Could we be witnessing a transformation in the consulting industry?

Could we be witnessing a transformation in the consulting industry?

It’s always nice in this game when you float a theory and have it at least partially confirmed a couple of days later. Last week I posited that a new breed of consultancy firm fuelled by refugees from the old Big Four was beginning to compete head on with the current market leaders for high value work and talent. This new tier in the market would potentially separate off project design and management and relegate the bigger consultancies for system building, integration and outsourcing, unbundling the “design, build, run” model that’s dominated consultancy for years. The only thing I was lacking was a suitable name for this emerging strand

A couple of days later at the Top Consultant recruitment fair, Ernst & Young neatly filled the gap. I was immediately intrigued to see a Big Four firm so blatantly competing head to head with the likes of Accenture and Capgemini, and what intrigued me was how different and deliberately focused their message was. I hope to write in more detail about Ernst & Young’s re-entry in to the consulting spaced, but in a nutshell their stance is that of “trusted advisers”: remaining firmly on the client side of the table with a limited palette of services that nevertheless bring all the capabilities of an international professional services firm to bear on the client’s issues.

The question is, does this represent a decisive shift for the market, or is this just a case of firms which can no longer achieve scale in IT or outsourcing work making the best of the opportunities that are left?

The second argument is easily made: the structure of any consultancy firm, even the whole industry is usually best explained as a series of historical accidents. Even while accountancy firms were recruiting hundreds of SAP programmers in the 1990s. you never saw an IT firm buy a firm of auditors, and the pressures that saw them divest those IT assets were almost entirely external.

However, the period in which three of the Big Four exited the consultancy market may well represent a high-water mark in the vertical integration of the industry. At that point it was fashionable to conceive of consultancy as a river, with high-value, low-volume strategy work upstream and high-volume, low margin implementation and IT work downstream. Then the players began to encroach on each other’s territory, perhaps best symbolized by EDS’ purchase of A.T. Kearney. As that relationship now unravels, you have to ask, are the forces which pushed EDS and Kearney in opposite directions at work in other consultancies?

Note that this has very little to do with the direction any of these firms want to pursue—the migration of individual talent alone could settle the issue. Accenture and IBM, for example, have roomfuls of strategy consultants but how happy are these people with their company and personal branding? Particularly as the rest of the industry is assiduously pressing the claim that consultancy for these firms is little more than pre-sales outsourcing or systems integration work?

Client needs have also shifted. Vertical integration used to be justified by constant references to a mythical old school of consultants who wrote reports which were inevitably described as “gathering dust on the shelf”. The new paradigm of consultancy was to roll up your sleeves, do the job or even take over the process, with any doubts about conflicts of interest resolved by innovative risk/reward structures.

For a long time this paradigm worked, because pretty much<