Business Consulting Services, NEC

SIC 8748

Companies in this industry

Industry report:

An important part of this classification's title and definition, "not elsewhere classified," needs some clarification so that the classification may be properly understood. This classification is one of a group of five industries called Management and Public Relations Services. The largest service industry in this group is SIC 8742: Management Consulting Services, which is somewhat similar in function to this industry, but is several times larger in terms of its revenues and work force.

Organization and Structure

Business consulting services, not elsewhere classified, include businesses involved in supplying counsel and assistance to companies in the following areas: agricultural consulting; city planners, except professional engineering; economic consulting; educational consulting, except management; industrial development planning service; radio consultants; systems engineering consulting, except professional engineering or computer related; testing and test development and evaluation service, educational or personnel; and traffic consultants.

Hundreds of companies have reported activities in this industrial classification, including those involved in the testing of aptitude and skill for suitability in academic and vocational endeavors, and environmental consulting with or without testing. Other companies have offered business consulting as adjuncts to their main functions, as in the fields of insurance or guard services.

Business consulting services, not elsewhere classified, provide a wide range of specialized technical assistance to businesses, nonprofit organizations, and government establishments. Some of these service firms are small, some are quite large, and others are small parts of large organizations whose major activities are in other fields.

Reasons for Using Consultants.
As with all consulting, the specialties that have been successful are those where the client organizations require temporary expertise in areas where they have not found it feasible to employ a professional staff, or where a knowledgeable advisor may be wanted to give an authoritative independent opinion on an important matter. Profitable consultants usually have areas in which they are considered especially authoritative or skilled.

Industry Size.
According Dun & Bradstreet, total receipts for firms in the industry were $89.2 billion in 2009. The number of employees in this service industry was estimated at 927,261.

Industry Associations and Accreditation.
There is no central licensing agency for management consultants. In fact, no guidelines or regulations exist in the industry at all as standards for operating practices. The only available form of acknowledgment of consulting expertise is the Certified Management Consultant designation, which is granted by the trade association, the Institute of Management Consultants. Other industry associations include the Society of Professional Management Consultants, the Association of Management Consulting Firms (formerly the Association of Management Consulting Engineers), and the Association of Internal Management Consultants.

Background and Development

Consulting grew slowly in the years before 1950, when there were fewer than 100 firms in the industry. The number of firms expanded rapidly after 1950, however, and by 1990 well over 1,000 firms were established. According to Service Industries USA, in 1998 there were an estimated 22,000 firms, representing an enormous increase during the 1990s.

Pre-World War II.
The consulting field had its beginnings in the late 1880s. The Arthur D. Little Company, founded in Cambridge, Massachusetts in 1886 was among the first prominent consulting firms and was still an industry leader in the early 1990s. The company provides both business and management consulting and specializes in engineering-related research for its clients.

A new impetus in consulting came around World War I with the concepts of scientific management pioneered by Frederick W. Taylor and Frank and Lillian Gilbreth. Their studies of worker productivity in factories led to the widespread use of time studies. In 1929, a small group of firms joined together to form a trade association known as the Association of Consulting Management Engineers (ACME). In the 1930s and 1940s, such new consulting firms as McKinsey & Co. and Booz-Allen & Hamilton established themselves by broadening their scope of services to cover finance, organization, and policy issues. These firms, which have become among the most successful in the industry, also helped bolster troubled companies during and after the Depression.

Post-World War II.
The consulting field grew rapidly in size, scope, and diversity from World War II to the mid 1990s. Many small firms were established and larger companies grew and branched out to meet ever-changing business needs. Many firms, for example, were hired to provide training and assistance for computer technology and methods. Public accounting firms initially offered consulting assistance as a sideline, but it has since come to represent a significant portion of revenues and profits.

In 1968, groups of consultants and consulting firms organized the Institute of Management Consultants (IMC), an individual membership organization that acted to further its members' interests as well as to certify and assure the ethics and capabilities of its members. In 1989, ACME and IMC established an overseeing umbrella organization, the Council of Consulting Organizations (CCO).

Growth and Change.
This industry grew rapidly in the late 1980s and through the 1990s. Overall, the industry grew at an annual rate of nearly 20 percent between 1987 and 1991. In 1993, the industry grew 11 percent from the previous year, then 22 percent in 1994, 16 percent in 1995, 3 percent in 1996, and 5 percent in 1997.

Several conditions led to this growth. For example, an increasing number of firms were solicited to provide testing and analysis assistance on environmental issues. Additionally, psychological testing was in greater demand in the early 1990s as more academic and vocational organizations came to rely on such test results. In these areas, many companies found it more expedient and cost effective to use an outside service for a fee, rather than to hire a staff with the requisite skills. Companies also benefited from the further advantage of receiving an objective judgment from an independent outside service.

According to the U.S. Industry and Trade Outlook, demand for professional services increased along with the increased use of computers, the Internet, integrated systems, and other high-technology equipment. The challenge for this industry was to train and retain qualified consultants.

The diversity in the specialties of professionals in the business consulting services field led to a proliferation of firms. Many of the smallest firms in the industry not covered in this article have very narrow specialties in which they have special expertise, or serve small geographical areas in which they have become well known.

Industry Leaders

Accenture plc of New York held the position as the world's largest consulting firm in 2010, registering annual revenues of more than $23 billion. In management consulting, industry leaders included Boston-based Bain & Company Inc., with 3,500 consultants in more than 24 countries; The Boston Consulting Group, with 4,400 consultants worldwide and total sales of $2.4 billion in 2009; and McKinsey & Company Inc. of New York, which served about two-thirds of the companies on the Fortune 1000 list and had revenues of $6.0 billion in 2009.

Workforce

Because this industry is a field with many different types of functions, the work force is made up of individuals of many different specialties. For instance, environmental consulting requires engineers; psychological testing requires psychologists; economics consulting requires economists or MBAs; and urban planning and consulting requires architects, civil engineers, and landscape architects. The urban planning and consulting segment of the industry, for example, had 3,530 firms ranging in size from solo practitioners to businesses thousands of employees.

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