| 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 | |
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| | 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 | |
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| | total UK consulting
revenues to £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 | |
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| | client base, the private
and public 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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| | suitable staff.
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 and offshoring | |
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