Global Market Outlook on Management Consulting
- In 2017, the global management consulting industry was valued around $260 billion, and it is expected to grow at ~4–5 percent to reach $285 billion by 2019
- New business models like crowdsourcing is evolving in the industry, which can be disruptive in nature. Wikistrat, HourlyNerd are few companies with such models
Global Management Consulting Market Maturity
- North America and Europe are highly mature markets contributing to three-fourth of the consulting revenue. Supplier capabilities to serve complex client requirements in these regions are high. The APAC consulting market has relatively lesser market share
Global Management Consulting Drivers and Constraints
Need for the operational efficiency, compliance to regulations, and technological advancements are driving the demand for consulting services. On the other hand, freelance consulting industry and in-house consulting groups are posing threat to traditional consulting business model
- Shift toward Process Improvement and Efficiency
Organizations are constantly trying to reduce costs and increase their efficiency, so that the cost savings can be transferred to the customer as a means to withstand intense competition. This is leading to growth in demand for business process improvisations and consulting related to operational efficiency.
- Automation and Digital Media & Marketing
MNCs are actively seeking consulting advice on following technology skill sets: Agile, Artificial Intelligence, and analytics. Both product and service corporations are increasingly investing on user experience design, customer-focused data analytics, and customer engagement strategies, so that corporate buyers have greater demand for digital marketing and transformation consulting.
- Regulatory Changes
Regulatory changes, like the US Tax Reform, BREXIT, EU GDPR (General Data Protection Regulation) and others, have led to an increase in demand for consulting across all major service lines. In order to stay compliant to regulations, multinationals will seek high-value advice, thereby fueling the demand for the management and regulations consulting
- Freelance Consulting Sector:
Pricing and flexibility offered by independent/freelance consultants has led to rapid expansion of freelance consulting segment. For e.g., in the UK, independent consulting industry account for 10 percent of £10 billion consulting market. Freelance consulting sector is hence expected to eat up traditional consulting firm/industry revenues, in the near future
- In-house Consulting Groups
Large organizations are setting up in-house consulting groups and recruiting former consultants into management positions, thereby reducing the usage of external consultants.
Few other reasons hampering consulting industry growth, revenues, and clientele are time crunch for nurturing client relationships, consultant’s need to provide more value to clients at the same cost, and unavailability of sufficient time to effectively respond to client RFIs/RFPs
Cost Structure Analysis
- Cost structures for management consultants vary in wages and profit margins
- Industry players, like Accenture and Deloitte, tend to have high profit margins, due to their ability to leverage capacity in many fields to boost sales and achieve economies of scale
- Smaller firms have considerably higher wage costs, as profit margins are slimmer and majority of revenue is paid in wages