One fifth of UK management consulting work goes to independent consultants

17 April 2018 11 min. read

One fifth of UK’s annual £10 billion management consulting spend now goes to independents, according to a new study. Looking ahead, clients are increasingly charmed by the growing pool of high-skilled freelancers, and as the processes of matchmaking platforms mature, the segment seems set to have a growing role in the industry’s future.

The top segment of the UK consulting industry is now worth £9.75 billion, according to the most recent available analysis. The upper echelon of the UK’s consulting scene has undergone steady growth in recent years, gaining revenue via heightened demand for strategy, organisation, operations, finance, human capital, regulatory, digital and technology services. However, despite the sustained popularity of ‘Big Consulting’ in Britain, a growing ‘professional gig economy’ of highly skilled freelance consultants is changing the shape of UK’s multi-billion pound professional services sector.

Gig consultants are highly experienced, often entrepreneurial professionals, who are, perhaps tired of the bureaucracy of working for large, white-collar organisations. They have, therefore, set up on their own, picking and choosing contracts, building their networks and are taking charge of their own career trajectory.

Management consulting industry

In order to analyse the impact that the independent consulting boom is having on the wider market, Odgers Connect commissioned Source Global Research to execute a survey of 250 corporate executives at the c-suite level, based in the UK, Germany, Switzerland and the Netherlands. More than three quarters of respondents had spent over £5 million on consulting in the past two years.

According to the report, of the work delivered by consultants in the UK, almost one-fifth, valued at around £2 billion, is currently attributable to independent management consultants. 40% of organisations surveyed revealed they now use a fairly even split of traditional management consulting firms and independent consultants. In comparison, the UK professional services “gig economy” – defined as project-based work – is worth over £40 billion a year.

The size of the UK management consulting industry

“An army of independent professionals and consultants is growing within both private and public-sector organisations,” said Adam Gates, Principal of Odgers Connect.

There are a number of reasons why independent management consultants are winning terrain. These range from pricing – a perennial concern for the clients of consulting firms – to ease of contact, or uniqueness of skillset.

Flexibility and pricing are key

When asked why organisations would select an independent consultant over a big firm, respondents to Source’s survey said that flexibility is far and away the biggest selling-point. Overall, 48% of business leaders selected this. Both companies and independent consultants gain freedom and flexibility that they can’t get from bigger, traditional management consulting firms.

As the business world sees project timelines shrinking, with long-term market incumbents looking to keep pace with agile new innovative competitors, fresh approaches are required. This transformation suits independent consultants perfectly, as their flexibility allows companies to turn the tap on and off whenever they need, without worrying about lucrative long-term contracts.

How do clients buy consulting services - Consulting firms vs Competitors

While flexibility was ultimately the most important factor to clients when opting for a gig economy consultant, price was still the second most important factor. With companies in every industry coming under financial pressure due to the aforementioned competition, many are looking to scale back on expenditure – especially in consulting. As a result, 38% of respondents plumped for price as a key motivator.

Interestingly, while it is well known that as independents lack the overheads of a traditional management consulting firm, as many as 58% of independents recently told a study performed by consulting matchmakers Comatch that they were better paid in their new independent capacity than at large firms. While the majority find this, however, it is not universal by any means. While independents in multiple markets, including the UK and the Netherlands, do offer their services at lower rates, many have cited fee pressures as a key concern in the future.

Quality work easily obtained

Organisations polled by Source also revealed that they believe they receive higher-quality work from independent consultants than they do from traditional firms. 23% of organisations also say that higher quality is a top reason to go with an independent consultant. When analysts pushed respondents to elaborate on this, of work delivered by both parties in specific consulting services, independent consultants were found to deliver higher-quality work in four of eight areas asked about, and were equal in a further two.

This is largely as, against backdrop of growing gig economy in general, a growing pool of consulting talent is leaving life with top firms to go it alone on the independent scene. This means that a skilled talent pool of former MBB and Big Four management consultants become available at a discount price, having obtained the same skill-set, as well as freedom to specialise in a particular topic – adding a new string to their bow that life at larger, generalised consulting firms often denied them.

Top four reasons why clients pick independent consultants rather than traditional consulting firms

Speed is also a big determinant in why clients go independent. Independent consultants are characterised as being quicker to take up a job or contract, as they are directly responsible for their own revenue. If they do not take up work, they do not get paid.

While personal networks and direct recommendations remain key sourcing channels for independent consultants, businesses have found speed and ease of access to independent consultants further facilitated by the growing professionalisation of matching platforms. These can not only find a suitable independent for projects of all shapes and sizes, from networks of thousands, but also filter out freelancers who do not provide the best value, according to user reviews. In management consulting, this has seen Odgers Connect themselves, as well as the likes of ComatchEden McCallum, Talmix, Catalant and B2E Consulting and Outsized boom in recent years.

Who provides higher quality work

Types of projects

The research also looked at which areas independent consultants are likely to be most active in. When asked to identify the areas in which they expected to make use of independent consultants, 31% said they were likely to hire them to increase their talent pool in projects relating to data analytics. In a close second, meanwhile, a further 29% said that the implementation of digital technologies would see them draft freelance advisors in.

In joint fourth, in terms of popularity, 27% of respondents said they would engage independents in order to address operational improvement projects and regulatory work. In other words, all four of the top reasons to hire a freelance consultant related to uncertain trends in the global industry – as rapidly shifting technology changes the workings of data analytics, offers new, improved ways of working, and presents the opportunity of rapidly adapting to a regularly shifting regulatory environment. The flexibility of an independent consultant makes them perfectly suited to such quickly changing client needs, in this regard.

How do you source independent management consultants

Pertaining to regulatory work in particular, which has long been seen as a safe haven of reliable income by the biggest management consulting firms, independent consultants present a real threat. Most companies actually think the quality of work delivered by independent consultants is higher than that delivered by traditional firms, while 27% of organisations informed Source and Odgers Connect that they expect to increase their use of independent consultants in this area.

Financial services also represent a major opportunity for independents. It is already the largest service line for independent consultants – as it is for the consulting industry in general – and in part this is due to the sector’s close ties to the rapidly changing world of regulation. However, independents could be set to further eat into the market share of traditional management consulting firms, as the financial services sector is also set to be most impacted by Brexit. While much of the attention relating to Britain’s divorce from the EU relates to manufacturing, financial organisations will be tasked with balancing the demands of further regulatory changes with a need to digitise operations and focus on the customer, as well as finding new ways of sourcing talent amid what could be tightened immigration rules for skilled EU workers.

The flexibility of independent consultants could prove critical to the UK financial sector’s transformation ambitions, in that uncertain environment, to the extent that 68% of financial services respondents felt it was independent consultants delivering the highest quality in the risk & regulation service line.

Areas in which clients expect to make more use of independent consultants

Continuing growth

While it is more than apparent that British companies will need to deal with several large spikes in workload over the coming months, beyond the deadlines relating to new regulations and the actual implementation of Brexit as of 2019, it would not make sense to resource for these challenges with permanent employees. However, while this would have meant that traditional consultancies would be tapped to provide temporary solutions, according to Odgers Connect and Source’s report, it is making a decreasing amount of business sense to hire from the usual suspects. Consulting firms are increasingly being found by organisations to be needlessly inflexible and overly expensive.

Now, as more highly skilled former members of big consulting firms are taking their chances as solo operators, and the quality of the work delivered by independents is subsequently as good, or in many cases better than that provided by the big names, the future of gig economy professional services provision looks set to go from strength to strength. Looking ahead then, the independent consulting scene in the UK is likely to experience much heavier demand in years to come, and as noted, much of this growth is likely to relate to digital technology.

Adam Gates concluded, “A quiet revolution is underway in the professional workplace, across both the UK and Europe, driven by the changing needs of employers – and this genie isn’t going back in the bottle.”