US Management Consultancy Market

An Analysis

Publication Date	July 2006
Publisher	RocSearch
Product Type	Report
Pages	36
ISBN Number	not applicable
Product Code	ROC00172

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Summary

The consulting market in the US continued its upward swing in 2005, with a y-o-y growth of 16.2%. The market in the past two years (2004-2005) has seen a sharp turnaround from the losses it experienced in 2003, during the economic recession. M&A activities are a key driver for the growth of the consultancy market, as their services are sought for valuation and litigation aspects. The market is expected to ride on the M&A deals in 2006 also, with projections of total global M&A deals reaching US$3.3 billion. Key Findings

The market is currently fragmented, characterized by rise of boutique firms and competitors eating into each other's market share. Post-2007, consolidation is expected to be a major factor defining the competitive landscape.
Boutique firms adopt a different strategy to tap potential clients. They do not typically venture into IT service offerings (enterprise software implementation and outsourcing), unlike the big players.
Consulting firms in the US, post-2001 recession, are struggling with low billing rates. The current hourly billing rates are not at par with pre-2001 standards (US$200-225), thereby lowering their profitability

This report contains a detailed study about the US Management Consultancy Industry and its various segments. The US is the largest business consulting market in the world, accounting for almost half of the global consultancy market. The CAGR of 3.9% during 2002-2004 in the industry has been kept as a benchmark to assess the revenues for 2005. The report employs Micheal Porter's Five Forces Analysis model and also uses the PEST Analysis framework for analysis. The report also profiles the leading firms of the industry namely McKinsey & Company, Boston Consulting Group, A.T Kearney, Mercer Consulting, Accenture, IBM Global Services, Gartner, Booz Allen Hamilton, Edgar, Dunn & Company, L.E.K. Consulting, The Parthenon Group and also compares their competitive positioning. It also talks about the strategies adopted by these firms in detail. Moreover, the report includes a brief financial analysis to ascertain the performance of the competing firms. The report finally ends with a broad future outlook regarding the industry and its performance overall.

Content

1. Introduction

1.1 Industry Definition

1.2 Industry Segments

The management consultancy market can be classified into the following divisions:

Large Consulting firms

Small firms / Boutiques

Sole Practitioners

Internal Consulting Organizations

2. Market Dynamics

2.1 Market Overview

The US is the largest business consulting market in the world, accounting for almost half of the global consultancy market. The CAGR of 3.9% during 2002-2004 in the industry has been kept as a benchmark to assess the revenues for 2005.

2.2 Trend Analysis

Demand for Healthcare Consulting
Entering the Advertising Business

2.3 Key Drivers
Regulatory Changes Open up New Avenues
Growing Demand from Government and Public Sector
M&A Driving Consulting Firms Revenues
2.4 Major Issues and Implications
Outsourcing as Threat to Consulting Business
Competition from Region-Specific Consulting Companies

3. PEST Analysis

3.1 Political Factors
Impact of Sarbanes Oxley Act
3.2 Economic Factors
Consulting Industry Leans on US Economic Recovery
3.3 Social Factors
Talent Drives Consulting Business
Increasing Client Expectations
3.4 Technological Factors

New Technologies Drive Consulting Businesses
IT for Effective Management

4. Management Consulting Value Chain

The newcomers who focus on certain parts of strategy consulting, coupled with growing competition, are threatening the big consulting players. This has lead to the disaggregation of the value chain.

5. Michael Porter's Five Forces Analysis

5.1 Buyers Power
Sophisticated Clients Drive a Hard Bargain
5.2 Suppliers' Power
High Attrition Rate
Outsourcing to Knowledge Services Companies
Higher Salaries to Attract New Talent
5.3 Rivalry among Competitors
Emergence of Boutique Firms

5.4 Threat of New Entrants
Entry of Non-Consultancy Firms
New Ventures Compete with Established Players
Availability of Niche Markets
5.5 Threat of Substitutes
Internal Consulting Departments

6. Competitive Landscape

The US consulting firms can be divided into two main categories:
Generalists Firms
Specialty Consulting Firms
6.1 Major Players

6.1.1 Competitive Positioning

Competitive positioning of the four major industry players has been assessed on the following parameters:

Revenues
Management consulting growth
Employees
Number of offices
Major markets
Specialization
6.1.2 McKinsey & Company
6.1.3 Boston Consulting Group
6.1.4 A.T Kearney
6.1.5 Mercer Consulting
6.1.6 Financial Assessment

McKinsey was the highest earner among the four firms compared in terms of revenue which grew by 20.6% y-o-y in 2005.

6.2 Other Key Players

6.2.1 Accenture
6.2.2 IBM Global Services

6.2.3 Gartner, Inc.
6.2.4 Booz Allen Hamilton, Inc
6.2.5 Edgar, Dunn & Company
6.2.6 L.E.K. Consulting
6.2.7 The Parthenon Group

7. Industry Outlook

The US leads global revenues and is expected to account for over half of global revenues by 2009. The industry is likely to grow at a CAGR of 3.9% during 2005-2009.
Appendices
Appendix I Industry Associations and Conferences
Industry Associations
Institute of Management Consultants USA
International Council of Management Consulting Institutes (ICMCI)
Association of Management Consulting Firms (AMCF)