Is consulting industry facing a downturn? Why?

[Abby Chang]

Nowadays, China is developing rapidly especially in financial. The degree of dependence on the consulting industry becomes higher than before, But why does the consulting industry not have as high profit as before? Is the industry facing a downturn?

[Tom Spencer]

Hi Abby, 

According to IBIS World, the growth rate of the management consulting industry in China from 2012 to 2017 was around 11% with industry revenue of around $25 billion. 

What is your source of information suggesting there is a downturn in consulting in China?

[Chen Cao]

Hello, the report and stats from IBIS World are very interesting. Particularly, I noticed its saying "the industry is still on a small scale compared with its counterparts worldwide". What are the counterparts of management consulting industry by its definition?

Have a look at the service products mentioned on which the stats are calculated based on: 

• enterprise management consulting
• public relations services
• education consulting
• psychological consulting
• other business consulting services

The above arguable area lays on the vague boundary of the management consulting industry, that I am afraid, which leads to the dilution image of the total pie.

IT consulting is not included, and so are the market investigation and stats modelling services. Management consulting is undoubtable faced with more fierce competition with turns seen in the profit and loss sheets against the backdrop that enterprises are going digital; IT consulting has advantages of scales, and its operating margin is supposed to lower, whereas management consulting firms have to endure the increasing headcount costs as the labor costs and knowledge capital costs both soar in China recently. 

Overall, the charging fees vary significantly among firms, and I would suggest to discuss case by case for more rigorous analysis.