Consulting

Consultants and their clients are in a constant state of flux due to changes in government legislation, globalization, new technology, evolving business trends, and many other factors. Consultants interact with clients via mobile technologies, social media, cloud computing, and collaborative software, and many clients expect consultants to be available around the clock. Businesses are implementing next-generation technologies such as mobility and cloud computing, advanced analytics software, Internet of Things, artificial intelligence, and blockchain technology to drive performance, and consulting firms must provide advice and “thought leadership” regarding these technologies. Personal skill requirements are also changing. Consulting magazine reports that firms are increasingly seeking job candidates who have the “ability to problem-solve and individuals who can bring more data-rich and asset-based solutions to market.” New and changing health care and financial laws and regulations are creating demand for consultants with experience and specialized training in these areas.

New Digital Models Creating New Opportunities

Many publishing, entertainment, and telecommunications companies are creating new digital business models (paywalls, e-pubs, video-on-demand, etc.) to meet consumer demand. Businesses, nonprofits, and government agencies use all types of technologies (e.g., Internet of Things, cloud computing, data analytics, back-of-office robotic process automation, artificial intelligence, cognitive computing) to better understand their customers, provide services to constituents, or work more effectively.

Consulting firms are adjusting to these changing client requirements by ramping up their focus on digital-strategy consulting. Deloitte, Booz Allen Hamilton, and Capgemini have launched dedicated digital practices, while other firms, such as PwC and IBM, have acquired existing digital-strategy firms. “Consulting firms with digital-consulting practices are also snapping up design and innovation firms,” according to Consulting. For example, West Monroe Partners acquired GoKart Labs, a Minneapolis-based digital product studio that works alongside clients to design, and build digital experiences to solve business problems. “When you incorporate GoKart Labs’ iterative design thinking and product expertise into West Monroe’s proven consulting approach and deep-rooted industry teams, our clients will be able to achieve even better returns, faster, for their digital transformation efforts,” said Greg Layok, managing director of West Monroe’s national technology practice, in a press release at the West Monroe Partners Web site.

The global digital transformation consulting market size is expected to grow from $5 billion in 2020 to $11 billion by 2026, according to Facts & Factors. The market research company reports that “demand for digital transformation consulting is being driven by an increasing requirement for rapid deployment of a digitized omnichannel approach for boosting business functions across various businesses. Due to continually changing market and client conditions, business leaders frequently struggle to complete large projects. This has also helped to drive up demand for digital transformation consulting.”

Generative AI Will Have Big Effects on the Consulting Industry and Beyond

Generative artificial intelligence (AI) is one of the newest technologies in the consulting industry. It is a form of machine learning algorithms that can be used to create new content (including text, simulations, videos, images, audio, and computer code), as well as analyze and organize vast amounts of data and other information. One of the best-known examples of generative AI is ChatGPT, released in late 2022 by the San Francisco-based company OpenAI. “Easy-to-consume generative AI applications like ChatGPT, DALL-E, Stable Diffusion, and others are rapidly democratizing the technology in business and society,” according to A New Era of Generative AI for Everyone, a report from Accenture. “Anything conveyed through language (applications, systems, documents, emails, chats, video, and audio recordings) can be harnessed to drive next-level innovation, optimization and reinvention.”

Generative AI will be used in-house in the consulting industry, as well as to provide better services to clients. Accenture says the following functions will be improved by the use of generative AI:

• Advising: “AI models will become an ever-present co-pilot for every worker, boosting productivity by putting new kinds of hyper-personalized intelligence into human hands.” Areas of use include corporate strategy, competitive intelligence, customer support, sales enablement, human resources, and medical and scientific research.
• Creating: Generative AI will bring innovation and reduce time expenditures in production design, design research, visual identity, naming, copy generation and testing, and realtime personalization, among other fields.
• Coding: “Software coders will use generative AI to significantly boost productivity—rapidly converting one programming language to another, mastering programming tools and methods, automating code writing, predicting and pre-empting problems, and managing system documentation.”
• Automation: Generative AI “will catalyze a new era of hyper-efficiency and hyper-personalization in both the back and front office—taking business process automation to a transformative new level.”
• Data Protection/Compliance: In the long term, types of generative AI will be developed to proactively identify risk, protect against fraud, and improve regulatory compliance. But there are also downsides to this technology. In the short term, Accenture warns that “organizations can expect criminals to capitalize on generative AI’s capabilities to generate malicious code or write the perfect phishing email.”

The use of generative AI will change the modern work world, allowing businesses and other organizations to save time, obtain information insights that were impossible or hard to achieve in the past, and improve customer service, among other benefits. But the use of this technology will also create many challenges. It will eliminate or reduce the need for many low-level jobs, create the need to train employees to work effectively with AI-infused processes, and create demand for workers to develop AI-based software and ensure that generative AI processes are being used appropriately and ethically and generating accurate data. New career fields that may emerge due to the introduction of generative AI include generative AI utilization directors, implementation specialists, product and adoption managers, quality controllers, editors, engineers and software architects, and output auditors. Consulting professionals will play a major role in both helping their companies integrate and use generative AI technologies, as well as providing expertise to clients regarding these issues.

Generative AI is already being used in many industries, but this technology is in the early stages of development. It is only as good as the information it receives (or that is available online or through other sources) before it creates new content. Many ethical, operational, and data security issues must be addressed before the technology is fully integrated into the regular operations of businesses, government agencies, nonprofits, and other organizations.

The Crowdsourcing of the Consulting Industry

Companies are increasingly utilizing freelance and transactional-style consulting services instead of the services provided by traditional consulting firms to reduce costs and enjoy more operational flexibility. For example, a company called Wikistrat operates a global network of more than 5,000 subject-matter experts to provide consulting services to companies, organizations, and government agencies. Another company, Catalant, offers a crowdsourced marketplace that matches businesses with 80,000 freelance business experts. “With on-demand consulting increasingly an option, people with analytical minds and a taste for problem solving may not have to sign up with a big consulting firm if they aren’t interested in the travel,” according to Mark Garrison, a former reporter and substitute host for NPR’s Marketplace.

Some traditional consulting firms have taken note of this trend by launching their own freelance-style consultancy branches. For example, Deloitte Pixel uses crowdsourced consultants, in collaboration with its own consultants, to solve an array of business problems.

An Increasing Focus on Risk Management

Hackers. Corporate espionage. Terrorism. Infrastructure breakdowns. Brand reputations threatened by negative social-media posts. Volatile fluctuations in the cost of raw materials. Hurricanes, tornadoes, and floods. Worldwide pandemics. These are just a few of the challenges faced by companies today. Organizations are becoming more aware of how these issues can negatively affect productivity and profits. Consulting magazine reports that an increasing number of clients are asking consulting firms to advise on IT risk, supply chain disruption, brand management, and other risks. As business becomes more globalized and risks increase in number and complexity, look for consulting firms to expand their risk management departments. “Consultants with strong risk and governance capabilities are finding great opportunities in helping clients to better define and understand risk culture, and integrate it into their current business models in measurable ways,” advises Consulting.

Change Management is Again in Vogue

Many clients no longer want to pay consultants for mere strategies. In addition to providing solid, well-researched advice on issues such as cost reduction, productivity improvement, and revenue growth, consultants are increasingly expected to be available—at the very least by phone and more often on a part-time basis at the client site—to oversee the implementation of their strategy. Consulting magazine says that this trend has prompted the reemergence of change management consulting as a highly sought-after service.

Offshoring and Working Abroad

Like many other industries, the U.S. consulting industry is beginning to offshore some consulting work to foreign countries, where consultants often are paid lower salaries. This will reduce employment for consultants in some industries in the United States.

On the other hand, as U.S. consulting firms expand internationally, some U.S.-based consultants are being asked to work in these foreign countries to help companies build their businesses. (These workers earn higher salaries than consultants in foreign countries who are doing offshored consulting work.) Many large consulting firms have offices in Europe and Asia, and others are opening new branches in emerging business markets such as India, China, Brazil, and many African countries. Working in a foreign country can be exciting and rewarding. But not every consultant gets a dream posting to Paris or London. You might be sent to a lesser-known city with few cultural amenities, or a major city with high crime or serious pollution issues. For example, many Chinese cities (especially Beijing) have life-threatening pollution problems, which are forcing many residents to stay indoors during high-pollution days or even move to healthier environs.

Small Is In

A large segment of the consulting industry is made up of very small consulting firms—in many cases, firms comprised of only one individual. The number of smaller consulting companies has grown rapidly in the last decade as technology allows for easier communication, collaboration, and research, and more people are able to work remotely. It has also grown as a result of corporate layoffs and downsizings, which led to many highly skilled workers with excellent industry contacts deciding to start their own consulting firms. “Freelancers working out of their homes, with little overhead, may be able to quote a price much lower than a multi-million dollar consultancy,” according to InfoDesk.

Becoming Fast Friends

Mergers and acquisitions remain commonplace in the consulting industry as firms seek to expand their service offerings, promote efficiency in operations, and take advantage of shared functional and industry strengths of other companies. For example, Deloitte took over the Monitor Group in 2013, greatly increasing its market share and speeding up its expansion into strategic consulting. Another industry giant was formed in 2010 when Towers Perrin and Watson Wyatt merged to form Towers Watson. Other major moves include Deloitte’s acquisition of mining consultancy Venmyn; Hitachi Consulting’s acquisition of the business operations consultancy Celerant; Accenture’s acquisition of Kurt Salmon, a global strategy firm focused on the retail industry; Duff & Phelps' acquisition of Kroll, a corporate investigations and risk consulting business; Bain & Company’s acquisition of FRWD, a digital marketing consulting firm; and Accenture acquired data-driven strategic advisory firm, Strongbow Consulting, in 2023, gaining their expertise in technology transformation. What do all these mergers and acquisitions mean for you? Some of these deals increase company revenue, which may translate into more job stability, more company perks, and higher pay. On the other hand, there are many stories of mergers and acquisitions that end up causing poor firm performance and layoffs, with the new firm sometimes deciding to eliminate positions (or even entire departments) that are considered redundant.

Cost Pressures

The Great Recession (December 2007–June 2009) and the COVID-19 crisis (which began in late 2019) dampened revenues at many large companies. Although the economy is slowly picking up, many organizations are cutting costs and making it clear to consulting firms that the days of unrestricted spending are gone. Plunkett Research, Ltd. reports that companies are “now much more demanding when negotiating consulting contracts. Their demands are likely to include specific caps on overall costs, 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.” Thirty-three percent of consultants surveyed by Consulting in 2016 (the most recent year for which data is available) reported that clients were negotiating travel expense limits—up from 20 percent the year before. Clients are also demanding that work be carried out by senior consultants, not entry-level consultants and associates (as was common in the past). Additionally, some companies are working with freelance consultants and transactional-style consulting firms to reduce costs. The technology firm InfoDesk reports that “some consultancies are providing added value technology, like artificial intelligence, with their advisory services in order to differentiate themselves within the pricing ecosystem.”

The Rise of Internal Consulting

Recent economic downturns have caused many companies and other organizations to rethink the massive expenditures they make each year on external consulting services. The average consultant bills $150 to $200 an hour, and many organizations, faced with declining revenues, cannot afford, or are unwilling, to pay these rates. In response, a growing number of Fortune 500 companies and organizations (such as Airbus, American Express, Capital One, DHL, Johnson & Johnson, and the Mayo Clinic) have created their own internal consulting departments to tackle issues formerly addressed by outside consultants. These departments, which provide a cost-effective alternative to the large consulting firms, “pose a genuine threat to consulting firms,” according to Fiona Czerniawaska, founder and CEO of Source Global Research. Czerniawaska, though, doesn’t believe that internal consulting departments will bring the consulting industry to its knees. She says that in-house consulting firms sometimes have difficulty providing specialized knowledge to their employers and might have problems being objective when it comes to sensitive company issues such as layoffs and budget allocation planning. The bottom line is this: there will still be demand for external consultants, although it may not be as strong as in the past.

The War for Talent and Market Share

The elite consulting firms continue to compete for the services of top consultants, but another challenge they face is maintaining staffing levels and the quality of workers in response to industry demand. In addition, traditional consulting firms are facing competition for workers and customers from investment banks (many of which have developed strong research departments in different sectors to improve their valuation capabilities). According to “New Approaches to Strategy Consulting,” by Marc Kitten, many analysts at these banks are “former strategy consultants who have been trained to integrate strategic options into their thinking.” Research houses such as Forrester and Gartner are also developing consulting services, according to Kitten, to “capitalize on their research and analytical capabilities, and to capture part of the value chain.”

Specialization

Insiders agree that the future of consulting seems to lie in specialization. Big consulting firms are expanding their specialty divisions, and boutique consulting firms are growing rapidly by focusing on hot industry niches such as the biotech industry or artificial intelligence consulting. According to Kitten, the industry is “seeing an interesting ballet between the traditional firms and the smaller players, each jumping from one lucrative specialized opportunity to another. Often the opportunity is linked to a global issue such as corporate governance, derivatives, renewable energies, elderly care, waste management, or pensions, to name only a few.”

The conventional wisdom at firms such as McKinsey and Bain used to be to develop generalist consultants who could handle work across all sorts of industries, geographies, and business functions. However, today, clients increasingly demand that consultants possess prior knowledge in some specific, relevant area. While most larger firms still hire generalists, they ask consultants to specialize early in their careers, often only two or three years after starting at the company. So, as a newly hired consultant at a generalist firm, you will work for a time on a wide variety of project types. But, after a couple of years, you might be asked to focus on a particular area and be placed on projects in just one business or industry function. Generalist firms sometimes also hire industry experts who might follow different (and possibly accelerated) career tracks than those established for standard-hire consultants. The so-called “rise of the super-boutique” involves not only rapid growth among specialist consulting firms but the creation of highly specialized practices within the large generalists.

The Rise of Environmental, Social, and Governance Consulting

Environmental, social, and governance (ESG) is an umbrella phrase for how a business or other organization interacts with society and the environment. ESG issues are becoming increasingly important to companies and other organizations. They include climate change and wider sustainability; environmental compliance and liability management; diversity and inclusion; employee development and retention; customer welfare; community relations; and business ethics and governance, among others. “Clients are seeking consultants who can help them integrate ESG considerations into their business strategies, as they recognize that ESG performance can impact their reputation, risk profile, and financial performance,” according to NMS Consulting. There is also a need for in-house consultants to examine their organization’s ESG practices. The worldwide ESG and sustainability consulting market is expected to have a compound annual growth rate of 17 percent from 2022-2027, and the global market will reach $16 billion by 2027, according to Verdantix, a research and advisory firm.