Firms concerned about growing competition from boutiques and independents

31 July 2018

Continued pressure on prices and growing competition in the market are according to partners of consulting firms the top two challenges faced in the consulting industry. The rise of well-organised networks of independent consultants and the growing popularity of boutique consultancies eating share in specific niches is playing a key role in consulting’s changing threats landscape.

The freelance consulting sector is experiencing a period of rapid expansion, as former employees turn their backs on life at firms, amid the allure of a better work-life balance, and the suggestion of better pay. A growing portion of the globe’s circa $150 billion management consulting spend now goes to independents, and looking ahead, clients are increasingly being charmed by the growing pool of high-skilled freelancers. Further boosted by digitised matchmaking processes which are maturing, the segment seems set to have a growing role in the industry’s future.

In the UK for instance, independents now account for around 10% of the £10 billion consulting market. As might be expected in what is the largest segment of the consulting scene overall, independents receive most business from the financial services sector. However, proportionally speaking, the independent market is largest in the manufacturing sector, taking more of the market share from firms there than in any other sector, by comparison.

Independent consultants account for ~10% of UK’s management consulting industry

In a new survey commissioned by Deltek, a software provider to the professional services industry, among 700 professional services firms across the globe, the researchers found that the pricing and flexibility of independents are some of the factors behind the segment’s upward incline. A breakdown into the view of leaders in management and IT consulting (350 respondents) subsequently found that they increasingly fear a multitude of challenges thanks to the surge in support for freelancers. Top of these is pricing pressure, with 55% of respondents suggesting that the lower costs of independent consultancy could drive down their own ability to bill for work executed. Tapping into this fear, 49% of leaders also said a top challenge they faced was increased competition.

Interestingly, third on the list was gaining and retaining people’s trust. 46% of respondents answered with this, suggesting a belief that the unchartered nature of consulting work could open the industry up for people who will not fulfil their services, bringing the reputation of consulting as a whole into question. Recently, this has seen the MCA – UK association for consulting firms – and the ICMCI – an international association for management consultants – both launch respective awards to offer some level of standardisation in consulting, and to offset these fears.

The top  strategic and commercial challenges for consulting firms

In terms of growing competition, Deltek’s study showed that both management consulting and IT consulting firms fear boutique providers most. 45% of management consulting firms reported already losing business to boutiques, while 35% of IT firms said the same. In the future, around half of both segments both perceive boutiques as a growing threat.

Boutique consultants are typically capable of being more entrepreneurial and agile thanks to their smaller organisational structure and lack of larger corporate chain, while being able to address key issues faced by clients. In particular, clients are becoming weary of the big firms which operate in all areas, as a growing number of investigations into conflicts of interest – particularly in the case of the Big Four – hit the sector. Meanwhile, the on average lower pricing of services from boutiques mean that clients can address heightened scrutiny on consulting expenditure, while also diversifying their suppliers. On top of this, improved access to technology has given smaller players more ammunition to compete more effectively, and much top talent is also drifting toward boutiques, as improved promises of work-life balance outweigh the prestige of larger brands.  

What are the most likely sources of competition

While independents are taking less work – 21% of management consultants and 22% of IT firms reported losing work to them – mainstream consultants fear the sector as a source of competition in the future. Again, the price can be half that of a renowned consultancy, while the flexibility and on-demand staffing of independents offer an agility which larger firms sometimes struggle to match. Again, a growing number of experienced consultants are opting to go at it alone, later in their careers, lured by higher pay and a better work-life balance, meaning more quality workers are ending up in independent consulting.

Other key sources of competition included client insourcing work and commoditised solution providers. Clients insourcing more work naturally worries IT consultants most, as improving technologies and IT infrastructures of many clients means that formerly outsourced IT work can be done in-house for greater control. Commoditised solution providers are also a major threat to consulting firms in the long term because they could be strong in automation and robotisation, which could challenge consultancies in an increasingly lucrative segment.

The top four reasons why clients pick independent consultants

When compared to other leading markets in Europe, the top reasons why independent consultants are chosen over traditional firms are proportionally the same. As is the case in Germany and Switzerland, the most common reason in the UK is flexibility, at 47%, followed by pricing at 38%. However, while higher quality was cited by just under a third of businesses in Germany, Switzerland and the Netherlands, UK clients suggested that ease and speed of contracting took precedent over this, at 26%. Higher quality – mentioned by 17% of UK clients – meanwhile takes a back seat.

While the rise of independent consulting might be seen as a major threat to firms, however, it could also be a boom, especially when relating to the agility in terms of contracting that it enables, which is so attractive to clients. Firms could tap into this by cultivating networks of independent consultants to enable the rapid staffing of a diverse range of projects at short notice, without having to invest in long term training programmes and benefit packages.



Accenture's push into the creative sector is an identity crisis

18 April 2019

In its latest push into the creative sector, Accenture Interactive acquired New York and London-based ad agency Droga5 earlier this month, adding illustrious clients such as HBO, Amazon and The New York Times to its roster of clients. With the latest in a long line of similar purchases, Accenture Interactive further demonstrated its ambition of becoming the globe’s leading trusted advisor to chief marketing officers. Yet according to Ben Langdon, Chairman of Class35, Accenture’s strategy may be heading in the wrong direction.

A press release on Accenture’s website announcing the acquisition sits next to a quote stating that “brands aren’t built through advertising” – a huge contradiction from a consultancy firm hell-bent on becoming the ‘CMO agency of choice’. It’s not alone of course. The entire consulting industry wants a piece of the creative pie right now. In addition to Accenture Interactive, recent acquisitions by PwC Digital, IBM iX, and Deloitte Digital meant that in 2017, for the first time ever, four of the world’s ten largest creative agencies were consultancies.

So just what it is that Accenture wants to achieve from this? For one thing, it’s clearly trying to be a digital transformation business. A one-stop creative shop rivalling more traditional models, it wants to lure CMOs in with the promise of lower ad spend and a “more impactful customer experience”. At the same time, though, it’s still in thrall to those same slinky, shiny branding and advertising agencies it’s attempting to disrupt. The Droga5 acquisition and that of Karmarama a few years before are both testament to this.

There’s a fundamental problem with this, though. Digital transformation businesses don’t sell to CMOs. These people have enough on their plates trying to transform their own marketing skills in order to keep up with an ever-changing market – they just don’t have the time or the energy to concern themselves with digitally transforming a whole business. If Accenture’s purpose is digital transformation, then going after creative agencies is barking up the wrong tree.Is Accenture's push into the creative sector an identity crisis?

Worlds apart

Perhaps more importantly, these two industries are worlds apart in terms of the way they think. Creative agencies are all about ideas, campaigns and consumers. Digital businesses, on the other hand, are customer-driven – they think in terms such as lifetime value, measurement, and efficiency. Customer-led thinking is an entirely different beast to consumer-led thinking.

The reality is that the arrival of digital and an all-encompassing obsession with technology, measurement and social has led to the death of agencies in a reductive, zero-sum, efficiency-focused battle with brands. Indeed, agencies have become so obsessed with the latest tech fads, they’re beginning to forget how brands work. Worse still, they’re beginning to forget how brands are built. And, by forgetting, they’re destroying their own values.

Killing creativity

All things considered, it really feels to me as though Accenture is a chip leader in a game it doesn’t understand. Expensive acquisitions like these show that they’ve got the big money, but they don’t appear to have any idea what they’re doing with it. Take talent, for example. The best talent in the creative industry right now is out in the market; it’s not tied to any one agency. Both agencies might well be at the top of their game, but why would a consulting firm waste so much money on buying them when they could hire high-quality creative talent on a contingent basis instead?

As their presence in the top 10 creative agencies shows, there is a growing trend in which Accenture, like many of the other big players, are buying up agencies as if they were nothing more than keywords. What they’re really buying, though, is a collection of credentials, clients and IP. Unfortunately, the talent that created those credentials aren’t going to stay at the business, the clients that hired the agency in the first place won’t be interested in buying what is basically just another part of Accenture, and the IP never really existed to begin with.

Droga5, for example, was one of the few agencies that did great brand work the old-fashioned way – undoubtedly something that made it attractive to Accenture in the first place. The irony, though, is that by leading it further away from the way of working that made it so special, the consulting giant will kill its creativity.

“Accenture Interactive has been dazzled by its ambitions to become the CMO agency of record…. But, in flashing its cash, it is spending millions on acquiring nothing of any value.”

If pressed, the recently acquired agency staff at Accenture will tell you just how dysfunctional the new arrangement is. They’re largely unfulfilled. Rarely do they feel their work has any sort of meaning or purpose. What’s more, the different disciplines have found little or no common ground, and find it hard to work together as a cohesive whole. It’s not surprising, then, to see talented people leaving in droves.

Beyond the window dressing 

It’s clear, then, that consulting firms and creative agencies are no easy bedfellows. But in his company’s defence, Accenture Interactive’s Senior Managing Director for North America, Glen Hartman, described its culture as being “far, far away from what a stereotypical consulting firm would look like. Our office and studios look a lot like Droga5’s.”

In demonstrating a belief that office design equates to workplace culture, this statement serves as an illustration of how confused Accenture is right now. It wants to justify its new strategy so badly, it’s started dressing like a creative agency. But if you look beyond the window dressing and see that you and your partners are speaking a different language with a different purpose, selling to different people in a different market, there’s no getting away from the fact that you’re different.

Accenture Interactive has been dazzled by its ambitions to become the CMO agency of record, and it wants to dazzle others with its new direction. But, in flashing its cash, it is spending millions on acquiring nothing of any value.

Related: Space between consulting firms and creative agencies is converging.