Why do we have consulting firms?

People have been advising each other since the dawn of time, but it was only in the early twentieth century that they felt the need to band together into firms. The shift was a testimony to the broadening role of the consultants and the size of organisations they were dealing with: individuals were no longer enough. But almost a century later, freelance consultants now occupy as much as 20% of the market.

Freelance consultants are clearly cheaper and, because they focus on a specific field and cannot be pulled off to work on projects in other areas, may have more specialised skills. But they cannot, by themselves, compete with the brand and scale of the consulting firm. Into the breach between the two steps the virtual firm which, because it relies on a network of associates, rather than fulltime employees, combines organisational flexibility with lower costs.

Does this herald the end of the consulting firm? Clearly brand is still an issue, but this could resolve itself over time. Perhaps a bigger hurdle is teamwork. A virtual firm, by definition, will be using different people on different projects, so there is less opportunity for them to learn each others’ strengths and weaknesses. A consulting firm, by contrast, provides the social and cultural glue that is the bedrock of collaboration. If virtual firms can fix this, then they may indeed be the model for the future.

Source hosted a debate between Phil Walker, former chief operations officer at Capgemini, and Richard Stewart, chief executive of Mindbench, to explore this issue further. Click here to see what they had to say.