Landscape Shifts In Management Consulting Require Consulting Firms To Change Their Approach

Gimme 3 — Insight Interview with TBR’s Subject-matter Experts

In TBR’s new blog series, “Gimme 3 — Insight Interview with TBR’s Subject-matter Experts,” Principal Analyst Patrick M. Heffernan discusses our latest and most popular research with our analyst team.

This month Patrick chats with Senior Analyst Kelly Lesiczka about the management consulting space, including the outlook for consultancies’ resource management strategies and revenue trajectory. Ongoing landscape shifts within the management consulting space have pushed firms to re-evaluate business structures and portfolio offerings.

Patrick: TBR’s Management Consulting Benchmark looks at 13 vendors. Did any of them do something in 2022 that surprised you or really stood out from the rest of the pack?

Evan: EY’s potential split stood out, as it would mark a significant change in the consulting landscape. While most firms are reorganizing to blend technology with consulting and to capitalize on opportunities brought to light after client’s technology-driven transformations, EY’s potential split seems to be the most drastic business change to respond to the client needs. Boston Consulting Group (BCG) looks to accomplish the same goal but on a smaller scale with the establishment of BCG X, which combines BCG Digital Ventures, BCG GAMMA and BCG Platinion. The development of BCG X creates a hub for BCG to build out its technology presence and expertise to reach the same opportunities as those vendors with larger-scale technology practices.

Patrick: Growth across the benchmark — that is, all the vendors combined — has fluctuated kind of crazily in the last few years, dropping to just under 2% in 2020, jumping to almost 13% in 2021, and now you’re projecting around 9% for 2022. Nine percent isn’t terrible; it is close to the average pre-pandemic, but what are you expecting in 2023 and 2024 when it comes to revenue growth?

Kelly: Recessions typically work out well for consultancies as clients look for guidance around how to best navigate changing market conditions, indicating the current market conditions will serve consulting vendors well during 2023. Estimated consulting revenue for the benchmarked firms will likely decelerate annually, as firms look internally to reinvent business models and refresh portfolio priorities.

Moving into 2023, revenue will be generated around two key focus areas. The first area will be alliances, which will continue to shape the way firms approach client engagements and technology establishment. Partnerships have become more important and central to firms over the past few years and will serve as core strategy levers to move them through 2023.

Second, firms will look internally to ensure business models and organizations are properly aligned with both portfolio and market changes. Firms that ensure access to expansive and diverse partner networks with different technology and industry knowledge, combined with a flexible and understandable business model, will be best suited to accelerate revenue growth through 2023 and 2024.

Patrick: One thing we hear about constantly across the IT services and digital transformation industries is the challenge around recruiting and retaining talent. When you think about the vendors in the benchmark and their talent strategies or initiatives, which ones are addressing this issue best?

Kelly: Talent competition challenges firms to retain employees and create consistency across portfolio and client management. While each firm sets forth different resource management strategies and recruitment tactics, certain firms have been more successful at improving culture and environments.

One example is BCG: The firm retains a more “old school” reputation centering around a different culture from startups and the like, creating additional difficulties for the firm to retain employees. That being said, BCG has pursued new initiatives — such as flexible work environments, including the opening of WeWork spaces, and newer training programs that support the development of skills — to attract and retain new employees.

Another firm to watch for resource management strategies would be PwC. The firm has launched different programs and platforms that more closely monitor employee metrics and benefit usage to improve engagement and thus retention. While the programs are still evolving and being brought to scale, the efforts and initiatives to track engagement and career progression will help employees envision a path forward and their place in the organization overall.

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