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Insead CC Handbook 2011

Insead CC Handbook 2011

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Published by: Shashi Sriram on Aug 27, 2011
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08/28/2011

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In the late 1990s, aggressive penetration of emerging markets, globalization, privatization
and the new Information Technology industry drove growth in the consulting industry, with
established firms growing as fast as 20% p.a. and with new players emerging in the
marketplace. There was a huge demand for services and consulting firms were hiring MBAs
aggressively on campus.

After this boom period, the growth stalled for a couple of years in the early 2000s. Earlier,
the consulting industry was expected to do as well in good economic conditions, as in bad
ones. As the ultimate service industry, Consulting depends heavily on the prospects of large
corporations. In good economic conditions, consultants can advise their clients on growth
strategies, investment projects and due diligences. In bad economic conditions, clients need
advice on down-sizing, cost cutting and disinvestments. However, the rough economy of
2001 and 2002 introduced a lot of uncertainty for the consulting firms' clients, who reacted
to the economical downturn by postponing major decisions. This resulted in a sharp decline
for the industry: many younger and smaller firms had to withdraw and major players had to
downscale their recruiting efforts.

From 2004 onwards, the consulting industry recovered growth and firms are now recruiting
again and aggressively. At present, most offices are working at full capacity and the outlook
for the sector as a whole is very positive. Firms are competing more among each other and
with the Investment Banks for the best candidates.

The consulting industry has a very interesting value proposition for a recent MBA graduate:
the outlook for the industry is good and looks stable, salaries and bonuses are highly
competitive, there is almost no beach time in most firms, and the work is interesting,
diverse and enriching.

As we are entering an ever increasingly complex and global world, some clear trends are
emerging for the management consulting firms:
Specialization. Clients are more demanding and ask for consultants specialized in the
industry or topic. The major global strategy firms do not want to lose their generalist
scope and the ability of their consultants to work across industries. However, they
have now more structured organizations across industries and functional lines in
order to deal with the increased sophistication of their clients and to successfully
compete with specialized firms.
Implementation. Clients ask for a greater focus on implementation rather than only
theoretical recommendations or strategic plans. This causes increasing competition
among firms in different segments of the consulting industry, but is also an
opportunity for consulting firms to develop long-term relationships with their clients.
Pay for performance and Measurable Business Results (MBRs). Especially during
the dot-com boom, some firms agreed on partial/full equity payment. Clients
demand more tangible results and pay according to a performance measure (e.g.
cost savings in procurement optimization projects).

ICC Handbook 2011 Page

12

New geographies. The market for Consulting is growing extremely rapidly in China,
Russia and Middle East (Abu Dhabi, Dubai). Markets such as Latin America and India
are also growing very fast. Major firms are heavily investing in these geographies,
opening or expanding offices. They compete aggressively to recruit the candidates
who have a connection with these regions or possess the right language skills
(Mandarin, Russian, Arabic, etc.).
Fragmented markets. In some markets, a large number of former employees start
their own small consulting firms. For example, in China, this trend has led to a very
fragmented market, with hundreds of small and medium-sized firms.

ICC Handbook 2011 Page

13

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