Recession, tragedy will change consulting again

by Tom Rodenhauser | Oct 05, 2001 7:00:00 AM

Tags: Tom Rodenhauser

Takeaway: Both the impending global recession and the September 11 terrorist attacks have set the backdrop for cyclical changes in the consulting business. Find out why one industry expert says the events will widen the gap between small and large consulting firms.

The human and emotional toll of this past month is immeasurable. But the business perspective is quite specific. Spreadsheets already are detailing the rebuilding and reorganizing efforts. And industries directly and indirectly affected are restrategizing to guard against new kinds of horrible scenarios.

A recession is likely, although many believe the bounce back will be swift. Management consultants, however, won't be leading the comeback this time, as they did in 1992, when reengineering dominated the landscape. But be assured that they will walk lockstep with clients searching for the "next big thing" (NBT).

Consultants think about the unthinkable and devise plans accordingly. Most of the situations don't involve terrorists and bombs. But disruptions in inventories? Kinks in supply lines? Redundant backup systems for critical data? You bet.

Will that be enough to lift the management consulting industry from the doldrums for the short term?

The answer is an unequivocal “no.” Clients will continue holding off on big projects, worsening the over-capacity situation at major firms. But smaller firms may actually see a surge, as clients look to "incrementalize" consulting engagements and spread projects among myriad players.

Industry fragmentation—a phenomenon I’ve been suggesting for quite some time—will accelerate. The resulting bifurcation between large and small firms will increase. And the cast-of-thousands consulting model, which worked so well during the mid-1990s, will fall even more out of favor, pushing major players that much closer to an outsourcing-style business that relies on huge long-term contracts with fewer clients.

The battle for dominance in this "solutions integrationists" space will grab the headlines. But in many ways, the consulting profession will experience a throwback to the days when smaller was better and experience mattered most.

With no NBT on the horizon, the quiet firms may have the most impact.

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About the author
Inside Consulting is written by Tom Rodenhauser as a free weekly supplement to The Rodenhauser Report. The report informs senior advisors and business executives of consulting trends and best practices. Subscription cost is $295 per year for 10 issues. Copyright 2000, Consulting Information Services, LLC. Reproduction is prohibited. Quotation with attribution is encouraged.

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