The consulting market - realities, myths and analysis (I)
The terms consultancy and consulting are often used interchangeably to explain a set of knowledge acquired and implemented in a specialised field or fields. Consultancy or consulting involves assuming an advisory role in a given discipline or set of disciplines. Consultants provide varying degrees of advisory services in a range of disciplines: finance, operations, strategy, human resource and technology, among others.
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Generally, there are two major forms of consultants. These include internal and external consultants. The responsibilities and functional dispositions of these two forms are similar in many respects, with at least two clear differences: internal consultants are usually full-time employees and listed on the regular payroll of their employers.
However, external consultants are often remunerated only when their services are engaged by an organisation. Finally, internal consultants are sometimes “heckled” in the course of discharging their professional responsibilities. Stated differently, internal consultants are sometimes compelled by their employers to present analyses and findings in a particular or desirable manner.
In addition, internal consultants are believed to have a better understanding of their organisation’s cultural and functional dispositions than external consultants. Conversely, external consultants often tend to be “resolute” and “firm” in the discharge of their professional duties.
External consultants have the opportunity to address compelling and varied challenges of all shapes of organisations – small-, medium- and large-sized organisations. However, internal consultants may be limited in scope and function since their responsibilities are often limited to their organisations.
The foregoing notwithstanding, there are a number of internal consulting firms that have developed into external consulting firms. Examples include Shell, Philips, GM, Porsche Consulting, among others.
The choice of internal or external consultant is often tied with the financial strength of the hiring organisation. Thus, the budgetary strength of a firm strongly influences its decision to opt for an external or internal consultant.
Segments in the consulting industry
Extant research reveals the existence of myriad of segments in the consulting industry. This could be attributed to the existence of numerous disciplines across the globe. Advisory experts believe there are over two hundred (200) different segments in the consulting industry.
Different forms of typologies have been advanced, over the years, by different analysts to ensure apt definition and valuation of the consulting industry.
Varied definitions of the consulting industry are applied by analytical firms such as IDC or Source Global Research, Gartner, and ALM Intelligence. The latter was formerly known as Kennedy Consulting Research and Advisory.
Also, representative bodies such as the Management Consultancies Association (MCA) and European Federation of Management Consultants (FEACO) apply different definitions to the consulting industry. In line with common practice among many consulting firms across the globe, the typology of ALM Intelligence is applied to this write-up.
Major segments of the consulting industry
Further categorisation of the over 200 various segments identified in the consulting industry could result in the major segments outlined in Figure One.
The data in Figure One depicts the existence of five distinct segments: strategy consulting, operation consulting, human resources consulting, financial advisory consulting and information technology consulting.
The sixth segment, management consulting, comprises an amalgamation of strategy, operation and human resources consulting.
Consultants engaged in strategy consulting provide the requisite consulting services for the drafting of effective government policies and the development of meaningful strategies for businesses and corporations.
Issues related to business, organisation and management are often handled by management consultants. Operation consultants provide useful advice in the areas of outsourcing and finance, performance on day-to-day operations, procurement, supply chain, process management, among others.
Human resource consultants provide clients with advisory services on meaningful human capital development; and effective contribution of human capital to attainment of organisational goals and objectives.
Financial consultants are often called upon when clients are interested in restructuring; require actuarial, forensics and litigation services, and others.
Technology consultants often provide the technology advice needed by organisations to ensure the effective management and continuous improvement in their information technology infrastructure.
Main segments and key service areas
Figure Two presents useful information on the essential services provided by consultants under a major segment. We identify five (5) key service areas under strategy consulting; and six (6) key service areas under information technology consulting.
It is worth noting that the consulting segments and areas outlined in Figure Two are not mutually exclusive; a consulting firm or consultant may engage in the provision of advisory services across segments and key service areas.
A consultant may be knowledgeable in more than one area. This would afford him or her the chance to offer advisory services to varied clients with different consulting needs.