Companies in the sector provide support services to businesses, such as office administration, hiring and placing of personnel as well as consultancy services. Major companies include ADP, ManpowerGroup, along with Adecco (Switzerland), Randstad (the Netherlands), and TUI Group (Germany).
Europe and North America are the primary markets for business services. Worldwide demand in the sector is driven by technology, digitalization, and new communication technologies and infrastructure. As a result, startups have emerged across the world, with business solutions that are innovative, flexible, and sustainable. While large companies may operate globally or within a specific region, many business services firms serve smaller geographic areas near their headquarters.
The US business services sector consists of about 420,000 establishments with combined annual sales of about $950 billion.
The Internet is changing the way companies do business and the kind of consulting they need. Many traditional consulting practices are in danger of becoming less relevant in the Internet Age. The consultants of tomorrow will require different skills than the consultants of today.
To help you understand the consulting landscape, we’ve divided the industry into six different categories: the industry elite, the Big Five, boutiques, information technology (IT) consultancies, human resources specialists and the independents. Most players in the industry can be put into one or more of these different categories.
The rich and famous of the consulting world focus on providing cutting-edge strategy and operations advice to the top management of large corporations. They generally hire the best candidates from the best undergraduate, MBA and other graduate programs. Players in this group include: Arthur D. Little, A.T. Kearney, Bain & Co., Booz-Allen & Hamilton, the Boston Consulting Group, McKinsey & Co., Mercer Management Consulting and Monitor Co., to name a few.
The consulting operations of the Big Five accounting firms. Although these firms provide some of the same strategy and operations advice as the elite, they tend to put a stronger emphasis on implementation work, particularly in the IT world. The players are Accenture, Deloitte Consulting (part of Deloitte & Touche), Ernst & Young, KPMG and PricewaterhouseCoopers. The Big Five may get out of the consulting business, partly because the SEC is concerned about possible conflicts of interest that could result in overly rosy audits of firms that are consulting clients of the accounting firm performing the audit. The Big Five deny that a conflict of interest problem exists. At any rate, Arthur Andersen is spinning off Accenture, Ernst & Young may sell its consulting business to French consultancy Cap Gemini, and industry observers expect more of the same.
Human Resource consulting focuses on personnel issues such as employee management and evaluation systems, payroll and compensation programs, pensions and other benefits programs. Representative firms include The Hay Group, Hewitt Associates, William M. Mercer, Sibson & Co., Towers Perrin and Watson Wyatt Worldwide. In addition, several of the Big Five firms have practices devoted to this area.
Independent one-man or one-woman shops. By sheer numbers, independent consultants far outnumber the larger firms. Fully 45 percent of all consultants are reported to be independents. They typically have some sort of industry or functional specialty and get hired on a project basis.
To manage growth while maintaining staff and service quality, many consulting firms have placed renewed emphasis on retaining seasoned staff. It’s generally much better to keep people who know the business than to hire fresh-off-the-boat students and raise them to maturity (although students are comparatively cheap). Consulting will never be a nine-to-five job, but many firms seem to be adopting measures to minimize stress and strain where possible.
Consultants are hired advisors to corporations. They tackle a wide variety of business problems and provide solutions for their clients. Depending on the size and chosen strategy of the firm, these problems can be as straightforward as researching a new market, as technically challenging as designing and coding a large manufacturing control system, as sensitive as providing outplacement services for the HR department, or as sophisticated as totally rethinking the client’s organization and strategy.
Management consultants must be skilled at conducting research and analyzing it. Research means collecting raw data from a variety of sources including the client’s computers, trade associations in the client’s industry, government agencies, and, perhaps most importantly, surveys and market studies that you devise and implement yourself. It also means interviewing people to gather anecdotal information and expert opinion. The interviewees may be anyone, from industry experts to the client’s top executives to the client’s lowest-level employees. All this data must then be analyzed, using tools from spreadsheets to your own brain. The idea here is to spot behavior patterns, production bottlenecks, market movements and other trends and conditions that affect a client’s business.
Your ultimate job is to improve the client’s business by effecting changes in response to your analysis. That’s the hard part, because it involves convincing the client to accept your recommendations, often in the face of opposition from client executives who resent outsiders upstaging them with the boss or resistance from company employees who have something to lose from change. To succeed you’ll need excellent people skills and the ability to put together a persuasive PowerPoint presentation. Finally, you’ll need the ability to handle disappointment if your solution fails or the client decides not to even try implementing it.
For many business services, newer technologies have also increased competition, forcing traditional providers to adapt to survive. For example, in recent years online services such as LinkedIn’s career-related social networking and Indeed’s online job postings have transformed the personnel staffing industry. In order to compete with these types of industry disruptors, established companies may need to upgrade their own technologies and provide superior customer service.
What can business services do in the short term? It is unlikely that cost pressures are going to decrease in the short term as there is uncertainty stemming both from the general economic outlook. Businesses should therefore focus on improving the efficiency of their operations.
• First, increasing the scale of operations to reduce marginal costs will help drive profitability. While the economic outlook might appear gloomy, businesses should focus on identifying areas where growth continues. Local governments are increasingly growing an appetite to extend their working relationship with the private sector to deliver more public services in the future. Business service companies should look at the portfolio of services they offer and identify which ones are the most profitable to focus on. Many businesses are also developing new offerings to ensure they continue to meet client demands and enter service areas where competition is still limited.
• Second, it is expedient to make operations more efficient through simplified processes and leaner supply chains. Organizations that experience rapid growth often end up having their business processes and legacy systems combined, rather than having a thorough review of what is the most efficient way of achieving the same outcome. Only when there is more pressure on margins does the focus shift to understanding what is not working. A detailed analysis of business processes and costs can highlight inefficiencies or duplication of resources which could be avoided. Business service companies should map out where the most employee hours are spent, what the biggest pain points are and analyze how processes could be simplified to make operations more efficient.
Our take at Cibunet is that considering the mass layoffs taking place in various industries that previously employed large number of employees, many people would venture to pursue entrepreneurial goals and so there is great growth potential for the Business Services industry.
