Pricing

As part of our research on consulting in Europe, the Middle East, India and Africa, we inevitably asked consulting firms how much they’d seen prices fall during the recession.

Overall, we estimate that fee rates among multinational corporations have dropped by between 10% and 15%, and those among large regional or national companies by as much as 50%. The most precipitous declines have now levelled off and in some highly specialised and sought-after areas there are even indications that prices are edging up.

Consulting is always being commoditised but has yet to become a commodity.

Commoditisation has always snapped at the heels of the industry, but emerging challenges and new technologies has historically allowed the industry, on balance, to stay ahead. And that’s what consultants do: they keep on running.

But just occasionally it’s worth looking back over our shoulders to understand exactly how and why consulting services become commoditised. After all, if we could slow down that process, perhaps we wouldn’t be so breathless.

Every time private-sector organisations cut back on their use of consultants, the amount of talk about risk-reward or other types of performance-related payment increases. However, history suggests that the talk far exceeds the walk. The recent recession has been no exception, with many organisations announcing their intention to make greater use of this approach, only to baulk at it in practice. Our quarterly survey of buying trends shows that, at 12%, the proportion of payment-by-results is scarcely higher than it was three years ago.