Two threats facing the consulting industry

As the consulting industry gradually emerges from the dark days of the Great Recession, the numbers are creeping back up to pre-recessionary levels: utilization and billing rates are up, pipelines are bulging and recruiters are busy. But even now, with all signs pointing skyward, new trends are emerging that might threaten the industry's return to lucrative prominence.

In a concise, well-argued piece, Fiona Czerniawska, founder of sourceforconsulting.com, discusses two emergent trends that could shake the consulting industry's tree: internal consulting units and consultant-managers.

Internal consulting units

Simply put, it's expensive for companies to hire consultancies to address their economic concerns.  As is the case in any industry, you pay for what you get: the most learned and successful consultancies will invariably demand the most for their services. After a brief decline during the late Recession, billing rates are increasing steadily again, as they did for years before economic disaster struck in 2008. Now, many large multinational corporations have had enough. Their discontent has given rise to the use of internal consulting units.

These in-house consultancies are "typically relatively small," Czerniawska notes, and "are typically staffed with project and change managers" who are tasked with solving many of the same problems their employers would have hired outside consultants to accomplish. Not only would the addition of an internal consulting division save money in the long run, the author suggests, it would also bring new skill-sets to the table that could be useful at all levels of a massive organization. Czerniawska says that internal consulting units now "pose a genuine threat to consulting firms," using Germany as an example of one powerful market in which the trend has gained traction.

While it may indeed pose "a genuine threat", Czerniawska isn't convinced that this trend could bring the industry to its knees. For one, she says, in-house consulting shops will struggle to provide insight on matters that require specialized knowledge. And she's right—even at the most prestigious independent consultancies, the "generalists" are typically strategists who couldn't provide the answers that, say, an energy, HR or operations consultant might provide a company. Czerniawska also argues that in-house consultants would be too close to their own brand to make the cold, calculated decisions that unbiased consultants regularly have to make. When "sensitive issues are concerned," she writes, like the prospect of harsh cost-cutting measures (read: layoffs) or budget allocation matters, these units will be rendered "less able to be objective."

Consultant-managers

If internal consulting units at major corporations have the potential to hurt the consulting industry, the emergence of the "consultant-manager" role could strike an even more sinister blow. Who is this ominous fellow, the consultant-manager? Czerniawska describes the role as "the former consultant now occupying what may be a very senior position in a client organization." In other words: the top consultant who knows all the tricks of the industry, brought onboard to supervise and direct the work of the independent consultants brought in from the outside. Ouch.

Czerniawska's condemnation of the consultant-manager follows sound logic: if a consulting project's senior management is internal to the client, it "erodes demand for senior people" and increases demand for "generalist support." That trend, the author argues, will "push the consulting firms affected further towards body-shopping" and, ultimately, "we'd end up with a very different consulting industry."

That is certainly true. Imagine a world in which ex-consultants, now working for the client, are lording over their ex-colleagues with all the power that a senior corporate post would afford. As a corporate stooge, the consultant-manager would likely be tasked with making projects shorter, more intense, and less lucrative for the consultancies. Whether or not that would ultimately be in the client's best interest is uncertain, but make no mistake—the consultant-manager is one ominous fellow who knows how to make it happen.

Read Czerniawska's post here:
Consultant-managers: something else to worry about

Photo: Dennis Cook, AP