The consulting industry may experience various operational and technological trends in the year 2020. Some of these trends are affecting other industries, such as keeping up with the pace of new technology, but consulting also has some of its own unique issues. As consultancy firms face more aggressive competition from new players entering the field (e.g. freelancers, crowdsourcing), they are being further burdened by the demand for greater levels of expertise at lower, criteria-based prices. As such, it is becoming increasingly common for professional services to collaborate in order to better face these challenges. This blog explores these emerging consultancy trends in greater depth, including their suspected causes and expected outcomes as we move into 2020.
1) Newer players like freelancers and crowdsourcing are increasingly entering the field and are gaining traction
Expert Rita McGrath, a business school professor, believes that consultancies are facing an overarching threat: the trend of ‘on-demand’ expectations is infiltrating the industry, as it has done in so many industries before it. Simply put, clients expect ever-faster expert resolutions to their business challenges, threatening traditional consultancies who cannot currently match freelancers’ and crowdsourcing’s capacities to meet these customer demands. Not all hope is lost, however; with a flexible and technology-focused approach, these struggling consultancies will be able to satisfactorily serve clients seeking such quick service and skilled experts, McGrath claims.
The appetite for these “on-demand” experts is so high that some seasoned consultants are even leaving their employers to start their own businesses, according to Harvard Business Review, who examined the growing trend of professional services experts leaving established consultancies to become independent consultants. Surveys show that these independent advisors may, in fact, be happier than their traditionally employed counterparts, with their increased flexibility making it easier to give the client the customization they desire.
However, while Beroe states that the freelance sector will undoubtedly pose major competition to larger consultancies in the future, the list of challenges does not end there. In fact, even the democratization of information searching can be considered a threat, as anybody is now able to glean data with the simple power of an Internet search.
2) Demand for consultants to have a wide breadth of knowledge
It is not a new concept that clients want consultants to be both highly skilled and up-to-date on the latest technologies. However, the exponential speed at which 21st-century technology is developing can leave even the most dedicated of consultants at a loss. With most technology companies releasing software updates every few months, consultants find themselves overwhelmed by the prospect of mastering all the nuances of the latest versions.
In an attempt to meet the mammoth demand for such limitless technology knowledge, some larger consultancies are now acquiring high-tech start-ups; mergers and acquisitions of digital agencies, for example, are fast becoming common amongst leading consultancies.
Nevertheless, even advanced technologies like Artificial Intelligence and Machine Learning do not mark the extent of the knowledge expected of consultants. Clients also demand a rich understanding of the regulatory landscape, and often hold the expectation that consultants will be up-to-the-minute specialists in a range of legal matters. As such, consultants now find themselves burdened by the unceasing need to be aware of the latest legislation and regulations, according to Deltek.
3) Collaboration among different professional services firms is becoming more commonplace
No consultancy can possibly be an expert in all knowledge spheres. Thus, as clients continue to demand the utmost in both breadth and depth of expertise, larger consultancies have found themselves partnering with other firms, cutting-edge tech start-ups, or independent consultants to better bolster themselves against the mounting pressure. Occasionally, the clients themselves will either suggest the collaboration or “multi-source” varying service providers in order to achieve their strategic goals.
This increasing number of collaborations and partnerships is confirmed by TEKSystems’ overview of modern consulting, which identifies a trend of consultancies providing more flexible and customized offerings to clients in place of rigid, pre-packaged services.
Beroe also notes the increasing commonality of partnerships with crowdsourced entities or individual experts on niche topics. Indeed, consulting firms would do well to embrace working with a variety of competitors in order to serve common clientele, according to Acuity Knowledge Partners.
4) Value-based performance is being demanded
In recent years, clients have started requesting more value-based results from consultants; Beroe’s market study of the consulting industry confirms this, with consultants expected to provide ever-higher value despite no increase in billing amounts.
Worryingly, in a survey of 700 executives, Deltek found that the trending demand for higher value has actually put overall profitability at stake, with some clients even abandoning consultancies who interact more traditionally (as overtly stated by ALM Intelligence). After all, independent consultants may be better equipped to cater to the requests of clients who want more customized and measurable value metrics.
5) Billing and pricing models are changing
Alongside the aforementioned value-based performance metrics, non-traditional pricing and billing models are also increasing in demand, according to Consultancy.uk. Where traditional pricing and billing for advisory services would have been charged periodically or upon project completion, some clients are now requesting custom billing plans which allow them to more tangibly quantify their return on investment. For example, “milestones met” payment criteria enable the client to directly derive output value from the number of dollars spent.
Clients also seek financial transparency – demanding costs upfront – and often request reductions in either price or delivery time in order to meet budget constraints. In light of these various requirements, many clients engage in “comparison shopping” to ensure their consultant is sufficiently sensitive to any cost concerns that may arise. This only serves to increase the pressure on already overburdened consultancies.
Evidently, the consulting industry is not immune to the trends and disruptors that affect other industries. As such, many consultants are having to adjust to the headwinds of client sensitivities regarding pricing, timing and technological expertise. After all, in such a competitive business environment, adaptability may be consultants’ only option if they want to both survive and thrive. Various consultancies are trying to achieve this, collaborating with multiple partners, revising billing models and providing the versatility that is increasingly requested by their clients. The year 2020 may bring challenges for consultancies, but will undoubtedly be a period of transformation for those who strive to make ever-increasing change and flexibility the norm.