Giving advice in adversity
From the Economist

WHEN even consultants suggest that companies might want to spend less on consultancy, you know the industry is in for a difficult time. A recent article in the McKinsey Quarterly argues that Wall Street’s ailing banks could slash up to $2 billion each from their bloated overheads without damaging employee morale.

Convulsions on Wall Street and elsewhere are grim news for the global consulting industry, which boasted $309 billion in revenues last year, according to Kennedy Information, a research firm.

Financial institutions are some of the industry’s biggest customers. But revenues are also under pressure in other areas. The credit crunch has cut the number and size of deals by private-equity firms, which are also big consumers of consulting services. And a decline in mergers and acquisitions means there is less demand for the nitty-gritty work of combining computer systems, a mainstay of some consultancies.


Consultants say they have fared pretty well in the first half of 2008. But consulting revenues are not immune to a downturn .Consultants will feel the pinch next year, as clients cancel or delay projects.

Some consultancies are already sounding cautious about the rest of this year.

All consultants agree that emerging markets such as China, India and the Middle East offer the best opportunities for the future. But they accept that most of their business will come from the developed world for a while yet. So the industry badly needs a “Big New Idea” that it can sell to clients there. Previous consulting booms were built on ideas such as “total quality management” and re-engineering. But at the moment consultants have no successor to such money-spinners.

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