Will the US run out of consultants?

By Fiona Czerniawska

It’s not quite the story arc of a Hollywood blockbuster, but it’s a realistic enough prospect to make many a managing partner quake in their boots.  Forget massive explosions levelling cities; forget aliens abducting large swathes of Americans: this is where the action is.

Unbelievable?  Not really.  This is what we heard from the CIO of a major US corporation at the back end of last year: “We’ve now reached the stage where we’re sufficiently confident about the economy that we’re prepared to invest.  We’re looking back at the various initiatives we shelved at the start of the financial crisis, together with the opportunities emerging from new technology, and working out what we should focus on.  Our worry, now, is that we think our competitors are doing exactly the same and that there won’t be enough consultants to go round.”

Aha, we hear you say, that’s about technology consulting and there’s always a shortage of good people in that field.  It’s certainly true that scarcity is – and will be – sharpest here.  Sorting the experts from the cowboys has been a perennial problem, but it’s exacerbated by the arrival of new technologies where we don’t have years of experienced people to fall back on.  Offshoring work to India and other countries (the solution when the resourcing train hit the Y2K buffers 15 years ago) is less easy because salaries in supposedly low-cost locations have risen, because client organisations are generally less comfortable with wholesale offshoring and because the successful implementation of mobile technologies (just as an example) depends on close co-operation between the business and IT functions.

But this isn’t just a technology problem: the consulting well is running dry more generally.

One reason has been the pace of recent growth.  Our new report on the US consulting market pegs its total size at just under $42bn (remember, we focus on ‘big’ consulting – work done by firms with more than 50 consultants, typically for clients with a turnover in excess of $500m). That’s up 5.7% on 2012 which itself was up 8.5% on the previous year.  It means that the consulting market in the US, in each of the last two years, has grown by approximately the size of the entire German consulting market.  That’s an awful lot of new consultants to find.

But that’s also not the only factor at work here.  Clients continually raise the bar in terms of the level of expertise they require – and many of them are former consultants which nudges that bar up still further.  Flying consultants from state to state is becoming less acceptable with more clients expecting more consultants to be based reasonably locally.  Recruitment freezes during the recession made matters worse, making it especially hard to find people in their late 20s or early 30s with around five years consulting experience.

If we make some simple assumptions – that the US consulting market grows by a further 5% in 2014 and that the ‘average’ consultant earns his or her firm around $200,000 a year, then that’s around a quarter of a million new consultants to be found just this year.  Even if you could find that many, recruiting and on-boarding them takes time – and that doesn’t even begin to touch on the 10-15% who move to other firms or out of the industry altogether.

The whole notion of the ‘war for talent’ is a very familiar one, but what we’ve seen so far has just been a skirmish.  The real battle, Hollywood-style, is just beginning.