasonable growth from $391 billion in 2012. In the U.S., accounting and related services (such as tax preparation) generated an additional $131.6 billion in 2012, up from about $123.0 billion the previous year, according to the U.S. Bureau of the Census.
Consulting is a somewhat cyclical industry. The years 2008-09 marked a challenging period throughout the world of business, in light of the global economic slowdown and shrinking corporate budgets. In general, major consulting companies, including leading firms in management consulting and HR consulting, along with other advisories such as accounting firms, found themselves with substantial drops in business during 2009, in many cases 5% to 10%. Some companies cut their employee rosters and/or restrained hiring. India’s largest outsourced business and technology consulting firms were complaining that clients were delaying or cancelling projects as 2009 began.
However, as of late 2009 and into 2012, corporate profits in general grew dramatically, meaning that executives are more willing to authorize new consulting projects as long as they see the potential for a good return on the cost. During 2010-12, for example, India’s leading consultancies enjoyed substantial growth in employee count and revenues, as did most of the global consulting firms based in the U.S. and EU.
While corporate profits have been growing, government budgets in the U.S. and much of Europe are under tremendous pressure at the national, state and local levels. At many governmental units, tax revenues were down significantly during the recent recession, although 2012 saw a rebound. Meanwhile, governments and their agencies have been under intense budgetary scrutiny. Spending and debt have been called in question, and in some cases curtailed. This has been particularly hard on some consulting firms, since governmental agencies are prime clients for consultancies.
Positive factors for the consulting industry over the mid-term:
1) Continued growth in health care expenditures and significant changes in health care coverage are creating demand for consulting projects. This includes a focus on digital health records and a dramatic need for greater efficiency and cost control.
2) Consultancies that focus on projects that clearly reduce business costs and enhance operating ratios in a reasonably short period of time will find a ripe corporate market (such as consultants who focus on cash flow enhancement, supply chain efficiency and manufacturing efficiency).
3) Vast new labyrinths of government regulation will create numerous opportunities for consultants who can show companies how to navigate rapidly changing relationships between government and certain industries, or deal with government oversight, particularly in financial services and health care.
4) Consultants who assist firms in lowering employee benefits costs are in high demand.
5) Consultants and advisors in the fields of corporate expansion into emerging markets, information technology, mergers and acquisitions will be in high demand.
Source: Plunkett Research, Ltd.
In emerging nations and the booming economies of parts of Latin America and Asia, the consulting industry and related sectors have been enjoying soaring growth and a very positive rebound from the recent recession. Brazil has been a particularly fertile market, although the growth of Brazil’s economy has been disappointing in recent months. Growth in global trade has rebounded from the very low levels of the recent recession. This fueled demand for consulting of all kinds, including management, HR, industrial and technology. Such nations as South Korea, Taiwan, China, Singapore and Indonesia are providing a wealth of new work for consultants. Firms with multi-cultural staffing capability and offices in strategic cities worldwide will benefit in particular. Recent growth in these nations has created myriad opportunities for consulting firms, both in government and private sector contracts, in industries ranging from transportation to energy to health care. However, beginning in mid-2012 and into early 2013, economic growth appeared to be slowing in many important markets, including the rapidly emerging nations of India and China. Economic growth was slow in the United States, and parts of Europe were reentering recession. As a result of these economic trends, 2013 may see consulting projects of some types delayed or cancelled. Consultancies that do well in such an environment will be those that emphasize their ability to create cost-savings, enhance efficiencies and deal effectively with government austerity programs or other dramatic changes in governmental goals.
In recent years, many types of consulting and accounting projects have been offshored to a growing extent. Initially, this was due to efforts by firms in North America and Europe that wanted to take advantage of the lower hourly fees charged by professionals in emerging nations. More recently, however, offshoring of such tasks has become necessary in order to conduct consulting projects in the growing nations where practices must be applied. As multinational companies headquartered in the U.S. and elsewhere continue to open offices, factories and research facilities in nations such as India, Malaysia, Indonesia and China, consultants must follow.
At the same time, China and India are investing heavily in their own upper-level education systems, and they are now graduating large numbers of MBAs, scientists, researchers and engineers from their universities. Many Asian nations have already achieved excellent success in this regard, including China, South Korea, Singapore, Taiwan and Japan. This means that a growing global cadre of young people with graduate degrees and high ambitions are seeking entry-level work in consulting of all types.
The consulting industry is a multifaceted, global business sector that is facing many challenges and evolving quickly. At the highest level of the business is “management consulting,” the segment that advises top executives and boards of directors at Fortune 1000 firms on strategy and organization. McKinsey & Company, Inc., Bain & Company, Inc., Boston Consulting Group, Inc. and a handful of other companies are the most elite. Such firms may charge their clients anywhere from $300,000 to $1 million in monthly fees, with top consultants billing as much as $5,000 daily plus expenses, and associates at $1,500 or so. These consultants’ engagements for a multinational corporation may include analysis of multiple divisions and involve travel to several continents. Their suggestions often result in sweeping organizational changes, adding (clients hope) tens of millions of dollars to the yearly bottom line. Management consultants may take assignments involving many aspects of a client’s business, including marketing, acquisitions, finance, information technology, manufacturing, distribution, human resources, divestitures, government relations, facilities, telecommunications, environmental matters and more.
The growing globalization of business and industry in general led inevitably to the globalization of the leading consulting companies. Major consultancies operate offices in the most important business centers in Europe and Asia-Pacific as well as in North and South America. Africa is the next consulting frontier, as rapid economic growth is being enjoyed by a handful of African nations. Many consultancies operate worldwide and have multiethnic, multilingual employee bases. In particular, major consulting firms have opened significant offices in Brazil, India and China in recent years.
Annual revenues at top, global consulting firms run in the billions of dollars, and top consultants may each earn $200,000 to $500,000 or more yearly in return for grueling hours, high stress and many, many days spent traveling far from home. Despite these drawbacks, considering the high pay and the prestige, the best students at the best business schools frequently pine for posts in consulting. (An interesting exception to the grinding work and travel required of employees at many consultancies is found at Atlanta-based North Highland, At this innovative mid-sized firm, consultants find that their assignments are largely in the cities where they live, negating the need for extensive travel, and work/life balance is encouraged by the firm’s business practices.)
In contrast to the size and infrastructure of the leading management consulting companies, a large portion of the consulting industry is comprised of very small companies—in many cases these are one-person shops, perhaps operating from a spare bedroom at home. This part of the business has grown rapidly since 2000, as legions of well educated, highly qualified and thoroughly experienced executives and professionals were laid-off during corporate downsizing or took early retirement in exchange for an opportunity to work for themselves. These professionals have turned to self-employment as consultants, focusing on their specialties and combing their contacts for leads.
Despite recent superb levels of profitability throughout many corporate sectors, the days of unrestrained corporate spending are long gone. Corporate clients are now much more demanding when negotiating consulting contracts. Their demands are likely to include specific caps on overall cost, tight controls on travel and other expenses related to a consulting project, a demand for lower hourly rates and sometimes a penalty if desired goals are not met.
In an effort to control costs, some corporations that were formerly desirable clients have built their own internal consulting staffs. One interesting offshoot of this trend is that the internal consulting units at a few companies have begun offering consulting services to outside clients. This is increasingly common in industries, such as hospitality, that are focused on high levels of customer service. At the Walt Disney Company, long famous for customer satisfaction and innovative employment practices, a consulting unit called The Disney Institute is now teaching other firms how to better engage their customers. Likewise, The Ritz-Carlton Leadership Center, a unit of Ritz-Carlton Hotels (itself a luxury property subsidiary of hotel giant Marriott), is teaching client firms how to provide high levels of service to picky customers.
Going forward, consulting firms will be forced to compete fiercely for their engagements, and the engagements they receive may be relatively short-term or less profitable than assignments of the recent past. Corporate clients will be focused on a provable return on investment for consulting dollars spent. Specific goals will be set early in the process, and consultants will be under intense pressure to meet those goals. Large, multifaceted consulting companies will face fierce competition from smaller, niche companies. In particular, consultancies that can quickly improve their clients’ profits may have the best competitive advantage over the mid-term. Corporate clients may lean toward hiring consultancies with a proven ability not only to point out a corporation’s problems and strategic deficiencies, but also to implement solutions that cut debt, restore health to balance sheets and stabilize profits.
Historically, U.S. governments at local, state and federal levels have provided lucrative consulting contracts. Government at all levels has large needs for consulting in IT, security, human resources and other areas. For example, the latest Washington Technology ( list of Top 100 Federal Prime Contractors, based on contracts granted during the federal government’s 2012 fiscal year, ranks Lockheed Martin ($17.4 billion), Northrop Grumman ($9.1 billion), Boeing ($7.4 billion), SAIC ($5.9 billion) Raytheon ($5.6 billion), General Dynamics ($5.4 billion), Hewlett-Packard ($4.1 billion), Booz Allen Hamilton ($3.8 billion), Computer Sciences—“CSC” ($3.5 billion) and DynCorp International ($3.3 billion) among the top 10 firms in prime federal contracts for the year. Many of these firms’ federal contracts were down substantially from their 2010 and 2011 totals. These contracts are for consulting and services in information technology, defense, telecommunications, professional services and engineering. Note that the largest awards went to firms that are predominantly defense or aerospace contractors. The winding down of U.S. involvement in Afghanistan and Iraq is having a deep, negative impact on these defense-related contracts.
One of the fastest-growing segments of consulting has been information technology (IT). This segment includes consultants focused on e-commerce; telecommunications; intranet and Internet strategies and functionality; hardware systems design and implementation; software design, acquisition and implementation; and web site design and operation.
During the tech boom of the ‘90s, IT consultancies like the now defunct marchFIRST appeared out of nowhere and quickly attained annual revenues in the hundreds of millions of dollars. The ‘90s, through the widespread commercialization of the Internet and fiber optics, as well as the rapid spread of networked computing, brought a tidal wave of technology opportunities to light. Managers everywhere wanted to quickly ramp up new systems, from web sites to private data networks to advanced e-commerce systems. A concern over potential software problems when the new millennium turned in year 2000 (“Y2K”) also lead to massive consulting projects. Corporate clients turned to consultants, and the IT consulting companies boomed. These consultancies created marketing partnerships with leading hardware and software manufacturers so that they could quickly recommend, purchase and install technology system packages—at high profits to both the consultancies and the system manufacturers. Enterprise-level systems, which were supposed to seamlessly deliver real-time information from subsidiaries around the globe to top managers, became the standard at Global 1000 companies. In the end, corporate clients invested massive sums but didn’t always get the results they desired. Now, corporations have new IT needs thanks to the rapidly expanding fields of social networking, mobile computing, online employee collaboration and cloud computing and data storage.
Today’s largest IT consulting firms often provide outsourced IT services of many types. In fact, successful consultancies with IT roots have evolved into full-service companies. In many cases, they are now integral departments within larger technology-based firms. The IBM Global Services unit of computer giant IBM best illustrates this trend, as services now bring in more revenues for IBM than computer hardware and software. At such tech firms, a large portion of income is derived from outsourcing. That is, once these IT services firms have determined a client’s needs during a consulting or analysis phase, they may deliver turnkey services that include actual day-to-day operation of the client’s computer department and/or other departments. Not all of IBM’s competitors have been as successful as IBM in this regard. HP has also been focusing on its large consulting and services unit, which grew dramatically with its 2008 acquisition of EDS. While services now bring in about one-fourth of HP’s revenues, the firm has not been meeting its goals in this field, and in 2012 it wrote down $8 billion of the cost of its EDS acquisition. Dell acquired consultancy Perot Systems, marking a new strategic direction for the computer manufacturer.   Nonetheless, Dell has been struggling to maintain momentum and was likely to go private via a buyout by investors as of 2013. Meanwhile, many companies outside of the computer hardware and software field have successfully blended consulting and outsourcing into their offerings, developing dependable additional revenue sources by offering a complete line of services to their clients.
A major development in IT consulting has been the extremely rapid growth of large companies that are based in India but compete globally, such as Wipro, Infosys and Tata Consultancy Services (TCS). These companies quickly grew multi-billion dollar revenue bases as major contenders in the global IT sector. Additional hot competition for IT consulting budgets comes from software companies, such as Oracle, that have quickly built up large consulting units of their own.
For the near-term, the biggest opportunities for IT consulting growth will lie in three exciting areas:
1)            Big Data
2)            Cloud-based IT infrastructure
3)            Mobile apps and data services
In an interesting development, OEMs (original equipment manufacturers) of a wide range of products and components, from computers to hard drives to automobile components, now consult intensely with their clients in the product development phase, and are later involved in the actual manufacturing. This has led to the evolution of some OEMs into ODMs (original design manufacturers). These ODMs consult with, design for and then manufacture for their clients.
For example, an ODM might determine the needs for an in-dash stereo/radio system of an automaker client, design the system and finally manufacture the system. The automobile industry has become an environment in which major manufacturers, such as GM, rely heavily on a handful of component and systems manufacturers, such as Delphi, to consult in the design and engineering phase of new car planning. The newest generations of aircraft at Airbus and Boeing are designed and manufactured to a large extent by ODM partners scattered around the globe.
The consumer electronics and personal computer sectors are heading in the same direction. Contract electronics manufacturers such as Flextronics consult heavily with their clients in the design of new products such as computers, stereos or telecommunications equipment.
As technology has advanced rapidly and microchips have become integral components of many everyday items, consulting regarding design and implementation has become necessary to many types of manufacturers. Likewise, many types of service providers, such as those in telecommunications, must consult to a large extent with customers regarding their systems’ needs. Consulting in these types of situations may or may not result in additional fees, but can be vital pieces of the complete sales cycle. In many cases, the consulting functions at manufacturing and services firms have been developed into true profit centers with specific fee structures.

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Video Introduction to Consulting Industry
Complete list of market research data provided by Plunkett Research, Ltd. for the Consulting Industry
  • Consulting Firms Accept Assignments with Contingency Fees
  • Accounting Firms Taking Large Market Share of Consulting Contracts
  • Many Industry Sectors Seek Consulting and Outsourcing Income, Competing with Pure Consultancies
  • Major Corporations and Organizations Develop Internal Consultants and Seek Outside Clients
  • Corporate Clients Want Solid Returns on IT Investments
  • Federal Government Consulting is Curtailed in Some Agencies as Part of Budget Austerity and Defense Cutbacks
  • Consultancies Position Themselves to Serve Global Markets and Multinational Corporations
  • Offshoring to India Drives Changes in Global Consulting
  • BPO and KPO: White-Collar and Professional Tasks Are Offshored to a Growing Extent
  • New MBAs Desire Consulting Jobs
  • Complete list of statistics data provided by Plunkett Research, Ltd. for the Consulting Industry
  • Consulting Industry Overview

  • Consulting Industry Revenue & Expenses, U.S.: 2007-2012
  • Management Consulting Services Revenue, U.S.: 2007-2011
  • Environmental Consulting Services Revenue, U.S.: 2006-2012
  • Consulting Industry Employment, U.S.: 2007-2013
  • Table of Contents for Plunkett's Consulting Industry Almanac  
    See Full Table of Contents

    introduction 1
    how to use this book 3
    chapter 1: major trends affecting the consulting industry 7
    1) introduction to the consulting industry 7
    Profiles of Leading Consulting Companies are provided, including Public, Private, U.S., and non-U.S. Firms.  
    See Full List of Companies

    • ABB Ltd
    • Abelica Global
    • ABT Associates Inc
    • Accenture plc
    • Acorn Energy Inc
    • Acquis Consulting Group
    • ACS Actividades de Construccion y Servicios SA
    • Adecco SA
    • Advisory Board Company (The)
    • Affiliated Computer Services Inc
  • Affiliated Computer Services Inc
  • Agility Solutions LLC
  • Albany Molecular Research Inc
  • AlixPartners LLP
  • Alpha Financial Markets Consulting Ltd
  • Altran Technologies SA
  • Alvarez & Marsal Holdings LLC
  • Ameresco Inc
  • Amey plc
  • Analysis Group Inc
  • Key Consulting Industry Topics
  • Consulting
  • Management Consulting
  • Health Care Consulting
  • IT and E-commerce Consulting
  • Marketing consulting
  • Human Resources Consulting
  • Transportation, Supply Chain and Logistics Consulting
  • Outsourcing
  • Project Design and Facilities Management
  • Profiles of Leading Companies
  • Executive Mailing Lists