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The short-term impact of COVID-19 pandemic on Management Consulting industry – Project economics

The projections and outlook on overall economic impact, let alone industry remains to be a moving target as we cope with the unprecedented pandemic. While many global firms saw disruptions from COVID-19 approaching, the extent to the disruption has been jaw-dropping for all. The hours of planning done to get 2020 financial projections in place has become obsolete in a matter of days. So what lays ahead for consulting firms? What does short-term look like? While much of our research has been done based on insights from clients and consulting firm leaders, we have incorporated some growing trends even the years leading up to Q1 2020 to strengthen our report. This write-up will focus on project economics of consulting projects and what lays ahead. Four key takeaways for short-term will be (1) clients will increasingly ask for results-based fee structure, (2) clients will transact on entire lifecycle of the project rather than by phases, and (3) clients will spend on finite time projects, and (4) client will require more remote work.

Results-based fee structure:

While much is uncertain for clients in the coming months, one of the leading insights heading into this pandemic was driving consulting services to be results-based fee structure. This is a novel approach, and requires consulting firms to understand the past projects and results even more than before to drive future offerings. The results-based consulting projects are not an outcome of the pandemic, however, the rising trend in clients' request will be solidified and advantageous for consulting firms as they begin to re-position their offerings for the near and long-term.

Purchase the entire project:

To pair with results-based fee structure, is another input that client leaders requested and that is purchasing consulting services from start to finish. Very often, clients and consulting firms have transacted by phase leaving the results to be somewhat unintentionally misconstrued, however, clients will increasingly be purchasing by the entire lifecycle to ensure that each project is completed with set expectations. This practice has been in place to some extent for most consulting projects, and will continue to strengthen in the short-term.

Purchase concisely & clearly timed project:

Clients will focus on projects with a finite time frame instead of multi-year projects in the near future. Short-term projects are never the goal for traditional consulting services; however, it might be an indicator to what lays ahead and the change that could potentially benefit both clients and consulting firms. Today, we find this to be different from decades of consulting services, however, in the future, this can be a shift towards profitable and exponentially beneficial.

Increased amount of remote work:

Without hesitation, social distancing has caused remote work for most corporate clients, and consulting projects are no different. While consulting has taken pride in building relationships and trust to ensure the best is offered to each client, this pandemic will be a stark change that will require consulting leaders to re-position how that relationship and trust is built over time with much less in-person contact. While this also is a change in how business development and project delivery has been traditionally setup, the evolution stemmed from this pandemic will drive future sustainability for consulting firms as they face increased pressure from the clients and the competitive landscape.

The research and analysis above are focused and intended for small to medium consulting firms. The short-term outlook is for new projects and new clients, and cannot be replicated for on-going large-scale multi-year projects. Lastly, the key project trends for the future are based on research to-date on management consulting from a client's viewpoint, and these points becomes are increasingly validated with the unprecedented pandemic.


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