Due to the virtualization of everything, the Cloud, broadband, the gig economy we are entering the next phase of management consulting. After 100 years of consulting with the current model based on full time consultants, we are taking advantage of both the new definition of a job and new technology – we are adapting our sourcing approach to complement the full-time worker.
This is not accidental, it has been coming for some time and the last Recession was the spark that ignited the current revolution. How?
The classical model of consulting business was based upon hiring just the right amount of consultants that could bill approx 2000hrs/year/person. The economics were tied to a fixed cost and expenses. During good economic times the business would hire consultants to meet the demand. They could also reallocate consultants that completed work onto other work. Rates were high for the most part and the consultant, who owned the IP, was in effect in a position to replace full-time workers at the client’s business for project related work.
The first critical impact to the model was sometime in the 90’s when off shore consulting companies were vying for the commodity work – that is developement and implementation. The offshore came in with a low-rate business, somewhat of a on demand model where bodies were placed into accounts when work increased. Because their rate was so low, they could undercut the Big 4,5,6 on almost any large enterprise project. What ensued were major layoffs across the US consulting businesses.
The second blow was the Great Recession and the introduction of the Cloud operating on high band width lines. Another outgrowth of the great Recessiom was the emergence of many independent consultants, veterans of the largest firms, who understood the power of the internet, cloud, on-demand services and the desire of companies to flip their high fixed IT costs to variables. Since they, like other contractors had little overhead they would sign up or formulate quality, highly trained consultants at competitive rates.
Now the large consulting firms are beginning to see that they do not need to hire to capacity or over-utilization. Now they can draw upon its network of independent consultants on an on demand basis. By marking up the IC rate, they can make some money, but more important respond quickly to the market and to their clients, fill temporary roles at market base costs, and have assurance that the experience of the IC trumps the increasing large investment in new hires.
The model will look like this going forward. There will be a core business that predominately contains product development, sales, business development, business management and some project management people. If the consultancy specializes, the specialist would also be part of the core. The remainder of the workforce would be housed in a closely monitored(scheduled) and managed virtual group(s). Incentives and other devices could be implemented so that these resources remain in the network.
Once you begin to conduct the business of consulting with more media channels (video) client/consultant distance begins to become less of an issue.