Consultant tsunami

officeworkers250Australia’s army of consultants is growing quickly, with many taking packages and turning from corporate samurai into guns for hire. But the growth isn’t just being driven by rising redundancies. In a cash-constrained economy, more businesses hire consultants to improve operations and systems without hiring staff.

But what does it take to make a consultant? What are the advantages? What’s the downside? And how do the best consultants get work in a market likely to get even more crowded over the next five years?

Certainly, the consulting space has been growing strongly since the downturn. Figures from IBISWorld show that revenue for the consulting industry in Australia in 2009-10 is expected to grow 2.5% to $6.69 billion. That compares with a 0.2% drop last year when consultants were struggling to command premium prices for their services. Next financial year, total turnover is expected to increase another 2.9% as the recovery kicks in and companies start expanding.

And that’s just the beginning of the boom – IBISWorld expects revenues will be growing at 5% per annum from 2012. IBISWorld senior analyst Raghu Rajakumar says while consultants focused in niche areas are not doing as well as the big consulting firms like McKinsey and Accenture, they will start to grab a bigger share of the market when companies are in stronger shape three years from now.

“A lot of niche providers will be in a good position to provide services in growth areas in demand like IT, environment and consumer analytics,” Rajakumar says.

He says the numbers demonstrate the resilience of consulting during a downturn. According to IBISWorld, there were 3,673 consulting practices in Australia in 2008-09. In 2009-10, this had grown to 3,732 and IBISWorld expects there will be 3,997 next year.

The IBISWorld data is supported by research by Roy Morgan Research and Melbourne think tank Marshall Place Associates, which shows there are now 314,000 home based workers. The number of self-employed home based workers increased from 19% of the workforce to 23% from 2007 to 2009, the same period when the world economy went off the rails. Significantly, most of these workers have occupations in senior management. The numbers also show the average home based worker’s income has increased, up from 20% earning more than $130,000 per annum to just under 30%.

The demand is clearly out there. The latest PricewaterhouseCoopers private business barometer shows that two out of three small businesses have called in consultants during the downturn. According to the barometer, 64.6% of private businesses employed an external consultant. Consultants specialising in computer technology seem to be doing well. According to the barometer, four out of 10 businesses called in an information technology professional while one in five used a consultant assisting them with human resources or strategy related matters.

PricewaterhouseCoopers partner Greg Will says the growth of consulting in a tight market made sense.

“For IT, HR, strategy operations and marketing, it’s not a full-time role that they need, so when you haven’t got a full-time role or even a significant part-time role – it might only be a day a month – it’s just not worth the administration to try to employ someone and in any case, no one would really take a job for a day a month so they need someone on an ad hoc basis and someone who can charge an hourly rate.”

“Particularly in a downturn, they can manage not only the expectation of how often or how long they’ll use them but also they don’t have this permanent employee on their books that they have to deal with if things didn’t turn out right.”

Interestingly, many of the new self-employed consultants appear to be working on a part-time basis. Figures from the Australian Bureau of Statistics show there were 629,400 “own account” workers around Australia in October 2009, marginally down from the 652,300 the year before. However, the numbers show an increase in the number of people working for themselves part-time, from 337,200 in 2008 to 388,900.

The 15% increase suggests more people are trying it out first part-time, testing the waters before making the plunge. With their hours cut, many are now using their spare time to explore consulting as a career alternative.

The national secretary of the Institute of Management Consultants Sophie Carson said her association was getting many queries from people interested in pursuing consulting on a part-time basis.

Asked what was driving the trend, she summed it up in one word: redundancy.

“It’s a horrible thing to say but a lot of people in their 40s to 55 year range are being made redundant or hitting a ceiling in their current work situation so they are moving out to consulting,” Carson says.

“They are looking to diversify their experience so they are using all their skills and not one specific skill.”

Of course, working as a consultant is not the same as getting paid in a regular job, regardless of how much work you put in. Consultants have to deal with the uncertainty of living from job to job which is why many head back to paid employment. Carson says women tend to do that more than men. “It’s a gender specific thing, it’s a cultural thing, it’s a psychology thing with the women where they can’t afford to have that insecurity.”

To differentiate themselves, sole practitioner consultants focus on particular niches. Look around and you will find specialists in clothing retailers, particular types of franchise operations, small law firms and small accounting practices.

Others make themselves stand out by adopting some sort of proprietary tool or “black box”. These are the specialists with their own methodologies in such areas as business process re-engineering, team building, leadership or change management. But the box needs to be constantly updated. Competitors will copy it and clients will become more capable of working on their own.

COMMENTS

Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments
Close
SmartCompany Plus

Sign in

To connect a sign in method the email must match the one on your SmartCompany Plus account.
Or use your email
Show
Forgot your password?

Want some assistance?

Contact us on: support@smartcompany.com.au or call the hotline: +61 (03) 8623 9900.