| | By Mick James
A friend of mine once
advised me there were
three things you should
never attempt to do
yourself. One was move a
piano, the second was
repoint a chimney. I
forget what the third was
but I suspect it may have
had something to do with
coming up with a
structural analysis of
the management consulting
industry.
Fortunately – and this
is the point my friend
was making – there are
people out there prepared
to venture up those
ladders. For the last few
years we have seen a
steady improvement in the
quality and nature of the
information gleaned from
its members by the
Management Consultancies
Association.
Unfortunately, this has
come at a price, as we
have to live with media
who consider any
expenditure on
consultancy to be folly.
So the year-on-year
increases posted by the
Association have not been
interpreted as welcome
signs of health in a
British knowledge
industry, but as evidence
of a collective descent
into madness. The abuse
of public sector
consulting figures has
been particularly
atrocious, with any
quoted figure immediately
divided by the cost of a
hospital or a police car
and portrayed as robbery
from the needy.
The problem for the
MCA is that in stating
aggregate figures for its
membership you end up | |
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| | Hill, the MCA's chief
executive. "We want to
ensure that people are
not selling a
non-consultant as
MCA-approved."
In the longer term the
plan is for the MCA to
use this core figure as a
platform for a much more
robust and quantitative
discussion about the
value clients derive from
consultants.
At the moment the
current report is
bolstered by an in-depth
client survey that shows
that most clients are
satisfied with their
consultants, most
projects come in within
or only slightly over
budget and timescale and
that they have a very
clear-cut view of what
they want from
consultants.
"It's a first step, a
very qualitative approach
to get something on the
value of consultancy from
the end-buyer," says
Hill.
What is interesting
here is that the key
priority is neither
cutting costs nor
increasing revenue, but
getting things done more
quickly. The only thing
the survey is missing is
a counterbalancing survey
of consultants about what
they think clients want
from them or value about
them, which could offer
some highly instructive
contrasts.
On the back of this
work, the MCA – which
accounts for around 70%
of the industry – has
taken the bold step of
dividing its membership
into six categories, | |
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| | envisaged as an
interlocking Venn
diagram. At the centre
are what it calls Type M
firms, who offer "pure"
management consulting.
Impinging on this centre
are the Type As,
accountancy firms
including, but not
limited to, the Big Four.
Once the lynchpin of the
industry and now in
revival mode, this sector
still accounts for a
healthy fifth of total
revenues. A smaller
category, Type E,
represents the
engineering and project
management strand, again
at one time a central
plank of the industry,
but now only 1% of the
total. The rest of the
industry is defined by
its involvement with the
wider world of IT: Type I
which also does IT
consulting, and Type O
which also do
outsourcing. Together
these two make up 9% of
the market, but
unsurprisingly the lion's
share is taken by the
Type Cs, the IBMs and the
Accentures who do
everything and take a
whopping 61% of the pie.
Two things occur here:
one is that a neat Venn
diagram has the same
appeal to the consultancy
industry as a nice smooth
patch of wet concrete has
to a stray dog and that
this picture is bound to
become a bit messier.
Consolidations and
opportunism are bound to
mess up what is at the
moment a relatively
focused industry. My
favourite scenario would
be for a player like IBM | |
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| | to tackle the lack of
competition in the audit
industry and set up a Big
Five audit firm. Stranger
things have happened.
The other is how much
genuine overlap there is
between the firms, and
how much of it is in the
"pure" consulting sector,
where the Type M firms
are prospering and
account for 13% of fee
income. This, I think,
answers those doubts that
some people have about
the ability of the MCA to
represent such a diverse
bunch of firms. It’s
possible that in the
future the consultancy
industry will go through
another phase of
demerger. At the moment
the mixed business models
hold good because clients
are happy with them: if
I'm enjoying my lunchtime
ciabbata I'm relatively
unconcerned about whether
I bought from Boots, M&S
or the local sandwich
maker.
It's always easy to
forget that consultancy
can only ever define a
negative space defined by
client problems, and
clients will always be a
destabilising force in
consultancy. A lethal
combination of pester
power with purchasing
clout can always
undermine the most
rational business model.
In the final analysis,
the structure of the
consultancy industry will
always resemble nothing
so much as a chair, which
bears the imprint of the
last person who sat on
it.
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| | adding a lot of apples to
pears. So a member of the
commentariat can pick up
on, say, some apparently
daft communication
exercise undertaken by a
redevelopment authority
in the Midlands and then
conclude "...and you
realise as a nation we
spend billions a year on
this sort of stuff".
The MCA's response
this year has been to
undertake a careful, if
potentially
controversial,
segmentation of its
client base, which raises
fascinating questions for
the future shape of the
industry as well as for
the MCA itself.
The first bold move is
to restate total fee
income in terms of
different service lines,
and restate a figure for
"pure" management
consultancy for 2006.
This is, of course, a
lower figure than the
headline figures stated
in previous years, but
still it shows an
increase of around 16%
over the previous year –
a lower rate of growth
than 2005 but still
healthy. In the future
the MCA will focus very
much on this area, partly
to ensure that clients
understand that this is
the area of its members'
activities that it
regulates.
"It's the stamp of
approval," says Peter | |
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