The consulting industry can trace its roots back to the late 19th century, when the world’s first modern consulting firms were founded. From the turn of the century, management consulting – which focused mainly on engineering and finance early on – increasingly gained terrain in the business world. However, it wasn’t until the 1930s that consulting firms started to grow their size beyond a few founding partners and small teams. In the slipstream of the growth of scientific management, operations and organisational theory, the number of consulting firms rapidly expanded in the next decades, with today’s well-known US firms such as Arthur D. Little, A.T. Kearney, Booz Allen Hamilton and McKinsey & Company playing frontrunner roles.
The consulting industry started its internationalisation in the early 1960s, when the large American management consultancies expanded into Europe, bringing their management models and experience to transform European organisations. In the next thirty years, the consulting industry found itself in a phase of unprecedented growth across Western markets, far outpacing the growth of the world economy during the same time period. Revenues of the top ten worldwide management consultancies, for instance, grew from around $200 million to around $50 billion at the beginning of the 21st century, while the headcount of the thirty largest consultancy firms in the industry grew from about 20,000 in the early 1980s to approximately 430,000 in 2000.
Nearly two decades down the line, the consulting industry has developed into one of the most mature sectors in the professional services industry, generating between $100 billion to $300 billion in revenues, with the precise estimate depending on the definitions used. At the heart of the industry stand six main domains – Strategy Consulting, Management Consulting, Operations Consulting, Financial Advisory, HR Consulting and IT Consulting – that when combined, span services and offerings in over 200 industry and functional areas. The majority of consultants work at large and mid-sized consulting firms, yet, in terms of the number of consultancy enterprises, these firms typically represent no more than 15% of the total, with the majority of enterprises active as sole proprietorships (i.e. freelance consultants).
Besides consultants working in the consulting industry, advisors are increasingly working in a consultant role that leverages consultancy skills but lies outside the consulting industry. Over the past few decades, organisations have taken large steps in maturing their internal advisory and implementation units, building internal consulting and project management teams as well as developing typical ‘consulting’ capabilities across key departments, functions and process areas. Little is known on the exact global size of the ‘internal consulting’ industry, and estimates range widely from a fraction of the consulting industry’s size to a market that is larger in terms of scale. Typical internal consulting roles are based in, among others, corporate development, project management units and dedicated advisory departments. Many consultants also often venture into managerial roles.
The chapter ‘Consulting Industry’ presents an overview of all aspects of the advisory market, ranging from the definition of consulting and its key segments to insight into market sizes per region/country, including India. The chapter further presents an outline of fees & rates billed by consultants, details on the M&A landscape in consulting and an overview of the main rankings and recognitions in the industry.