The New Competition To Management Consulting Firms
By Fernando Okumura, Venture Builder | Former McKinsey, BCG and JPMorgan M&A
Increasingly, McKinsey, BCG and Bain may not only be competing among themselves, but also with enterprise software companies.
Most operators of a B2B SaaS company understand that:
- SaaS is not just about software. It is also about service (i.e., client success)
- SaaS companies often end up knowing more about their clients’ business (vertical SaaS) or a specific function (horizontal SaaS) than the clients themselves
- SaaS companies have instant access to clients’ real time performance data
As such, SaaS companies have an ongoing incentive and are uniquely positioned to provide consulting services to their clients. As a matter of fact, Client Success Managers exist exactly for that purpose.
As AI gets increasingly embedded in SaaS, these consulting services tend to become products themselves (e.g., AI based recommendation systems for up/cross-sell, CPQ, pricing and market segmentation). The result is consulting at scale through Product-Led-Consulting.
Although Product-Led-Consulting is unlikely to substitute strategy projects in the short term, it can replace some of the operational excellence and customer intimacy work performed by consultants today.
Who will win?
Competitive advantage resides with data because it is the fuel for consulting and AI. As such, players that can position themselves as the official system of record will have a solid advantage. In this context, controlling CRMs, ERPs, and subscription management platforms are very strategic. Therefore, I will not be surprised if we see consulting firms acquiring or joining forces with these in the future.
It’s also worth noting that this fragmented segment of enterprise software (especially at the SMB level) tends to consolidate as AI introduces network effects dynamics into it ( more data > AI > better product > more data).
Although enterprise software companies start from an advantageous point because they already have the software, the data and the switching cost are high, consulting companies have a better strategic view point and are already moving in the software direction.
Software companies often lack a holistic view of its clients’ operational needs so consultants are deployed to instruct them on how to use and integrate software tools according to their specific needs. However, all-in-one vertically focused SaaS companies tend to have the capabilities needed to offer the whole “solution”, which means the end client could go without additional help.
Maybe consulting firms will win or maybe enterprise software companies will. Maybe they will merge or co-exist at different layers. One thing is certain though: Product-Led-Consulting will increasingly substitute consulting teams and excel.
Fernando Okumura has been a serial entrepreneur, investor and digital venture builder for 14 years. Backed by VCs (e.g., Accel) and Corporates (Groupon). Former strategy consultant at BCG and McKinsey, and M&A banker at JPMorgan. Attorney at law.
Liked this article, and curious to know more? Drop me a note at fyo@alumni.stanford.edu
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