| Earlier this year the Management Consultancies Association published its Consulting Industry Report 2005/6 and we thought it worthwhile republishing some of the key messages which emerged from the report. |
| Private sector clients increasingly fuel management consultancy boom |
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Overall the industry
achieved 18% growth in
revenues this last year
– with pure management
consultancy growing 40%
year on year. Whilst the
figures are UK-centric,
they are encouraging for
practitioners across
the globe. They
represent a scale of
growth that’s not been
seen since the heady
days of the dot-com boom
– and the good news is
that more of the same is
expected in 2006/7.
Coupled to the 18% rise
in revenues has been a
27% growth in the number
of consultants employed
by the UK consulting
sector. There has been
of a “War for Talent” in
consulting these last
months – and strong
demand has also
translated into higher
salaries according to
the MCA report, as firms
compete for what is a
very limited pool of
suitable staff.
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| | and offshoring to try to
restore some of this
lost margin. Last but
not least, the industry
is portrayed as a series
of micro-markets, with
some sectors and firms
thriving whilst others
are still struggling.
Growth by service
line – a tale of
differing fortunes
Delving into the
growth figures, MCA
member firms reported a
25% growth in
like-for-like revenues
this last year – with
that membership believed
to account for 70% of
the total UK consulting
industry. Once
performance of
non-members is taken
into account (and these
are predominantly
strategy firms and small
independents), growth
for the industry as a
whole stands at 18%,
taking total UK
consulting revenues to | |
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| | £11.9bn per annum.
Hidden within this
overall growth figure is
a dramatic
transformation in the
fortunes of different
service lines:
-Fee income from
outsourcing grew at a
slower rate than in
previous years (15%
like-for-like), and most
of this growth came from
the delivery of managed
services rather than
outsourcing-related
consulting;
-Pure management
consulting revenues grew
by 40% like-for-like,
reversing the drab
performance of recent
years;
-IT consulting grew
at 10%, slightly down on
2004;
-Systems development,
meanwhile, shrank by
5%;
Looking at the
evolution of our
industry client base,
the private and public | |
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| | sector markets for
consulting in the UK
grew at almost the same
rates in 2005 (22% and
23% respectively). Yet
while the public sector
continues to be an
important market for
consultants, there is
every sign that demand
is now slowing, as
specialist skills are
transferred from
consultants to civil
servants. As testament
to this trend, growth in
the public sector
decelerated from 114% in
2003 to 60% in 2004, and
has slowed further in
2005 to 23%. So it seems
the baton is being
passed back to the
private sector, which is
expected to account for
an increasing share of
consulting revenue
growth in the coming
year.
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Yet while the picture
is indeed rosy for those
pursuing a career within
consulting, things
aren’t quite as
clear-cut for consulting
partners. For, alongside
this growth in revenues,
there’s been a
deterioration in fee
rates for some types of
work, squeezing margins
within the sector – and
that’s before rising
salaries take their toll
on margins. The
commoditisation of some
types of consultancy is
harming the long-term
margins that can be
earned in the sector –
and partners will need
to juggle with
resourcing strategies | |
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