Market conditions

There's a common perception that consultants do well in a downturn.  Because they sell services rather than products, consulting firms are - the argument goes - better able to adapt what they do to, to fit changing economic circumstances.  Thus, in the good times, their focus is on growth and new markets; in bad times, it's on cost-cutting.

But perhaps consulting tells us more about the economic situation than we think.

If the consulting "industry" is a collection of micro-markets, you'd expect any downturn to hit sectors and services at different times and with varying degrees of ferocity.  That would certainly be borne out by the experience of niche firms in recent years: 2002-04 saw some firms powering ahead while others gave up an unequal struggle.  Bigger firms see this, too, although their broader portfolio disguises the ups and downs of specific markets.

These slides attempt to show how a downturn rolls across the major sectors and services in consulting.

The question on every consultants' lips at the moment is just how badly will a recession affect their business.

The answer comes in three stages.