I disagree with the cost-reduction point. This is a services industry in which the product is the people. This is not like merging two manufacturing companies and taking advantage of excess capacity or creating increased purchasing power via volume leverage. Furthermore, a lot of these firms appear to be fairly lean. Projects often have 1 or 2 analysts, consultants, and an EM. I'm not sure where you start to cut people without sacrificing serious quality or speed.
Consulting industry consolidation is much more about strategic positioning and synergies than it is operational efficiency. Strategy firms are reaching down into implementation, and implementation firms are reaching up into strategy. They still differentiate on a number of factors, but I think it's going to get harder and harder for most of the firms to compete without having some of both. Granted there are exceptions, but how long will they last? Even McKinsey is building technology platforms to sell to clients.
Fair -- it's probably a bit of both. As lean as these companies are -- there are still two sets of 'inside function groups' here, right? HR, Finance, Ops, IT, etc. But also about being able to 'extend the sell.'
Brian Lange | Manhattan GMAT Instructor | North Carolina
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