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Well fed and growing fast on the back of...
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Well fed and growing fast on the back of corporate demand
TONY JACKSON asks how long the phenomenal growth in the use of management consultants can continue
THESE are the salad days of management consultancy. The big firms such as Anderson or McKinsey are enjoying revenue growth of at least 20% and more and more high-flying MBAs from top business schools are turning to consulting as their first choice of career. But there is a snag. The growth rate of 20%, which has been going on for several years now, is at least twice that of the corporations which pay the consultants' fees. How long can the industry go on outgrowing its clients?
Peter Davis, European director of management consultancy for Price Waterhouse, argues the pressures on corporations which have produced the extra work for consultants will not go away. Take the trend towards outsourcing IT, he says. "People are saying what is the cost of me having an in-house IT shop and keeping it technologically up to date. Isn't it better to use advisers who are forced to keep up to date?" Or take the trend to globalisation, he says. "There is a cost to being global and having an international mindset does require people moving around. For a US multinational, the cost of having a US person in Europe is very high. So companies are looking to consultants with global experience who can produce world-class solutions." The growth in consulting has been most marked in the US, where share prices have risen at an almost unprecedented rate in recent years. Sooner or later Wall Street's bull market will end. Can consulting avoid the fall-out? In the end, the growth prospects for consulting may depend on two linked propositions. First, the consultants represent the managers of the future: rootless and versatile, acquiring knowledge around the globe and dispensing it for a fee. Second, the corporation as we know it is becoming atomised. Big old companies will either cease to exist, or will end up as clusters of much smaller organisations. If that is the future, well and good. If not, the suspicion remains that something is wrong. It is one thing for corporations to relinquish functions in which they have no particular advantage. It is another for them to hand over their brains. - Financial Times
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